Nationstar Mortgage, which rebranded as “Mr. Cooper,” agreed to a $91 million settlement this week for allegedly violating consumer protection laws after the Great Recession. The case could serve as a warning to companies that prey on borrowers during the pandemic.

The federal Consumer Financial Protection Bureau (CFPB) collaborated with attorneys general from all 50 states and mortgage regulators in 53 jurisdictions — including the District of Columbia and Puerto Rico — in the case against Nationstar, which is the largest non-bank home loan servicer in the country.

The CFPB said the settlement involves allegations that Nationstar violated consumer protection laws during its servicing of mortgage loans between January 2012 and the end of 2015. The proposed agreement, if approved by the court, will result in $85 million in payments to consumers and more than $6 million in fees and penalties.

Nationstar also entered into a separate settlement agreement with the Justice Department to address past mortgage servicing issues affecting homeowners under bankruptcy protection. Under that settlement, the Justice Department said U.S. Bank, PNC and Nationstar will provide more than $74 million in redress payments to homeowners. “Most of the remediation and corrective actions have already been taken by the servicers,” the Justice Department said.

The CFPB complaint, filed in federal district court in D.C., said Nationstar failed to identify requests for loan modifications, which are supposed to help borrowers with their payments. The company allegedly foreclosed while some homeowners were still waiting for their loan modification applications to be processed — even though Nationstar had promised it would not do so.

Allegations against Nationstar included improperly increasing borrowers’ payments and misrepresenting when homeowners would be eligible to have their private mortgage insurance premiums canceled. The claim alleged that Nationstar also failed to forward real estate tax payments from escrow accounts in a timely manner.

“More than 1,000 borrowers in Maryland were harmed by Nationstar’s misconduct,” Maryland Attorney General Brian E. Frosh (D) said in a statement. “The settlement requires Nationstar to change its practices and to pay millions of dollars to those it hurt.”

State financial regulators license mortgage servicers. The mishandling of mortgages by Nationstar was discovered during reviews of the company’s servicing activities, according to the claim. The investigations found that borrowers had problems when their loans were transferred to Nationstar.

Examinations by state and federal regulators helped to uncover the problems with Nationstar’s origination and servicing practices, including the mishandling of the loan modifications for homeowners who were struggling to pay their mortgages,” Illinois Department of Financial and Professional Regulation Secretary Deborah Hagan said during a call with reporters.

Nationstar said that management and the board took steps to address the issues identified during the investigations.

“We are pleased to resolve this matter,” Mr. Cooper Group chief executive Jay Bray said in a statement. “When these issues were identified several years ago, we immediately made restitution to our impacted customers and invested in process improvements to prevent reoccurrence.”

Regulators are particularly concerned about the actions of loan servicers, because borrowers have no choice in who services their loans. Companies that service loans are responsible for collecting mortgage payments and working with borrowers when they can’t pay.

Millions of people have lost their jobs because of the coronavirus pandemic, and this has left many homeowners struggling to keep up with their mortgage payments. Under the Coronavirus Aid, Relief, and Economic Security (Cares) Act passed in March, homeowners were allowed to ask for an initial forbearance of up to 180 days on their payments. If additional relief was needed, they were entitled to a 180-day extension. Interest still accrues, but fees and penalties are waived.

Initially, many borrowers panicked when some servicers said they would have no other option but to make huge lump sum payments at the end of the forbearance.

In early June, almost 4.3 million homeowners were in forbearance plans, according to the Mortgage Bankers Association (MBA). In the MBA’s most recent report, released this week, an estimated 2.8 million homeowners were in forbearance plans. But this number could increase because of the resurgence of the novel coronavirus, which could cause state and local jurisdictions to respond by closing more businesses.

Borrowers who are in financial trouble or find themselves unable to pay their mortgages will need the help of mortgage servicers to find the right repayment options as they come out of forbearance, Hagan said.

During this pandemic, in particular, the home has become our office, our school, and a place where we can feel safe,” Illinois Attorney General Kwame Raoul said. “And that’s why it’s important that we continue ensuring that mortgage servicers are fulfilling their obligations to borrowers.”

People are going to need assistance as covid-related financial struggles continue into next year. The Nationstar settlement should be seen by other companies as a shot across the bow that they should be diligent and correct in their servicing of mortgage loans.