Three credit bureaus also named — the compliance issues raised could affect any servicer
Mr. Cooper faces a federal lawsuit over allegedly failing to update mortgage credit reporting months after a borrower's bankruptcy discharge.
The case, filed on February 11, 2026, in the United States District Court for the Northern District of Texas — where Nationstar Mortgage LLC, doing business as Mr. Cooper, is headquartered — names the servicer alongside Equifax, Experian, and Trans Union. At its core, the lawsuit raises a question every mortgage servicer should take seriously: what happens when post-bankruptcy tradeline updates fall through the cracks?
According to the filing, the borrower secured a mortgage in or around February 2019 and entered Chapter 13 Bankruptcy in January 2020. Timely monthly payments were allegedly made throughout the bankruptcy. The borrower received a discharge on March 4, 2025, with the mortgage excepted from the discharge — as home loans are under Chapter 13 — meaning the obligation continued and so did the payments.
More than seven months later, the lawsuit alleges, all three credit bureaus were still reporting the mortgage with a derogatory rating and creditor remarks referencing the bankruptcy. Under Metro 2 reporting guidelines — the industry standard adopted by all three bureaus — servicers are expected to update a borrower's Consumer Information Indicator code upon discharge, clearing the bankruptcy flag and allowing normal payment history to report on the credit file. The lawsuit alleges Nationstar never made that update.
The borrower sent direct disputes to all three bureaus on or about November 9, 2025. What came back, according to the filing, was far from reassuring. Equifax allegedly responded on November 18, 2025, but made none of the requested corrections. Experian allegedly never responded. Trans Union allegedly replied on December 3, 2025, by deleting the mortgage tradeline entirely without explanation — rather than correcting it. A tri-merge credit report pulled in January 2026 allegedly confirmed that none of the requested changes had been made.
The lawsuit accuses Nationstar of failing to investigate the disputes after receiving notice from the bureaus, failing to note the debt as disputed, and failing to correct its own records to prevent the continued reporting of inaccurate data. The borrower is seeking statutory and punitive damages, attorney's fees, and a jury trial.
For mortgage servicers, this case carries a pointed message. The Metro 2 framework lays out a clear process for handling the transition from active bankruptcy to post-discharge reporting, and the lawsuit alleges that both the servicer and all three bureaus fell short. The window between a Chapter 13 discharge and the proper updating of a mortgage tradeline is not a gray area — it is a defined compliance obligation. When that process breaks down, the exposure under the Fair Credit Reporting Act can be significant.
No court rulings have been issued, and no final determination has been made. The case remains in its earliest stage.
