Nationstar Mortgage, the nonbank also known as Mr. Cooper, will pay out more than $1.5 million as part of a settlement with the state of Maryland over allegations that the nonbank illegally charged homeowners for inspection fees.

According to the office of Maryland Attorney General Brian Frosh, Nationstar allegedly passed certain home inspection costs on to homeowners despite it being illegal to do so in the state.

Per details provided by Frosh’s office, Nationstar, acting as a mortgage servicer, orders inspections on properties when the borrower goes into default on their mortgage payments.

The inspections are meant to protect the interest of the lenders that hold an interest in the property.

Maryland law prohibits passing the fees from these inspections on to the borrowers, but Nationstar allegedly illegally charged the inspection costs to borrowers until Jan. 1, 2014 on forward mortgages and February 2016 for reverse mortgages.

In total, Nationstar charged Maryland borrowers more than $1 million in improper fees.

“These inspection charges violate state law,” Frosh said in a statement. “They were performed for the benefit of the lenders, not the benefit of the homeowners. We are pleased that the victims of the illegal charges will be made whole.”

As part of the settlement, Nationstar will return more than $260,000 in fees to the affected borrowers. That’s in addition to the $827,759 that the company already returned during the state’s investigation into the issue.

Additionally, Nationstar is ordered to pay a fine of nearly $490,000 to the state along with $10,000 to cover the costs of the investigation.

Nationstar is also ordered not to collect the inspection fees in the future.

According to Nationstar, the company discovered the issue in 2013 and “quickly updated” its procedures to address the issue.

“We recognize and have resolved the operational issue addressed in this order and have worked tirelessly to identify and correct impacted accounts to avoid significant impact to our customers,” Jay Bray, chairman and CEO of Nationstar, said in a statement provided to HousingWire.

“Over the past few years, we have consistently made investments in new staff, training and technology to enhance our processes, and we are committed to treating our customers responsibly and in full compliance with the law,” Bray added. “Our customers are our top priority, and we’re confident this issue has been successfully contained and thoughtfully addressed.”

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