Mortgage lenders are being challenged in court on mortgage compliance issues. Among recent activity in several compliance cases is Wells Fargo’s agreement to make loan modifications on thousands of “pick-a-pay” mortgages in California.
Wells Fargo has agreed to provide loan modifications worth more than $2 billion to thousands of California homeowners with “pick-a-pay” loans and to pay an additional $32 million to thousands of borrowers who lost their homes through foreclosure.
None of the loans were made by Wells Fargo. All were originated by World Savings and Wachovia. Wachovia purchased World Savings in 2006, while Wells Fargo acquired Wachovia in 2008.
“Customers were offered adjustable-rate loans with payments that mushroomed to amounts that ultimately thousands of borrowers could not afford,” Attorney General Edmund Brown said in a statement issued about the agreement. “Recognizing the harm caused by these loans, Wells Fargo accepted responsibility and entered into this settlement with my office.”
Under the settlement, Wells Fargo will offer affordable loan modifications to an estimated 14,900 California borrowers with pick-a-pay loans made by the two banks. The modifications will include significant principal forgiveness.
Wells Fargo is also required to pay $32 million in restitution to more than 12,000 pick-a-pay borrowers in California who lost their homes through foreclosure, plus approximately $1.8 million in costs to the state. Payments to foreclosed homeowners are expected to average more than $2,650.
Wells Fargo has reached settlements over pick-a-pay loans with attorneys general of several other states, including Arizona, Colorado, Florida, Illinois, Nevada, New Jersey, Texas and Washington.
A company that may have been formed to do good for homeowners fighting foreclosures isn’t doing so well in Arizona’s federal trial courts.
In AOM Group LLC v. Provident Funding, Associates LP, the United States District Court for the District of Arizona threw the case out of court and then noted that wasn’t the first time AOM had seen a case dismissed.
In court papers AOM Group is described as a trustee for a series of trusts formed by individuals who have defaulted on home loans.
Noting that AOM lacked standing – did not have a cognizable interest in the litigation — the court dismissed the lawsuit. “According to the complaint, the AOM Group had no involvement whatsoever in the lending process,” the court said.
And in a footnote, the court also noted that seven of the nine cases filed by AOM from January through March 2010 in that court system had been dismissed.
“It appears, after reviewing the pleadings in this case and other cases that the AOM Group operates as nothing more than a complex ruse designed to frustrate and delay otherwise lawful non-judicial foreclosures in the State of Arizona,” Judge Mary H. Murguia wrote in the 4-page order.
Judgment was entered for the defendant on August 25, 2010. On Oct. 8, 2010, the plaintiff was ordered to pay $350.00 as a judgment on taxation of costs.
AOM could not be reached for comment.
A California borrower who decided that the increase in his mortgage payments warranted rescission of the loan saw his case thrown out by the California federal trial court.
Samuel Smith sued GMAC claiming that, upon the transfer of his residential mortgage loan, the terms and payments had been changed from the original agreement. Smith claimed that he originally had a 40-year fixed-rate mortgage with payment of $1,145 per month that was increased to $2,800 a month.
He told the lender that he was not going to make the larger payments, amounting to a rescission of the loan. In response, WMC Mortgage Co. told Smith to inform the new lender. Smith claims that he told the next several lenders who obtained the loan including, GMAC, the most recent lender.
Smith sued, deciding to handle the case by himself. The court found that Smith’s Truth-in-Lending Act and Home Ownership and Equity Protection Act of 1994 claims were not applicable.
TILA could not be used for three reasons. First, the court said that evidence provided by Smith included an adjustable rate rider and a balloon rider — both of which Smith had signed.
Secondly, the court found that Smith’s claims were barred by the statute of limitations under the TILA. TILA requires lenders to provide consumers with the terms of their loans in a consistent and easy to understand manner so that consumers can easily compare loan terms. TILA requires that actions for damages be brought within one year and actions for rescission be brought within three years.
Third, TILA didn’t apply to Smith’s case because TILA specifically exempts residential mortgage transactions from its rescission and disclosure rights.
The court also found Smith’s claim under HOEPA to be legally deficient, pointing out that the transaction was for the finance of the acquisition of his house – a residential mortgage transaction — and that residential mortgage transactions are specifically excluded under HOEPA.
The case was decided April 15, 2010.
Levetown & Jenkins LLP put out a statement in January indicating that it was investigating SunTrust Mortgage over its lending practices and soliciting prospective plaintiffs located in Washington, D.C., who closed on their loans between 2000 and 2008.
Case Info:
In Re: Wachovia, Case No. 5:09-md-2015, Settled: Dec. 15, 2010 (U.S. District Court, Northern District of California).
AOM Group LLC v. Provident Funding, Associates LP, Case No. CV 10-605-PHX-MHM, Filing Date: March 18, 2010 (U. S. District Court for the District of Arizona).
Smith v. GMAC Mortgage, LLC, Case No. CIV S-09-0648 GEB GGH PS, Decided April 15, 2010 (United States District Court, E.D., California).
Information on Smith was provided by Leagle.com.
