- 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.
Tag Archives: settlement
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 Ct., New York County) (Moulton, J.) (unpublished opinion), that two lenders will forfeit more $100,000 in interest payments on two mortgages because they did not act in good faith in negotiating a mortgage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?
Monday’s Adjudication Roundup
- Primary Capital Advisors LLC will face suit for selling bad loans to a Residential Capital LLC subsidiary, putting the parent company into bankruptcy, because the contract language was ambiguous.
- California federal court approved Diversified Lending Group’s $163 million settlement with the SEC in a Ponzi scheme suit over returns on rental properties.
- JPMorgan Chase & Co. settles for $388 million to end investor class action for misrepresenting underwriting standards for $10 billion in mortgage-backed securities.
Monday’s Adjudication Roundup
- The New York Court of Appeals overturned a lower court’s dismissal of suit against New York City, the New York Mets’ ownership group and The Related Cos., which had plans to build the Mets’ stadium on public parkland. The Court ruled that the city had incorrectly found that the rules allowed such a development. This ruling effectively bars the $3 billion project from moving forward.
- CitiMortgage settles to pay $2.2 million in case brought by military members. It was accused of violating the Servicemembers Civil Relief Act, which caps interest payments on military members’ mortgages.
- A Florida federal judge ruled that the $1.3 billion suit against Deloitte for its involvement in the end of Taylor Bean & Whitaker Mortgage Corp. will not be dismissed because Freddie Mac presented evidence that Deloitte “put amateurs on the job, overlooked inconsistencies in audits and accepted the explanations of Taylor Bean executives even when they didn’t make sense.”
- A NY federal judge dismissed Bank of New York Mellon’s indemnification and loan-repurchase claims against General Electric Mortgage Holding LLC, leaving only a breach of contract claim. The court found that the indemnification claims were duplicative of the breach of contract claims and the failure to repurchase claims were precluded by a recent NY Court of Appeals decision in Ace Securities v. DB Structured. The suit involves a $900 million mortgage-backed security that performed poorly.
CFPB Roundup
The Consumer Financial Protection Bureau released its Semi-Annual Report. From a news perspective, it is a snoozer — dog bites man — as it is really just a summary of what the Bureau has done (and already issued press releases about) over the last year. That being said, it is a great compendium of the CFPB’s actions for those who are looking to sketch the forest after six months of peering at the trees. I note a few interesting aspects of the report.
Director Cordray writes that “our supervisory actions resulted in financial institutions providing more than $114 million in redress to over 700,000 consumers.” (2) In this era of billion dollar settlements, this amount seem relatively small. In fact, “$114 million in redress to over 700,000 consumers” comes out to just $163 per affected consumer. I am not sure exactly what that means, but $163 per consumer does not sound as impressive as $114 million. It would be helpful to have had more detail about those supervisory actions. This is not to say that big settlements are a good unto themselves, but it would be helpful to know whether the punishment fit the crime.
I also found the appendices to be particularly interesting, at least for CFPB geeks:
- Appendix B contains a list of all of the CFPB’s reporting requirements
- Appendix C lists all of the significant rules, orders and initiatives adopted by the Bureau in the past year
- Appendix D lists the consent orders the Bureau has entered into with certain regulated entities
- Appendix E lists significant state attorney general and regulatory actions
- Appendix F lists CFPB reports from the past year
- Appendix G lists Congressional testimony given by CFPB officials over the past year
- Appendix H lists speeches given by Director Cordray and Deputy Director Antonakes over the past year.
All in all, the report is a thorough review of the state of the CFPB. Enjoy!
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
- The United States Supreme Court holds that debtors do not have an absolute right to appeal a denial of a proposed bankruptcy plan (mentioned in April 6 post).
- Maryland federal judge approves settlement between CFPB and Genuine Title and participants for illegal mortgage-kickback scheme (mentioned in May 4 post).
- CFPB settles with Florida law firm for nearly $12 million for collecting over $5 million in illegal fees. The firm enlisted homeowners to bring “mass-joinder” suits against mortgage lenders.
- Lead plaintiff in class action against Bank of America asks the Third Circuit to rehear case alleging violations of Fair Debt Collection Practices Act decided last month. The Third Circuit held that the FDCPA covers foreclosure complaints (mentioned in April 13 post).
- The Clearing House Association LLC, the American Bankers Association, the Financial Services Roundtable and the U.S. Chamber of Commerce support Bank of America in its Second Circuit appeal of $1.3 billion fine for allegedly defrauding Fannie Mae and Freddie Mac through its mortgage program, “Hustle.”
- In stipulation, Massachusetts Federal District Court voluntarily dismisses claims against JPMorgan Chase & Co. and other institutions in $5.9 billion MBS suit brought by Bank of Boston.
