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Attorney General, DIFS Finalizes Investigation of National Mortgage Servicer's Misconduct and Operational Weaknesses

LANSING – In coordination with state and federal partners and law enforcement, Attorney General Dana Nessel and the Michigan Department of Insurance and Financial Services (DIFS) announced today the closing of a multiyear investigation into one of the largest mortgage servicers in the nation, Mr. Cooper, formerly Nationstar Mortgage LLC. The settlement requires the company to issue refunds and other redress to 1,930 impacted consumers in Michigan totaling $2.5 million, as well as pay $750,000 in civil penalties to be distributed evenly among participating states and jurisdictions.  

The consent judgment was filed in the U.S. District Court for the District of Columbia.  

“Mortgage servicers play a critical role for homeowners, and this department has no tolerance for those that harm consumers by failing to comply with state and federal laws,” said DIFS Director Anita Fox. “Consumers should feel confident that the companies we license are following the law, and we thank our partners across the country for their collaboration on this large-scale investigation.” 

“This settlement provides financial relief for thousands of Michigan families that were not treated fairly or properly under the consumer protection laws of this state,” Attorney General Nessel said. “Many people across the country lost their homes because of this company’s misconduct, and I am grateful for the exceptional effort of my assistant attorneys general and my colleagues across the country in reaching a settlement that benefits our residents.”  

In signing the settlement, DIFS and Attorney General Nessel were joined by 52 state regulators, and attorneys general from all 50 states and the District of Columbia. The settlement was reached in coordination with the attorneys general, 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 (USTP), 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. 

Mr. Cooper’s violations of state and federal laws included impermissible mortgage origination fees and charges; missed tax payments from borrower escrow accounts; failure to terminate private mortgage insurance when conditions were met; mishandling of loan modifications and servicing transfers; and wrongful foreclosures.   

The coordinated government agreements assessed four main penalties and organization changes:  

  1. Refunds and other retributions approaching $90 million to more than 115,000 consumers in 53 states and jurisdictions;
  2. Civil monetary penalties and government reimbursement in excess of $6.5 million;
  3. Enhanced servicing standards for three years; and
  4. Additional regulatory oversight and corporate disclosure going forward to ensure the company maintains adequate risk and compliance programs. 

In 2012, Nationstar began purchasing mortgage servicing portfolios from competitors and grew quickly into the nation’s largest non-bank servicer. As loan data was transferred to Nationstar, borrowers who had sought assistance with payments and loan modifications sometimes fell through the cracks, the lawsuit alleged. Borrowers in this category will receive a guaranteed minimum payment of $840 as part of the settlement. In Michigan, about 220 borrowers qualify for this payment, a total of $184,000.   

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. In Michigan, about 152 borrowers qualify for this payment, a total of $38,000. 

A settlement administrator, Rust Consulting Inc., will send a claim form to eligible borrowers in 2021. Nationstar has already provided some of the relief outlined in the settlement. Additional restitution will only become available following the court’s approval of the settlement. 

Today’s final order resolves all outstanding issues that stem from the coordinated CFPB and state regulator examinations that began in 2014. State regulators retain jurisdiction over this order and nothing in the agreement impacts state regulators from supervising the ongoing licensing and compliance obligations of Mr. Cooper. Should additional violations occur, or if issues are not addressed sufficiently, the company remains subject to further regulatory actions.   

The DIFS’ settlement agreement and consent order may be found on the Conference of State Bank Supervisors website.  

Click here to view a copy of the Attorney General’s settlement filing that was submitted to the court. 

Michigan consumers with questions, concerns about financial services, or who wish to file a complaint, may call DIFS toll-free 8 a.m. to 5 p.m. Monday through Friday at 877-999-6442 or file a complaint online.  

The mission of the Michigan Department of Insurance and Financial Services is to ensure access to safe and secure insurance and financial services fundamental for the opportunity, security, and success of Michigan residents, while fostering economic growth and sustainability in both industries. In addition, the Department provides consumer protection, outreach, and financial literacy and education services to Michigan residents. For more information, visit DIFS’ website or follow the Department on FacebookTwitter, or LinkedIn.