Shellpoint Mortgage Servicing Failure to Cancel PMI Class Action

NewRez, LLC services mortgages as Shellpoint Mortgage Servicing. The complaint for this class action alleges that the company has charged mortgage customers for private mortgage insurance (PMI) premiums, even after the PMI has terminated. The complaint claims Shellpoint has violated the Homeowners Protection Act (HPA) and Illinois state laws and breached its contracts with customers.

The class for this action is all individuals in Illinois (1) who have or had a mortgage serviced by Shellpoint (2) for which Shellpoint continued to collect PMI (3) after the termination date of the PMI when the loan was first scheduled to reach a 78% threshold, (4) between June 6, 2019 and the date the class is certified in this case.

Martha E. Aguinaga bought a condominium in Chicago, Illinois with a mortgage loan from Countrywide Home Loans in 2006.

Aguinaga started out paying PMI of $189.59 a month. According to the Mortgage Insurance Disclosure, she could ask for cancellation of the PMI on either of two dates: “the date the principal balance of [the Loan] is first scheduled to reach 80% of the original value of the property” or “the date the principal balance of [the Loan] actually reaches 80% of the original value of the property.”

Also, the PMI was to automatically terminate when the loan was “first scheduled to reach 78% of the original value of the property” as long as she was up-to-date on her payments.

In January 2019, she wrote to Ditech Loan Servicing, LLC, her mortgage servicer at the time, requesting cancellation of the PMI because she believed she had met the 80% requirement. But the complaint claims that Ditech told her she was only at 84.7%. It also said the PMI was scheduled for cancellation on March 1, 2021.

Shellpoint acquired or began servicing the mortgage later in 2019. In February 2020, Aguinaga wrote to Shellpoint, believing she might have met the 80% threshold, and asked for cancellation of the PMI. The complaint claims her principal balance at the time was 77.4%. But Shellpoint denied her request and claimed her loan balance was only at 79.4%.

Shellpoint denied her a second time as well. The complaint quotes the company as saying, “Because your property’s value has not increased, your property’s LTV (loan-to-value) ratio has not decreased to 70% or less—which is what’s required to cancel PMI on a Fannie Mae-backed loan as a result of home improvements or property-value increases.”

The complaint asserts, “PMI cancellation was not dependent on the Property’s value increasing and the LTV threshold for automatic cancellation was 78% per the terms of the Loan and the HPA…”

In all, Aguinaga sent Shellpoint four requests for cancellation. She then complained to the Consumer Financial Protection Bureau (CFPB) and eventually to the Illinois Attorney General.

Shellpoint finally canceled the PMI in May 2022. The complaint alleges that Aguinaga was forced to make PMI payments long after the PMI should have automatically terminated, according to her agreements.

Article Type: Lawsuit
Topic: Loans
Tags: Breach of Contract, Mortgage-Related Unfair Practices, Private Mortgage Insurance, Servicing Your Mortgage