- New York state appeals court affirmed denying dismissal of claims against Morgan Stanley for fraud. Plaintiff bought $17 million in high-risk notes tied to residential mortgage-backed securities in a $500 million collateralized debt obligation that eventually were wiped out.
- Quicken Loans’ suit was dismissed against the U.S. government for its use of the False Claims Act for failure to state a claim. This suit was brought to prevent a costly enforcement action.
- JP Morgan has settled to pay $48 million fine for shoddy mortgage servicing practices in response to allegations from the Office of the Comptroller of the Currency (OCC). (Consent Order; Termination).
- Credit Suisse AG has settled for $110 million in class action alleging the use of misleading financial disclosure documents that caused the plaintiffs to purchase $1.6 billion in bad mortgage-backed securities.
Tag Archives: class action
Monday’s Adjudication Roundup
- HSBC settles class action by homeowners that claimed the bank received kickbacks for insurance policies on their properties.
- Goldman Sachs, Deutsche Bank and RBS have petitioned the US Supreme Court to consider repose statutes and statutes of limitations extenders that could block a $2.1 billion mortgage-backed securities suit against them.
Monday’s Adjudication Roundup
- Class action suit filed against JPMorgan for alleged illegal demand of payment from junior mortgage holders who’s senior mortgages had been foreclosed. The class claims that JPMorgan’s demands violated several California laws.
- PHH Corp. urges the DC Circuit to vacate the CFPB’s penalty for $109 million for mortgage kickback scheme, claiming that the CFPB oversteps its constitutional authority.
- Second Circuit dismisses IKB Deutsche Industriebank AG suit against Standard’s & Poor’s for costing IKB almost $574 million by positively rating an investment vehicle that collapsed.
Monday’s Adjudication Roundup
- EB-5 fraud case will get a jury trial contrary to the request from the SEC. The court rejected the SEC’s attempt to block it claiming it came too late.
- Wells Fargo settles with a group of homeowners for $25.7 million in a RICO class action for unnecessary property inspections and charging delinquent borrowers.
- AARP backs the CFPB’s $109 million fine of PHH Mortgage Corp. for allegedly making mortgage kickbacks, citing to CFPB’s enforcement power.
Monday’s Adjudication Roundup
- BNY Mellon files a brief on writ for cert with the Supreme Court warning the potential for “warping” the residential mortgage-backed securities market if it overturns the Second Circuit’s decision finding that provisions of the Trust Indenture Act did not apply to the securities at issue.
- Investors of Citibank file a class action in NY state court claiming that Citibank ignored toxic residential mortgage-backed securities causing $2.3 billion in losses.
- Investors sue RAIT Financial Trust and its trustees alleging that the trust knew about subsidiary pocketing fees leading to a $21.5 million SEC settlement.
Monday’s Adjudication Roundup
- Bank of America, Wells Fargo & Citigroup cannot escape the City of Miami’s discriminatory lending suit, which caused a loss in city tax revenue.
- Texas federal judge sanctions the US Environmental Protection Agency for failure to turn over documents that would have killed a Clean Water Act suit brought against Thomas Lipar, a property developer, and four other Lipar companies.
- Mortgage borrowers of Citibank and JPMorgan Chase seek class certification in suit over property inspection fees.
- If appeal fails from Second Circuit judgment, Nomura Holdings & Royal Bank of Scotland Group will pay $33 million more than the $806 million damages for selling risky mortgage securities.
- A New York federal judge found that federal law did not cover many claims in class action against Citibank for “mishandling mortgage-backed securities in more than $17 billion worth of pooled loans.”
- Property owners have petitioned the U.S. Supreme Court to determine their standing in suit against several banks, including Bank of New York Mellon, HSBC, US Bank, Deutsche Bank & Wells Fargo, after the Second Circuit denied their claims that those banks did not own their mortgages.
- A class action over highly leveraged mortgage-backed securities against Goldman Sachs is dismissed for lack of evidence.
- The Securities Industry and Financial Markets Association (SIFMA) claims the Fifth Circuit incorrectly interpreted an FDIC statute, by extending the statute of limitations period, when it reinstated $2.1 billion mortgage-backed securities suit, which conflicts with Supreme Court precedent in CTS Corp. v. Waldburger.
Shaking up the Title Industry
The United States Court of Appeals for the 9th Circuit issued an opinion in Edwards v. The First American Corporation et al., No. 13-555542 (Aug. 24, 2015) that may shake up how the title insurance industry works. As the court notes,
The national title insurance industry is highly concentrated, with most states dominated by two or three large title insurance companies. See U.S. Gov’t Accountability Office, Title Insurance: Actions Needed to Improve Oversight of the Title Industry and Better Protect Consumers 3 (Apr. 2007). A “factor that raises questions about the existence of price competition is that title agents market to those from whom they get consumer referrals, and not to consumers themselves, creating potential conflicts of interest where the referrals could be made in the best interest of the referrer and not the consumer.” Id. Kickbacks paid by the title insurance companies to those making referrals lead to higher costs of real estate settlement services, which are passed on to consumers without any corresponding benefits. (9)
The Real Estate Settlement Procedures Act (RESPA) is intended to eliminate illegal kickbacks in the real estate industry. In this case, the 9th Circuit has reversed the District Court’s denial of class certification in a case in which home buyers alleged that First American engaged in a scheme of paying title agencies for referring title insurance business to First American in violation of RESPA. The reversal does not get to the merits of the underlying claims, but it does open up a can of worms for title companies.
The title industry is not only highly concentrated but it is also highly profitable. In some jurisdictions like NY its prices are set by regulation at rates that greatly exceed the actuarial risks they face. Regulators like the NYS Department of Financial Services have begun to pay more attention to the title insurance industry. This is a welcome development, given that title insurance is one of the most expensive closing costs a homeowner faces when buying a home or refinancing a mortgage.