Nationstar Mortgage, the country’s fourth-largest mortgage servicer, has agreed to resolve parallel investigations by state attorneys general, state mortgage regulators, and the federal Consumer Financial Protection Bureau in a settlement that includes combined monetary relief valued at around $86.3 million.
The settlement resolves allegations that Dallas-based Nationstar, which does business as “Mr. Cooper,” violated consumer protection and banking laws in its servicing of residential mortgage loans. The New Jersey Department of Banking and Insurance is among the state mortgage regulators involved in the settlement.
The settlement provides for restitution to over 55,000 borrowers across the U.S. who suffered foreclosure and other harms due to a variety of mortgage loan servicing violations by Nationstar.
In New Jersey, the settlement affects 2,075 borrowers, and has a total value to those borrowers of approximately $3.45 million.
A complaint and consent judgment memorializing the settlement were filed today in the U.S. District Court for the District of Columbia by the participating attorneys general.
The consent judgment addresses conduct by Nationstar spanning the period from January 1, 2011 through December 31, 2017.
The complaint alleges a wide variety of unlawful acts and practices by Nationstar during those years, including:
- failing to properly oversee and implement the transfer of mortgage loans;
- failing to appropriately identify loans with pending loan modification applications when a loan was being transferred to Nationstar for servicing;
- failing to timely and accurately apply payments made by certain borrowers;
- threatening foreclosure and conveying conflicting messages to certain borrowers engaged in loss mitigation;
- failing to properly process borrowers’ applications for loan modifications;
- failing to properly review and respond to borrower complaints;
- failing to make timely escrow disbursements, including the failure to timely remit property tax payments;
- failing to timely terminate borrowers’ private mortgage insurance; and
- collecting monthly modified payment amounts on certain loans where the amounts charged for principal and interest exceeded the principal and interest amount contained in the trial plan agreement.
In addition to providing for monetary relief for eligible borrowers, today’s settlement requires Nationstar to follow a detailed set of rules or “servicing standards” for its handling of certain mortgage loans going forward. These standards are more comprehensive than existing law, and take effect for three years starting January 1, 2021.
Among other things, the servicing standards require Nationstar to: ensure the accuracy of information it includes in foreclosure-related filings; apply any borrower payments that exceed the amount due in accordance with the borrower’s instructions; adopt more consumer-accessible procedures for handling billing disputes, such as a toll-free number and email; and take prompt action to remediate inaccuracies in borrowers’ account information – including correcting information provided to credit reporting agencies, and providing refunds or account credits where appropriate.
The servicing standards also require Nationstar to offer loan modifications for eligible borrowers rather than initiate foreclosure when such loan modifications meet program and other requirements, and to periodically have the company’s primary system for recording account information independently reviewed for accuracy and completeness.
Attorney General Gurbir S. Grewal made the announcement today.
“This settlement illustrates the benefits of state and federal partnership when it comes to consumer financial protection,” said Attorney General Grewal. “By working together, we were able to provide more relief for homeowners in New Jersey and around the country. And with many homeowners struggling to pay their mortgages in today’s economy, we’re sending a clear message that we’re here for them.”
“Homeownership is one of the most important investments our residents can make, and the Department is committed to ensuring that all New Jersey homeowners are treated fairly when seeking help from their mortgage servicer,” said Department of Banking and Insurance Commissioner Marlene Caride. “New Jersey worked in collaboration with state and federal partners on this case to reach a resolution which provides compensation for our residents and specific servicing requirements for Nationstar that enhance consumer protections.”
In addition to the Consumer Financial Protection Bureau and the state mortgage regulators, which filed separate settlement agreements, the settlement was signed by the attorneys general for all 50 states and the District of Columbia. The partners also collaborated with the U.S. Trustee Program, a component within the Department of Justice that seeks to promote the efficiency and protect the integrity of the bankruptcy system. The USTP is finalizing a separate agreement with Nationstar to address historical servicing issues impacting borrowers in bankruptcy.
“This settlement not only provides over $3 million in financial relief for borrowers in our state, but also raises the bar in the mortgage market,” said Division of Consumer Affairs Acting Director Paul R. Rodríguez. “By requiring that businesses adhere to higher standards of care for their clients, we are ensuring that our residents are protected from sloppy practices that cause real damage to their financial wellbeing and our economy.”
In 2012, Nationstar began purchasing mortgage servicing portfolios from competitors and grew quickly into the nation’s largest non-bank servicer. As loan data was transferred to Nationstar, borrowers who had sought assistance with payments and loan modifications sometimes fell through the cracks, the lawsuit alleged. Borrowers in this category will receive a guaranteed minimum payment of $840 as part of the settlement.
Other borrowers suffered damages when Nationstar failed to oversee third-party vendors hired to inspect and maintain properties owned by delinquent borrowers and improperly changed locks on their homes, the lawsuit alleged. These borrowers will receive a guaranteed minimum payment of $250.
A settlement administrator, Rust Consulting, will send a claim form to eligible borrowers in 2021. Nationstar has already provided some of the relief outlined in the settlement.
The agreement also requires Nationstar to conduct audits and provide audit results to a committee of states to ensure compliance with the settlement.
Deputy Attorney General Donna J. Dorgan of the Consumer Fraud Prosecution Section in the Division of Law’s Affirmative Civil Enforcement Practice Group represented the State in the Nationstar matter.