A lawsuit that Freedom Mortgage filed against LoanCare more than half a decade ago is finally getting its day in a New Jersey federal court.
The case, which is being heard throughout the month of July, centers on Freedom's claims that negligent practices of its subservicer in the years spanning from 2010 to 2016 resulted in the lender losing over $30 million.
The allegations, filed in 2016, say the subservicer did not carry out duties outlined in a contract it signed with the full-service residential mortgage lender, such as properly managing loss mitigation and the foreclosures of loans.
Freedom claims that LoanCare did not follow through with the required steps that government agencies, such as the Federal Housing Administration, The Department of Veterans Affairs, Fannie Mae and Freddie Mac, have for reimbursing servicers in situations where a borrower defaults on a loan. This allegedly resulted in millions of dollars of financial losses for Freedom.
Specifically, Freedom in its suit points out that typically for defaulted FHA loans, the
Forms submitted by LoanCare for close to 1,225 defaulted FHA loans were allegedly "incomplete or contained incorrect information," which resulted in curtailments, a situation where HUD reimburses the FHA-insured lender less than the full amount that it would otherwise reimburse. The loss from this totals over $15 million for Freedom, the suit alleges.
Similar situations happened with loans guaranteed by the VA, Department of Agriculture, and the GSEs, the lawsuit said.
The case has
The subservicer is suing Freedom for $22 million claiming that "when the parties relationship soured," the lender withdrew money in certain custodial accounts for loans that LoanCare serviced without the subservicers knowledge.
"Ultimately, Freedom received over $111 million through multiple transactions. After learning it was duped, LoanCare demanded the return of its money. Freedom returned most of the money but is still holding over $22 million – money LoanCare claims belongs to it," the lawsuit states.
Dave Worral, the president of LoanCare, said in a written statement that the litigation is in progress "so it would be premature to provide commentary beyond expressing my confidence that LoanCare will defeat Freedom's unfounded loan servicing claims."
"LoanCare is also confident in its claims against Freedom for fraud and conversion relating to Freedom's unjustified taking of nearly $23 million of LoanCare's money," he said.
Freedom did not respond to a request for comment.
