Mortgage Daily

Published On: January 24, 2007
Secondary Dispute

GEECU sues Lorainne O. Legg

January 24, 2007

By PATRICK CROWLEY

photo of Patrick Crowley
A federal credit union has filed a lawsuit against two companies and their owner for allegedly failing to sell mortgages on the secondary market and keeping the money for herself.The suit against Lorainne O. Legg and her companies — Tiserv Inc. and LoriMac Inc. — was filed by the G.E. Employees Federal Credit Union in U.S. District Court in Connecticut, where the credit union and G.E. are headquartered.

The credit union transferred mortgages “for sale in the secondary market with the expectation that LoriMac and Tiserv would promptly sell the loans in the secondary market, and pay [the credit union] its principal on the loans in the amount of $391,500,” the credit union alleges in the eight-page lawsuit.

“Defendants … have wrongfully misappropriated and stolen the proceeds of the [credit union] loans,” the credit union said.

The credit union is seeking $7 million in damages.

Legg, whose companies are based in San Francisco, did not return a phone call to comment.

The credit union has worked successfully in the past with Legg and her companies, lawyer Jonathan Katz, who is representing the credit union, wrote in an e-mail to MortgageDaily.com.

“The transactions [the credit union] sued on did not affect any consumer closings,” Katz said.

The loans in question are resales of existing loans from its portfolio, he said. All mortgage transactions were immediately funded by the credit union.

“At the loan closings all funds were provided and [the credit union] honored all of its commitments to its customers and borrowers on schedule and in accordance with their terms,” he said.

The mortgages were for $49,500, $142,000 and $200,000, court documents show.

Legg tried to keep the company at bay with promises that the payments would be made.

The credit union alleges that Legg “individually and repeatedly falsely represented” that it would pay the funds within 60 days.

“She knew that such funds would not be paid within that time period,” the company alleged. “Legg made those false representations deliberately for the purpose of inducing GEEFCU not to pursue its legal remedies against defendants, so that defendants could enjoy the use of GEEFCU’s loan proceeds and profit from them.”

Legg has not yet answered the allegations in court.


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