Utah Court Dismisses HAMP, RICO, ECOA, RESPA & FDCPA Claims
The court in deciding Cornia v. Countrywide Home Loans, Inc., 2013 U.S. Dist. LEXIS 149592 (D. Utah 2013) granted defendant’s motion to dismiss. Plaintiffs’ claims based on securitization, assignment to MERs, or “robo-signing,” were dismissed with prejudice.
Plaintiffs’ complaint sought to quiet title in the property in plaintiffs’ names. As the basis for this relief, plaintiffs claimed that defendant (1) engaged in predatory lending, mail fraud, and wire fraud, (2) violated the Real Estate Settlement Procedures Act (“RESPA”), the Fair Debt Collection Practices Act (“FDCPA”), the Racketeer Influence and Corrupt Organizations Act (“RICO”), Homeowners Affordable Modification Program (“HAMP”), Equal Credit Opportunity Act (“ECOA”), the Utah Fraudulent Transfer Act and other statutes, regulations and unspecified consent orders, (3) fraudulently “robosigned,” the deeds of trust, and (4) securitized the loan.
Defendant moved pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure (“FRCP”) and also pursuant to FRCP 8(a) and 9(a)(2) to dismiss all Plaintiffs’ claims. After considering both arguments, the court granted defendant’s motion.
December 27, 2013 | Permalink | No Comments
Texas Court Found That There Was no Gap in Chain of Title
The court in deciding Acosta v. Fannie Mae, 2013 U.S. Dist. LEXIS 148066 (S.D. Tex. 2013) found that Under Section 51.0025 of the Texas Property Code, BOA had standing to foreclose as servicer of the loan.
Plaintiff asserted numerous claims arising from the foreclosure of his property.
The court found that the plaintiff had offered no summary judgment proof of any defect in the foreclosure proceedings. Acosta had also offered no summary judgment proof that BOA made any false or reckless statement to him upon which he relied to his harm; therefore, his claim for fraud or misrepresentation failed.
The court also found that BOA effectively became the “original lender” of Acosta’s loan by virtue of the merger with Countrywide. MERS, in its capacity as nominee, assigned the loan to BOA, as successor of the merger. Hence, there is no cognizable “gap in the chain of title” and BOA, therefore, had standing to foreclose.
The court ultimately granted summary judgment in favor of the defendants.
December 27, 2013 | Permalink | No Comments
December 26, 2013
Battle of the Mortgage Experts
Judge Saris of the United States District Court (D. Mass.) issued a Memorandum and Order in Massachusetts Mutual Life Insurance Company v. Residential Funding Company, et al., No. 11-30035-PBS (Dec. 9, 2013). The opinion addresses a battle of statistical experts over the proper way to sample some of the hundreds of thousands of mortgages at issue in this litigation.
Mass Mutual, the plaintiff, alleges that the defendants misrepresented material aspects of many of those mortgages. To prove this, Mass Mutual intends to “reunderwrite” about 3.5% of loans by reviewing the “original loan file to determine whether it was originated in accordance with applicable standards.” (3) . More particularly, Mass Mutual alleged that
the defendants marketed the [RMBS] certificates with representations that the loans backing the securities were underwritten in accordance with prudent underwriting standards and the underlying properties were appraised in accordance with sound appraisal standards, in order to ensure that the borrower could repay the loan and to decrease the risk of default. Plaintiff asserts that the loans underlying each [loan pool] were, in reality, far riskier than represented. Plaintiff also alleges that the defendants knowingly reported false loan-to-value (“LTV”) ratios, and in the case of defendant HSBC, inaccurate owner-occupancy rates for underlying properties. The defendants deny that they made any material misrepresentations in the marketing and sale of the certificates. (4)
The Court stated that while the defendants had identified various methodological errors that would render the report of Mass Mutual’s expert unreliable, similar challenges had failed in four other RMBS litigations. The Court ultimately denied the defendants’ motion to exclude the opinions of the plaintiff’s expert.
A body of law about expert evaluation of misrepresentations in securitization is slowly developing as cases are moving from the motion to dismiss stage to the pretrial discovery phase. This will have broader significance than just securitization litigation, but I find it particularly interesting to watch experts attempt to reduce “questions of misrepresentation” regarding RMBS to yes/no answers. (15) Such attempts to quantify misrepresentation will be useful to resolve cases such as this but also to regulators and researchers down the line.
December 26, 2013 | Permalink | No Comments
December 24, 2013
Qualified Mortgages and The Community Reinvestment Act
Regulators issued an Interagency Statement on Supervisory Approach for Qualified and Non-Qualified Mortgage Loans relating to the interaction between the QM rules and Community Reinvestment Act enforcement. This statement complements a similar rule issued in October that addressed the interaction between the QM rules and fair lending enforcement.
The statement acknowledges that lenders are still trying to figure out their way around the new mortgage rules (QM & ATR) that will go into effect in January. The agencies state that “the requirements of the Bureau’s Ability-to-Repay Rule and CRA are compatible. Accordingly, the agencies that conduct CRA evaluations do not anticipate that institutions’ decision to originate only QMs, absent other factors, would adversely affect their CRA evaluations.” (2)
This is important for lenders who intend to only originate plain vanilla QMs. There have been concerns that doing so may result in comparatively few mortgages being CRA-eligible. It seems eminently reasonable that lenders not find themselves between a CRA rock and a QM hard place if they decide to go the QM-only route. That being said, it will be important to continue to monitor whether low- and moderate-income neighborhoods are receiving sufficient amounts of mortgage credit. Given that major lenders are likely to originate non-QM products, this may not be a problem. But we will have to see how the non-QM sector develops next year before we can know for sure.
December 24, 2013 | Permalink | No Comments
Michigan Court Holds That Plaintiffs Were Not Subject to Double Liabilty on Their Debt and Thus Lacked Standing
The court in deciding Laues v. Bank of Am., N.A., 2013 U.S. Dist. LEXIS 147912 ( E.D. Mich. Oct. 15, 2013) granted the defendant’s motion and dismissed the plaintiff’s claim.
Plaintiffs Roy A. Laues and Kristin G. Laues (“the Laues”), preceded pro se, and filed a complaint claiming that the defendants fraudulently conveyed their property and improperly bifurcated their note and mortgage. The plaintiff’s sought to quiet title by extinguishing Defendants’ interest in the property. Defendants filed a motion to dismiss the complaint for failure to state a claim upon which relief can be granted, pursuant to Fed. R. Civ. P. 12(b)(6). After considering the arguments the court ultimately granted the defendant’s motion.
Plaintiff alleged that MERS lacked authority to assign the mortgages, which would make the subsequent assignments invalid. MERS acted as nominee for lender AWL in assigning the mortgages. The court found that the plaintiffs were not a party to the assignment and as such was not threatened with double liability on the debt. Thus the court determined that they had no standing to challenge the assignment.
December 24, 2013 | Permalink | No Comments
Michigan Court Dismisses State Claims Against 13 Defendants – Including Wells Fargo
The court in deciding Berry v. Main St. Bank, 2013 U.S. Dist. LEXIS 147915 ( E.D. Mich. 2013) granted the defendant’s motion to dismiss, and the plaintiff’s claims were dismissed without prejudice.
Plaintiff Erik Berry initiated this action against thirteen defendants, including Defendant Wells Fargo, in state court seeking to redress alleged improprieties in the foreclosure of his home. Wells Fargo filed a motion seeking dismissal of plaintiff’s complaint pursuant to Federal Rule of Civil Procedure 12(b)(6), or in the alternative, a motion for summary judgment pursuant to Rule 56. The court ultimately granted Wells Fargo’s motion and dismissed this action without prejudice.
The court found significant portions of the plaintiff’s complaint and response were dedicated to challenging the validity of the note, mortgage, and assignment. Although plaintiff relied on case law from several states other than Michigan, the court construed the complaint as alleging that (1) the splitting of the note and mortgage rendered the assignment from MERS acting as nominee for Main Street Bank to Wells Fargo defective, (2) because the assignment was invalid, no record chain of title evidencing the assignment of the mortgage existed as required by Michigan Compiled Laws § 600.3204(3), and (3) this chain of title defect deprived Wells Fargo of the authority to initiate foreclosure proceedings. The court rejected these arguments.
Wells Fargo’s motion to dismiss was ultimately granted and plaintiff’s claims were dismissed without prejudice.
December 24, 2013 | Permalink | No Comments
