Nationstar Mortgage Sued for Failing to Sell Loans

Nationstar Mortgage Holdings Inc. was sued for failing to complete a $150 million sale of residential mortgage loans it offered at auction.

Truman Capital Advisors LP and U.S. Bank NA sued Nationstar Mortgage LLC in New York State Supreme Court in Manhattan yesterday seeking $35 million in damages.

Nationstar told Truman Capital that it was the winning bidder for more than 500 loans, and then a few days later refused to complete the transaction, offering no explanation “other than to say that it ‘has made the decision not to go forward with those sales,’” according to the complaint.

“Nationstar’s decision in that regard was based principally, if not solely, on its belated realization that the reserve prices it had set for, and at which it had agreed to sell, the mortgage loans to TCA was significantly lower than their fair market value,” Truman Capital and U.S. Bank said.

Nationstar had the right to cancel the loan sales under the terms and the conditions of the auction, the company said in a statement. Nationstar said it sued Truman Capital in federal court in California last week seeking a ruling on contracts governing the auction, and believes the New York suit is without merit.

‘Good Faith’

“We attempted to work in good faith with Truman Capital to resolve the dispute,” Nationstar said in the statement. “Unfortunately we were not able to reach a resolution of this matter. So we determined the only way to resolve this matter was to resort to litigation.”

Nationstar Mortgage, based in Lewisville, Texas, and majority-owned by Fortress Investment Group LLC, was the program manager for a title trust participating in the loan deal. U.S. Bank, a unit of Minneapolis-based U.S. Bancorp, sued in its capacity as legal title trustee and participation agent for the trust.

New York State Supreme Court Justice Eileen Bransten in March ordered Nationstar to stop auctioning some loans after a separate investor group, KIRP LLC, sued in the same court accusing the company of holding the auctions at the expense of mortgage-bond investors.

KIRP withdrew its motion for a preliminary injunction after Nationstar canceled three auctions, said it has no plans to conduct any note sale auctions related to six trusts sponsored by Residential Accredit Loans Inc., and will provide 90 days’ written notice if it plans to do so, according to court filings.

About 20 percent of the loans bought by Truman Capital are subject to the KIRP litigation, according to the complaint.

The case is Truman Capital Advisors LP v. Nationstar Mortgage LLC, 652652/2013, New York State Supreme Court, New York County (Manhattan.) The KIRP case is KIRP LLC v. Nationstar Mortgage LLC, 650794/2013, same court.

Before it's here, it's on the Bloomberg Terminal.