Feb. 12 (Bloomberg) -- Nationstar Mortgage Holdings Inc., the mortgage-servicer majority owned by Fortress Investment Group LLC, agreed to settle a lawsuit in New York in which it was accused of auctioning loans without notifying investors.
State Supreme Court Justice Eileen Bransten in Manhattan in March ordered Nationstar to stop selling some loans after investor KIRP LLC sued to block the auctions. It asked for $35 million in damages. The parties have agreed in principle to settle the case, according to a letter to the judge dated yesterday. Terms weren’t disclosed.
KIRP withdrew a motion for a preliminary injunction after Nationstar canceled the auctions challenged in the suit and agreed not to conduct others of loans held by the trusts at issue in the case without at least 90 days’ notice.
Jonathan E. Pickhardt, an attorney with Quinn Emanuel Urquhart & Sullivan LLP representing KIRP, didn’t immediately respond to an e-mail message seeking comment on the filing. John Hoffman, a spokesman for Lewisville, Texas-based Nationstar, didn’t immediately reply to a voice-mail message.
A potential buyer of $150 million worth of loans, Truman Capital LP, sued the company in the same court four months later for failing to complete the sale. That case was moved to federal court in Manhattan in August.
Mortgage servicers handle billing and collections on behalf of lenders or investors who own the loans, and oversee foreclosures when borrowers default. Banks have been selling the rights to service loans to reduce their risk and comply with new regulations.
Nationstar has been among the buyers, with Tampa, Florida-based Walter Investment Management Corp. and Atlanta-based Ocwen Financial Corp. Ocwen this month was blocked by Benjamin M. Lawsky, New York’s top financial regulator, from buying the rights to service about $39 billion in loans from Wells Fargo & Co.
Lawsky, head of New York’s Department of Financial Services, said today regulators should slow or stop the rapid growth of nonbank mortgage servicers to protect homeowners and ensure that the firms can handle the increased business.
Lawmakers and regulators have been bombarded by complaints that mortgage firms failed to help consumers avoid foreclosures, sometimes losing paperwork and charging excessive fees.
The state court case is KIRP LLC v. Nationstar Mortgage LLC, 650794/2013, New York State Supreme Court, New York County (Manhattan). The other is Truman Capital Advisors LP v. Nationstar Mortgage LLC, 1:13-cv-05945, U.S. District Court, Southern District of New York (Manhattan).
To contact the reporter on this story: Chris Dolmetsch in New York State Supreme Court in Manhattan at
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