The U.S. Court of Appeals for the 11th Circuit recently reversed and remanded a lower court’s rejection of a Fair Debt Collections Practices Act claim, determining in Reese v. Ellis, Painter, Rattertree & Adams, LLP that the contents of a “dunning” notice from the lender’s foreclosing law firm amount to an effort to collect a debt under the act. In this case, the borrowers, Izell and Raven Reese of Roswell, GA, purchased a piece of property in 2004 with the help of a $650,000 loan from Provident Funding Associates, LP. To get that loan, the Reeses signed a promissory note and...

With his home state of Nevada leading the nation in foreclosures, Republican Sen. Dean Heller has introduced legislation that seeks to simplify and speed up the short-sale process via an amendment to the Truth in Lending Act. Heller has recently introduced SB 3177, the Stopping Ongoing Lender Delays Act (or SOLD Act). His legislation would require each servicer of a home mortgage to respond in writing within 30 calendar days to a mortgagor of a residential mortgage loan who has requested in writing a short sale of the dwelling or residential real property that is subject to the mortgage...

The Federal Deposit Insurance Corp. late last week filed separate lawsuits against a number of companies that issued or underwrote non-agency MBS purchased by Citizens National Bank and Strategic Capital Bank, two Illinois banks that failed in May 2009. The two banks purchased some $140.5 million of non-agency MBS issued by Bear Stearns, Citicorp, Credit Suisse and Merrill Lynch. The lawsuits also name JPMorgan Securities, Citigroup, Credit Suisse, Deutsche Bank, Ally Securities, HSBC Securities, RBS Securities and UBS Securities as underwriters of these transactions. The FDIC is seeking $77.0...

Uncertainty lingers in the wake of last week’s announced $8.7 billion settlement between non-agency MBS investors and Ally Financial’s subsidiary Residential Capital as the details and implications of the deal resonate throughout the market. The agreement with 17 residential MBS investors was struck in a photo finish shortly before ResCap’s bankruptcy filing, and it represents the second major settlement between non-agency MBS investors and the sponsors of non-agency securitizations. Bank of America’s controversial $8.5 billion proposed settlement with investors that purchased Countrywide non-agency MBS...

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 Freddie’s...

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 ResCap’s 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 county’s legal counsel.The New Castle county law department found that Fannie and Freddie are federally chartered private corporations and not governmental agencies. The county’s 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 nation’s biggest issuers of non-agency mortgage-backed securities after a federal judge rejected a bid by UBS Americas to turn back the FHFA’s 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 FHFA’s 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 staffer’s 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 Fannie’s mismanagement of the Obama administration’s 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.