Pemberton v. Nationstar Mortgage, LLC
Pemberton Class Settlement
Case No. 3:14-cv-01024-BAS-MSB

Frequently Asked Questions

 

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  • A Federal Court authorized the Notice because, as someone who had an Option ARM loan serviced by Nationstar between 2010 and 2018, you have a right to know about the Settlement of this class action, and about all of your options. The Notice explains the lawsuit, the Settlement, your legal rights, what benefits are available, who is eligible to receive them, and how to get them.

    Judge Cynthia A. Bashant of the United States District Court for the Southern District of California is overseeing this class action and the Settlement.  The case is known as Pemberton v. Nationstar Mortgage LLC, 3:14-cv-01024-BAS-MSB.  The people who sued are called the Plaintiffs.  The company they sued, Nationstar Mortgage LLC, is called the Defendant or Nationstar.

    The Court granted final approval of the Settlement on January 15, 2020. You may read the Order here.

  • You had an Option ARM loan serviced by Nationstar that, at least for some time period, provided you with the option to make monthly mortgage payments that were less than the amount of interest that had actually accrued on your loan during that month.  If you chose to exercise that option, the difference between the amount of monthly interest that was due and the amount you paid was added to the principal balance of your loan (this is called deferred interest or negative amortization).  So, instead of the principal amount of your loan decreasing each month, it increased.  Nationstar ordinarily reports payments of deferred interest to the IRS and you on Forms 1098s.  However, in some cases, Nationstar may not have included your payments of deferred interest in the amounts reported for tax years between 2010 and 2018.  

  • In a class action, one or more people, called Class Representatives or Named Plaintiffs (in this case Michael Pemberton and Sandra Collins-Pemberton), sue on behalf of all people who have similar claims.  Together, these people are called a Class or Class Members.  One court resolves the issues for all Class Members, except for those who excluded themselves from the Class.

  • Plaintiffs claim that Nationstar did not report some borrowers’ negative amortization payments to the IRS on tax Form 1098 for tax years between 2010 and 2018.  They further claim that by not reporting these payments, and by relying on the Form 1098 that Nationstar sent to them, they overpaid their taxes because they were not able to claim the full amount of their mortgage interest deduction.  More specifically, the Plaintiffs sued Nationstar for: (1) breach of contract; (2) breach of covenant of good faith and fair dealing; (3) violation of the unfair competition law; (4) fraud; (5) negligence; (6) negligent misrepresentation; and (7) violation of IRS codes.  In 2016, after the case was filed, Nationstar began attempting to identify loans on which Class Members’ payments of negative amortization were not captured by its automated system.  As a result of that process, in 2016 Nationstar began crediting and reporting additional payments of negative amortization to the IRS on the Forms 1098 that it issued to many Class Members.  Thus, if you had negative amortization as part of your loan balance and were making fully amortized monthly payments in 2016 and years thereafter, you may have noticed a substantial increase in the amount of interest that Nationstar reported to you in Box 1 on your Form 1098 for years 2016-2018 compared to the amount it had been reporting in 2015 and years prior.  As a result of this change in Nationstar’s process, you may by now have already had reported to you the full amount of mortgage interest that Plaintiffs’ original complaint sought to have Nationstar report to you.  Therefore, Nationstar may have corrected the problem for you that Plaintiffs sought to correct, and you may have already deducted the full amount of interest that Plaintiffs’ original complaint sought to allow you to deduct.  The purpose of this Settlement is to provide relief to those persons who did not get full relief from Nationstar’s 2016 change in Form 1098 reporting.

  • The Court has not decided who is right or whether Nationstar did anything wrong.  Instead, by agreeing to a Settlement, both Plaintiffs and Nationstar avoid the cost and risk of further litigation and a trial, and the people affected will get benefits.  The Class Representatives and their attorneys think the Settlement is best for the Class and recommend the Settlement to Class Members. Nationstar also denies it did anything wrong and claims that the IRS does not require negative amortization payments to be reported on Forms 1098.

  • You received the Notice because Nationstar’s records show that you are included in this Settlement as a Class Member. You are included in the Settlement even if you refinanced your loan or sold your home.  Specifically, the Settlement includes:

    All persons who, according to Nationstar’s reasonably available computerized records, had or have Option ARM Loans serviced by Nationstar and made payments to Nationstar in any tax year from 2010 to 2018.

  • An Option ARM loan lets you pay some or all of the interest you owe each month for a limited period of time.  When you make the minimum payment on the loan, the unpaid interest gets added to the amount you borrowed causing the balance of your loan to increase.  At some point in time you begin to repay both the original amount you borrowed and the interest you have previously deferred to a later date by not making the full monthly interest payment.

  • Payments of Negative Amortization are when you pay not only your current interest due, in full, but also additional money that is applied to the deferred interest you have not paid previously.  For example, if, during the month of August the interest on your loan was $100 and you paid that amount plus an additional $100 of previously deferred interest, you made a Payment of Negative Amortization.

  • If you make mortgage interest payments that total $600 or more in one tax year (January 1 through December 31), your loan servicing company (such as Nationstar) will file a Form 1098 with the IRS and send one to you.  Form 1098 states the amount of mortgage interest the loan servicing company received from you during the tax year.  Form 1098 is often used when preparing yearly taxes because mortgage interest may be claimed as a deduction on your income taxes.

  • Class Members who submit valid Claim Forms may be entitled to two different forms of relief.  Class Members may submit Claim Forms with documentation sufficient to establish that they paid more in taxes than was owed, for one or more tax years between 2010 and 2018, based on Nationstar’s reporting on Forms 1098 that did not include deferred interest.  Nationstar will review each Claim Form and all supporting documentation that is submitted.

    If Nationstar determines a Class Member’s claim is valid and that the amount reported on a Form 1098 for any tax year in 2016, 2017, or 2018 did not include deferred interest, Nationstar will issue an amended IRS Form 1098 for tax years 2016, 2017, and/or 2018.  You can then file an amended return for each affected tax year and attempt to recover any deduction you lost.  If Nationstar determines a Class Member’s claim is valid and that the amount reported on a Form 1098 for any tax year from 2010 to 2015 did not include deferred interest, Nationstar will issue the Class Member a payment of $50.  This is because for those years it is too late now to file an amendment to those tax returns as the three-year statute of limitations has passed.

     
  • The Court held a hearing on January 13, 2020 to decide whether to approve the Settlement. Although the Settlement was approved on January 15, 2020, there may be appeals. Resolving appeals can take a long time. Please be patient. Payments will be mailed to Class Members who submitted valid claim forms within 90 days after the Court has granted final approval of the Settlement and the deadline to file an appeal has passed or all appeals are resolved. Amended Forms 1098 will be mailed to Class Members who submitted valid claim forms approximately 30 days after the Court has granted final approval of the Settlement and the deadline to file an appeal has passed or all appeals are resolved.  Priority will be given to tax year 2016 since it will be important that you make a determination as to whether you want to file an amended Form 1098 for tax year 2016 within three (3) years of the date you filed your 2016 tax return.  You can call Nationstar if you have any questions about whether or not it sent you your amended Form 1098.

     
  • You may not have claimed all of the mortgage interest you paid during the 2016, 2017, or 2018 tax year and; therefore, you may have overpaid your taxes for those years.  You should use the amended Form 1098 to amend your tax return to claim a mortgage interest deduction for the negative amortization payments you made.  You have three years from the date your tax return was filed to file an amended return.

    You may want to check with your tax advisor to (1) see if you already claimed your negative amortization payments in 2016, 2017, and 2018; and (2) determine when you must file your amended tax return.

  • Unless you excluded yourself, you are staying in the Class.  If the Settlement becomes final, all of the Court’s orders will apply to you and legally bind you.  That means you won’t be able to sue, continue to sue, or be part of any other lawsuit against Nationstar and related parties for the legal issues and claims resolved by this Settlement.  The specific rights you are giving up are called Released Claims (see Question 14).

  • “Released Claims” mean that the Plaintiffs and all Class Members will release Nationstar and its past, present, future controlling persons, parent companies, subsidiaries, affiliates, successors-in-interest, predecessors, assigns, insurers, as well as the directors, officers, agents, employees, and all of their attorneys for any claim, right, demand, charge, complaint, action, cause of action, obligation, or liability of any and every kind, including, both known or unknown, those that were or could have been asserted; and including, those that arise out of common law, state law, or federal law that the Plaintiffs and Class Members had or have relating in any way to Nationstar not crediting or reporting payments of Negative Amortization on Forms 1098.  Specifically, any claims related to the facts alleged in the class action lawsuit, including, the causes of action asserted for breach of contract, breach of the covenant of good faith and fair dealing, unfair business practices under California's Unfair Competition Law, declaratory relief, injunctive relief, fraud, negligence, negligent misrepresentation, and violation of 26 U.S.C. § 6050H.

    The Settlement Agreement and Release, describes the Released Claims in necessary and accurate legal details.  If you have any questions, you can talk to the lawyers listed in Question 15 for free, or you can, of course, talk to your own lawyer if you have questions about what this means.

  • Yes. The Court appointed David J. Vendler and Michael R. Brown of Michael R. Brown, APC to represent you and all other Class Members.  Together these lawyers are called Class Counsel.  You are not responsible for paying these lawyers. 

     

    David J. Vendler, Esq.
    Law Offices of David J. Vendler
    2700 South Oak Knoll Ave.
    San Marino, CA 91108
    Tel: (213) 700-5194

    Michael R. Brown, Esq.
    Michael R. Brown, APC
    2030 Main Street Suite 550
    Irvine, CA 92614
    Tel: (949) 435-3888

     

     
  • You do not need to hire your own lawyer because Class Counsel is working for you.  If you want someone other than Class Counsel to speak for you, you may hire your own lawyer at your own expense.

  • Class Counsel, who have been handling this case since its investigation and filing in 2014, asked the Court to approve up to $700,000 as payment of their fees and expenses. They also requested a total of $20,000 for Michael Pemberton and Sandra Collins-Pemberton, who have actively participated in this case, as an award for their services as the Class Representatives. The Court granted Class Counsel’s motion for attorneys’ fees and the Class Representatives’ service awards. You may read a copy of the Order here.

    Nationstar will separately pay the requested attorneys’ fees and expenses and the Class Representatives payment.  These fees, expenses and payment will not reduce the amount of money or other relief available to Class Members. Nationstar will also separately pay all costs to administer the Settlement.

  • If you excluded yourself from the Settlement: (1) you will not be able to get an Amended Form 1098 or payment from this Settlement; (2) you will not be legally bound by the Court’s judgments; and (3) you will keep any rights you may have to sue Nationstar for the legal claims included in this lawsuit and resolved by this Settlement.

  • The deadline to exclude yourself from the Settlement was November 22, 2019 and has passed. 

     
  • No.  If you excluded yourself, you are telling the Court that you don’t want to be part of the Settlement Class in this Settlement. You can only get a payment or amended Form 1098 if you stay in the Settlement Class and submit a valid claim.

  • No.  Unless you excluded yourself, you are giving up the right to sue Nationstar for the claims that this Settlement resolves and releases (see Question 14).  You needed to exclude yourself from this Settlement to start or continue with your own lawsuit or be part of any other lawsuit.  If you start your own lawsuit against Nationstar after you excluded yourself, you will have to hire and pay your own lawyer for that lawsuit, and you will have to independently prove your claims.

  • The deadline to object to the Settlement was December 30, 2019 and has passed.

     
     
  • Objecting is simply telling the Court that you don’t like something about the Settlement.  You can object only if you stay in the Settlement Class (i.e., did not exclude yourself).  Excluding yourself is telling the Court that you don’t want to be part of the Settlement Class.  If you excluded yourself, you cannot object because the Settlement no longer affects you.

     
  • The Court will hold a hearing to decide whether to approve the Settlement.  You may attend and you may ask to speak at the hearing, but you don’t have to.

  • The Court held a “Fairness Hearing” on January 13, 2020 at 11:00 a.m., in Courtroom 4B of the United States District Court for the Southern District of California, 221 West Broadway, San Diego, CA 92101.

    At this Hearing, the Court considered whether the Settlement and all of its terms are fair, adequate, and reasonable. On January 15, 2020, the Court granted final approval of the Settlement. However, it is possible that there may be appeals. We do not know how long these decisions will take.

    You may read the Order here.

  • No, you did not have to come to the hearing. Class Counsel is working on your behalf and answered any questions Judge Bashant may have had about the Settlement. However, you were welcome to come to the Final Fairness Hearing at your own expense. If you filed an objection, you did not have to come to the Court to talk about it. As long as you filed and mailed your written objection on time, signed it and provided all of the required information listed in the Notice, the Court considered it. You could have also paid your own lawyer to attend, but it’s not necessary.

  • Yes. You or your attorney could have appeared and spoken at the Fairness Hearing.

    To do so, you were required to file a written request with the Court saying that it is your Notice of Intent to Appear at the Fairness Hearing in Pemberton v. Nationstar Mortgage LLC, Civil Case No.: 3:14-cv-01024-BAS-MSB. Your written request needed to be filed with the Clerk of the Court by December 30, 2019 and a copy needed to be mailed to Class Counsel and Nationstar’s Counsel. The deadline to file your Notice of Intent to Appear at the Fairness Hearing has passed.

     
  • If you do nothing, you will be bound by the terms of the Settlement Agreement and Final Judgment, thus forfeiting your right to start a lawsuit, continue with a lawsuit, or be part of any other lawsuit against Nationstar and related parties about the legal issues or claims resolved by this Settlement.  In addition, your failure to timely submit a valid Claim Form will forfeit your right to receive any relief for which you are eligible under the Settlement.

  • In order for you to have Nationstar review your Forms 1098 and determine if you are entitled to an amended return for tax years 2016-2018, or to determine if you are entitled to a $50 payment, you were required to complete a Claim Form. The deadline to submit a Claim Form was December 30, 2019 and has passed.

  • More information is available by calling 1-844-961-0318 or writing to the Settlement Administrator at Pemberton Class Settlement, c/o JND Legal Administration, P.O. Box 91050, Seattle, WA 98111.  You may also call Class Counsel at one of the numbers listed in Question 15.  All of the Court’s records are available for a small fee through the Court’s web site at http://www.cand.uscourts.gov/ (click on the “CM/ECF” link and follow the instructions to download pleadings).

    Talk to your tax advisor if you have questions about your amended Form 1098.

    DO NOT CALL THE COURT WITH QUESTIONS ABOUT THIS CASE OR THIS NOTICE.
    THE COURT CANNOT SPEAK TO YOU OR ANSWER ANY OF YOUR QUESTIONS.

     

For More Information

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Mail

Pemberton Class Settlement
c/o JND Legal Administration
P.O. Box 91050
Seattle, WA 98111