New York State’s top banking regulator is raising questions about the capabilities of the mortgage servicing firm Nationstar Mortgage Holdings, demanding details about the company’s staffing levels, modification procedures and affiliated businesses.
In a letter to Nationstar on Wednesday, Benjamin M. Lawsky, New York’s superintendent of financial services, said his office had received “hundreds of complaints from New York consumers†about problems related to the company’s mortgage modifications, improper fees and lost paperwork.
“Our department has significant concerns that the explosive growth at Nationstar and other nonbank mortgage servicers may create capacity issues that put homeowners at risk,’’ Mr. Lawsky said in the letter.
Nonbank servicers like Nationstar have been growing rapidly in recent years, as traditional banks seek to exit the business of servicing subprime mortgages. The nonbank firms say they can service the loan more efficiently and with better customer service than the large banks. Their growth has produced big returns for the companies’ investors, among them Fortress Investments, which is Nationstar’s largest investor. Nationstar is among the largest nonbank servicing companies.
Last month, Mr. Lawsky halted the transfer of $39 billion of mortgage servicing rights to the biggest nonbank servicer, the Ocwen Financial Corporation, citing concerns about its capacity to handle the increased loan volume. Mr. Lawsky has also asked Ocwen for details about the company’s affiliated businesses, which he said could pose multiple conflicts of interest and could put homeowners at greater risk of foreclosure.
Ocwen’s chairman, William C. Erbey, for example, is also chairman of a company that seeks to profit by renting out foreclosed homes.
Mr. Lawsky is asking Nationstar about similar issues, demanding a list of its third-party vendors, including its affiliates, and the procedures that the company takes to prevent potential conflicts.
Mr. Lawsky said Nationstar’s growth has been particularly explosive in New York, where loans serviced by the Texas company have nearly tripled in the last year, to 73,489 at the end of 2013 from 26,111 a year earlier.
The regulator has asked Nationstar for a detailed breakdown of New York loans in foreclosure that it handles.
