A new investor lawsuit filed against Nationstar was reported by Reuters, in an article called, “Securities lawsuit says Nationstar concealed illicit practices,” by Dena Aubin on June 5, 2015. The case is City of St. Clair Shores Police and Fire Retirement System v. Nationstar Mortgage Holdings et al, U.S. District Court, Southern District of Florida, No. 15-cv-61170.St Clair v Nationstar Complaint
Of interest from the Complaint, the investors allege:
Until late 2013, Ocwen Financial Corporation (“Ocwen”) and entities affiliated with Ocwen had grown to become the nation’s largest non-bank subprime mortgage servicer by purchasing mortgage servicing rights (“MSRs”) from banking entities who no longer wanted to service their own portfolios due to increased regulatory attention. 4. However, by late 2013, federal regulators, followed in early 2014 by New York state regulators, commenced regulatory enforcement actions against Ocwen accusing it of illegally gouging customers and improperly profiting from doing so. By 2014, the Ocwen-related entities, mired in litigation and facing delisting proceedings, began retreating from the loan serving industry. 5. Nationstar grew its own portfolio exponentially by purchasing MSRs from Ocwen and from banks that Ocwen could no longer purchase from, promising that due to the Company’s own superior loan handling proficiencies and ability to comply with the law while profitably servicing loans, Nationstar could be profitable where Ocwen had not been. Beginning in early 2014, Nationstar began acquiring tens of millions of dollars of MSRs from Ocwen and other bank entities.
However, unbeknownst to investors, throughout the Class Period defendants knew or recklessly disregarded that: (a) Nationstar’s deficiencies in management control and supervision rendered it unable to comply with laws and regulations applicable to servicing MSRs; (b) Nationstar was gouging mortgagors – and illegally enhancing its profits through unsustainable means – via illicit practices, such as charging for repeated, unnecessary inspections, which resulted in additional late payment fees, and by pressuring mortgagors to carry out expensive modifications and refinancing of their mortgages;
. . .
(d) Heightened regulatory scrutiny into MSR transferring and servicing – including a probe into Nationstar’s own loan servicing practices launched by the New York State Department of Financial Services (“NY DFS”) in March 2014 – had significantly increased Nationstar’s costs of servicing MSRs and diminished the profitability and carrying value of the Company’s MSR portfolio; (e) In order to deflect regulatory scrutiny in the wake of the regulatory enforcement actions taken against Ocwen, Nationstar had abandoned certain of its own abusive loan servicing practices and adopted others required by regulators, which had made its loan servicing business less profitable and rendered Nationstar’s MSR portfolio less valuable to the Company;
This lawsuit by investors against Nationstar for padding its profit projections with loan servicing income based on illegal practices and that had to be ceased (shutting down such a lucrative profit source for said investors) should be interesting to watch. Funny how wealthy investors can throw enough money at lawyers and investigators to find out exactly what went down. Meanwhile, the parties directly damaged by the bad acts of Nationstar and Ocwen, its source of loans and bad ideas, parties such as the borrowers, consumers, homeowners were already poured out by the courts with nary a listen for their claims of damage from these harmful practices. Poured out onto the street, no less. Literally.
Sometimes it would seem that the nicer your shoes, the shinier your justice. At any rate, I am optimistic that the investors’ attorneys will uncover meaningful and interesting discovery regarding these shady practices.
Please don’t think I oppose the investors. I fully support their right to pursue justice too. Perhaps I am just a wee bit antagonized by how borrowers/consumers are treated by the courts compared to other litigants. And I might be the weensiest bit jealous of their war chest given the resources needed to bring down the Goliaths.
Speaking of war chests, it’s too bad that virtually none of the National Mortgage Settlement dollars actually made it into the hands of the homeowners affected, or into the coffers of law firms willing to represent homeowners at discounted fees, or pro bono, with the relief funds. Are you listening, Arizona Legislature? We remember that you swept half of the homeowners’ money by threatening then-Attorney General Horne’s entire budget. And Attorney General Horne? We aren’t so certain that you fought all that hard for that homeowner money, given your speech to one homeowner group about having to have panels to determine who “deserved” relief, given the moral hazards involved. And you weren’t talking about the “moral hazards” presented by bailed out banks being allowed to dictate the terms of their own civil penalties while keeping their jobs and exorbitant bonuses. But hey, somebody has to keep Bergdorf Goodman and the Upper East Side in business.
Also, Jan Brewer? We remember that a lot of homeowner money was funneled to for-profit private prisons run by cronies. Because what could be wrong or morally hazardous about profiteering off of locking up petty, non-violent criminals?
A lot of the money was never disbursed, and some of it was disbursed to “non-profits” with Board Members consisting of lawyers from the same firms representing the wrongdoer banks, such as Wells Fargo.
We aren’t bitter though. We’ll keep fighting for the Arizona homeowner.