WASHINGTON, D.C. – Attorney General Karl A. Racine today announced a coalition of 51 Attorneys General reached an $86.3 million settlement with Mr. Cooper, a mortgage servicer, resolving allegations that the company violated consumer protection laws while servicing mortgage loans nationwide. The coalition negotiated the settlement alongside state mortgage regulators and the federal Consumer Financial Protection Bureau, which filed separate settlement documents. As part of the settlement, the company—which previously operated under the name Nationstar Mortgage Holding, Inc., until August 2017—must provide 142 District consumers a total of $146,583.81 in restitution for harms from violations spanning several different categories. The consent judgment, filed in the U.S. District Court for the District of Columbia, provides a total of $79.2 million in restitution for borrowers who took out a total of 55,814 loans nationwide between Jan. 1, 2011 and Dec. 31, 2017. A settlement administrator will send out claim forms to eligible borrowers in 2021.
“This settlement holds Mr. Cooper accountable for failing to properly service tens of thousands of mortgage loans, and it delivers much-needed relief to District borrowers harmed by the company,” said AG Racine. “I am proud to have joined this broad bipartisan effort, which brought together the chief legal officers from all fifty states to protect consumers in our respective jurisdictions. State Attorneys General will take action against any lending company that breaks the law and treats borrowers unfairly.”
Mr. Cooper was founded in 1994 in Denver, Colorado as Nova Credit Corporation. In 1997, the company moved to Dallas, Texas, where it remains today. It has since operated under three other names—Centex Credit Corporation, Centex Home Equity Company, and Nationstar Mortgage Holding, Inc.—before rebranding as Mr. Cooper in 2017. The company employs nearly 9,000 employees and counts 3.8 million homeowners as customers. It is the nation’s fourth-largest mortgage servicer.
In 2014, the Iowa state Attorney General formed a multistate coalition to investigate the company over a series of complaints regarding mortgage servicing issues. According to the lawsuit, in 2012, the company—then operating as Nationstar—began purchasing mortgage servicing portfolios from competitors, which allowed it to quickly grow into the nation’s largest non-bank servicer. The shift also resulted in a string of alleged consumer protection violations. The lawsuit contends that the company neglected several duties, including properly overseeing and implementing transferred mortgage loans; appropriately identifying loans with pending loan modification applications and processing those applications; and accurately applying payments made by certain borrowers in a timely fashion. The lawsuit further alleges that the company failed to properly review and respond to borrower complaints, left borrowers without timely escrow payments, and did not terminate borrowers’ private mortgage insurance. The company also allegedly conveyed conflicting messages, and even threatened foreclosure, to some borrowers engaged in loss mitigation.
Under the terms of the settlement, Mr. Cooper will:
- Pay at least $840 to borrowers the company allowed to fall through the cracks: A number of consumers were current on their payments at the time that the company bought their loans and transferred them from other mortgage servicers, but then fell behind within three months. The lawsuit alleged that problems arose during the transfer process, leaving the borrowers in delinquency. These roughly 4,615 borrowers—including one residing in the District—will receive at least $840 in restitution.
- Pay at least $250 to borrowers affected by the company’s neglect around third-party vendors: The lawsuit further alleged that the company hired third-party vendors hired to inspect and maintain properties owned by delinquent borrowers but failed to perform any oversight of these vendors. As a result, these vendors improperly changed locks on several borrowers’ homes. These roughly 7,870 borrowers—including 24 residing in the District—will receive a guaranteed minimum payment of $250.
- Adopt new “servicing standards” for mortgage loans: The company is required to follow a detailed set of rules for how it handles mortgage loans, which, if followed, will prevent the company from violating consumer rights.
- Conduct audits to ensure compliance: The company is required to conduct internal audits to track its own progress in addressing the violations outlined in the lawsuit and provide the results of those audits to a committee of states involved in the settlement.
A copy of the settlement is available at: https://oag.dc.gov/sites/default/files/2020-12/Nationstar-Mortgage-Mr-Cooper-Judgment.pdf
In addition to the District of Columbia, other Attorneys General participating in this settlement include Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin, and Wyoming.