Attorney General James Helps Secure $86.3 Million in Multistate Agreement with Mortgage Servicer Nationstar
More Than 2,300 New Yorkers Will Receive More Than $4.5 Million in Restitution
NEW YORK – New York Attorney General Letitia James has joined 50 other attorneys general and other federal and state agencies to deliver an $86.3 million agreement — including $79.2 million in restitution for homeowners — with Nationstar Mortgage LLC for its multiple servicing errors since 2011. These errors have caused financial harm to tens of thousands of Americans and resulted in some being locked out of their homes, robbing them of their dignity. Nationstar — which does business as “Mr. Cooper” — is the country’s fourth-largest mortgage servicer. This agreement, inclusive of the new servicing standards Nationstar must follow, will protect hundreds of thousands of homeowners across the United States.
The agreement provides $79.2 million in restitution to 55,814 borrowers for a variety of harms that were identified in the attorneys general’s six-year investigation. In particular, thousands of borrowers had problems when their loans were transferred to Nationstar, leading to foreclosure in some circumstances. In New York, 2,363 borrowers will receive more than $4.5 million, either as a credit to their account if Nationstar is still their servicer, or as a check.
“Far too often, corporate greed has been a barrier to millions of families trying to attain the American Dream of homeownership,” said Attorney General James. “Our work on this case will directly help thousands of New York homeowners and hold Nationstar mortgages servicer accountable for putting profits over people.”
The agreement also requires Nationstar to follow a detailed set of rules, or “servicing standards,” in how it handles certain mortgage loans. These servicing standards are more comprehensive than existing federal law and will be in place for three years starting on January 1, 2021. In particular, the agreement affords greater protection to borrowers with limited English proficiency, including using state and federal government Spanish language mortgage-related forms, capturing and tracking borrowers’ language preferences, and communicating with borrowers who are engaged in loss mitigation in the language of their loss mitigation application.
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 agreement.
The lawsuit alleged that 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. These borrowers will receive a guaranteed minimum payment of $250.
A settlement administrator will send a claim form to eligible borrowers in 2021. Nationstar has already provided some of the relief outlined in the agreement.
The agreement also requires Nationstar to conduct audits and provide audit results to a committee of states to ensure compliance with the settlement.
The lawsuit alleged other unlawful acts and practices by Nationstar, 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 exceed the principal and interest amount contained in the trial plan agreement.
The settlement was signed by attorneys general from all 50 states and the District of Columbia and covers conduct by Nationstar occurring from January 1, 2011 to December 31, 2017. The state attorneys general negotiated the settlement with the state mortgage regulators and the federal Consumer Financial Protection Bureau, which filed separate settlement documents.
The coalition also collaborated with the U.S. Trustee Program (USTP), a component within the U.S. 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 matter was handled by Assistant Attorneys General Mark Ladov and Elizabeth M. Lynch of the Consumer Frauds and Protection Bureau, under the supervision of Bureau Chief Jane M. Azia. The Consumer Frauds and Protection Bureau is a part of the Division for Economic Justice, overseen by Chief Deputy Attorney General Chris D’Angelo and First Deputy Attorney General Jennifer Levy.