Banking and Finance Law Daily Mortgage servicers to give $74M as remediation to homeowners in bankruptcy
Tuesday, December 8, 2020

Mortgage servicers to give $74M as remediation to homeowners in bankruptcy

By Thomas G. Wolfe, J.D.

Under separate "Memorandum of Understanding" agreements with the Government’s U.S. Trustee Program, Nationstar Mortgage, U.S. Bank, and PNC Bank address "past mortgage servicing deficiencies" allegedly impacting thousands of borrower accounts in bankruptcy.

Three national mortgage servicers—Nationstar Mortgage, LLC, U.S. Bank, N.A., and PNC Bank, N.A.—have entered into "Memorandum of Understanding" agreements with the Department of Justice’s U.S. Trustee Program (USTP) to "address past mortgage servicing deficiencies impacting homeowners in bankruptcy." Noting that the three companies are to provide more than $74 million in remediation to homeowners for the mortgage servicers’ "systemic bankruptcy servicing errors," USTP Director Cliff White remarked, "Homeowners in bankruptcy are entitled to receive proper and timely notices and to have their payments properly accounted for, consistent with the Bankruptcy Code and Rules The failure of mortgage servicers to comply with those requirements compromises the integrity of the bankruptcy system and the ability of homeowners to receive a fresh start."

Generally, the "Memorandum of Understanding" (MOU) agreements with Nationstar MortgageU.S. Bank, and PNC Bank address noncompliance with the Bankruptcy Code and the Federal Rules of Bankruptcy Procedure that "impacted over 60,000 accounts of borrowers in bankruptcy dating back to 2011" and resulted in: payment application errors; inaccurate, missing, and untimely bankruptcy filings; and/or delayed escrow statements, the USTP stated. Along these lines, the pertinent MOU agreements require the mortgage servicers to implement improvements in their bankruptcy operations to ensure that the errors do not recur.

Remediation, corrective measures. Generally, under the terms of the respective MOU agreements, the mortgage servicing companies have or will provide account credits and refunds to the impacted bankruptcy borrowers. For instance, Nationstar Mortgage has provided nearly $40.7 million in credits and refunds. U.S. Bank has (or will) provide approximately $29 million in credits and refunds, and has "waived approximately $43 million in fees and charges across its mortgage servicing portfolio," including those for borrowers in bankruptcy. Meanwhile, PNC Bank has provided about $5 million in credits and refunds, as well as additional remediation "in the form of lien releases and debt forgiveness."

Further, in addition to the monetary and other remediation measures, the three mortgage servicers have made changes to their internal procedures to prevent the recurrence of deficient bankruptcy servicing practices. For example, the companies have made "enhancements to computer platforms, improvements to vendor and employee training and oversight, and implementation of quality control processes to ensure the accuracy and timeliness of filings in bankruptcy cases and escrow analyses for borrowers in bankruptcy." Consequently, according to the USTP, most remediation and corrective actions "have already been taken by the servicers."

Attorneys: Ramona D. Elliott, Deputy Director and General Counsel, U.S. Justice Department, for the United States Trustees. John Pietz, Deputy General Counsel, for Nationstar Mortgage, LLC. Joseph H. Zwicker, Deputy General Counsel, for PNC Financial Services Group. Phoebe S. Winder (K&L Gates LLP) for Nationstar Mortgage, LLC, PNC Bank, N.A., and U.S. Bank, N.A.

Companies: Nationstar Mortgage, LLC; PNC Bank, N.A.; U.S. Bank, N.A.

MainStory: TopStory BankingOperations EnforcementActions Loans Mortgages

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