- 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: New York
Ending Homelessness
The Christian Science Monitor quoted me in Los Angeles to Serve as Crucible for Reform in Ending Chronic Homelessness. It reads, in part:
As the heavy winter rains sweep across southern California, Los Angeles’s homeless residents hunker down. Many – like former farmworker Andreas, who huddled in the doorway of a parking structure – are unable or unwilling to find shelter off the street.
These are the chronically homeless, a large portion of the 44,000 people in L.A. that make this city the West Coast’s homelessness capital.
Nationwide, the chronically homeless represent roughly 20 percent of the nation’s homeless population at any given moment. And, both in California and across the country, they form the core target of an intensified effort by activists and politicians determined to get at the roots of intransigent homelessness.
* * *
The US is not going to conquer chronic homelessness until it addresses the structural issues that hand homelessness down from one generation to another, says Brooklyn law professor David Reiss, who specializes in housing issues.
The absence of a safety net for those who fall out of employment is the beginning of the cycle, particularly for at-risk populations such as foster-care children who age out of the system and single mothers with young children. Job scarcity is also a factor. Big cities with the highest cost of living, like Los Angeles and New York, usually present the most possibilities for those in search of work.
“Very low-income people often prefer to stay in such cities, even if they are at risk of homelessness, because it is the best of a set of bad options,” he points out.
The basic costs of maintaining a home are driving more people onto the street, says Professor Reiss – a growing problem tied to the issue of income inequality.
A recent study by the Harvard Joint Center for Housing Studies finds that this trend is increasing and, says Reiss, “we should expect more and more households to have trouble paying rent in the coming years.”
Monday’s Adjudication Roundup
- The U.S. Securities and Exchange Commission were granted its request to freeze Luca International Group LLC’s CEO’s assets. He allegedly engaged in a “Ponzi-like” scheme with EB-5 investors.
- New York appeals court revived claims against Nomura Holdings Inc. brought by investors finding that HSBC can seek damages for misrepresentation in mortgage-backed securities transactions, which ended up being defective loans.
- In case brought by U.S. Bank against Credit Suisse, a New York judge refused dismissal for failing to buy back bad loans worth $1 billion, finding that the servicing agreement with U.S. Bank required it to do so.
- The Internal Revenue Service approved Bank of America’s $8.5 billion settlement for mortgage-backed securities purchased from Countrywide.
- JPMorgan and MassMutual have settled in case where JPMorgan had allegedly cause MassMutual to lose $2.3 billion in mortgage-backed securities.
Monday’s Adjudication Roundup
- New York federal judge dismisses suit against Bank of America Corp. over “hustle” high-speed mortgage approval process for allegedly defrauding Fannie Mae and Freddie Mac.
- Midtown TDR Ventures LLC and Midtown GCT Ventures LLC, real estate developers that currently own Grand Central Terminal, file a complaint against the City of New York and SL Green, another developer, claiming that they were robbed of potential profits from air rights when the City and SL Green worked to rezone the area in which Grand Central sits and devalued the property.
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.
Monday’s Adjudication Roundup
- NY federal court approves Citigroup Global Markets Inc., Goldman Sachs & Co. and UBS Securities LLC settlement for $235 million in class action from pension fund for false prospectuses in mortgage-backed securities.
- Better Markets, a financial reform advocacy group, files brief in support of $1.3 billion penalty for Bank of America Corp. for fraud in one of its programs, “Hustle”, which allegedly ripped off Fannie Mae and Freddie Mac.
- Investors filed suit against US Bank NA in New York for failing to act in their best interests in regard to mortgage-backed security trust losses.
This Is What Bad Faith Looks Like
A New York judge ruled in Federal National Mortgage Assoc. v. Singer, 2015 NY Slip Op. 51038(U) (July 15, 2015 Sup. Ct., New York County) (Moulton, J.) (unpublished opinion), that two lenders will forfeit more $100,000 in interest payments on two mortgages because they did not act in good faith in negotiating a mortgage modification, as required by New York law. There is a lot of choice language in the opinion, but it is useful to read the judge’s summary of what the borrowers went through in trying to get the modification.
The judge disagreed with the lenders’ “positive assessment of the negotiations” as it was “belied” by the facts:
Fannie Mae delayed filing of Action No. 1 (filed on June 14, 2011) 17 and 1/2 months after the date of default. Counsel then delayed filing the RJI [Request for Judicial Intervention] for another three months after the answer was filed. The first settlement conference, scheduled on March 14, 2012, had to be rescheduled to May 2, 2012 due to Fannie Mae’s non-appearance, a one and one-half month delay. It took Fannie Mae and its counsel another five and 1/2 months to provide an explanation for why the two mortgages could not be merged or consolidated, and only after wasting time at two conferences in June and July attended by attorneys without knowledge of the case or settlement authority and only after my court attorney probed for answers. Thereafter, the Singers submitted the requested documentation for a loan modification of the 400-Mtge., despite confusing and conflicting requests by the Rosicki firm, by August 3, 2012. When that application became “stale,” the court directed the Singers to update the information and, finally, after another two-month delay, Seterus offered the Singers a trial modification plan on or about October 11, 2012. When the Singers received the permanent loan modification papers from Seterus in January 2013, they objected to the payment of $63,632.21 in accrued interest and the $5,605.23 accrued interest. It took many months for Seterus to admit its mistake on the escrow deficiency, and only after much prodding by the court for status updates. Seterus did not offer the Singers a new loan modification agreement until the very end of October 2013 — a whopping nine-month delay. Finally, it took Fannie Mae’s counsel another five months to reject the Singers’ January 1, 2014 counteroffer to pay $18,000 of the accrued interest.
Accordingly, the court holds that Fannie Mae and/or its counsel have acted in bad faith and have unreasonably delayed a resolution of this foreclosure action. As a result, interest should be tolled on the note and mortgage in the amount over and above 2% annually, for the period from September 30, 2011 (one month after Singers’ filing of their answer in Action No. 1) through the date of this Decision and Order. (10-11, footnotes omitted)
It is hard to really get how crazy the modification process can be in the abstract, so sitting with facts like these is a useful exercise. And this seems like the right result on these facts.
I have blogged before about the Kafkaesque struggles that borrowers face. Some deny that lenders behave this badly in general but the cases and the large scale settlements “belie” this too. What will it take to give borrowers a consistent and reasonable experience with mortgage modifications?
