Is Your Mortgage Service Provider Ripping You Off?

By: Ilana Siyance

Nationstar, America’s fourth largest mortgage servicer, is on the hook to pay $91 million to settle claims for unfairly foreclosing homeowners after the Great Recession. As reported by CNBC, the Consumer Financial Protection Bureau together with 50 state attorneys general alleged that Nationstar, now doing business as Mr. Cooper, handled multiple mortgage cases unlawfully following the Great Recession, which was the global economic decline that occurred between 2007 and 2009. Nationstar’s failings resulted in “substantial consumer harm,” said CFPB Director Kathleen Kraninger in a statement. “Mortgage servicers are entrusted with handling significant financial transactions for millions of Americans, including struggling homeowners. Nationstar broke that trust by engaging in unfair and deceptive practices,” Kraninger added.

The CFBP said approximately 40,000 borrowers were allegedly treated unfairly or deceptively by Nationstar. The claims, brought forth between January 2012 to December 2016, resulted in the proposed settlement last week. In the settlement, Nationstar will need to pay $73 million in restitution to affected borrowers, plus a $1.5 million civil penalty payable to the agency. When combined with the state settlements, the total comes to $85 million to the affected homeowners and $6 million in civil penalties, as per CNBC.

The charges include: failing to honor borrowers’ loan modification agreements; foreclosing borrowers with pending forbearance applications after promising not to; and dealing improperly with homeowners who were in Chapter 13 bankruptcy proceedings. The settlements still need to be approved by the D.C. district court, and if they are then Nationstar will be immediately required to allocate $15.6 million with which to pay hurt borrowers who have not yet been recompensed. CFPB said the mortgage servicer has already paid roughly $57.5 million in restitutions to borrowers. “When these issues were identified several years ago, we immediately made restitutions to our impacted customers and invested in process improvements to prevent reoccurrence,” said Jay Bray CEO and Chairman of Mr. Cooper in a statement.

Currently, the financial situation for homeowners is similar to the Great Recession, and the results may impact today’s borrowers. Roughly 2.8 million homeowners are in a forbearance plan, as of Nov. 22, as per research from the Mortgage Bankers Association. “There are going to be a lot of homeowners who need a home loan modification or other assistance,” said Kwame Raoul, attorney general of Illinois. “We will be watching the mortgage interest industry to ensure they are treating homeowners fairly and fulfilling their obligations.” Raoul added that borrowers should contact their state attorneys general if they have a problem with their lender.