The latest round of mortgage litigation deals with servicing issues, a big secondary marketing sale and disgruntled investors. A case tied to mortgage-backed securities is also on the docket, while an intellectual property rights case was settled.
First Catholic Federal Credit Union filed a lawsuit in the U.S. District Court for the Eastern District of Michigan on Dec. 31, 2009, against CUSO Mortgage Inc., according to court documents. The credit union, based in the City of Taylor, Mich., claims CUSO has failed to live up to the terms of a May 2002 subservicing agreement.
According to the complaint, CUSO has failed to pay delinquent taxes, neglected to properly process loan modifications and didn’t post payments on time — all activities required of CUSO in the agreement. In addition, CUSO neglected to monitor hazard insurance premium payments and was unable to prove it filed 1098 forms with the Internal Revenue Service
First Catholic notified CUSO that it wants to terminate the servicing agreement, but CUSO is demanding a 2 percent termination fee. First Catholic disputes the fee but agreed to place the 2 percent fee in an escrow account until the dispute is resolved — enabling the mortgages to be transferred to another servicer. The lawsuit seeks to invalidate the 2 percent fee.
A class action was filed in U.S. District Court against Sterling Savings Bank and parent Sterling Financial Corp. by employees who invested in the Spokane, Wash.-based company’s 401(k) Plan. Sterling allegedly failed to protect 2,500 employees’ investments in company stock.
Sterling is operating under an Oct. 2, 2009, agreement with its the Federal Deposit Insurance Corporation. A month ago, the company said it appointed Greg Seibly chief executive officer and Ezra Eckhardt president and chief operating officer.
A lawsuit was filed last week in New York State Supreme Court by Ambac Financial Group Inc. against Credit Suisse AG over a $170 million mortgage-backed security issued by Credit Suisse and affiliate DLJ Mortgage Capital in 2007 that Ambac has allegedly paid $44 million in claims on, Dow Jones Newswires reported. Ambac, which seeks compensatory and punitive damages, claims representations were breached on 80 percent of the 2,500 loans based on a sample it examined.
ECC Capital Corp., which in 2007 sold its wholesale lending operations to Bear Stearns & Co., filed a malpractice lawsuit on Jan. 8 in Los Angeles Superior Court against the two law firms that handled the deal, Latham & Watkins and Manatt Phelps & Phillips, the Amercian Lawyer reported. ECC claims it lost $48 million because the defendants drafted a flawed agreement that failed to shift the risk of early defaults to Bear — resulting in more than $1 billion in repurchases.
A Jan. 11 news release indicated that Tree.com has negotiated multiple settlements. One settlement is tied to intellectual property litigation, while another relates to litigation by buyers of two stated-income loans from LendingTree Loans. A $16 million fourth-quarter charge will be taken in connection with the settlements.
In 2008, LendingTree LLC settled in 2003 a lawsuit filed by IMX Inc. in U.S. District Court for the District of Delaware. IMX alleged patent infringement on a system and method for operating a real-time Internet exchange where borrowers and lenders exchange information in the pursuit of a loan. More recently, LendingTree dropped an Aug. 25, 2009, lawsuit filed against Mortech Inc. alleging that Mortech violated a contract it had with LendingTree by doing a deal with Google..
First Catholic Federal Credit Union v. CUSO Mortgage, Inc.
Case No. 2:09-cv-14982-VAR-VMM, Dec. 23, 2009 (U.S. District Court for the Eastern District of Michigan).
In. re. Jeffrey L. Levine.
Dec. 22, 2009 (U.S. District Court for the District of Georgia).
Cory Deter, individually and on behalf of all others similarly situated, Plaintiff, v. Sterling Financial Corporation, Sterling Savings Bank, Harold B. Gilkey, Robert G. Butterfield, Katherine K. Anderson, Ellen R.M. Boyer, William L. Eisenhart, James P. Fugate, James B. Keegan, Robert D. Larrabee, Donald J. Lukes, Michael F. Reuling, William W. Zuppe, and John/Jane Does 1-15, Defendants.
Case No. 2:10-cv-00012-LRS, Jan. 11, 2010 (U.S. District Court for the Eastern District of Washington).
