An Ohio couple is suing Mr. Cooper Group, claiming a mortgage servicing subsidiary wrongly denied their request for a loan modification that was mandated by law during the pandemic.
In a federal lawsuit filed Nov. 17 in U.S. District Court for the Northern District of Ohio, Eastern Division at Cleveland, plaintiffs James W. Groves and Judith Bartell-Groves claim Nationstar Mortgage LLC, which rebranded as Mr. Cooper Group in 2017, and its loan-servicing subsidiary, RightPath Servicing, violated federal loss mitigation protections put in place during the COVID-19 pandemic.
According to the lawsuit, which seeks class action status, James Groves obtained a mortgage of $108,005 in 2005, and the plaintiffs subsequently “fell upon financial hardships” and defaulted on the loan. Foreclosure proceedings were initiated against the couple in December 2019, and they continue to fight that effort.
The lawsuit states Nationstar acquired the servicing rights to the loan in May 2022, and notified the couple they were in default on the loan as of April 1, 2019.
In July 2021, the Federal Housing Administration (FHA) announced streamlined COVID-19 Recovery options to help homeowners with FHA-insured mortgages who had been financially impacted by the COVID-19 pandemic bring their mortgage current and remain in their homes. Described by FHA as a "COVID-19 Recovery waterfall," it allowed mortgage servicers to offer eligible homeowners who cannot resume making their mortgage payments a reduction in the principal and interest (P&I) portion of their monthly payments.
The plaintiffs contacted Nationstar in July 2022 seeking federal loss mitigation options that had been put in place during the pandemic, but the servicer responded in August by denying the request.
According to the lawsuit, Nationstar denied the complaint by stating that “because of an ‘Insufficient Monthly Payment Reduction,’ specifically stating ‘[t]he required modification terms would result in a principal and interest mortgage payment that is greater than your current principal and interest payment and therefore does not meet the requirements of the program.’”
The plaintiffs maintain that the denial “improperly claimed that the Recovery Modification required a reduction in the P&I portion of plaintiffs’ monthly payments,” and that the servicer had provided “inaccurate information regarding the eligibility requirements for a Recovery Modification.”
In an emailed statement, Mr. Cooper Group said that its policy is to not comment on pending litigation. It nonetheless offered "some background" on the issue.
"When a customer requests that their loan be reviewed for a modification as part of the COVID-19 pandemic mortgage assistance program, we will review all available options based upon the eligibility requirements set forth by HUD and the federal government as well as all applicable laws," the company said. "We are proud to have helped more than 250,000 customers with loss mitigation solutions in response to the pandemic. While we always hope to offer a solution that meets the needs of our customers while complying with all state and federal laws and regulations, in some scenarios, we may be unable to provide a modification given those laws, regulations and eligibility requirements."
In addition to seeking relief from the court for their loan, the plaintiffs also seek class action status, stating that “Nationstar was the largest nonbank home loan servicer in the United States and the fourth largest servicer overall,” and that the pandemic affected “nearly every family in the country.” They add that the size of the class can only be determined through discovery.
The lawsuit seeks actual and punitive damages from the defendants.
