In yet another major setback for the foreclosure settlement, Massachusetts Attorney General (AG) Martha Coakley filed a lawsuit against – JPMorgan Chase & Co. (JPM – Analyst Report), Bank of America Corporation (BAC – Analyst Report), Citigroup Inc. (C – Analyst Report), Wells Fargo & Company (WFC – Analyst Report) and Ally Financial Inc. – for alleged violation of foreclosure practices. Further, Mortgage Electronic Registration System Inc. (MERS) and its parent company have also been named as defendants.
Allegations
The lawsuit alleges that these five major mortgage servicers used various deceiving foreclosure practices to fast track foreclosures without properly following the rules. Some of the procedures followed by these banks included use of ‘robo-signers,’ misleading homeowners in relation to loan modification processes, utilizing flawed documents and illegally foreclosing a property.
Additionally, MERS, which provides database for mortgage servicers, has been accused of sloppy record keeping, hiding the identities of the holders of mortgage debt from borrowers and evading fees. The lawsuit also charges these banks for utilizing the MERS database without paying registration fees to the government.
Motives
Ms. Coakley commented that the primary motive behind the lawsuit is to provide proper accountability for the roles played by the banks in unlawful and illegal foreclosures. Additionally, the lawsuit aims to give proper and enforceable relief to the homeowners whose property had been wrongly foreclosed by the misconducts of the mortgage servicers.
Responses from the Banks
The officials of all these five alleged companies stated that they would fight the lawsuit. They have also expressed that a joint resolution would have been a better way to deal with foreclosure mess and the present lawsuit jeopardizes chances for broader relief.
The Story Behind
It all started more than a year ago, when JPMorgan, Bank of America and Ally Finance Inc. temporarily suspended foreclosures across the country, following the detection of faulty foreclosure paperwork. Following this, the U.S. bank regulators, along with the state AGs, geared up to take actions against mortgage servicers.
The banks and regulators along with the AGs were in the middle of settlement deal designed to provide new guidelines for foreclosure practices across the nation. However, several obstacles appeared in the settlement agreement between the mortgage servicers and the AGs.
Ms. Coakley along with the AGs of New York and Delaware has been vocal in arguing that banks should not be exempted from future liability. Some other states including Minnesota, Nevada and Kentucky have been raising concerns regarding the extent of civil protection that should be given to the banks as a part of the settlement deal.
Though at present the talks have ceased, differences have cropped up between the banks and the AGs over the amount of money (nearly $25 billion) that should be placed in the reserve account for those home owners with wrongly foreclosed property.
Still a Long Way to Go
The banks have been hoping to put the foreclosure matter behind them with the agreement to settle the issue with the state AGs. However, with the Massachusetts lawsuit their plans to avoid the legal issues have been jeopardized. Apart from Massachusetts, the AGs of California, New York, Delaware and Nevada have pulled themselves out of the settlement talks and have started their own investigations.
Additionally, the banks already facing a large number of litigations related to mortgages could face further liabilities if other states also follow the suit and start their own inquiries.
However, whatever be the case, either through settlement talks or lawsuits, clearing the foreclosure clutter will go a long way to resolve the mess. However, we are optimistic that various counteractive measures, if implemented correctly, would prevent yet another foreclosure crisis. But most importantly, it would leave a lasting impact on lenders, forcing them to be extra cautious during housing transactions
Posted via email from Title Insurance The U.S. Supreme Court today hears arguments in a major consumer case that traces its origins to a lawsuit a Cleveland home buyer filed against her title insurance company. Reuters says the dispute, which pits big business against consumer groups, gets at a fundamental question: whether a person has to suffer legal harm to sue a company over an alleged kickback it got. The Cleveland home buyer, Denise Edwards, “sued her title insurance company under a 1974 federal real estate settlement law that bars kickbacks and certain referral fee arrangements,” Reuters reports. The news service says Ms. Edwards paid First American Financial Corp $455 for title insurance as part of a home purchase in 2006 while the seller paid an additional $273. She alleges that First American “had an arrangement with her Ohio settlement agency to refer title insurance business exclusively to First American — the alleged kickback.” Reuters notes that her attorneys argued that Congress, in adopting the 1974 law, “created a sufficient basis for her to sue and that courts have long recognized an individual’s interest to receive services free of kickbacks or other conflicts of interest.” Backing the title company are organizations representing home builders, title insurance companies and mortgage bankers, as well as the U.S. Chamber of Commerce. The story, unfortunately, doesn’t do a good job explaining their view of the case. But Kevin Walsh, a University of Richmond assistant law professor, tells Reuters that oral arguments before the court could provide clues on whether the justices are likely to rule broadly or narrowly. “A broad ruling could either vindicate or constrict statutory damages provisions in laws designed to protect information privacy, to regulate debt collection and to set standards for credit reporting,” he says, citing other laws that could be affected. Posted via email from Title Insurance Federal regulators are asking for industry input on prototypes for a new, unified settlement disclosure form that will replace the separate HUD-1 Settlement Statement and Truth in Lending disclosure form currently in use. The Consumer Financial Protection Bureau — which has also been asking for feedback this year on a unified loan disclosure form that consumers will receive when they apply for a mortgage — says it plans to test a number of different designs for a new settlement disclosure form over the next few months. The bureau will accept industry and consumer feedback until Nov. 16 on its initial prototypes for a redesigned settlement disclosure form. Based on that feedback, the bureau will fine-tune the prototypes and seek additional comments. Consumers currently get two disclosure forms whenever they apply for a mortgage, and two more at the closing table. Posted via email from Title Insurance
Continuing Ed for Title Agents
Cleveland home buyer’s beef leads to Supreme Court case – Cleveland Business News – Northeast Ohio and Cleveland – Crain’s Cleveland Business
Continuing Ed for Title Agents
New settlement disclosure form to replace HUD-1 | Inman News
Continuing Ed for Title Agents
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