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Servicers Fight Lawsuits

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Among issues being fought in court by mortgage servicers are forced-placed insurance, denied loan modifications and lien releases.

CitiMortgage Inc. has agreed to a $2 million settlement in a class action, a news release said. The lawsuit, filed in the Superior Court for the State of California, County of Los Angeles, alleges that Citi charged excessive premiums on its forced-placed insurance premiums for California properties. The lender allegedly violated California’s Unfair Competition Law, Business and Professions Code Section 17200, et seq.

Citi “vigorously denies all claims asserted in the Action and all allegations of wrongdoing and liability,” according to a settlement notice.

In Philadelphia, after Patrick Rodgers was told by Wells Fargo & Co. that he had to quadruple his homeowner’s insurance coverage, he sued and obtained a default judgment, the Associated Press reported. Rodgers was able to take that judgment, slap a lien on Wells’ local office and prompt a sheriff’s sale of the branch — though he settled for $1,000 and a reduced insurance requirement.

Dorothy Rhue Allen, who purchased her home in 1976, failed to make her last payment and was declared in default in May 2010 on behalf LaSalle Bank, according to a copy of the decision from the Third Circuit U.S. Court of Appeals. The servicer is Cenlar Federal Savings Bank.

Allen requested a payoff on the loan and was sent a letter with a payoff quote that included the principal balance, servicer charges and attorney fees. Cenlar also sent a second letter to Allen’s attorney itemizing the attorney fees and costs. Three weeks later, Allen filed a class action counterclaim and third-party complaint in the foreclosure action claiming that the letter from Cenlar’s attorney violated the Federal Debt Collection Practices Act and state law — leading Cenlar to dismiss the foreclosure in New Jersey Superior Court.

That didn’t stop Allen, however, who filed a class action over excessive costs associated with the foreclosure. But the court dismissed her claim, concluding that because Allen’s attorney protected her from any unfair or unconscionable means used to collect the debt, Allen had failed to state viable FDCPA claims.

However, the appeals court agreed with Allen and overturned the decision.

A class action was filed in U.S. District Court for the Eastern District of Washington against EMC Mortgage Corp., Keller Rohrback LLP announced in January. The class includes Washington State borrowers who have attempted to obtain a modification from the JPMorgan Chase & Co. subsidiary under the Home Affordable Modification Program. Violations of the Washington Consumer Protection Act are alleged.

EMC allegedly “engaged in bad faith as to home mortgage loan modification negotiations; led mortgagors to reasonably believe and rely on Defendants’ representations that they would permanently modify their mortgage loans upon successful completion of ‘repayment agreements’ or other trial programs; charged unreasonable, unlawful, or excessive fees; failed to properly disclose and/or concealed fees and other charges; failed to provide to mortgagors a proper or comprehensible accounting of fees, payments, credits, arrearages, and amounts owed; improperly or under-applied mortgage payments to accounts; and breached ‘Repayment Agreements’ or other trial modification program contracts or promises.”

Celeste Butler has sued Chase because, she claims, the company’s contractors ransacked the home of property owner J.D. Butler — her father — while he was deathly ill in the hospital, KATU reported. But Chase claims the loan was delinquent despite Butler’s denial.

A $559,000 judgment has been confirmed by a federal judge in Corpus Christi, Texas, against Vanderbilt Mortgage and Finance Inc., a unit of Berkshire Hathaway, the Knoxville News Sentinel reported. Vanderbilt had sued borrowers Cesar Flores and Alvin King for non-payment on their manufactured housing loan, but the plaintiff’s counsel was able to locate a release of the lien that was filed with the county clerk in 2005 without the homeowners’ knowledge.

A Nov. 18, 2010, news release from the plaintiff’s law firm, The Gutierrez Law Firm, indicated that Vanderbilt was found liable of civil racketeering and fraud. The problems started when fraudulently notarized liens were filed two days after the loan was made in 2002. Similar problems on other loans led to litigation in 2003 and were followed by lien releases being filed.

Last September, Ohio Attorney General Richard Cordray said a motion to dismiss the state’s lawsuit against HomEq Servicing was denied by Montgomery County Common Pleas Judge Timothy N. O’Connell. HomeEq is accused of multiple violations of Ohio’s Consumer Sales Practices Act.

In 2006, USA Commercial Mortgage Co. filed voluntary Chapter 11 bankruptcy. The hard-money commercial mortgage lender serviced 60 loans for $485 billion, and Compass Partners LLC’s bid won it the servicing rights.

Some of the investors in the loans sued Compass in federal court, seeking to terminate the company as servicer. The case was transferred to bankruptcy court. After much back and forth, the case wound up before the appeals court, which remanded it for the district court to determine whether an injunction bond is warranted.

Rounds v. CitiMortgage Inc.
Case No. BC386656, (Superior Court for the State of California, County of Los Angeles).

DOROTHY RHUE ALLEN, by her Attorney in fact, James Martin, Individually and as a class representative on behalf of others similarly situated, Appellant. v. LASALLE BANK, N.A; CENLAR FEDERAL SAVINGS BANK FSB; FEIN, SUCH, KAHN AND SHEPARD, PC; JOHN DOE SERVICERS 1-100; JOHN DOE LAW FIRMS 1-100.
Case No. 09-1466 (U.S. Court of Appeals, Third Circuit).

In the Matter of: USA COMMERCIAL MORTGAGE COMPANY. DONNA CANGELOSI; et al., Plaintiffs-Appellants, v. SILAR ADVISORS, LP; et al., Defendants-Appellees, WILLIAM A. LEONARD, Jr., Trustee for the Estate of Asset Resolution LLC, Trustee-Appellee.
No. 09-15632 (U.S. Court of Appeals, Ninth Circuit).

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