When a homeowner files bankruptcy, the automatic stay protects them from foreclosure and other mortgage-related collection actions. However, their mortgage servicer is still required to fulfill certain obligations.
For example, a servicer must:
- Send the homeowner timely notices
- Account for and apply payments made by the homeowner
- Run annual escrow analyses
- File notices regarding bankruptcy-related changes to the homeowner’s mortgage payments
- Provide a final accounting of any payments the homeowner made during their bankruptcy
- File proofs of claim
The Department of Justice’s U.S. Trustee Program recently discovered that three major mortgage servicers (Nationstar Mortgage, LLC, U.S. Bank National Association, and PNC Bank, NA) failed to complete many of the above tasks for more than 60,000 homeowners who filed bankruptcy since 2011. The servicers made more than 76,000 errors that violated the Bankruptcy Code and Federal Rules of Bankruptcy Procedure.
Because of the errors, the U.S. Trustee has required the servicers to provide monetary compensation for impacted homeowners in the following amounts:
- $40 million in credits and refunds from Nationstar
- $29 million in credits and refunds from U.S. Bank (along with waiving $43 million in fees and other charges)
- $5 million in credits and refunds from PNC (along with lien releases and debt forgiveness)
The servicers are also adjusting their internal operations to prevent future errors. These adjustments include enhanced computer systems, better training of employees, increased oversight, and quality control processes.
To read the full report by the Department of Justice, visit here.
Let Our Attorneys Be Your Trusted Advocates
Are you struggling with your mortgage and other types of debt? Bankruptcy might be the right next move. At Buchalter & Pelphrey Attorneys At Law, we are here to not only inform you of your rights and options but also ensure all other parties fulfill their legal obligations. Bankruptcy is designed to be a fresh start for overwhelmed debtors, and we are ready to use our skills, knowledge, and 45+ years of experience to help you succeed.