The note never defined ‘anniversary date.’ Now it's a class action.
Mr. Cooper faces a class action lawsuit alleging it systematically overcharged mortgage borrowers on prepayment penalties by misreading its own contracts.
The suit, filed on March 6, 2026, in federal court in California, centers on a deceptively simple question: what does "anniversary date" mean in a mortgage note?
According to the lawsuit, a California-based borrower, Michael E Kasaba LLC, entered into a fixed rate mortgage on April 4, 2024, with Investor Mortgage Finance LLC for a property in Port Hueneme, California. The note carried a principal of $399,000 and included a tiered prepayment penalty schedule — five percent within the first year, stepping down one percentage point each year, with no penalty after year five.
The loan was later transferred to Mr. Cooper, one of the largest mortgage servicers in the country, which according to the filing manages a portfolio with $1.5 trillion in unpaid principal balance and serves over six million customers.
When the borrower paid off the loan in full on May 27, 2025, Mr. Cooper — operating under its Rushmore Servicing brand — charged a prepayment penalty of $19,748.32, reflecting five percent of the outstanding principal. The borrower contends the correct rate should have been four percent, or $15,798.66, because the loan's first anniversary — measured from its April 4, 2024 origination — had already passed. The difference: $3,949.66.
The crux of the dispute is that the note never defines "anniversary date." The borrower argues the term naturally refers to the date the loan was funded. Mr. Cooper, the lawsuit alleges, instead used the date of the first installment payment — which was roughly two months later — pushing the borrower into a higher penalty tier.
The borrower says it contacted Mr. Cooper on June 5, 2025, to challenge the charge and was turned down.
What makes this case worth watching for mortgage professionals is not the dollar figure on a single loan. It is the allegation that this was not a one-off mistake but a company-wide practice. The lawsuit seeks class certification on behalf of all borrowers who were assessed a prepayment penalty exceeding what would have applied if the anniversary had been calculated from the funding date. The filing estimates the proposed class runs into the thousands, with an aggregate amount in dispute exceeding $5 million.
The case raises a question that mortgage servicers and originators may want to examine closely: how is "anniversary date" defined — or left undefined — in their own loan documents? If the term is ambiguous and a court determines it should be read in the borrower's favor, the effects could extend well beyond this single lawsuit.
The suit brings claims for breach of contract, unjust enrichment, and violations of California's Unfair Competition Law. It seeks damages, restitution, and injunctive relief.
No court has ruled on the merits. The case is in its earliest stage, and the allegations have not been proven.
