Wisconsin joins nationwide $86.3M agreement with mortgage servicer

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Wisconsin joined in a nationwide $86.3 million agreement with Nationstar Mortgage to resolve allegations that the company’s practices caused problems for thousands of homeowners.

Wisconsin Attorney General Josh Kaul’s office announced the agreement on Dec. 7.

The consent judgment resolves allegations that Nationstar, which does business as Mr. Cooper, violated consumer-protection laws during its servicing of mortgage loans. The company is the fourth-largest mortgage servicer in the U.S. Kaul’s office said thousands of borrowers had troubles when their loans were transferred to Nationstar, leading to foreclosure in some cases.

As Nationstar began purchasing mortgage-servicing portfolios from its competitors in 2012, borrowers who had sought help with payments and loan modifications sometimes fell through the cracks, according to the lawsuit put forward by Kaul and 50 other U.S. attorneys general.

The lawsuit accused Nationstar of other unlawful acts and practices from Jan. 1, 2011, through Dec. 31, 2017, including:

• failing to properly oversee and carry out 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 failure to remit property tax payments in a timely manner;
• failing to terminate borrowers’ private mortgage insurance in a timely manner;
• 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 agreement provides about $79.2 million in relief that affects 55,814 loans nationally. In Wisconsin, the agreement affects 609 loans for a total of $835,515.69.

Borrowers who fell through the cracks during the purchasing process will receive a guaranteed minimum payment of $840. 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 will send a claim form to eligible borrowers in 2021. Nationstar has already provided some of the relief outlined in the agreement, according to Kaul’s office.

According to the agreement, Nationstar must also follow a detailed set of rules in handling certain mortgage loans. The servicing standards are more comprehensive than existing law and will be in place for three years, starting on Jan. 1, 2021. The company will also have to conduct audits and provide audit results to a committee of states to ensure compliance with the agreement.

The settlement was signed by attorneys general from all 50 states and the District of Columbia. The state attorneys general negotiated the agreement with the state mortgage regulators and the federal Consumer Financial Protection Bureau, which filed separate settlement documents. 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.

The parties reached a binding agreement before the commencement of any court action. Thus, the requirements of 2017 Wis. Act 369 regarding court settlements do not apply. Follow @WLJReporter