On the same day that Mr. Cooper announced a settlement with state and federal authorities over its servicing practices, the Dallas company and two other lenders reached separate agreements with the Justice Department regarding bankrupt borrowers.
Mr. Cooper agreed to pay out over $91 million to consumers and state and federal regulators in order to settle allegations of misconduct in its servicing practices dating as far back as 2011.
The charges cover problems with loan modifications, foreclosures and mortgage insurance policy cancellations. The complaints were first raised in a pair of examinations conducted by a consortium of state regulators in 2014, when the Dallas company was operating under the Nationstar name. In 2018, the servicer was
"Mortgage servicers are entrusted with handling significant financial transactions for millions of Americans, including struggling homeowners," Consumer Financial Protection Bureau Director Kathy Kraninger said in a press release. "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."
In agreeing to the settlement, Mr. Cooper did not admit any wrongdoing or to violating applicable laws.
"When these issues were identified several years ago, we immediately made restitution to our impacted customers and invested in process improvements to prevent reoccurrence," Jay Bray, Mr. Cooper's chairman and CEO, said in a statement.
The charges were brought by the CFPB, the attorneys general from all 50 states and mortgage regulators from 48 states plus the District of Columbia, Puerto Rico and the U.S. Virgin Islands. The only state mortgage regulators not listed were Colorado and New York.
Mortgage regulators from the Empire State participated in the 2014 multistate origination and servicing examinations that
"Multistate supervision and enforcement actions like today's exemplify the power of states working together to regulate financial services, protect consumers and local economies," said John Ryan, president and CEO of the Conference of State Bank Supervisors. "States working together and with their federal counterparts is the future of industry oversight."
The bank supervisor group said it worked with the American Association of Residential Mortgage Regulators on the state enforcement portion of the case.
According to the settlement, $62.6 million in consumer remediation was completed prior to the agreement. That included payments to consumers affected by issues related to the company's loan modification, private mortgage insurance cancelation, escrow and loss mitigation practices. That amount also included violations cited in the origination examination, such as charging impermissible fees.
An additional $15.6 million will be paid to consumers affected by Nationstar's loan mod, escrow and foreclosure practices. Another $6.4 million will go to borrowers who had been harmed by servicing transfer and property preservation practices, which involved loans that were transferred to Nationstar between 2011 and 2017. Part of that $6.4 million will cover properties that were erroneously declared vacant, for which the company had the locks changed.
Mr. Cooper will also pay $1.5 million in a CFPB consent judgment, $1.2 million to the states for an administrative penalty and costs, plus $3.9 million in attorney's fees.
Separately, the Justice Department's U.S. Trustee office, which oversees the administration of bankruptcy cases and private trustees, came to its own agreements with Mr. Cooper, U.S. Bank and PNC Bank regarding noncompliance with the Bankruptcy Code and Federal Rules of Bankruptcy Procedure, which affected more than 60,000 accounts at all three companies, dating to 2011.
Those failures resulted in payment application errors, inaccurate, missing and untimely bankruptcy filings and delayed escrow statements, the Justice Department said.
"The failure of mortgage servicers to comply with those requirements compromises the integrity of the bankruptcy system and the ability of homeowners to receive a fresh start," said Cliff White, the director of Justice Department's U.S. Trustee Program.
For Mr. Cooper, the agreement memorializes over $40 million in payments the company made to affected borrowers. The U.S. Trustee’s agreement includes the $22.84 million in remediation to bankrupt borrowers in the CFPB settlement. Mr. Cooper will pay an additional $17.84 million for bankruptcy-specific conduct in the U.S. Trustee case.
U.S. Bank has or will provide $29 million in credits and refunds, the Justice Department stated. The bank also waived approximately $43 million in fees and charges across its mortgage servicing portfolio, including for borrowers in bankruptcy.
U.S. Bank said the issues were first identified in 2014 and the bank took corrective actions the following year, with certain customers receiving remediation.
"Our agreement with U.S. Trustee includes additional customer remediation, which we expect to complete in the coming months," U.S. Bank said in a statement. "We take our responsibility to our customers seriously and worked quickly to ensure our bankruptcy processing is performed in a fair and compliant manner."
The Justice Department also issued a letter acknowledging that PNC provided close to $5 million in credits and refunds, as well as additional remediation in the form of lien releases and debt forgiveness.
"We're pleased to put this matter behind us and we appreciate the assistance of the U.S. Trustee's office as we worked to address it," a statement from PNC Bank said. "As outlined in the acknowledgement, PNC cooperated fully with the U.S. Trustee's office and in doing so, provided full and fair remediation to any customer who conceivably could have been impacted."
