On December 7, 2020, the Consumer Financial Protection Bureau (CFPB) along with attorneys general from all 50 states and the District of Columbia and bank regulators from 53 jurisdictions covering 48 states and Puerto Rico, the Virgin Islands, and the District of Columbia, announced a settlement with Nationstar Mortgage (d/b/a Mr. Cooper), one of the country's largest mortgage servicers and the largest non-bank mortgage servicer in the United States, in connection with allegations concerning violations of multiple Federal consumer financial laws. If approved by the court, the combined CFPB and state settlements will result in an overall payment by Nationstar of $91 million ($85 million in recoveries and over $6 million in fees and penalties).
The CFPB Complaint filed in United States District Court for the District of Columbia ( https://files.consumerfinance.gov/f/documents/cfpb_nationstar-mortgage-llc-dba-mr-cooper_complaint_2020-12.pdf) specifically alleges that Nationstar engaged in unfair and deceptive acts and practices in violation of the Consumer Financial Protection Act of 2010, violated the Real Estate Settlement Procedures Act (RESPA), and violated the Homeowner's Protection Act of 1998 (HPA).
Specifically, the Complaint alleges that between January 2012 and January 1, 2016, Nationwide acquired mortgage servicing rights for many loans that were subject to trial modification agreements entered into by the borrower and prior servicer. In numerous instances, Nationstar allegedly failed to identify loans on its systems that had pending loss-mitigation applications or trial-modification plans, and as a result failed to honor borrowers' loan modification agreements.
The Complaint also alleges that Nationstar unlawfully foreclosed on borrowers who had applied for loan modifications after promising it would not foreclose while the borrowers' applications were pending. The Complaint further alleges that Nationstar increased borrowers' permanent, modified monthly loan payments, mispresented to borrowers when they would be eligible to have their private mortgage insurance premiums canceled, and failed to timely remove private mortgage insurance from borrowers' accounts. Nationstar allegedly failed to timely disburse borrowers' tax payments from their escrow accounts and failed to properly conduct escrow analyses for borrowers during their Chapter 13 bankruptcy proceedings.
CFPB Director Kathleen L. Kraninger commented on the settlement, noting “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 prohibited by the Consumer Financial Protection Act of 2010, as well as violations of the Real Estate Settlement Procedures Act and the Homeowner's Protection Act.” The CFPB has also made it clear that the Nationstar settlement represents an ongoing commitment to government coordination with state regulators in pursuing multistate supervision and enforcement efforts, including prosecuting mortgage servicing and compliance violations, and other operational failures.
As consumers navigate the COVID-19 pandemic, many unknowns remain about regulators' enforcement agendas, interpretation and application of the relief afforded by the CARES Act, or whether any pending or future legislation will provide further relief and perhaps servicing obligations. It is also unclear whether the CARES Act and various state foreclosure and eviction moratoriums will expire as they are currently scheduled to, or will be extended as the pandemic rages.
Seyfarth Shaw's Consumer Financial Services practice group represents some of the country's largest mortgage lenders and servicers in myriad complex litigation and compliance matters throughout the country. We are following closely the legislative, regulatory and enforcement landscapes as they evolve, and our team is well-suited to address our clients' mortgage-related legal needs. For more information about our practice and team, please reach out to Tonya Esposito or David Bizar.
Originally Published by Seyfarth Shaw, December 2020
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
