The Times Herald (Norristown, PA)
Nationstar’s $91 million settlement for mishandling mortgages
Nationstar Mortgage, which rebranded as “Mr. Cooper,” agreed to a $91 million settlement last week for allegedly violating consumer protection laws after the Great Recession. The case could serve as a warning to companies that prey on borrowers during the pandemic.
The federal Consumer Financial Protection Bureau (CFPB) collaborated with attorneys general from all 50 states and mortgage regulators in 53 jurisdictions — including the District of Columbia and Puerto Rico — in the case against Nationstar, which is the largest non-bank home loan servicer in the country.
The CFPB said the settlement involves allegations that Nationstar violated consumer protection laws during its servicing of mortgage loans between January 2012 and the end of 2015. The proposed agreement, if approved by the court, will result in $85 million in payments to consumers and more than $6 million in fees and penalties.
Nationstar also entered into a separate settlement agreement with the Justice Department to address past mortgage servicing issues affecting homeowners in bankruptcy protection. Under that settlement, the Justice Department said U.S. Bank, PNC and Nationstar will provide more than $74 million in redress payments to homeowners. “Most of the remediation and corrective actions have already been taken by the servicers,” the Justice Department said.
The CFPB complaint, filed in federal district court in D.C., said Nationstar failed to identify requests for loan modifications, which are supposed to help borrowers with their payments. The company allegedly foreclosed while some homeowners were still waiting for their loan modification applications to be processed — even though Nationstar had promised it would not do so.
Allegations against Nationstar included improperly increasing borrowers’ payments and misrepresenting when homeowners would be eligible to have their private mortgage insurance premiums canceled. The claim alleged that Nationstar also failed to forward real estate tax payments from escrow accounts in a timely manner.
“More than 1,000 borrowers in Maryland were harmed by Nationstar’s misconduct,” Maryland Attorney General Brian E. Frosh, D, said in a statement. “The settlement requires Nationstar to change its practices and to pay millions of dollars to those it hurt.”
State financial regulators license mortgage servicers. The mishandling of mortgages by Nationstar was discovered during reviews of the company’s servicing activities, according to the claim. The investigations found that borrowers had problems when their loans were transferred to Nationstar.
“Examinations by state and federal regulators helped to uncover the problems with Nationstar’s origination and servicing practices, including the mishandling of the loan modifications for homeowners who were struggling to pay their mortgages,” Illinois Department of Financial and Professional Regulation Secretary Deborah Hagan said during a call with reporters.
Nationstar said that its management and board took steps to address the issues identified during the investigations.
“We are pleased to resolve this matter,” Mr. Cooper Group chief executive Jay Bray said in a statement. “When these issues were identified several years ago, we