A judge Monday denied Mr. Cooper's motion for judgment on claims that its $25 fees for expedited payoff quote statements are illegal. The Fair Debt Collection Practices Act lawsuit from borrowers can proceed to discovery, U.S. District Judge Barbara Rothstein ordered.

The suit refers to Mr. Cooper by its previous Nationstar Mortgage name, which remains in its corporate record. The events in the litigation took place in 2022 and 2023, after the rebranding in 2017.

Borrowers who claim they weren't previously aware of the fees are also suing for unjust enrichment and violation of state consumer laws. Attorneys for Mr. Cooper argue in case filings that its fees are permissible, and that the servicer doesn't charge for statements provided within a seven-day business window. 

The company has stated on its website that fees up to $25 may apply to payoff quotes sent via web. A representative for Mr. Cooper declined to comment. Attorneys for the parties to the lawsuit had not responded this publication's inquiries at deadline.

The Consumer Financial Protection Bureau weighed in on the case in August in an amicus brief, siding with borrowers. The regulator said consumers have a right to sue Mr. Cooper despite mortgage contracts requiring them to first notify the company prior to any legal action, an argument Rothstein agreed with Monday. 

Plaintiffs said they gave notices to the owners of the mortgages: a lender and both Fannie Mae and Freddie Mac. Rothstein said those counted as indirect notices, distinguishing the situation from a case against Ocwen Loan Servicing the courts dismissed in 2017. Plaintiffs never provided notice to the servicer in that lawsuit.

"Requiring a plaintiff to not only provide notice, but to correctly determine the right party to whom notice must be given, is inconsistent with the purpose of the FDCPA and state consumer laws," Rothstein wrote.

Counsel for Mr. Cooper also argued the unjust enrichment count shouldn't stand because the Maryland and Washington consumer laws cited don't allow such claims when a contract governs the parties' conduct. Rothstein agreed with plaintiffs that the claim should stand since the parties' contract doesn't cover the fees at issue. 

The judge also said Nationstar didn't cite any federal or state law expressly authorizing or approving the expedited fee, also allowing the FDCPA claim to stand. 

Plaintiffs also named Freddie Mac as a defendant in an amended complaint in May, because of its role as owner of one of the loans in the lawsuit. The government-sponsored enterprise cited the Merrill Doctrine in a motion to dismiss last month. The Merrill Doctrine is a legal principle stating that instruments of the government can't be held liable for actions taken by its agents unless the entity authorized the challenged actions. 

"The amended complaint does not contain a single allegation that Freddie Mac instructed Nationstar to charge the fee, or actually authorized Nationstar to do so," the GSE's attorneys wrote.

Freddie Mac requires servicers to comply with all applicable laws and charge only fees that are legal, rendering the accusations against it in the litigation moot, the enterprise's representation argued. Rothstein didn't rule on Freddie Mac's motion, nor one for class certification by plaintiffs. 

Mr. Cooper in court filings said plaintiffs are "seeking to capitalize on the wave of so-called 'convenience fee' litigation.'"

Among other similar cases, Ocwen is appealing a more recent  "pay-to-pay" suit. The CFPB has asked an appeals court to participate in an oral argument in that case scheduled for November, according to court filings.