- Ocwen and Assurant settle with homeowners for $140 million in class action suit, in which the homeowners alleged that Ocwen received kickbacks by inflating premium costs for forced-placed insurance.
- New York’s Appellate Division, First Department, affirmed dismissal of suit against UBS AG for $30 million, brought by Hanwha Life Insurance Co. (a Korean corporation) claiming that NY courts do not have an interest in adjudicating the suit. Hanwha purchased $30 million in credit-linked notes from UBS that turned out to be worthless. It was trying to recover its losses because it relied on UBS’s advice in purchasing the notes.
- CFPB and the Maryland Attorney General filed suit and settlement consent orders against a title company and participants in an alleged illegal mortgage-kickback scheme.
- After the National Credit Union Administration Board (NCUA) filed a complaint against HSBC for failing as trustee of $2 billion in residential mortgage-backed securities trusts, HSBC claims that the regulator lacks standing to represent the trusts and is barred by Delaware’s three-year statute of limitations.
- Wells Fargo and Deutsche Bank moved to dismiss fives suits from BlackRock Inc., Pacific Investment Management Co. and NCUA for allegedly failing to watch over 850 RMBS trusts as the trustees.
Tag Archives: settlement
Monday’s Adjudication Roundup
- Former Freddie Mac executives, who were accused of lying about Freddie’s exposure to subprime mortgages before the financial crisis, settled with the SEC.
- Citibank shareholders slam the Bank’s motion to dismiss a case over mortgage-backed securities worth more than $17 billion as NY federal courts have rejected similar arguments to dismiss similar cases.
- The Second Circuit dismisses a class action against Royal Bank of Scotland PLC finding that the bank did not lie about its exposure to residential mortgage-backed securities.
- DC federal judge certified a class action of evicted homeowners, with a lead representative who lost his home over a $134 unpaid tax bill. The court will decide whether district law creates a property interest in equity, if its tax-sale statutes effect a taking of the property and if class members were properly compensated.
Monday’s Adjudication Roundup
- Bankrupt Washington Mutual settles in class action suit for $10 million after duping plaintiffs into taking out mortgages with low “teaser rates.”
- Goldman Sachs asks NY Federal Judge not to certify class action suit over its Abacus collateralized debt obligation, which caused $1 billion in investor losses.
- The Third Circuit Court of Appeals has ruled that the Fair Debt Collection Practices Act (FDCPA) covers foreclosure complaints in suit brought by Bank of America and a NJ law firm.
- First Horizon National Corp.’s subsidiary First Tennessee Bank settles with FDIC over violation of due-diligence regulations for Federal Housing Administration-insured home loans for $212.5 million.
- HSBC and Assurant settle for $1.8 billion over allegations that the bank got kickbacks for getting consumers to purchase inflated flood insurance.
Home Loan Toolkit
The Consumer Financial Protection Bureau has issued Your Home Loan Toolkit: A Step-by-Step Guide. The toolkit is designed to help potential homeowners navigate the process of buying a home. As the press release notes,
The toolkit provides a step-by-step guide to help consumers understand the nature and costs of real estate settlement services, define what affordable means to them, and find their best mortgage. The toolkit features interactive worksheets and checklists, conversation starters for discussions between consumers and lenders, and research tips to help consumers seek out and find important information.
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Creditors must provide the toolkit to mortgage applicants as a part of the application process, and other industry participants, including real estate professionals, are encouraged to provide it to potential homebuyers.
The toolkit asks many of the important questions that homebuyers have:
- What does affordability mean for you?
- What kind of credit profile do you have?
- What kind of mortgage is right for you?
- How do points work?
- How do you comparison shop with lenders?
- How does a closing work?
- How do you read your Closing Disclosure?
- How do keep your mortgage in good standing?
That being said, it remains to be seen whether this toolkit will actually help potential homeowners. It is important for the CFPB to design an effectiveness study to see how the toolkit performs in practice.
Monday’s Adjudication Roundup
- HSBC facing suit for breaching its duties as trustee for 271 residential mortgage-backed securities trusts.
- The US Supreme Court considered whether debtors should have an absolute right to appeal denial of proposed bankruptcy plan after three circuit courts have found that debtors can automatically can appeal, while in other jurisdictions, the bankruptcy judge must permit the appeal.
- BNP Paribas Mortgage Corp. suit from 2009 regarding Bank of America’s mishandling of hundreds of millions of dollars of mortgage-backed notes issued by Taylor Bean & Whitaker Mortgage Corp. finally settles.
Monday’s Adjudication Roundup
- Consumer Financial Protection Bureau has sued and settled with Flagship Financial Group for $225,000 for advertising their mortgages as government approved.
- Citigroup, UBS and Goldman Sachs settle for $235 million over Residential Mortgage-Backed Securities that Residential Capital, LLC issued without informing consumers of the risks associated with such securities. New Jersey Carpenters Health Fund et al v. Residential Capital LLC et al, U.S. District Court, Southern District of New York, No. 08-08781.
Reiss on $1.5B S&P Settlement
Westlaw Journal Derivatives quoted me in S&P Settles Fraud Suits for $1.5 Billion. The story reads in part,
Standard & Poor’s has agreed to pay $1.5 billion to settle lawsuits filed by the U.S. Department of Justice, 19 states and a pension fund that accused the ratings agency of damaging the economy by inflating credit ratings in the years leading up to the 2008 financial crisis.
According to a statement issued Feb. 3 by S&P, a subsidiary of McGraw-Hill Cos, the ratings agency will pay $687.5 million each to the DOJ and the states. It also will pay $125 million to settle a lawsuit filed by California Public Employees’ Retirement System. Cal. Pub. Employees’ Ret. Sys. Moody’s Corp. et al., No. CGC-09-490241, complaint filed (Cal. Super. Ct., S.F. County July 9, 2009).
The parties filed a joint stipulation of dismissal with the U.S. District Court for the Central District of California on Feb. 4.
“After careful consideration, the company determined that entering into the settlement agreement is in the best interests of the company and its shareholders and is pleased to resolve these matters,” McGraw-Hill said in the statement.
S&P did not admit to any wrongdoing in agreeing to settle.
U.S. Attorney General Eric Holder announced the settlement for the Justice Department and states.
“On more than one occasion, the company’s leadership ignored senior analysts who warned that the company had given top ratings to financial products that were failing to perform as advertised,” he said in a statement.
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David Reiss, a professor at Brooklyn Law School, also said the settlement closes an important chapter of the crisis.
“S&P would have faced a lot of unquantifiable risk if it had to admit wrongdoing in the settlement,” he said. “It is unclear that the Justice Department would have wanted to expose one of the three major rating agencies to such a risk because it could have destabilized the rating agency industry.”
Reiss added that the $1.5 billion settlement should have a deterrent effect.
”[It] likely gives ratings analysts some firm ground to stand on if they are pressured to lower their standards by others in their organizations,” he said. (1, 18-19)
The article also has a sidebar that reads,
Ratings agencies had avoided liability for their actions for quite some time based on the theory that they were First Amendment actors who dealt in opinions.
Recent cases have held that the rating agencies can be held liable for some of their ratings notwithstanding the First Amendment. United States v. McGraw-Hill Cos. et al., No. 13-CV-0779, 2013 WL 3762259 (C.D. Cal. July 16, 2013) and Federal Home Loan Bank of Boston v. Ally Financial Inc. et al., No. 11-10952, 2013 WL 5466631 (D. Mass. Sept. 30, 2013).
For instance, if the rating agency did not follow its own rating procedures, it could be held liable for fraud.
—David Reiss, Brooklyn Law School (18)
