The settlement provides relief to consumers harmed by Nationstar's unlawful practices
SACRAMENTO – California Attorney General Xavier Becerra today joined a 50-state settlement against Nationstar Mortgage (Nationstar), which does business as Mr. Cooper, resolving allegations that the mortgage servicer engaged in unlawful practices in the wake of the 2008 financial crisis. The settlement addresses alleged misconduct regarding servicing transfers, property preservation, loan modifications, and other mortgage servicing issues, which in some cases led to improper foreclosure or borrowers being locked out of their homes. The multistate settlement was negotiated with the Consumer Financial Protection Bureau, the California Department of Financial Protection and Innovation (DFPI), and other state mortgage regulators, which are filing separate settlement documents.
“The illegal practices of mortgage servicers like Nationstar left struggling borrowers to pick up the pieces,” said Attorney General Becerra. “As we’re now faced with another economic crisis, it is critical that mortgage servicers and all financial institutions take seriously their obligations to borrowers and their role in the larger financial system.”
“The Department joins regulators across the country in sending a strong message that we will not tolerate excessive fees or other harmful practices in the mortgage industry,” said DFPI Commissioner Manuel P. Alvarez. “Under this settlement, Nationstar will compensate tens of thousands of borrowers in California and across the nation who were hurt by its servicing and foreclosure actions.”
The settlement provides approximately $79.2 million to 55,814 borrowers nationwide. This includes at least $840 to eligible borrowers whose loan became delinquent within 30 days of being transferred to Nationstar and who later lost their home to foreclosure. It also includes at least $250 to eligible borrowers whose homes Nationstar mistakenly determined were vacant. This settlement also includes approximately $57.7 million that the company has already provided to borrowers. Nationstar will also pay approximately $7.1 million in costs and penalties to the government parties and for settlement administration.
In the aftermath of the 2008 financial crisis, many major banks sold off the rights to service mortgage loans to non-bank servicers. Dallas-based Nationstar then quickly grew to become one of the largest non-bank servicers in the nation and in California. An investigation by a multistate coalition of attorneys general, state mortgage regulators, and the Consumer Financial Protection Bureau (CFPB) found that Nationstar committed multiple violations of law, including but not limited to failure to:
· Properly oversee vendors hired to inspect properties in foreclosure, leading to cases of vendors improperly designating homes as vacant and locking borrowers out of their homes;
· Properly process mortgage loans that were transferred to Nationstar; and
· Appropriately identify loans transferred to Nationstar with pending loan-modification applications.
The settlement administrator will contact borrowers who are eligible for payment. A series of injunctive terms also require Nationstar to comply with detailed standards for servicing mortgage loans and to conduct audits to ensure compliance with those standards. The settlement follows a collaboration among state and federal law enforcement partners including the United States Trustee Program, which is finalizing a separate agreement with Nationstar to address historical servicing issues impacting borrowers in bankruptcy.
Today’s settlement is the latest in a series of actions taken by Attorney General Becerra against faulty mortgage servicing practices in California. In September, the attorney general filed an amicus brief with the California Supreme Court to hold mortgage loan servicers liable for negligently handling mortgage modification requests from homeowners. In August, he sent a letter to 33 mortgage servicers reminding the companies of their obligations to California homeowners and tenants under the Homeowner Bill of Rights during COVID-19. Throughout 2020, Attorney General Becerra has issued updated guidance to California tenants and homeowners, encouraging them to learn about their rights in light of the COVID-19 pandemic. He has also made information and resources available to consumers regarding updates to tenant, mortgage, and foreclosure protections that have been enacted through both the state and federal governments.