Nationstar Mortgage Faces Lawsuit Over Alleged Relief Denial

In the midst of the COVID-19 pandemic, many Americans found themselves financially strained and struggling to keep up with their mortgage payments. Among them were Michelle VonNieda-LaGrassa, Ashley Monroe, and Joanna McKenna, three Pennsylvania homeowners who claim they were denied the financial relief they were entitled to under federal regulations.

According to a lawsuit filed on August 31, 2023, the women allege that Nationstar Mortgage LLC, a loan servicer operating under the name RightPath Servicing, violated regulations set by the Secretary of the United States Department of Housing and Urban Development (HUD). The regulations in question pertain to the servicing of FHA-insured mortgage loans, which are designed to help low-to-moderate income individuals purchase homes.

The crux of the lawsuit revolves around Nationstar's alleged refusal to issue Standalone Partial Claims (SPCs), a type of financial relief that allows borrowers to reinstate their loans without having to make a lump sum payment. The plaintiffs claim that despite having sufficient funds available, Nationstar denied their requests for SPCs.

"Nationstar refused to issue Standalone Partial Claims to reinstate the loans of the Plaintiffs and the Class Members," the complaint reads. This refusal, the plaintiffs argue, is a violation of the Dodd-Frank Wall Street Reform and Consumer Protection Act (DFA), a federal law enacted in the wake of the 2008 financial crisis to protect consumers from abusive financial services practices.

But the alleged violations don't stop there. The lawsuit also accuses Nationstar of refusing to apply funds from the Pennsylvania Homeowner Assistance Fund (PAHAF) in conjunction with partial claims. PAHAF is a program designed to assist homeowners facing financial hardship due to the COVID-19 pandemic. According to HUD guidelines, these funds can be used in conjunction with partial claims, but the plaintiffs allege that Nationstar refused to do so.

"Nationstar refused to apply Homeowner Assistance Fund (HAF) funds in conjunction with partial claims," the complaint states. This refusal, the plaintiffs argue, is a violation of the Real Estate Settlement Procedures Act (RESPA), a federal law that requires mortgage servicers to respond to borrower inquiries and complaints.

The lawsuit seeks damages for the plaintiffs and class members, who the complaint alleges have suffered both pecuniary and non-pecuniary damages as a result of Nationstar's actions. These damages include increased interest payments, legal fees, emotional distress, and potential loss of their homes.

"Plaintiffs and Class Members have suffered pecuniary and non-pecuniary damages, including increased interest payments, legal fees, emotional distress, and potential loss of their homes," the complaint reads.

The plaintiffs also claim that Nationstar's actions constitute a breach of contract and fraudulent or deceptive conduct, in violation of the Pennsylvania Unfair Trade Practices and Consumer Protection Law (UTPCPL).

The lawsuit is a class action, meaning it seeks to represent a group of people who have been similarly affected. The class is defined as borrowers in Pennsylvania with FHA-insured mortgage loans serviced by Nationstar, who sought loss mitigation relief due to the COVID-19 pandemic, had sufficient partial claim funds available, and were refused an SPC or the application of HAF funds in conjunction with a partial claim by Nationstar.

The case is a stark reminder of the financial hardship many Americans have faced during the COVID-19 pandemic, and the crucial role that mortgage servicers play in providing relief. As the case progresses, it will be interesting to see how the court interprets the federal regulations at issue and whether Nationstar's actions were indeed in violation of these regulations.

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