The New York Office of the Attorney General (OAG) announced a $500,000 settlement with Champion Mortgage, the Reverse Mortgage servicing division of Nationstar Mortgage, over allegations that claimed Champion failed to provide proper notices and information to reverse mortgage borrowers in order to protect their homes from default or foreclosure. The conditions of the settlement also stipulate that Nationstar is not required to admit nor to deny the findings of the OAG.

As a result of the settlement, Nationstar will pay $500,000 into a relief program spearheaded by New York Attorney General Letitia James called the Equitable Reverse Mortgage Assistance (ERMA) program, launched in 2020 and dedicated to limit instances of displacement among senior homeowners by providing deferred low-cost loans to reverse mortgage holders who are at risk of defaulting because of municipal property taxes, property insurance obligations, or other charges stemming from a temporary inability to pay.

The additional $500,000 in funds will be earmarked specifically for the assistance of Nationstar/Champion customers who avail themselves of ERMA program benefits, according to the attorney general’s office.

The dispute

The core issue according to the New York Office of the Attorney General (OAG) is that Champion Mortgage allegedly sent “misleading” information to its reverse mortgage borrowers in the state of New York, or failed to provide information that was clear in helping borrowers in danger of losing their homes avoid that eventuality. An example cited by OAG includes an incident alleging that Champion sent over 3,000 “pre-foreclosure” letters to reverse mortgage customers whose loans were either in default, or had been accelerated but not yet sued by Champion.

“These letters thereby created the misleading impression that Champion had already sued the borrowers for foreclosure, potentially causing confusion and harm to the senior citizen homeowners who received these notices,” the OAG settlement explained.

OAG also says that in situations where a borrower’s property taxes were paid by the servicer without the borrower’s knowledge, the borrowers in some cases made those payments causing the same property tax payments to have been made twice.

“Champion’s payment of taxes without adequate notice also may have resulted in some borrowers’ inability to make other arrangements or to avoid the costs (or risk of default) associated with tax payments made by their loan servicer,” the settlement said. “By virtue of the facts described above, the OAG finds that certain of Champion’s communications and actions were deceptive and unlawful.”

The settlement

According to conditions of the settlement, Nationstar/Champion “neither admits nor denies the OAG’s Findings,” and has “agreed to this Assurance in settlement of the OAG’s Findings described above and to avoid the time, expense, and distraction of litigation.”

As another condition of the settlement, Champion will pay $500,000 to ERMA, which will assist affected reverse mortgage borrowers at risk of displacement in every New York City borough, as well as Nassau, Suffolk, Albany, Broome, Dutchess, Erie, Monroe, Onondaga, Orange, and Westchester Counties.

Additionally, OAG says that Champion has agreed to modify some of its practices including improving borrower notifications about tax payments on their behalf; use plain language in providing borrowers with information and services that can help them avoid foreclosure or default; and to provide direct contact information to not-for-profit housing counselors, government representatives, legal services organizations, and attorneys for the purpose of helping homeowners to understand and take advantage of all available loss mitigation opportunities.

Champion has also agreed to “comply with New York law when making property payments and communicating with at-risk homeowners,” and ceased sending letters that OAG described as “misleading,” according to an OAG statement.

“This pandemic is harming all Americans, but our senior citizens are especially at risk,” said Attorney General James in a press release announcing the settlement. “No one should have to experience the threat of losing their home, and companies have a responsibility to provide transparency and fairness to at-risk borrowers and homeowners. These funds will provide much needed assistance to ensure our seniors have access to permanent housing, and this action puts companies on notice that we are holding them to their obligations to their customers.”

ERMA’s mission, recent Nationstar history

ERMA is overseen by Special Assistant for Housing & Community Development Kerri White, and the infusion of $500,000 was lauded by organizations including the Center for NYC Neighborhoods and Enterprise Community Partners. The OAG also included a statement from a couple who benefitted from intervention by ERMA, Ann and David Yeaw of Monroe County, who were over $20,000 behind on property tax payments before learning about ERMA and seeking its help.

“We were in dire straits because of everything that had built up in five years because of medical bills and other costs,” said Ann Yeaw in the OAG press release. “If it hadn’t been for ERMA, we wouldn’t be safe today. We were going to lose the home.”

RMD reached out for comment to representatives of Nationstar, but did not hear back by press time. Recently, a dispute arising out of a 2015 purchasing agreement where Nationstar Mortgage acquired the reverse mortgage servicing portfolio of former reverse mortgage lender Generation Mortgage was decided in favor of Nationstar, which has sought indemnification from Generation over certain losses on the purchased servicing portfolio.

Read the settlement at the New York OAG website.

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