Last month, Nationstar Mortgage, the nonbank also known as Mr. Cooper, disclosed that it was facing a regulatory issue with the California Department of Business Oversight and in the process of negotiating a settlement.
At the time, the company did not disclose what issues led to the potential settlement, but said that one of the matters at hand stemmed from an examination in 2012.
On Monday, the other shoe dropped.
The California Department of Business Oversight announced Monday that it reached a $9.2 million settlement with Nationstar to resolve allegations that the company “overcharged borrowers and failed to properly investigate consumer complaints.”
According to the CDBO, the issues at hand actually stretch back to 2009.
One of the issues is the “per diem” stipulation in California law, which states that lenders cannot start charging interest on mortgages prior to the business day before the loan proceeds are disbursed and may not charge fees that exceed actual recording costs.
The CDBO said that an investigation found that Nationstar violated the statutory limits on per diem interest and recording fee charges.
Nationstar is hardly the first company to run afoul of California’s per diem laws. In just the last few years, Prospect Mortgage, PrimeLending, and United Shore Financial Services, the parent company of United Wholesale Mortgage, all reached settlements with the CDBO over similar issues.
Additionally, California law also prohibits lenders from accepting referral fees from third-party settlement service providers, and the CDBO investigation found that Nationstar accepted “unlawful” referral fees.
And finally, the CDBO investigation found that Nationstar “lacked appropriate policies and procedures to conduct a reasonable investigation of complaints involving errors that arose with a prior servicer.” California state law requires servicers to conduct a “reasonable investigation” when a borrower levies a complaint about alleged servicing errors.
The $9.2 million settlement includes more than $4 million that the company has already refunded, under CDBO direction, to 48,000 borrowers for per diem interest and recording fees.
An additional 1,637 borrowers will receive refunds of $120 plus interest for an origination fee they paid that the CDBO determined to be unlawful.
The combined refunds total more than $4.2 million.
Additionally, Nationstar will pay $4.8 million in penalties for past violations, $250 for each additional violation identified by the independent auditor, and $200,000 to cover the costs of the investigation, the CDBO said.
The settlement also requires Nationstar to participate in independent auditing of its mortgage originations, as well as implement revised policies and procedures to prevent future violations of California law.
“You don’t get to take advantage of consumers in California,” CDBO Commissioner Jan Lynn Owen said. “With this settlement, the DBO has secured millions in refunds for borrowers, penalties to discourage future violations, and ongoing independent audits to monitor Nationstar’s compliance with California law.”
In a statement provided to HousingWire, Nationstar said that it has taken “numerous steps” to address its internal processes to “ensure these errors will not happen again.”
As the company transitioned from Nationstar to its new brand name, Mr. Cooper, the company often said that the change was about more than just a name. And the company held true to that message on Monday.
“The recent launch of Mr. Cooper for Nationstar is a representation of our total commitment to transforming the customer experience. While our journey is not yet complete, we are proud of the progress we’ve made through key strategic investments and cultural and institutional changes,” the company said in a statement. “We look forward to continuing to evolve as a company with a customer-centric culture of compliance and innovation.”
The company said that when it discovered the issues identified by the CDBO, it began refunding its affected customers.
“Nothing is more important than maintaining our customers’ confidence and trust, and we apologize to our valued customers in California,” Jay Bray, chairman and CEO of Nationstar, said in a statement. “We are on a mission to reinvent the mortgage experience and keep the dream of homeownership alive, and we have been and will continue to be transparent and forthright in making things right with our customers.”
Click here to read the full settlement agreement between Nationstar and the CDBO.