The Residential Mortgage-Backed Securities Working Group announced a new website this week for whistleblowers to submit tips regarding potential fraud involving non-agency mortgage-backed securities. There are scores of people who worked in the residential MBS market who acted responsibly but who also may have witnessed greed and misconduct that crossed the legal line and created havoc for investors, homeowners and our economy, said Acting Associate Attorney General Tony West. We want to hear from them ... [Includes seven briefs]
A costly difference of interpretation between the Mortgage Guaranty Insurance Corp. and Freddie Mac over a pool insurance dispute has prompted the mortgage insurer to file suit against the government-sponsored enterprise and its regulator, the Federal Housing Finance Agency. Filed earlier this month in the U.S. District Court of Milwaukee, where the company is based, the legal dispute concerns differing readings of the aggregate loss limit for insurance policies MGIC provides on 11 pools of Freddie loans. The aggregate loss limit is about $535 million higher under Freddies...
Ally Financial negotiated an $8.7 billion settlement with investors in non-agency MBS issued by Residential Capital before putting the company, one of the pioneers in the securitization of jumbo, Alt A and subprime mortgages, into bankruptcy. Long before ResCaps bankruptcy filing early this week, trustees for outstanding non-agency MBS had already been instructed by 17 investors to sue Ally Financial for compensation over alleged violations of ResCap representations and warranties. The deal was reached shortly before the filings, according to a source close to the matter. Ally said that some 290 MBS trusts...
Real estate transactions in New Castle County, DE, will no longer be exempt from transfer tax as a conveyance from a governmental entity, following a new ruling from the countys legal counsel.The New Castle county law department found that Fannie and Freddie are federally chartered private corporations and not governmental agencies. The countys revised interpretation of the realty transfer tax statute earlier this month, consistent with the growing practice in other jurisdictions, has prompted the county to enforce the distinction starting in June.
Look for the Federal Housing Finance Agency to press its multiple legal actions against many of the nations biggest issuers of non-agency mortgage-backed securities after a federal judge rejected a bid by UBS Americas to turn back the FHFAs lawsuit over its sale of non-agency MBS to Fannie Mae and Freddie Mac. Judge Denise Cote, of the U.S. District Court for the Southern District of New York, two weeks ago denied UBS motion to dismiss on statute of limitations grounds, while dismissing the FHFAs negligent misrepresentation claims. The FHFA, as GSE conservator, sued UBS in July 2011 alleging that billions of dollars of MBS purchased by Fannie and Freddie were based on offering documents that contained materially false statements and omissions.
Fannie Mae received a leg up earlier this month in its defense against a former staffers wrongful termination lawsuit when a federal judge ruled that the GSE is not legally considered a government entity while under the conservatorship of its regulator, the Federal Housing Finance Agency. Caroline Herron, a former Fannie vice president who left in 2007 but returned as a consultant in 2009, filed suit against the GSE in June 2010. Herron claims she was wrongly fired for reporting what she said was Fannies mismanagement of the Obama administrations housing rescue initiatives. According to papers filed in U.S. District Court for the District of Columbia, Herron sought to prove that Fannie was not a private company but an adjunct of the state while under FHFA conservatorship as part of her claim against Fannie. Herron asserted a Bivens claim, a claim under the First Amendment for private damages against federal officials for civil rights violations outside the purview of the Federal Tort Claims Act.
Three mortgage lending industry groups have challenged the position of the Consumer Financial Protection Bureau in a key Truth in Lending Act case by asserting that borrowers must file a lawsuit within three years of a mortgage loans signing in order to exercise their right of rescission. As far as the industry is concerned, the crux of the dispute in Rosenfield v. HSBC Bank, No. 10-1442, currently before the 10th District Court of Appeals, is whether borrowers who notify lenders of their intent to rescind must also sue their lenders within three years. TILA gives certain...
The Consumer Financial Protection Bureau has sided with borrowers in an appeals case being brought under the Fair Debt Collection Practices Act, Birster v. American Home Mortgage Servicing, Inc., which is currently before the 11th Circuit Court of Appeals. The FDCPA prohibits debt collectors from using certain means to collect debts and from engaging in certain conduct in connection with the collection of a debt. In order for a plaintiff to successfully sue under the act, he or so must show two things: that the defendant is in fact a debt collector under the law, and the behavior...
In Bridge v. Ocwen Federal Bank, FSB, the U.S. Court of Appeals for the Sixth Circuit recently ruled that a pro se plaintiff stated a Fair Debt Collection Practices Act claim against a mortgage servicer where the mortgage was not actually in default, reversing the district courts dismissal. The court came to the conclusion that the mortgage servicer and the purchaser of the mortgage came under the scope of the FDCPA because the mortgage servicer treated the mortgage as if it were in default and tried to collect on it as a debt that was in default. In Bridge, the homeowner...
In Gilbert v. Residential Funding LLC, the U.S. Court of Appeals for the 4th Circuit became the first federal appellate court to rule that a borrower only needs to send notice of rescission within the three-year period to exercise a valid right to rescind. In this case, the borrowers are appealing a district courts dismissal of their claim that Deutsche Bank Trust Company Americas, as trustee for Residential Accredit Loans, Inc., Residential Funding LLC and GMAC Mortgage LLC, violated various consumer protection laws in connection with a refinance mortgage the borrowers secured...