New York’s top bank regulator asked Nationstar Mortgage LLC for information about “explosive growth” in its mortgage-servicing business, citing hundreds of consumer complaints about the company’s practices.
Benjamin Lawsky, superintendent of New York’s Department of Financial Services, also asked about Nationstar’s apparent failure to fund 141 loans in a letter to Nationstar Chief Executive Officer Jay Bray.
“We have received hundreds of complaints from New York consumers about your company’s mortgage practices, including problems related to mortgage modifications, improper fees, lost paperwork, and numerous other issues,” Lawsky said in the letter.
The request marks an expansion of Lawsky’s investigation of non-bank mortgage servicers. U.S. officials have also raised concerns that mortgage servicing is increasingly being transferred from banks to specialty firms that don’t face the same degree of regulatory oversight.
Lawsky last week said he was probing possible conflicts of interest at Ocwen Financial Corp. and four related firms that could harm borrowers and push homeowners into foreclosure.
Nationstar had fallen 3.5 percent to $29.99 at 2:05 p.m. New York time after dropping more than 5 percent on news of Lawsky’s letter. Shares are down 19 percent this year. Ocwen slid 0.2 percent to $37.90, bringing its 2014 decline to 32 percent.
“We intend to comply fully and transparently with Mr. Lawsky’s request, just as we do when working with the dozens of state and federal regulators who oversee our business and industry on a daily basis,” Nationstar’s Bray said in a statement.
Nationstar, which is majority owned by Fortress Investment Group LLC, has experienced rapid growth as it takes over mortgage servicing from banks that are looking to offload their loan-collection work. In the letter, Lawsky said that the unpaid principal balance serviced by the Lewisville, Texas-based company had more than doubled to $283.3 billion in December 2013 from $126.5 billion a year earlier.
Lawsky said that Nationstar may lack the capacity to handle the growth, putting homeowners at risk. He asked the company to provide a detailed breakdown of its portfolio, the number of staff in each business unit, an organization chart, a description of acquisitions of mortgage-servicing rights and a list of third-party vendors, among other materials.
In a speech last month, Lawsky said that four of the top ten mortgage-servicers are non-banks, and that those four service more than $1 trillion worth of loans.
Steven Antonakes, deputy director of the Consumer Financial Protection Bureau, said last month in a speech to the mortgage industry in Florida that poor treatment of borrowers by companies that take over loans from other servicers “will not be tolerated.”