Nationstar Class Action Lawsuit Survives Attempt at Dismissal

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A Pennsylvania homeowner’s claim for breach of contract has survived a motion to dismiss by defendant Nationstar Mortgage Holdings Inc.

U.S. District Judge Stewart Dalzell determined that plaintiff Sue Song’s state law claims for breach of contract and unjust enrichment are not preempted by the federal Homeowners Protection Act. Judge Dalzell also determined that Song’s factual allegations are adequate to state claims for relief against defendant Nationstar.

In her Nationstar class action lawsuit, Song alleges the problems started after she was required to take out private mortgage insurance to finance the purchase of her home. Song’s mortgage originated from Bank of America in September 2010. Because the loan-to-value ratio for her mortgage started at over 80 percent, the agreement required her to take out private mortgage insurance.

According to a disclosure Song received from Bank of America, her mortgage insurance would automatically terminate once the principal balance on her loan dropped to 78 percent of the original value of the home, the lawsuit states.

Song says Nationstar purchased her mortgage in February 2013, without modifying its terms. By September 2014, her loan-to-value ratio had fallen to 78 percent, and it was down to 75 percent by February 2015.

Yet Nationstar did not automatically terminate her mortgage insurance then, and it continued to charge her the monthly premium, she alleges. Song says Nationstar refused to terminate her mortgage insurance when she requested it. The company told Song she would have to have the property reappraised at her own cost before it would consider terminating her mortgage insurance, she claims.

Song says she has always kept up with her mortgage payments, and she has continued to pay her mortgage insurance premiums to avoid going into default.

In moving for dismissal, Nationstar argued that Song’s claims are preempted by the federal Homeowners Protection Act. But Judge Dalzell disagreed, holding that the HPA’s preemption provision does not preclude a claim for breach of contract related to a contractual provision governing termination of mortgage insurance.

Song’s claim for unjust enrichment is likewise not preempted, to the extent that it is a pleading in the alternative raising questions about the validity of her mortgage contract, the judge determined.

Nationstar also argued that the mortgage insurance provisions in the Bank of America disclosure never became part of the mortgage contract that is binding on Nationstar. Judge Dalzell declined to address that issue in detail, saying that it would be premature to do so without the benefit of discovery. For pleading purposes, Song’s allegation that the disclosure is a contractual provision binding on Nationstar is adequate, the judge determined.

The judge also declined to dismiss Song’s claim for unjust enrichment, reasoning that she is permitted to plead that theory as an alternative to her breach of contract claim.

Song seeks to represent a plaintiff Class consisting of similarly situated persons. Details of her proposed Class definition were not addressed in Judge Dalzell’s memorandum.

Plaintiff’s counsel is attorney Kenneth J. Grunfeld of Golomb & Honik PC.

The Nationstar Breach of Contract Class Action Lawsuit is Sue Song v. Nationstar Mortgage Holdings Inc., Case No. 2:16-cv-00006, in the U.S. District Court for the Eastern District of Pennsylvania.