Nationstar Mortgage has been slapped with a $5 million fine by the New York Department of Financial Services over findings that it violated the state’s banking laws related to mortgage origination and servicing.
Under a consent order with the department, Nationstar will also donate $5 million in residential real property or first-lien mortgages to one or more non-profit organizations to assist in the rehabilitation of vacant and abandoned properties. Nationstar previously made restitution of $7 million to New York borrowers as a result of the department’s investigation.
“The company’s failure to fully plan for risks associated with its rapid growth exposed borrowers to increased risks, including in some cases, the possibility of costing them additional money,” Financial Services Superintendent Maria Vullo said. “Today’s action ensures that consumers will be protected and that companies are held to account for their failures. I appreciate Nationstar’s cooperation in resolving this matter.”
The department found numerous deficiencies and violations of banking law by Nationstar when it examined the company’s servicing operations between Jan. 1, 2011, and March 31, 2014, and origination operations between March 1, 2012, and March 31, 2014. During these periods, Nationstar saw dramatic growth after it acquired large portfolios of mortgage servicing rights and subservicing rights from various financial institutions that were exiting the mortgage servicing business.
The examinations found that Nationstar did not properly plan for the growth in its business, damaging consumers. The company’s document retention and document management processes showed significant flaws and the controls related to its information technology systems were underdeveloped. Under the consent order, Nationstar is remediating these issues.
Additionally, the consent order provides that Nationstar will identify an independent, third-party consultant to assess the sufficiency of measures the company has taken to address the deficiencies and violations.