‘Dual Tracking’: Class Action Alleges Mr. Cooper Mishandled Calif. Mortgage Borrowers’ Loan Modification Requests

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A proposed class action alleges Nationstar Mortgage LLC—aka Mr. Cooper—has intentionally mishandled California borrowers’ foreclosure-related loan modification requests in an apparent effort to prevent the individuals from pursuing loss prevention options. 

According to the case, Nationstar has engaged in the illegal process of “dual tracking,” whereby a mortgage lender requests documents amid processing a submission for a loan modification while at the same time pushing a homeowner through the foreclosure process. 

“This practice has been used by mortgage companies for years, allowing them to trick the homeowner into thinking they will end up with lower monthly payments, but instead they are denied for a modification and left just weeks away from foreclosure with very few options left,” the lawsuit reads. 

Despite the state’s 2007 passage of the California Homeowner Bill of Rights in response to the nationwide foreclosure crisis, Mr. Cooper has nevertheless prevented borrowers from having any meaningful opportunity to negotiate with lenders and servicers prior to foreclosure, and thereby denied them a fair chance to obtain a loan modification and prevent the loss of their homes, the 31-page lawsuit claims.

The plaintiff, a Vista, California resident, alleges Nationstar, throughout the loan modification process, disregarded notice requirements, misrepresented deadlines, allowed employees to sign foreclosure materials without prior knowledge or review of the loan documents and loan status and ultimately foreclosed on her home after receiving her loan modification application. 

“Each of these violate the rights and protections afforded to California homeowners,” the suit charges. 

According to the complaint, the plaintiff was forced to file for bankruptcy in 2015 and found herself unable to keep up with her mortgage payments. In October 2018, Nationstar referred the woman’s account for foreclosure and sent her a notice of default the following month, the suit says. 

The lawsuit claims, however, that a declaration attached to the notice of default, stating Nationstar had “contacted the borrower to assess the borrower’s financial situation and explore options for the borrower to avoid foreclosure” as required by California law, is false in that the defendant did not contact the plaintiff. Had Mr. Cooper contacted the plaintiff 30 days prior to executing the declaration, the plaintiff would have requested a loan modification at that time, the case asserts. As a result of Nationstar’s failure to contact the woman, the plaintiff did not request a loan modification until after she received the defendant’s notice of default around November 21, 2018, according to the suit.

In response to the plaintiff’s loan modification request, Nationstar sent on December 22, 2018 a letter requesting that the woman complete the attached documents by the following month “in order to be evaluated for loss mitigation options,” the lawsuit continues. Per the suit, the letter also stated that the plaintiff would be provided with a letter of acknowledgment informing her of whether her application was complete or whether documents or information were missing once Nationstar received the communication.

After devoting “considerable time and energy into submitting her application” and the necessary documents, the plaintiff filed the forms through Nationstar’s web portal on January 16, 2019, nearly a week prior to the deadline, the lawsuit says. The suit alleges, however, that Nationstar delayed in acknowledging its receipt of the plaintiff’s modification application “until nearly a month later,” on February 14. In its response to the plaintiff, the defendant informed the woman that her application was incomplete in that it was missing her 1099 tax statement and a single additional paystub, among other deficiencies, the suit says. 

Less than a week later, the plaintiff received from Nationstar a letter that said her house would be sold at a public sale in March unless she took action, the lawsuit reads. Once again, the plaintiff, believing the statements relayed to her by Nationstar, thought that the company would evaluate her loss prevention options as long as she cured prior deficiencies in her application, according to the case.

After resubmitting everything through Nationstar’s online portal a week before the deadline and roughly two weeks before her house was to be sold at auction, the plaintiff was once again told by the defendant that her application was incomplete, the lawsuit says, with the hold up this time centering on both Nationstar’s need of a letter of explanation clarifying the information the woman provided in a Profit and Loss Statement and pages the company said were missing from the statement. Per the suit, Nationstar requested the plaintiff resubmit her Profit and Loss Statement by April 7, 2019, upon which the company said it would evaluate all loss mitigation options available to the woman. 

The complaint stresses that even though Nationstar asked the plaintiff to update her Profit and Loss Statement, “the fact remained that it, along with all of the requested documents, had been submitted to Nationstar within the timeframe specified.” Nevertheless, the plaintiff was in the process of resubmitting the documents to the defendant when Nationstar sold the woman’s house via foreclosure sale on March 22, 2019, the lawsuit says.

From there, the plaintiff, confused as to why Nationstar would instruct her to resubmit a profit and loss statement in April when it planned on executing the foreclosure sale on March 22, filed a complaint against the defendant with the California Department of Business Oversight, the case says. 

In all, the lawsuit claims Nationstar’s conduct denied the plaintiff a meaningful opportunity to avoid the foreclosure of her home. The suit says Nationstar’s misconduct, in particular its practice of “dual tracking,” is not limited to the plaintiff but instead “reflects a pattern of willful disregard of California homeowners’ rights and protections” afforded under the state’s Homeowner Bill of Rights. 

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