On July 20, a Pennsylvania federal judge confirmed that a class action
suit against Nationstar Mortgage Holdings Inc. could move forward, based
on claims that Nationstar refused to terminate private mortgage insurance
in accordance with the disclosures provided in connection with the loan
The plaintiff who brought the suit, Sue Song, presented enough evidence
against Nationstar to support her claims of breach of contract and unjust
enrichment, U.S. District Judge Stewart Dalzell found.
The case stems from a loan Song took out for $308,000 back in September
2010 from Bank of America to purchase a $343,000 home. On home loans with
loan-to-value (LTV) ratios higher than 80%, banks typically require private
mortgage insurance (PMI), a product that protects investors against borrower
default. Since her loan-to-value ratio was above 80 percent, she was required
to purchase PMI at a cost of $174.20 per month.
At the time she took out the mortgage, Bank of America allegedly provided
a disclosure form which stated that PMI would end if she made her payments
on time and after the midpoint of the loan’s amortization period,
or when the principal balance fell to 78 percent of the home’s value,
whichever occurred first.
According to Ms. Song, she made all her payments on time, and in February
2013, Nationstar purchased the loan from BofA, leaving the original agreements
intact. She said her LTV fell below 78 percent by September 2014, and
by early 2015 was at 75 percent. Nationstar failed to end the PMI automatically
and when requested by Song, refused to cancel payments until she obtained
a full appraisal of the property. The complaint states that Ms. Song continued
to make payments, including the PMI payment portion.
In the suit, the plaintiff contends that Nationstar refused to honor the
agreement terms as laid out in the original BofA loan. The court agreed
with Song, stating that neither her breach of contract claim or unjust
enrichment argument was preempted by the Homeowners Protection Act.
In arguing for dismissal of the breach of contract claim, Nationstar contends
that the disclosure for which Song basis her argument was never part of
the mortgage agreement. Song’s defense was that the promises made
in mortgage disclosures are often considered an important aspect of the
contract. The judge agreed, stating that the BofA disclosure must be accepted
as part of the contract and that Nationstar breached that agreement.
As for the unjust enrichment claim, Nationstar argued that it is conclusory
to assume unjust enrichment because there is a valid mortgage contract
with terms enforceable by law. However, the judge allowed the claim to
remain valid since, at this stage of the suit, the plaintiff can use it
as an alternative to the breach of contract claim. Judge Dalzell also
ruled that the appearance of an incentive to Nationstar by allowing PMI
to remain as part of the agreement is enough to support the unjust enrichment claim.
Song v. Nationstar Mortgage Holdings, Inc. is being heard in U.S. District
Court for the Eastern District of Pennsylvania under case no. 2:16-cv-00006.
Contact Geraci Law Firm at (949) 298-8050 today, or contact NemaDaghbandan
for more information.