Paid off mortgage, kept the house, still got tagged derogatory on all three reports
A borrower alleges Mr. Cooper kept reporting his mortgage as derogatory - months after he'd paid it off and walked out of Chapter 13.
The lawsuit, filed September 30, 2026 in the US District Court for the Northern District of Texas, names Nationstar Mortgage LLC - which does business as Mr. Cooper - alongside Equifax Information Services LLC, Experian Information Solutions Inc., and Trans Union LLC. All four defendants, the suit alleges, violated the Fair Credit Reporting Act by continuing to report a closed, fully paid mortgage as a derogatory tradeline tied to a bankruptcy wage earner plan.
The borrower secured a mortgage on his primary residence in or around January 2018. When unforeseen circumstances hit, he filed for Chapter 13 bankruptcy protection in February 2021. His Chapter 13 plan specifically required him to keep making mortgage payments directly to Nationstar, outside the bankruptcy estate.
He did. Every payment, on time, according to the suit. He kept the home. He still lives there.
On November 26, 2025, the borrower received his Chapter 13 discharge. That should have closed the book. It didn't.
When he pulled his three-bureau credit report in May 2026, the filing says, all three agencies were still carrying the Nationstar mortgage with a payment status of "Wage Earner Plan," an account rating of "Derogatory," and creditor remarks tying the debt to the bankruptcy. Equifax's version showed a high balance of $0.00 and a last payment date frozen at January 1, 2021. The filing says the accurate high balance was $181,623 and the account should have read "Paid/Closed" with a zero balance.
The story those reports told any lender was completely wrong, the suit alleges - that the borrower had surrendered the property, converted the mortgage to unsecured debt, and walked away through bankruptcy. The filing calls this "a significant misrepresentation of this fully paid and closed account."
From there, the borrower tried the dispute process. On June 16, 2026, he sent direct disputes to all three bureaus, spelling out the inaccuracies and asking for corrections under the FCRA.
What came back was not encouraging. Equifax responded on July 7, 2026. No substantive changes. No disputed notation on the account. Experian responded on August 18, 2026. Same result. Trans Union, according to the suit, never responded at all.
An updated tri-merge report pulled after the dispute cycle confirmed nothing had moved. Same derogatory rating. Same wage earner plan status. Same bankruptcy remarks. Three disputes, zero corrections.
The suit then turns to Mr. Cooper as the company that supplied the data to the bureaus in the first place. The filing alleges Nationstar "knows how to report the Nationstar mortgage accurately" and calls its response to the bureaus "willfully reckless." More pointedly, the suit claims Mr. Cooper knows the current reporting "materially misleads lenders" into believing the borrower surrendered the property - and kept sending the same data anyway after being put on notice.
On the legal claims, the bureaus are accused of failing to follow reasonable accuracy procedures when preparing the borrower's credit reports, and then failing to properly investigate his disputes once he flagged the errors - both obligations the FCRA imposes on credit reporting agencies. Mr. Cooper, as the company feeding the data to those agencies, faces a separate FCRA claim for allegedly failing to run a reasonable investigation after the bureaus forwarded the borrower's dispute. The filing also alleges all three bureaus deviated from the Metro 2 format - the industry-standard method for reporting consumer credit data - in how they handled the account.
The borrower seeks actual, statutory, and punitive damages, a court order requiring the defendants to reinvestigate and correct his reports, plus attorney's fees and costs. A jury trial has been demanded.
For servicers and compliance teams, the case is a clean illustration of a recurring exposure: when a borrower pays a mortgage through a Chapter 13 plan rather than surrendering the collateral, getting the post-discharge reporting wrong can hand plaintiff's counsel a textbook FCRA complaint - and the data supplier's dispute response becomes the centerpiece exhibit.
The claims in the lawsuit are allegations, and no court has made any findings on the merits.
