He says he called before missing a payment - his credit took a 120-day-late hit anyway
A Mississippi veteran says his mortgage servicer told him to fall behind on purpose - then reported him late anyway and moved to take his home.
The homeowner sued NewRez, LLC, which operates as Shellpoint Mortgage Servicing, on August 13, 2026, in the US District Court for the Southern District of Mississippi. He is asking a judge to halt a foreclosure sale set for August 26.
The filing lays out a servicing dispute from the borrower's side. He bought his Gulfport home in January 2025 with a VA loan from Veterans United Home Loans, and Shellpoint serviced it. When he lost his job around October 2025, he says he called the company before missing a single payment, hoping to stay current until he found work.
What he got, according to the lawsuit, was bad advice. He says Shellpoint told him he had to miss his November payment before he could qualify for forbearance - a pause on payments for borrowers in hardship. The suit says that statement was false.
Shellpoint did grant the forbearance, running it from December 1, 2025 to February 28, 2026, then extending it to March 31, the filing says. The borrower says he was assured his payments would not be reported late during that stretch. On March 31, 2026, the company reported the loan 120 days late, according to the filing, which includes a screenshot from his credit report showing the "120 Days Late" flag. He says the result was immediate: damaged credit and no way to refinance.
The heart of the case is loss mitigation - the set of options a servicer is supposed to weigh to keep a borrower out of foreclosure. He says Shellpoint reviewed some options but passed over others, including a VA partial claim, which lets a veteran defer up to 25 percent of the unpaid balance until the loan matures. Instead, the filing says, the servicer pushed him toward a modification that would raise his interest rate. It claims Shellpoint's refusal to weigh other options "was solely designed to increase Shellpoint's profit for servicing the loan." He says the company then placed him into a loss-mitigation program without his consent.
The language sharpens from there. The suit says Shellpoint "has lied to the borrower regarding credit reporting during forbearance and the availability of loss mitigation options." According to the filing, after the borrower complained to the Department of Veterans Affairs, the Mississippi Attorney General, and the Consumer Financial Protection Bureau, Shellpoint referred his loan to the Padgett Law Group for foreclosure - a step he frames as retaliation. The firm, named as substitute trustee, published notice of a nonjudicial foreclosure set for August 26, 2026.
There is a VA-specific angle servicers will notice. The borrower says federal rules require the agency's approval before any foreclosure on a VA-backed loan, and that it appears Shellpoint moved ahead without getting that approval in time.
The suit brings three claims: a violation of the Real Estate Settlement Procedures Act, or RESPA, for failing to evaluate all loss-mitigation options and give written notice of them; a request for an injunction to stop the sale; and breach of the deed of trust's duty of good faith and fair dealing. The borrower is asking for actual damages, damages for emotional distress, attorneys' fees, and RESPA statutory damages of up to $2,000 per violation.
For servicers, the allegations track familiar compliance pressure points: what a borrower is told about eligibility timing, how a loan is reported during forbearance, whether every loss-mitigation option is documented in writing, and - on VA loans - whether approvals are locked down before a file goes to foreclosure counsel.
None of these claims has been tested, and no court has ruled on any of the allegations, which remain unproven.
