- Plaintiffs in class action suit against JPMorgan Chase & Co., who were fraudulently charged unnecessary home inspection fees, argue that the bank cannot avoid class certification because Chase admitted that “determining whether an inspection was reasonable requires an assessment of the borrower’s and property’s individual circumstances.” The plaintiffs claim “Chase cannot turn back time and do now what it was required to do then.”
- Deutsche Bank AG and Massachusetts Mutual Life Insurance Co. settle in suit accusing Deutsche Bank of misleading investors over approximately $125 million in residential mortgage-backed securities by failing to determine the accuracy of the statements in its offering documents.
Tag Archives: Deutsche Bank AG
Monday’s Adjudication Roundup
- Massachusetts’s federal court found that a unit of Deutsche Bank AG failed to vet some residential mortgage-backed securities, which mislead Massachusetts Mutual Life Insurance Co.
- US Bank filed an amended complaint claiming that Citigroup Global Markets Realty Corp. and CitiMortgage Inc. in suit over bad mortgage-backed securities.
- After PHH Corp. was ordered to pay $109 million in penalties by the CFPB in a mortgage kickback scheme, it has asked to D.C. Circuit to reconsider.
- New York state court dismisses Commerzbank AG’s suit against UBS AG, Credit Suisse Group AG, and others due to the statute of limitations. Commerzbank brought suit alleging loan quality fraud in the sale of $1.9 billion in mortgage securities.
- NY federal court dismissed a derivative shareholder suit against American Realty Capital Properties Inc. as the suit did not fulfill the state law requirement that demand be made on the board of directors before bringing suit and this case did not meet the narrow futility exception to such demand. The shareholders brought suit over accounting issues that led to a sharp drop in stock value and destroyed a possible $700 million sale.
- In suit against Amazon for breach of contract, The Durst Organization will not be able to force Amazon to sign a $20 million per year lease. The court found that the letter of intent does not compel the retailer to execute the lease. However, Durst may be able to recover under the additional breach of duty and fraud claims.
- In a historical decision, the U.S. Supreme Court held that the Fair Housing Act covers unintentional discrimination through disparate impact, citing to the deep racial divides in the 1960s.
- US Bank, as a trustee of Lehman XS Trust, brings suit against Bank of America and Countrywide Financial for $178 million for alleged breach of representations and warranties in sale of residential mortgage loans.
Monday’s Adjudication Roundup
- The CFPB increased PHH Corp.’s penalty to $109 million from $6.4 million on appeal, while upholding an administrative judge’s ruling that the firm was involved in a mortgage insurance kickback scheme.
- A class of PHH borrowers have been granted cert to the U.S. Supreme Court alleging that PHH Corp. violated the Real Estate Settlement Procedures Act.
- NY Court of Appeals bars mortgage-backed securities suit for $330 million against Deutsche Bank AG due to a six-year statute of limitations that started when the contract was signed.
- Nomura Holdings Inc. is appealing $806 million verdict in suit brought by the Federal Housing Finance Agency for selling bad mortgage-backed securities to Fannie Mae and Freddie Mac.
- The Securities and Exchange Commission brought suit against a New York broker for $4.1 million for allegedly selling unregistered securities through several entities.
Monday’s Adjudication Roundup
- NY Federal Court ended the suit against US Bank and Bank of America brought by Blackrock and NCUA for failure to properly oversee residential mortgage-backed security trusts finding that most of the trusts fell under state law.
- Deutsche Bank, Morgan Stanley and UBS Securities have settled with Federal Home Loan Bank of Boston for misleading it to purchase $5.9 billion in bad mortgage-backed securities.
- Associated Bank agrees to $200 million, record-breaking settlement with US Department of Housing and Urban Development in discriminatory lending suit.
Monday’s Adjudication Roundup
- Shareholders of Deutsche Bank petitioned for cert to the U.S. Supreme Court to clarify the standard for a claim for pleading a fraudulent claim under Section 11 of the Securities Act of 1933 following the Second Circuit tossing their suit in July 2014.
- 10th Circuit revives National Credit Union Administration’s $550 million suit against Barclays for misrepresentation of the quality of over $555 million in RMBS.
- First wave of Hurricane Sandy cases settle with FEMA and insurers over the improper cutting of the homeowners’ payouts following the storm.
Reiss on Single Family Rental-Backed Bonds
Law360 Quoted me in Newest Property-Secured Bonds Invite Scrutiny (behind a paywall). It reads in part,
The Blackstone Group LP’s recent groundbreaking move to sell bonds secured by single-family rental homes may have created the next securitization blockbuster, but attorneys say the product could attract the same type of litigation that has plagued the commercial and residential mortgage-backed securities markets.
Blackstone is among a growing group of entities that amassed large numbers of foreclosed homes after the crisis and are turning them into profitable rentals. Now some are hoping to take that profitability one step further, extending loans secured by these single-family homes and securitizing them.
This process offers benefits both to players like Blackstone and to smaller landlords that own groups of single-family rentals and can’t get traditional lenders to lend against their assets. Blackstone’s debut product — sold to a syndicate led by Deutsche Bank AG — has been very well-received, but attorneys caution that many questions remain unanswered, and REO-to-rental-backed bonds could pose litigation risks.
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Blackstone’s $480 million deal, in which it pooled 3,200 homes owned by its portfolio company Invitation Homes and used them to secured a single loan that it then securitized, made waves as the first of its kind.
Several other opportunistic real estate investment companies, including American Homes 4 Rent and Colony Capital LLC, are expected to follow suit, but they are treading lightly as the new product is assessed by the market and investors.
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The homes themselves may also be subject to condemnation or landlord-tenant litigation that could encumber the overall loan indirectly by affecting the value of the collateral, according to David Reiss, a real estate finance professor at Brooklyn Law School.
Before the recession, single-family homes were considered too expensive to be managed by a large institution like Blackstone or American Homes 4 Rent because of their geographic diversity and because it was hard to control property management on so many different homes, according to Reiss.
The financial crisis made distressed single-family homes cheaper and more attractive to opportunistic investors, and the low price may compensate for the other issues, he said.
“This is a new asset class, and it is not yet clear whether Blackstone has properly evaluated its risks,” Reiss said. “Time will tell whether these bonds will become a significant new category of asset-backed securities or whether the financial crisis presented a one-time financial opportunity for some firms.”
