Mortgage Daily Logo

3 Settlements Among Investor Litigation Activity

Mortgage News

Several settlements have been reached with mortgage-related corporations accused of deceiving investors, though court approval has yet to be granted in some cases. Among plaintiffs in investor lawsuits with recent activity were cities, states and the United States. Subsidiaries of Bank of America Corp. were dominant in the latest round of litigious investor actions.

Merrill Lynch & Co. and former executives E. Stanley O’Neal and Jeffreey N. Edwards were named as defendants in a lawsuit filed in U.S. District Court for the Southern District of New York on July 22 by New York Comptroller Thomas P. DiNapoli on behalf of the New York State and Local Retirement Systems and the New York State Common Retirement Fund. Merrill allegedly deceived investors about the degree of exposure it had to subprime mortgage-backed securities.

In addition, Merrill parent Bank of America Corp. was also sued by DiNapoli in federal court in Manhattan. BofA is accused of misrepresentation and concealing material facts when it acquired Merrill Lynch.

An amended complaint was filed on Aug. 31 in U.S. District Court for the Central District of California by the National Credit Union Administration as conservator of Western Corporate Federal Credit Union. The latest filing supersedes a November 2009 complaint.

NCUA claims that 15 former directors and officers of WesCorp breached their fiduciary duties of care and were grossly negligent by concentrating too much of WesCorp’s investments in mortgage-backed securities backed by payment-option adjustable-rate mortgages.

“The complaint also alleges breaches of fiduciary duty and fraud on the part of two former WesCorp officers and unjust enrichment on the part of one former officer in connection with irregular payments from WesCorp’s supplemental executive retention plans,” the statement said.

A motion to dismiss by defendants Morgan Stanley & Co. Inc.; Citigroup Global Markets Inc.; Merrill Lynch, Pierce, Fenner & Smith Inc.; UBS Securities LLC; Banc of America Securities LLC; and SunTrust Robinson Humphrey Inc. was granted by the U.S. District Court for the Northern District of Georgia on Friday. A copy of the decision posted by indicates that the plaintiff in the action, Belmont Holding Corp., claims it was misled in a 2008 prospectus supplement to a SunTrust Banks Inc. registration statement about the financial health of the company given the state of the economy.

In U.S. District Court for the Middle District of Florida, Wachovia Bank’s motion to dismiss a lawsuit that was filed by the City of St. Petersburg was granted in July, a copy of the decision posted at said. The case is tied to the city’s investments in failed Lehman Brothers Inc.

Wachovia-parent Wells Fargo Bank, N.A., was sued for $40 million by Sarasota County, Fla., The Clayton Law Firm, P.A., announced in July. The plaintiffs allege Wachovia Bank went against the county’s “conservative investment policies” when $40 million in Lehman Brothers notes and $40 million in MBS were placed in the county’s portfolio.

In July, the Securities and Exchange Commission announced a $75 million settlement with Citigroup Inc. Gary Crittenden, the former chief financial officer at the New York-based company, agreed to pay $100,000. Arthur Tildesley Jr., the former head of investor relations who now heads up cross marketing at Citigroup, agreed to pay $80,000.

The company allegedly misled investors about its exposure to subprime mortgage-related assets.

“Even as late as fall 2007, as the mortgage market was rapidly deteriorating, Citigroup boasted of superior risk management skills in reducing its subprime exposure to approximately $13 billion,” Robert Khuzami, director of the SEC’s division of enforcement, said in the statement. “In fact, billions more in CDO and other subprime exposure sat on its books undisclosed to investors.”

But the Citi-SEC settlement was held up by a federal judge last month who seeks more documents supporting the agreement. The SEC has since defended the settlement and called for the judge’s approval.

Investors from 48 Citigroup bond offerings were granted approval by a judge in the U.S. District Court for the Southern District of New York to proceed with their lawsuit against Citi, the New York Law Journal reported. The plaintiffs claim Citi neglected to disclose “toxic mortgage-linked exposures.”

More than $38 million in settlements were recently announced in the Metropolitan Securities Litigation by Hagens Berman Sobol Shapiro LLP and Gordon Thomas Honeywell Malanca Peterson & Daheim LLP. The class action was filed in U.S. District Court for the Eastern District of Washington.

A motion by investors in funds from Morgan Keegan & Co. Inc. to remand their lawsuit against Morgan Asset Management Inc. to the Circuit Court for Shelby County, Tenn., was granted by the U.S. District Court for the Western District of Tennessee in June, according to a copy of the decision reported by

Also that month, U.S. District Judge Samuel H. Mays Jr. in federal court for the Western District of Tennessee set a July 2nd deadline to file motions for lead plaintiffs, Robbins Geller Rudman & Dowd LLP announced. Plaintiffs in that case are investors of some of Regions Morgan Keegan Closed-End Mutual Funds.

U.S. District Judge Dean D. Pregerson in Los Angeles preliminarily approved a $125 million cash settlement for shareholders of New Century Financial Corp. in August, the National Law Journal reported. The agreement calls for New Century’s auditor, KPMG LLP, to pay $45 million. In addition, underwriter defendants will pay $15 million and former officers and directors will collectively pay more than $65 million.

Also last month in federal court in Los Angeles, U.S. District Judge Mariana Pfaelzer gave preliminary approval to a $600 million shareholder settlement with BofA-subsidiary Countrywide Financial Corp., The Daily Transcript reported. Countrywide founder and former chief executive officer Angelo Mozilo is among defendants named.

Two months earlier, a securities fraud lawsuit against Countrywide filed by Monaco-based hedge fund firm SRM Global was dismissed by New York federal court judge Richard Berman, reported.

In a lawsuit against Lynda S. Steele, investors of JP & Associates Investment Firm believed the loan officer was using the capital they invested to make real estate purchases. But instead Steele, who also goes by the names Lynda Alvitre and Sengpheth Bounnharaj, used the investments for her company’s expenses and was hit with a $3.6 million judgment in Cumberland County Superior Court, The Fayetteville Observer reported. Steele has since been named in a federal bill of criminal information that was filed on July 29.

Related Posts

NewDay USA CEO Rob Posner Expects 10% Increase in 2019 Mortgage Loan Volume

There is No Such Thing as a Free House …

Over the past several years, those who service loans in the State of Washington(1) have seen a dramatic rise in the number of lawsuits in which delinquent borrowers seek to quiet title to their homes on the grounds that lenders are barred from foreclosing based on...

NewDay USA CEO Rob Posner Expects 10% Increase in 2019 Mortgage Loan Volume

Mortgage Servicer Portfolios

servicing news | mortgages outstanding statistics | foreclosure news   Servicing Portfolios as of 2018 | 2017 | 2016 | 2015 | 2014 | 2013 | 2012 | 2011 | 2010 | 2009 | 2008 | 2007 | 2006 Residential Servicing Portfolios by Servicer Last Updated December 14, 2018...

NewDay USA CEO Rob Posner Expects 10% Increase in 2019 Mortgage Loan Volume

Fannie Mae Profile

Last Updated December 27, 2018 7:38 PM Central   full list | other directories | bank search | SEC filings | execs | m&a | production   Government Takes Over Fannie, Freddie Sept. 8, 2008 The government has seized control of Fannie Mae and Freddie Mac. The move --...

NewDay USA CEO Rob Posner Expects 10% Increase in 2019 Mortgage Loan Volume

Freddie Mac Profile

Government Takes Over Fannie, Freddie Sept. 8, 2008 The government has seized control of Fannie Mae and Freddie Mac. The move -- which is likely to push mortgage rates lower and provide a sense of stability for the more than 10,000 employees at both companies -- is a...

Popular posts

How Long Does It Take to Refinance a Mortgage
How Long Does It Take to Refinance a Mortgage

So, you’re interested in refinancing your mortgage. Maybe you want some extra capital to do that home project you’ve always dreamed of, interest rates are nearing record lows, or you want to start consolidating debt. Regardless of the motivation behind the refinance,...

How Does Refinancing a Mortgage Work
How Does Refinancing a Mortgage Work

A home purchase is considered an investment, and a robust one at that. Savvy owners are constantly looking for new ways to reduce debt, save money, pay less in interest, and ultimately build equity. Refinancing is one way to leverage your investment and do just that....

What Does It Mean to Refinance Your Home
What Does It Mean to Refinance Your Home

You can think of refinancing your mortgage as a debt redo. Essentially, you’ll swap out the existing loan for a new one - ideally with better terms and conditions. Only this time it could help you save money on high mortgage payments, rather than just borrow it....

Setting up the Utilities in My New House
Setting up the Utilities in My New House

All the tedious, time-consuming home closing documents have been signed, sealed, and delivered. Your belongings are packed into what seems like a million boxes and you have a solid plan to haul all your existing furniture to the new place. Just as your boxes and...

When Is My First Mortgage Payment Due?
When Is My First Mortgage Payment Due?

Navigating your way through a brand new mortgage loan can be a difficult task, especially for first time homeowners. After handing over a large sum of money for the down payment and closing costs, it’s important to pay attention to the timing of your first mortgage...


Don’t worry, we don’t spam

calculate your monthly mortgage payment

Related Topics

Helpful Links

Daily mortgage rate trends

Best mortgage lenders

First-time homebuyers programs by state

Loan limits by state

Types of mortgages

APR vs interest rate

Understanding PMI