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Mortgage Lawsuits News | Mortgage Litigation Index
Mortgage industry lawsuit news and mortgage litigation coverage. Stories about legal settlements, judgments and mortgage class actions.


The Mortgage Compliance Litigator

Recent mortgage compliance lawsuits and legal actions

March 29, 2010

By SAM GARCIA


Alleged mortgage compliance errors are landing some of the biggest names in the mortgage business in court. A bankrupt lender was held liable for mortgage fraud committed by a convicted real estate agent, and a former senior executive tied to the failure of a big FHA lender has been banned from any association with government lending.

Massachusetts Attorney General Martha Coakley said last week that Countrywide Financial Corp. agreed to a settlement that will provide an estimated $18 million in loan modifications -- including principal loan reductions -- to borrowers in the state as well as a $4 million cash payment to the state. The settlement, filed in Suffolk Superior Court, is an expansion of the 2008 agreement reached with 43 other states and Washington, D.C.

Countrywide used unfair lending practices by originating exotic loan products without considering the borrowers' abilities to repay the loans after introductory rates ended, Coakley said.

In a lawsuit against Wells Fargo Home Mortgage Inc. filed in U.S. District Court for the District of Maryland, plaintiff Renee Imeh Okon alleged violations of the Truth in Lending Act, according to a copy of the March 4 decision published by Leagle. She appealed the district court's decision to grant a summary judgment in favor of Wells Fargo, but the U.S. Court of Appeals, Fourth Circuit affirmed the lower court's decision.

TILA claims are fairly easy to bring, but they are difficult to maintain in state or federal court, California attorney Paul J. Molinar recently wrote. When mortgage brokers are involved, claims against wholesale lenders can be harder. Plaintiffs need to show some connection to invoke agency principles and this connection must be beyond the mere relationship status of a lender and a broker.

A federal judge has granted the City of Baltimore more time to file a second amended complaint against Wells Fargo Bank, N.A., the Associated Press reported. Baltimore alleged that predatory and discriminatory lending practices by the bank harmed the city. The judge dismissed the lawsuit in January but noted he did so "with leave for the city to file a second amended complaint asserting narrower claims."

A 70-year-old Arizona borrower won a $100,000 judgment against American Home Mortgage for allegedly aiding and abetting unlicensed real estate broker and convicted felon Patrick Downey in a mortgage fraud scheme, the plaintiff's counsel, Douglas J. Pettibone, said in a statement last month. The case was filed in U.S. Bankruptcy Court for the District of Delaware, where American Home filed bankruptcy, on behalf of Mona Dobben, who claims Downey forged her signature and submitted fraudulent documents without her knowledge.

Dobben claims American Home should have been alerted to red flags but ignored her pleas to look into the fraud. The lender then foreclosed on the property. The judgment included $32,000 in actual damages and $68,000 in treble damages.

An appeal by American Home is pending.

Michael Ashley, the former chief business strategist at failed Lend America, agreed to a settlement with the government that permanently enjoins him from originating, underwriting or submitting any loans to the U.S. Department of Housing and Urban Development for Federal Housing Administration insurance coverage, according to a copy of the consent judgment. He is also banned from advertising, marketing or soliciting business to originate federally insured loans and cannot work for a HUD-approved lender.

Lend America failed after it lost its FHA approval because of gross non-compliance with government lending requirements. Ashley didn't admit any guilt.

A $315,000 civil judgment was obtained by Monterey County, Calif., against Ed Veronick Mortgage Loans Inc. and several defendants, according to a March 12 statement from Monterey County District Attorney Dean Flippo. The loan brokerage allegedly engaged "in a civil conspiracy and illegal business practices between June 2004 and June 2007 to obtain an unfair advantage over competitors and earn illegal profits out of commissions on loans brokered by unlicensed persons."

Several of the defendants surrendered their licenses in exchange for lower penalties. The defendants had already been directed by California's Department of Real Estate in 2005 to cease illegal marketing and sharing loan commissions with unlicensed persons.

A lawsuit that included Pulte Mortgage LLC among its defendants was dismissed on Feb. 18 because it lacked a plausible claim, Pulte Homes announced. The case, filed in U.S. District Court for the Northern District of California, reportedly was an attempt by the Laborer's International Union of North America's to press for unionization at Pulte units.

The dismissal order indicated that the plaintiff, Soladin Kaing, was told she would receive a $75,000 price reduction on a $575,365 home if she used Pulte Mortgage. But the property was allegedly overvalued.

"These union groups have been behind false claims that Pulte and other residential homebuilders engaged in improper practices with respect to the sale of homes," Pulte stated. "The court had the opportunity to address many of these allegations in the lawsuit and found them lacking in merit, specifically citing that the plaintiff did not have a 'plausible claim' and that the plaintiff had an 'insurmountable problem' because plaintiff could not show that the alleged damages were caused by the alleged misconduct of Pulte."

In 2008, the New Hampshire Banking Department entered into a consent order with The Mortgage Specialists Inc. The Plaistow, N.H.-based company allegedly shredded documents to hide alterations to loan files from the regulators.

Now, the broker's former vice president of operations, Jean Duerr, alleges in a civil lawsuit filed in Rockingham County Superior Court that she was fired for refusing to hide things from state and federal investigators, the Eagle Tribune reported. The 10-year employee claims she tried to discourage the practice -- though she was one of four people named in the banking department's order.

Fifth Third Mortgage Co. lost an appeal to overturn a judgment in favor of Branch Banking and Trust Co., according to a copy of the March 2 decision from the Court of Appeals of North Carolina published by Leagle. Fifth Third had argued that its March 2007 note for $1.2 million to Alan Miller should have had priority over an $0.5 million home-equity line-of-credit recorded in June 2007 even though the property description was wrong.

After Miller and his wife defaulted on both loans, BB&T initiated foreclosure proceedings. Fifth Third quickly filed a complaint seeking to correct its errors, but the court ruled in favor of BB&T -- and its ruling was upheld by the appeals court.



COMMONWEALTH OF MASSACHUSETTS, Plaintiff, v. COUNTRYWIDE FINANCIAL CORPORATION, COUNTRYWIDE HOME LOANS, INC., COUNTRYWIDE MORTGAGE VENTURES LLC, FULL SPECTRUM LENDING, INC., Defendants.
Civil Action No. 10-1169 C (Superior Court, Suffolk, Commonwealth of Massachusetts).

RENEE IMEH OKON, Plaintiff-Appellant, v. WELLS FARGO HOME MORTGAGE, INCORPORATED, d/b/a American Servicing Company; FREMONT INVESTMENT & LOAN, INCORPORATED, a/k/a Fremont & Investment and Loan, Defendants-Appellees.
Appellate Case No. 09-1939, Civil Case No. 8:08-cv-01058-RWT (U.S. District Court for the District of Maryland; U.S. Court of Appeals, Fourth Circuit).

Mayor and City Council of Baltimore, Plaintiff, v. Wells Fargo Bank, N.A. and Wells Fargo Financial Leasing Inc., Defendants.
Case No. 08-00062-BEL, Jan. 8, 2008 (U.S. District Court for the District of Maryland).

In Re: American Home Mortgage Holdings, et al.
Case No: 07-11047 (U.S. Bankruptcy Court for the District of Delaware).


United States of America, Plaintiff, -against- Ideal Mortgage Bankers Ltd., d/b/a Lend America, and Michael Howard Ashley Defendants.
Case No. 2:09-cv-4484-JFB--WDW (U.S. District Court for the Eastern District of New York).

SOLADIN KAING, as an individual and on behalf of all others similarly situated, Plaintiff, v. PULTE HOMES, INC.; PULTE HOME CORPORATION, and PULTE MORTGAGE LLC, Defendants.
Case No. 09-5057 SC (U.S. District Court for the Northern District of California).

FIFTH THIRD MORTGAGE COMPANY, Plaintiff, v. ALAN MILLER, PHYLLIS A. MILLER, BRANCH BANKING AND TRUST COMPANY and JEFF D. ROGERS, SUBSTITUTE TRUSTEE, Defendants.
Case No. COA09-961 (Court of Appeals of North Carolina).


Sam Garcia worked in mortgage lending for twenty years prior to becoming publisher of MortgageDaily.com in 2000.

e-mail:
[email protected]


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