Class Action Claims Nationstar Mortgage Unlawfully Failed to Pay Interest on Escrow Funds in California

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Nationstar Mortgage—Mr. Cooper—has failed to pay interest on mortgage borrower funds held in escrow in violation of California law, a proposed class action lawsuit claims. 

The 12-page suit, filed June 30 in federal court, alleges Nationstar’s non-payment of interest on escrow amounts oversteps California law requiring mortgage lenders to pay a minimum of two percent in simple interest on money received in advance from the borrower to satisfy tax and insurance obligations. The plaintiffs allege Nationstar, rather than make lawful interest payments on funds kept in escrow, retained the money for itself.

According to the case, the plaintiffs, a married couple, bought a single-family home in San Marcos, California around October 19, 2018, entering into a mortgage loan agreement with lender loanDepot.com, LLC. In a letter dated November 5, the consumers were notified that responsibility for servicing their mortgage, including the collection of all associated payments, would be transferred to Nationstar effective December 1, the suit says.

The plaintiffs timely paid the required escrow funds, amounting to roughly $1,000 each month, from December 2018 through March 2019 into an account maintained by Nationstar, the lawsuit continues, adding that the defendant continued to service the mortgage until around March 22, 2019, when the consumers refinanced their home through a new mortgage loan agreement with LoanFlight Lending, LLC. That mortgage agreement also required monthly escrow payments similar to those stipulated in the plaintiffs’ prior mortgage agreement, according to the case. 

Per the suit, the plaintiffs again refinanced their home in early March 2020. In an April 23 letter, the plaintiffs were notified that the servicing of their new mortgage, including the collection of all payments, would be transferred to Nationstar as of May 1, 2020, according to the case. The terms of the plaintiffs’ 2020 mortgage required them to make escrow payments to the lender under the same terms and for the same purposes as their 2018 mortgage, the suit says, noting the 2020 mortgage also obligated Nationstar to pay interest on escrow funds.

The lawsuit alleges, however, that Nationstar has not made interest payments to the plaintiffs, nor provided any record that interest was accruing and due to the homeowners, at any time during or after December 1, 2018 to March 22, 2019 or May 1, 2020 through the present. Instead, Nationstar has kept the interest that accrued on the plaintiffs’ escrow funds, unjustly enriching itself, the lawsuit alleges.

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