Recent mortgage-related litigation includes a case against an Alabama bank accused of lending discrimination, a $4 billion lawsuit filed by Bank of America Corp. and a suit against IndyMac Bank. One of three cases tied to corporate bankruptcies has been settled.
In a settlement filed on Sept. 30 with the U.S. Department of Justice, First United Security Bank agreed to open a new branch in a black neighborhood of Central Alabama, a news release indicated. The 57-year-old bank also agreed to take other steps to resolve allegations of lending discrimination and spend $600,000 promoting its programs in the affected neighborhoods.
Thomasville, Ala.-based First United is accused of redlining by not offering equal access to some of its loan programs in predominantly black neighborhoods and charging blacks higher mortgage rates than similarly-situated whites. The bank’s alleged actions violated the federal Fair Housing Act and the Equal Credit Opportunity Act.
An investigation of First United was prompted by a compliance examination by the Federal Deposit Insurance Corporation in December 2005. The investigation revealed that originators were given latitude in pricing mortgages, leading to the alleged discriminatory actions.
The U.S. Bankruptcy Court in Jacksonville, Fla., approved an agreement this week by Taylor, Bean and Whitaker Mortgage Corp. to share financial information with Freddie Mac on unprocessed mortgage payments, the Star-Banner reported. The agreement also enables Freddie to attempt to access more than 100 bank accounts at Colonial Bank with nearly $2 billion in borrower payments and escrow deposits.
A bankruptcy judge in the case of failed Thornburg Mortgage Inc. has appointed a trustee as a result of allegations that former chief executive officer Larry Goldstone and former chief financial officer Clarence Simmons utilized employees and resources of the bankrupt firm to start a new venture, SAF, according to Reuters. The pair, who reportedly resigned on Sept. 15, are also accused of paying themselves $232,000 in bonuses and paying $93,000 to other managers helping with SAF’s launch without approval from the compensation committee.
Santa Fe, N.M.-based Thornburg filed for Chapter 11 bankruptcy protection on May 1 with plans to liquidate. On Aug. 7, it changed its name to TMST Inc.
A lawsuit filed by the bankruptcy trustee for American Business Financial Services Inc. alleges that JPMorgan Chase & Co., Bear Stearns, Morgan Stanley and Credit Suisse Group AG kept American Business afloat by enabling it to overstate the value of its assets, Bloomberg reported. The four companies, which denied any wrongdoing, agreed to a $100 million settlement to resolve the case, including $55 million from JPMorgan and Bear, $38 million by Credit Suisse and $8 million by Morgan Stanley. The trustee had sought $750 million..
A partnership announced earlier this month between Wingspan Portfolio Advisors and National Claims Filing LLC enables automated claims audits and compliant filings by mortgage servicers with bankruptcy courts. Accurate proof-of-claim filings are essential to recovery in this era of “judicial activism,” and the service promises to make such filings “remarkably fast and simple.”
“Borrower attorneys are capitalizing by casting doubt on lender information like servicing data, payment histories and basic accounting calculations the industry has used for decades,” Wingspan Chief Executive Officer Steven Horne said in the statement. “Lenders and servicers simply have to protect themselves in an increasingly hostile legal environment.”
A federal district court judge in Manhattan, N.Y., has ruled that Bank of America Corp. can proceed with its $4 billion lawsuit against Bear Stearns Asset Management and two former Bear hedge fund managers, The American Lawyer reported.
MBIA Insurance Corp. filed a lawsuit in Los Angeles Superior Court against IndyMac Bank claiming that the failed firm abandoned prudent underwriting in favor of more market share — leading to more than $1 billion in claims expected to be paid out on thousands of loans by MBIA — according to Courthouse News Service. IndyMac is additionally accused of encouraging employees to inflate income.
Also named as defendants are Credit Suisse Securities, UBS Securities and JPMorgan as well as former IndyMac executives Michael Perry, A. Scott Keys, Jill Jacobson and Kevin Callan.
United States of America, Plaintiff, v. First United Security Bank, Defendant.
Case No. 1:09-cv-0644, Sept. 30, 2009 (U.S. District Court for the Southern District of Alabama).
In re: TMST Inc.
Case No. 09-17787 (U.S. Bankruptcy Court for the District of Maryland).
Miller v. Santilli.
Case No. 001225 (Court of Common Pleas Philadelphia County, Pennsylvania),
