Nationstar Mortgage Must Face Putative Class Action Lawsuit

Nationstar Mortgage Holdings Inc. can’t duck a mortgage insurance class action lawsuit alleging that the company refused to terminate private mortgage insurance (PMI) in accordance with consumers’ mortgage agreements. Nationstar is being accused of unjust enrichment and breach of contract. According to U.S. District Judge Stewart Dalzell, the lead plaintiff’s first amended complaint contained enough facts to support these accusations.

The plaintiff, Sue Song, originally took out a mortgage loan in the amount of $308,000 from Bank of America in September 2010 and, together with a down payment, used it to purchase a home costing $343,000. Ms. Song was required to pay for PMI insurance because her down payment was less than 20 percent, making her loan-to-value ratio above 80 percent. According to her agreement, Ms. Song was required to pay an additional $174.20 per month on top of her mortgage payment for this product. She claims that she was told by Bank of America that she would no longer have to make these payments if she was current on her payments on the first day of the month after the midpoint date of the loan’s amortization period or when the principal balance of her loan reached 78 percent of the original value of the property – whichever came first.

In 2013, Ms. Song’s mortgage was purchased by Nationstar. By September of the following year, her loan-to-value ratio fell to 78 percent, and by February of 2015 it had fallen to 75 percent. Nationstar, however, never discontinued her PMI and continued to bill her the $174.20 per month. When she called Nationstar and requested that they end her PMI obligation, she was told that her property would need to be appraised at her expense before they would consider it. Not wanting to default on her mortgage, she continued to make the payments.

Nationstar attempted to argue for a dismissal of the breach of contract claim, stating that the disclosure Ms. Song based her claim on was never a part of her mortgage contract. However, the judge held that the Bank of America disclosure is a contract that Nationstar has breached, and that Ms. Song’s unjust enrichment claim is valid.

The case is Song v. Nationstar Mortgage Holdings Inc., case number 2:16-cv-00006, in the U.S. District Court for the Eastern District of Pennsylvania. The plaintiff is represented by Golomb Legal, P.C.