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Nationstar and Bank of America Balloon Payment Class Action Lawsuit

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This lawsuit claims that systemic and improper collusion between Nationstar Mortgage Holdings and Bank of America to charge homeowners inflated amounts of principal on their mortgages based upon late fees incurred throughout the term of the loan resulted in “balloon payments” at the end of the term.

            One plaintiff in this case, Gloria Hodge, is a mortgagor of a property located in Turlock, California.  She incurred her mortgage on January 5, 2001.  The annual percentage rate was 7.862%, the principal amount of the loan was $50,479, the finance charge was $35,892.74, and the total amount of all payments was $86,371.74.  The repayment was to be spread out over 180 monthly payments.  Over the course of the loan, Hodge made her full monthly payments within the 15-day grace period with the exception of a five-month period in 2005 in which she asked for a change in the payment schedule, which Bank of America accepted.  Her final payment was scheduled to be paid on July 19, 2016.  On June 25, 2013, Hodge received a letter from Nationstar informing her that they had acquired and would service the mortgage of the property.  The letter further stated that the “original loan terms will not change as a result of this transfer.”  On March 2, 2016, Nationstar sent Hodge a statement indicating a payoff balance of $11,469.  This drastically increased balance was the resulted of late fees that had been incurring interest throughout the term of Hodge’s loan.  Nationstar has not been able to produce evidence that Hodge had been late on her loan while it was owned by Bank of America and in the records that they released, Hodge made her payments on time while the mortgage was owned by Nationstar.

            Without substantiating its claims through Bank of America’s prior servicing records, Nationstar claims that due to purported late payments in its mortgagees’ payment histories, additional interest should be charged on the loan, which in turn caused the loan’s principal to be amortized at a drastically reduced rate from that articulated in the loan’s note.  When pressed, Nationstar has failed to provide records of these purported late payments.  Thus Nationstar, acting on behalf of Bank of America, either cannot or will not provide a complete schedule detailing the accrual of increased principal over the entire life.  Because of the refusal of Bank of American and Nationstar to provide complete documentation, it is impossible for plaintiffs and class members to determine whether or not they actually are required to pay the “balloon payments,” which are separate and apart from the payments detailed in the amortization schedules of the underlying loans.  Plaintiffs and class members are either forced to pay extortionate and unsubstantiated additional principal amounts, or else they risk the foreclosure of their property.

            Based on the facts of the case, the plaintiffs allege that Nationstar and Bank of America violated the Real Estate Settlement Procedures Act, violated the Fair Debt Collection Practices Act, were unjustly enriched, breached the terms of their contracts, and breached the implied covenant of good faith and fair dealing.


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