Nationstar Mortgage, the nonbank now known as Mr. Cooper, allegedly put hundreds of borrowers in Massachusetts at a heightened risk of foreclosure by offering them “unfair and deceptive” mortgage modifications, the state’s attorney general said Tuesday.
Massachusetts Attorney General Maura Healey announced Tuesday that the state reached a settlement with Nationstar that will require the company to provide “millions of dollars” in principal reductions to the affected borrowers, as well as pay $500,000 in restitution to certain borrowers who were foreclosed on as a result of Nationstar’s actions.
“In Massachusetts, mortgage servicers are required by law to help prevent unnecessary foreclosures and keep families in their homes,” Healey said in a statement.
“Nationstar failed to stop foreclosures and this settlement gives homeowners in the hardest hit areas in Massachusetts a chance to stay in their homes,” Healey continued. “It also sends a clear message that we will hold accountable companies that are not following the law.”
According to Healey’s office, Nationstar allegedly violated the “Massachusetts Act Preventing Unlawful and Unnecessary Foreclosures,” a 2012 law that provides foreclosure protections to mortgage borrowers in the state.
The law “requires creditors to make a good faith effort to avoid foreclosure for borrowers whose mortgage loans have unfair subprime terms,” Healey’s office stated.
According to Healey’s office, Nationstar allegedly violated the law by offering “unfair and deceptive” short-term, interest-only mortgage modifications to borrowers without considering the borrower’s ability to repay the mortgage debt over the life of the modified loan.
Then, after one or two years, the monthly payments on those modifications “ballooned” to a dollar amount that was higher than what the borrower was originally paying when they defaulted, Healey’s office stated.
Healey’s office alleged that Nationstar’s mortgage modification program “set borrowers up to fail and put them at heightened risk of foreclosure.”
Healey’s office also accused Nationstar of failing to provide borrowers with a “fair opportunity” for a loan modification review.
“When borrowers filled out and returned the necessary forms, Nationstar failed to log, track, and process those forms as required by the law,” Healey’s office stated. “Instead, borrowers faced massive delays, repetitive requests for modification paperwork and were often denied loan modifications on the grounds that they had failed to submit proper documentation, which had indeed been submitted.”
Under the terms of the settlement, which was filed this week in Suffolk Superior Court, Nationstar will be required to implement a mortgage modification program that will provide “millions” in borrower relief by reducing the principal on their mortgages.
Nationstar will also be required to pay $500,000 in restitution to certain borrowers that were foreclosed on, and provide the loan modification review protections required by Massachusetts state law to borrowers who default on their mortgages in the future.
According to Healey’s office, at least 500 to 600 Massachusetts residents are eligible for loan modification review under the terms of the settlement and more than 100 foreclosed-upon borrowers will be eligible for restitution.
In a statement provided to HousingWire, Nationstar Chairman and CEO Jay Bray said that the settlement covers “legacy” issues, adding that he feels the company has taken steps to address the cause of the issues.
“We are committed to keeping the dream of homeownership alive, and we apologize to our customers in Massachusetts,” Bray said.
“While we’re proud of our long track record of helping customers stay in their homes, we know we are not perfect,” Bray added. “Over the last few years we have made strategic investments to bolster our team and improve our processes, and we’re glad to have this issue resolved as we continue on our journey to reinvent the mortgage experience.”
