In a development that ultimately could affect legions of homeowners who couldn’t get a permanent loan modification, the U.S. Court of Appeals for the Seventh Circuit recently gave the go-ahead to a borrower class action against a mortgage servicer for not providing a permanent loan modification under the Home Affordable Modification Program. “We believe this affects hundreds of thousands of people, if not more – not just at Wells Fargo, but also with respect to other banks – who haven’t been able to get their loan modifications like they should have, given their compliance with their trial plans...

The settlements reached by five major mortgage servicers with a handful of states over their use of the Mortgage Electronic Registration System has not weakened the legal position of MERSCorp itself, according to industry experts. The new agreements signed by New York Attorney General Eric Schneiderman with Wells Fargo, Bank of America, JPMorgan Chase, Citigroup and Ally Financial has the banks paying a total of $25 million to the state in exchange for a release of further claims regarding the banks’ use of MERS throughout the servicing and foreclosure process and a pledge not to challenge...

The emerging consensus among industry analysts and attorneys who are reviewing the finalized documentation of the $25 billion servicing settlement is that state and federal government law enforcement officials are just getting started in their efforts to hold the industry’s feet to the fire over flawed foreclosure practices. Last week, the Department of Justice finally made public the official complaint and consent judgments for the $25 billion servicing settlement that had been announced the month before, the details of which seem to be largely in line with expectations...

Mortgage lenders that provide sensitive, confidential or proprietary information to the Consumer Financial Protection Bureau will be able to breathe easier when doing so under a rule the bureau proposed last week that would codify protections for privileged information submitted to the agency by financial institutions. Early this year, the CFPB told institutions it supervises that submitting privileged information to the CFPB does not waive any applicable privilege with respect to third parties. The proposed rule, published in the March 15 Federal Register, is intended to provide ...

A $95 million settlement with the nation’s four largest mortgage servicers – Bank of America, JP Morgan Chase, Wells Fargo and Citigroup – was announced last week by U.S. Attorney Bill Nettles of the District of South Carolina, the largest False Claims Act settlement in the history of the state, according to Justice Department officials. The settlement is part of the $25 billion global resolution announced in February between major banks and state attorneys general to settle claims of abusive mortgage practices, including robo-signing of foreclosures...

In Wigod v. Wells Fargo Bank, the U.S. Court of Appeals for the Seventh Circuit earlier this month gave a mortgage borrower the green light to move ahead with class action litigation against the servicer of her mortgage for its failure to provide a permanent loan modification under the Home Affordable Mortgage Program. In this case, the borrower, Lori Wigod, and the servicer, Wells Fargo, entered into a HAMP trial period plan with the understanding that if Wigod complied with the terms of the plan for four months, Wells would offer her a permanent loan modification...

Law firm K&L Gates and the National and Washington Lawyers’ Committees for Civil Rights launched a pro bono legal challenge to an allegedly discriminatory and otherwise unlawful foreclosure rescue scam targeting Hispanic homeowners in northern Virginia. Plaintiffs Jose and Margarita Viera allege they have been the victims of defendants Bella Homes LLC and a number of its management officials and agents in a scheme that zeroes in on Hispanic homeowners who were having difficulty making their mortgage payments. “The crux of the complaint is that ...

Even though approximately $10.0 billion in non-agency representation and warranty payouts have already been included in proposed or completed settlements, another $34.0 billion in payouts are probably waiting in the wings, with Bank of America and JPMorgan facing the largest exposure by far, according to analysts at Barclays Capital. “Total payouts to non-agency investors from rep and warranty related recoveries will be $26.0 billion to $52.0 billion, using the $8.5 billion Countrywide settlement deal as a template. This corresponds to an average of 3-6 points of recoveries on non-agency securities...

Many non-agency MBS investors are upset with the $25 billion servicing settlement involving 49 state attorneys general, eight federal agencies and the nation’s five largest servicers, the full terms of which were filed in U.S. District Court this week. Bank of America, Wells Fargo, JPMorgan Chase, Citigroup and Ally Financial will receive some credit for modifying loans they service but do not own, although several of these firms have indicated that they plan to focus their efforts on portfolio loans. The Association of Mortgage Investors said the settlement establishes a precedent under which the bad debts of...

The Securities and Exchange Commission this week filed a lawsuit against three former executives of Thornburg Mortgage regarding disclosure and accounting issues in early 2008. The former executives of the now bankrupt jumbo lender denied the charges and vowed to prevail in court. “Thornburg’s executives schemed to drop a disingenuous annual report into the public realm at the most opportune moment possible while knowing it was merely the calm before the next storm,” said Donald Hoerl, director of the SEC’s Denver regional office. Larry Goldstone and Clay Simmons, the former CEO and chief financial officer of Thornburg, respectively, countered that ...