Mortgage-servicer faces allegations of foreclosure fraud

CORDOVA, TN (WMC) -

A Shelby County Circuit Court lawsuit and government records revealed a pattern of fraud allegations against mortgage-servicing company Nationstar Mortgage.

The WMC Action News 5 Investigators launched an investigation of the Dallas-based mortgage-servicer after it foreclosed on the Cordova, Tennessee, home of Linda Howard. Howard and her husband had owned the home since 1998. Her attorney Kevin Snider produced records that proved Howard never missed a payment since Nationstar Mortgage started servicing her mortgage in 2011.

Also according to the records, Nationstar Mortgage suddenly started refusing her monthly payments in February of this year. From February to May, the company sent her payments back with statements posting thousands of dollars in unexplained fees like "property inspections" and "disbursement insurance."

"I wrote them. I called them. And I got no response," Howard said. 

Snider said Nationstar Mortgage kept returning Howard's payments and kept ignoring her requests for explanation of the fees until it foreclosed on her house in May, then sold it at auction. "Nationstar improperly foreclosed on the property," Snider said. 

Snider filed a lawsuit on Howard's behalf in Shelby County Circuit Court. The suit alleges Nationstar Mortgage committed negligence, fraud, breach of contract, breach of the implied consent of good faith and fair dealing, violations of the Tennessee Consumer Protection Act and unjust enrichment based on "...improper, inaccurate and fraudulent representations" of "...improper or excessive late fees" designed to force the Howards into foreclosure "...so that (Nationstar Mortgage) could acquire the property with its large equity at a bargain basement price."

"I don't understand it. I never missed a payment," Howard said. "I don't have a house anymore."

"The Howards made their payment every month. How are these payments being applied? What are the extra charges for?" asked Snider. "They have never been given an explanation. This is a way to garner, if you will, extra fees, extra charges, extra expenses to essentially force them into foreclosure so that Nationstar Mortgage can sell their home."

According to the federal Consumer Financial Protection Bureau, Nationstar Mortgage has registered 14,013 mortgage servicing-related complaints, the fifth most behind Bank of America, Wells Fargo, Ocwen and JPMorgan Chase. Spokesperson Sam Gilford said the bureau neither comments on nor confirms federal investigations of mortgage-servicing companies.

Tennessee Department of Commerce & Insurance spokesperson Kevin Walters said the agency has logged 24 mortgage-servicing complaints against Nationstar Mortgage since 2014. Narratives from the complaints include the following allegations:

"...consumer claims (Nationstar Mortgage) will not give an explanation of refused payment, nor do they show the money they are holding in suspension..."

"...consumer claims (Nationstar Mortgage) used deceptive tactics to steer consumer into foreclosure..."

"...consumer claims (Nationstar Mortgage) never released the lien when consumer purchased the home four years ago and said it would respond within 6 days (and did not respond)"

Kevin Solodar of Dallas, Texas, unsuccessfully filed a petition on Change.org in an attempt to encourage the Federal Trade Commission to "investigate Nationstar Mortgage for abusive servicing practices." He produced financial documents that indicated Nationstar Mortgage may have misapplied his mortgage escrow refund to his mortgage interest during a bankruptcy. "They are a foreclosure mill," Solodar said. "They buy risky mortgages --  people who are unemployed, people who are in bankruptcy -- and do what they can to get the house and sell it."

Kelly Ann Doherty, senior vice president of corporate communications for Nationstar Mortgage, issued this statement:

"We work hard to impress our customers through caring service. We are not perfect, but we have made tremendous progress on our journey to deliver radical service for our nearly 2.5 million customers. For example, customer complaints are down over 50% over the last two years, our current Better Business Bureau rating is an A+ and we have earned Fannie Mae's highest servicing rating for the second year in a row. We also have a legacy of assisting homeowners in the midst of the financial crisis. Since 2010, we have helped more than 600,000 customers stay in their homes through workout solutions. While it is our policy not to comment on pending litigation, I can share that integrity is core to our business and essential to every service we perform. When we collect a payment on behalf of the owner of the loan, our team follows a comprehensive compliance and risk management system, which includes adhering to state and federal regulations."

In 2014, Nationstar Mortgage settled a New York lawsuit, alleging the company illegally sold mortgage loans without notifying investors.The settlement's terms were kept secret.

Howard and her husband must vacate their home by September 30. She said she realizes there's no way to get her home of 18 years back, but she wants Nationstar Mortgage held accountable. "I'm not going to sit back and watch them do this because there's other people out there who are probably going through the same thing," she said.

Complaints concerning Nationstar Mortgage can be forwarded to Andy Wise at awise@wmctv.com. They should also be filed with your state consumer affairs office:

* Tennessee Department of Commerce & Insurance

* Mississippi Attorney General's Consumer Protection Division

* Arkansas Attorney General's Consumer Protection Division

Copyright 2016 WMC Action News 5. All rights reserved.

Mortgage Market Updates

You might remember the subprime mortgage crisis that began around 2007 and might be wondering to yourself if that could ever happen again. I have been reading and researching lately about mortgage default rates and trends which leaves me wondering if the United States could ever have a mortgage crisis like the one that occurred in the early/mid 2000s. 

It's no secret that foreclosures are still occurring throughout the United States. Bankrate.com publishes these rates periodically. According to Bankrate.com, “Foreclosure Filings increased 5.3 percent nationally from April to May 2017.” The national average for May was 1 in every 1,636 housing units is in foreclosure. The Top 10 states are as follows:

Rank State Total housing units Ratio of homes in foreclosure*
(1 in every …)
1 New Jersey 3,577,942 515
2 Delaware 414,416 753
3 Maryland 2,410,256 1,006
4 Illinois 5,303,675 1,057
5 Oklahoma 1,689,427 1,081
6 Nevada 1,192,083 1,108
7 Florida 9,094,999 1,140
8 New Mexico 909,565 1,168
9 Ohio 5,140,902 1,176
10 South Carolina 2,174,319 1,186

In a recent article in USA Today, ‘A Bad Idea’: More New Mortgages are Risky Ones’ indicated that trends are toward home loans guaranteed by the Federal Housing Administration that typically require down payments of just 3-5%. These FHA-backed loans are increasingly being offered by non-bank lenders with more lenient credit standards than most major banks. In addition, the article goes on to say that there are early signs of trouble in the mortgage market which add to concerns generated by recent “increases in delinquent subprime auto loans, personal loans and credit card debt.”

FHA loans comprised 22% of all mortgages for single-family purchases in 2016. The nations biggest banks have largely pulled out of the FHA market leaving non-banks like Quicken Loans and Freedom Mortgage to fill the void. According to the article, the worry is that if home prices peak and then dip, homeowners who put down just 3-5% will owe more on their mortgages than their homes are worth, increasing the incentive to default. The article presents other insights including one the publisher of Inside Mortgage Finance who basically says the fears of another housing crisis are unfounded, ‘noting Federal Reserve officials have complained that FDA loan standards have been too rigorous.’

In another article posted on CNN.com entitled, “Are we Heading Toward Another Subprime Mortgage Crisis,” Mr. William Poole (former president and CEO of the Federal Reserve Bank of St Louis) provided commentary and opinions on the current mortgage market.

“According to Freddie’s 2016 annual report, Expanding access to affordable mortgage credit will continue to be a top priority in 2017. Fannie/Freddie have redefined ‘subprime’ to a credit rating of below 620; previously these firms and banking regulators had used 660 as the dividing line that define a subprime borrower. Now by using the lower number, they may be buying even weaker mortgages than before the financial crises.”

Mr. Poole is concerned that we are headed to another housing crisis.

While the increase in defaults, delinquencies and foreclosures may alarm some, as note investors, this presents us with an opportunity to help. As we invest in non-performing notes, we can help home owners stay in their homes and work with the borrower who wants to make payments, but may not have been able to work with the bank or the bank may not be willing to work with the borrower. By helping the borrowers stay in their home and getting them to re-perform on their note, we are helping our communities stay healthy and free of blighted properties.