Nationstar Rejects Borrower for Covid-19 Modifications Class Action

This class action concerns homeowners with mortgages insured by the Federal Housing Administration (FHA) and serviced by Nationstar, who fell into default because of Covid-19. During the emergency, the FHA added Covid-19 Recovery Loss Mitigation Options to help borrowers under strain to keep their homes. But the complaint alleges that Nationstar improperly declared certain borrowers to be ineligible for these options.

Lenders for FHA-insured mortgage loans must comply with certain regulations set forth in the Single Family Housing Policy Handbook (SF Handbook). Because of the Covid-19 emergency, certain Covid-19 Recovery Loss Mitigation Options were added for those impacted by the emergency.

These options were meant to gives these borrowers “options to bring their Mortgage current” that “may reduce” the principal and interest (P&I) portion of their payments, to reduce the risk that they would go into default again and to help the country recover from Covid-19.

The complaint reviews requirements for certain modifications, which hope to achieve a 25% reduction in P&I payments. However, the complaint alleges the modification is not required to reduce the P&I payment. Instead, it alleges the rules require that the lender “must offer the Borrower the lowest monthly P&I payment achieved under the Covid-19 Recover Modification. If the Borrower affirms that they can make the offered payment, then the [lender] must complete that option.”

However, the complaint claims Nationstar has been rejecting borrowers by telling them they are not eligible because the modifications would not reduce their P&I payment. The complaint argues that the “may reduce” language does not mean the modifications must reduce this payment.

A class and a subclass have been defined for this action:

• The class is all borrowers in Ohio, during the applicable statute of limitations period (1) who have mortgage loans secured by residential real property (2) whose mortgages are insured by the FHA, (3) whose mortgage loans are serviced by Nationstar (4) who tried to get loss mitigation relief because of the direct or indirect impact from the Covid-19 National Emergency, and (5) who were denied eligibility for a Recovery Modification because the P&I portion of their monthly mortgage payment would not have decreased. (See the complaint for exclusions.)
• The Fair Debt Collection Practices Act Subclass is all borrowers in Ohio, during the applicable statute of limitations period (1) who have mortgage loans secured by residential real property (1) whose mortgage are insured by the FHA, (3) whose mortgages are serviced by Nationstar (4) whose mortgage loans were in default at the time Nationstar obtained servicing rights to them (5) whose loans are not owned in whole or in part by Nationstar, (6) who tried to get loss mitigation relief because of the direct or indirect impact from the Covid-19 National Emergency, and (7) who were told they were denied eligibility for a Recovery Modification because the P&I portion of their monthly mortgage payment would not have decreased. (See the complaint for exclusions.)

Article Type: Lawsuit
Topic: Loans
Tags: Covid-19 Related, FDCPA, Mortgage or Loan Modifications, Mortgage-Related Unfair Practices, Servicing Your Mortgage