Tag Archives: lawsuits

National Association of REALTORS® Moves to Dismiss Price-Fixing Lawsuit

Class action lawsuit claims real estate broker franchisors and National Association of Realtors conspire to require home sellers to pay buyer broker fees

By Jeff Sorg, OnlineEd Blog

(May 23, 2019)

CHICAGO (May 18, 2019) – The National Association of REALTORS® (NAR) moved to dismiss the Moehrl v. NAR lawsuit on the basis that the complaint misrepresents NAR rules for the operation of Multiple Listing Services (MLSs), which have long been recognized by the courts across the country as protecting consumers and creating competitive, efficient markets that benefit home buyers and sellers. The filing was made in federal court in Chicago.

“In today’s complex real estate environment, REALTORS® and Multiple Listing Services promote a pro-consumer, pro-competitive market for home buyers and sellers, contrary to the baseless claims of these class action attorneys,” said John Smaby, President of NAR. “Our filing today shows the lawsuit is wrong on the facts, wrong on the economics and wrong on the law.”

NAR’s brief points out that, as the centerpiece of their case, the seven class action law firms who represent one plaintiff have resorted to fundamentally mischaracterizing NAR’s rules. That mischaracterization, according to the NAR’s filing, led the class action attorneys to “dream up” purportedly anticompetitive rules that simply do not exist in NAR’s Handbook or Code of Ethics. In reality, NAR rules specifically direct listing brokers to determine – in consultation with their clients – the amount of compensation to offer buyers’ brokers in connection with their MLS listings. Furthermore, under NAR rules, a buyer’s broker is free to negotiate a commission from the listing broker that is different from what appears in the MLS listing. Neither NAR nor any MLS has any say in setting broker commissions.

Ultimately, these rules create a system of highly competitive markets where consumers receive superior service.

Beyond misreading the facts, NAR’s filing to dismiss demonstrates the shaky legal grounds of the plaintiff’s case, pointing out that the lawsuit disregards legal precedents that have upheld the pro-competitive benefits represented by the MLS system. For example, past court rulings have noted that NAR rules provide a more transparent marketplace, and encourage REALTORS® to share listing information and cooperate in the sale of real estate.

In fact, when considering the structure of commission payments, NAR’s filing notes that listing brokers’ offers of commission to buyers’ brokers on MLSs has been shown to actually increase the number of potential buyers. “When a seller elects to permit their brokers to pay compensation to the buyer’s broker, it frees up buyer cash thereby potentially increasing the number of buyers able to bid for that home and the amount of funds available for the purchase price,” the filing states.

“The MLS system is designed to create competitive markets to facilitate the sale of residential property in a way that benefits both buyers and sellers,” said Smaby.

Contrary to the career class action attorneys’ manufactured rules and claims, the plaintiff’s transaction was subject to the same rules as all transactions facilitated via an MLS: commissions are agreed upon up front by the seller and listing broker – independent of NAR – and commissions are negotiable. These rules have been proven to promote competition and ensure that brokers act in the best interests of their clients.

On the basis of these fundamental arguments that refute the plaintiff’s allegations and reading of legal precedent, as well as a failure to demonstrate harm, NAR is seeking to dismiss the lawsuit “with prejudice.”

[Source – NAR Press Release]

DEFENDANT: The National Association of Realtors, Realogy Holdings Corp., HomeServices of America Inc., RE/MAX Holdings Inc., Keller Williams Realty Inc.
CASE NUMBER: 1:19-cv-01610
COURT: U.S. District Court for the Northern District of Illinois

The National Association of REALTORS® is America’s largest trade association, representing more than 1.3 million members involved in all aspects of the residential and commercial real estate industries

 

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Financial Freedom Agrees to $89 Million Settlement

Financial Freedom Settles Alleged Liability for Servicing of Federally Insured Reverse Mortgage Loans for $89 Million

By Jeff Sorg, OnlineEd Blog

(May 17, 2017)

briefcase with money(US Dept. of Justice, May 16, 2017) – Financial Freedom has agreed to a settlement with the United States of more than $89 million to resolve allegations that it violated the False Claims Act and the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA) in connection with its participation in a federally insured Home Equity Conversion Mortgages (HECM) or ‘reverse mortgage’ program, the Justice Department announced today. Financial Freedom is headquartered in Austin, Texas.

“The Department of Justice is committed to ensuring that those who participate in federal mortgage insurance programs comply with requirements essential to the success of its programs,” said Acting Assistant Attorney General Chad A. Readler of the Justice Department’s Civil Division. “Among these requirements are the deadlines imposed by the Federal Housing Administration (FHA) on those who service government insured mortgages. Those deadlines are designed to protect the government’s collateral and stop the unnecessary loss of government funds and resources.”

Through ‘reverse mortgage’ loans, older people are able to access the equity in their homes by borrowing money against the equity they have built in their home. To encourage reverse mortgage loans, the FHA protects lenders from loss by providing mortgage insurance. Under FHA’s program, a loan becomes due and payable when the home is sold or vacant for more than 12 months or upon the death of the homeowner, whichever comes first. The lender is repaid the amount of the loan, including the costs of servicing the loan and any interest that accrues on lender expenses after a loan becomes due and payable. FHA will reimburse a lender that is unable to recoup the full amount of the loan. In order to claim recoupment, the servicer is required to meet a number of regulatory requirements and deadlines.

The United States alleged that Financial Freedom sought to obtain insurance payments for interest from FHA despite failing to properly disclose on the insurance claim forms it filed with the agency that the mortgagee was not eligible for such interest payments because it had failed to meet various deadlines relating to appraisal of the property, submission of claims to HUD, and pursuit of foreclosure proceedings. As a result, from March 31, 2011 to August 31, 2016, the mortgagees on the relevant reverse mortgage loans serviced by Financial Freedom allegedly obtained additional interest that they were not entitled to receive.

The United States’ investigation arose from a declaration filed pursuant to FIRREA by Sandra Jolley, a consultant for the estates of borrowers who took out HECM loans. Under FIRREA, whistleblowers may file declarations concerning alleged violations of the statute and may obtain a share of the recovery. Ms. Jolley will receive $1.6 million from the settlement.

“This settlement represents our office’s continued commitment to protecting the financial solvency of vital financial programs designed to benefit America’s seniors,” said Acting U.S. Attorney Stephen Muldrow of the Middle District of Florida. “HECM servicers must be held accountable for failing to adhere to FHA requirements that are designed to ensure the continued viability of the HECM program. We are pleased that Financial Freedom agreed to accept financial responsibility for these failures.”

“Today’s settlement agreement resolves allegations that this lender failed to comply with FHA servicing requirements and sought to receive financial gains that it was not legally entitled to,” said HUD Inspector General David A. Montoya. “These actions today demonstrate our continued commitment to address and halt business practices that pose a serious risk to the FHA program and the public’s trust in HHUD-administered programs.”

The settlement was the result of the coordinated efforts of the Civil Division’s Commercial Litigation Branch, the U.S. Attorney’s Office for the Middle District of Florida, and the Department of Housing and Urban Development’s Office of Inspector General and Office of General Counsel. The case was handled by Assistant U.S. Attorney Kyle Cohen, along with Trial Attorneys Sean O’Donnell and Christopher Reimer of the Department of Justice Civil Frauds Section.

The claims resolved by the settlement are allegations only, and there has been no determination of liability.

[Source: US Department of Justice press release]

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For more information about OnlineEd and their education for real estate brokers, principal brokers, property managers, and mortgage brokers, visit www.OnlineEd.com.

All information contained in this posting is deemed correct as of the date of publication, but is not guaranteed by the author and may have been obtained from third-party sources. Due to the fluid nature of the subject matter, regulations, requirements and laws, prices and all other information may or may not be correct in the future and should be verified if cited, shared or otherwise republished.

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Zillow to Pay $130 Million to NAR’s Move, Inc.

Move, Inc. and Zillow Reach Settlement Agreement

By Jeff Sorg, OnlineEd Blog

canstockphoto0389625 handshake(June 7, 2016) – The National Association of REALTORS is reporting in a press release that Zillow Group, Inc. has agreed to a settlement amount of $130 million in damages instead of going to trial to settle a 2014 lawsuit alleging misappropriation of trade secrets. Zillow Group and Move, Inc. are both reporting that they have reached an amicable resolution.

Move will receive the bulk of these funds but NAR hopes that they will invest this money to enhance the consumer experience on realtor.com® and benefit our members in support of the REALTOR® brand.

NAR reported that it will receive 10 percent of the settlement payment after Move deducts its legal fees, since Move covered the costs of the lawsuit. After this amount is determined, NAR’s Leadership Team will consider how best to apply those funds in service of NAR’s REALTOR® members; we will share that information as soon as a decision is made.

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For more information about OnlineEd and their education for real estate brokers, principal brokers, property managers, and mortgage brokers, visit www.OnlineEd.com.

All information contained in this posting is deemed correct as of the date of publication, but is not guaranteed by the author and may have been obtained from third-party sources. Due to the fluid nature of the subject matter, regulations, requirements and laws, prices and all other information may or may not be correct in the future and should be verified if cited, shared or otherwise republished.

OnlineEd® is a registered trademark of Harlow Spaan and Jeffrey Sorg

Owners and Property Managers Agree with HUD to Pay $630,000 for Discrimination Suit

HUD Announces agreement to resolve allegations that property owners used rental screening policies that prevented applicants with mental disabilities from renting

By Jeff Sorg, OnlineEd Blog

(May 16, 2016) – The U.S. Department of Housing and Urban Development (HUD) announced today that it has reached a $630,000 agreement with a group of Illinois property owners and a management company resolving allegations they violated the Fair Housing Act and Section 504 of the Rehabilitation Act of 1973 by using rental screening policies that prevented applicants with mental disabilities from living in a supportive living complex the group owned. Read the agreement.

The Fair Housing Act prohibits discrimination in the sale or rental of a dwelling on the basis of disability. In addition, Section 504 of the Rehabilitation Act of 1973 prohibits discrimination on the basis of disability by any program or activity receiving federal financial assistance.

“Discriminatory practices that target persons with disabilities not only violate their rights, they lock them out of decent, safe and affordable housing,” said Gustavo Velasquez, HUD Assistant Secretary for Fair Housing and Equal Opportunity. “HUD remains committed to taking action when property owners and managers fail to meet their obligations under the Fair Housing Act.”

The case came to HUD’s attention after several individuals with mental disabilities filed complaints alleging they were denied residency at the property managed by Eden Management, LLC, due to their disabilities. The individuals filed their complaints with the assistance of HOPE Fair Housing Center, a HUD Fair Housing Initiatives Program agency in DuPage County. HOPE conducted three tests at Eden and also filed a complaint with the Department.

Under the terms of the Conciliation and Voluntary Compliance Agreement, Eden will pay Complainants $630,000, which includes relief and attorneys’ fees and costs. The agreement further requires Eden to make significant policy changes, including revising its admissions manual and handbook; updating its non-discrimination statement; establishing a reasonable accommodation policy; and conducting fair housing training for employees. Furthermore, the company will develop a protocol to apply objective admissions criteria, notify all applicants of their due process rights, and refrain from asking applicants about the existence of mental disabilities or prescriptions during tours of the facility. Eden will also provide a letter to their top three referral sources encouraging individuals to apply regardless of mental disability.

In FY 2015, disability was the most common basis of complaints filed with HUD and its partner agencies, being cited as a basis for 4,548 complaints, or nearly 55 percent of the overall total.

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For more information about OnlineEd and their education for real estate brokers, principal brokers, property managers, and mortgage brokers, visit www.OnlineEd.com.

All information contained in this posting is deemed correct as of the date of publication, but is not guaranteed by the author and may have been obtained from third-party sources. Due to the fluid nature of the subject matter, regulations, requirements and laws, prices and all other information may or may not be correct in the future and should be verified if cited, shared or otherwise republished.

OnlineEd® is a registered trademark of OnlineEd, Inc.

Bank Agrees to Pay $64 Million to Resolve Alleged Liability Arising from FHA-Insured Mortgage Lending

The settlement resolves allegations that M&T Bank failed to comply with certain FHA origination, underwriting and quality control requirements.

By Jeff Sorg, OnlineEd Blog

gavel money court settlement(May 16, 2016) – M&T Bank Corp. (M&T Bank) has agreed to pay the United States $64 million to resolve allegations that it violated the False Claims Act by knowingly originating and underwriting mortgage loans insured by the U.S. Department of Housing and Urban Development’s (HUD) Federal Housing Administration (FHA) that did not meet applicable requirements, the Justice Department announced today. M&T Bank is headquartered in Buffalo, New York.

“Mortgage lenders that fail to follow FHA program rules put taxpayer funds at risk and increase the chances of borrowers losing their homes,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division. “We will continue to hold lenders accountable for knowingly submitting ineligible loans for FHA insurance.”

“M&T Bank bypassed its responsibility to originate and underwrite mortgages in accordance with the standards required by the FHA,” said First Assistant U.S. Attorney James P. Kennedy Jr. for the Western District of New York. “This case demonstrates that when a financial institution takes such a detour, we will work to ensure that it does not bypass the consequences of that conduct.”

During the time period covered by the settlement, M&T Bank participated as a direct endorsement lender (DEL) in the FHA insurance program. A DEL has the authority to originate, underwrite and endorse mortgages for FHA insurance. If a DEL approves a mortgage loan for FHA insurance and the loan later defaults, the holder of the loan may submit an insurance claim to HUD, FHA’s parent agency, for the losses resulting from the defaulted loan. Under the DEL program, the FHA does not review a loan for compliance with FHA requirements before it is endorsed for FHA insurance. DELs are therefore required to follow program rules designed to ensure that they are properly underwriting and certifying mortgages for FHA insurance, to maintain a quality control program that can prevent and correct deficiencies in their underwriting practices, and to self-report any deficient loans identified by their quality control program.

The settlement announced today resolves allegations that M&T Bank failed to comply with certain FHA origination, underwriting and quality control requirements. As part of the settlement, M&T Bank admitted to the following facts: Between Jan. 1, 2006, and Dec. 31, 2011, it certified for FHA insurance mortgage loans that did not meet HUD underwriting requirements and did not adhere to FHA’s quality control requirements. Prior to 2010, M&T Bank failed to review all Early Payment Default (EPD) loans, which are loans that become 60 days past due within the first six months of repayment. Between 2006 and 2011, M&T also failed to review an adequate sample of FHA loans, as required by HUD.

Additionally, M&T created a quality control process that allowed it to produce preliminary major error rates that were significantly lower (sometimes below one percent) than what the rate would have been if M&T had calculated its preliminary major error rate by dividing the number of loans with preliminary major errors by the number of loans reviewed to determine what percent of loans contained a preliminary major error.

M&T Bank also failed to adhere to HUD’s self-reporting requirements. While M&T Bank identified numerous FHA insured loans with “major errors” between 2006 and 2011, M&T Bank did not report a single loan to HUD until 2008, and thereafter self-reported only seven loans to HUD. As a result of M&T’s conduct and omissions, HUD insured hundreds of loans approved by M&T that were not eligible for FHA mortgage insurance under the Direct Endorsement program and that HUD would not otherwise have insured. HUD subsequently incurred substantial losses when it paid insurance claims on those loans.

[Source: US Department of Justice press release]

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For more information about OnlineEd and their education for real estate brokers, principal brokers, property managers, and mortgage brokers, visit www.OnlineEd.com.

All information contained in this posting is deemed correct as of the date of publication, but is not guaranteed by the author and may have been obtained from third-party sources. Due to the fluid nature of the subject matter, regulations, requirements and laws, prices and all other information may or may not be correct in the future and should be verified if cited, shared or otherwise republished.

OnlineEd® is a registered trademark of OnlineEd, Inc.

HSBC Agrees to Pay $470 Million to Settle Mortgage Abuse Allegations

The settlement reflects a continuation of enforcement actions to hold financial institutions accountable for abusive mortgage practices

By Jeff Sorg, OnlineEd Blog

gavel money court settlement(February 5, 2016) – The Justice Department, the Department of Housing and Urban Development (HUD) and the Consumer Financial Protection Bureau, along with 49 state attorneys general and the District of Columbia’s attorney general, have reached a $470 million agreement with HSBC Bank USA NA and its affiliates (collectively, HSBC) to address mortgage origination, servicing and foreclosure abuses.

“This agreement is the result of a coordinated effort between federal and state partners to hold HSBC accountable for abusive mortgage practices,” said Acting Associate Attorney General Stuart F. Delery.  “This agreement provides for $370 million in creditable consumer relief to benefit homeowners across the country and requires HSBC to reform their servicing standards.  The Department of Justice remains committed to rooting out financial fraud and holding bad actors accountable for their actions.”

“This settlement illustrates the department’s continuing commitment to ensure responsible mortgage servicing,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “The agreement is part of our ongoing effort to address root causes of the financial crisis.”

“Even as the mortgage crisis recedes, the U.S. Trustee Program will continue to combat mortgage servicer abuse of the federal bankruptcy laws so that homeowners are given their legal right to try to save their homes,” said Director Cliff White of the Justice Department’s U.S. Trustee Program.  “Homeowners in financial distress sometimes depend on chapter 13 bankruptcy to help them catch up on their payments.  When banks violate bankruptcy laws at the expense of homeowners and other creditors, they must pay a price.  This settlement holds HSBC accountable for its actions and helps to protect the most vulnerable homeowners.”

“Mortgage servicers have a responsibility to help struggling borrowers remain in their home, not to push them into foreclosure,” said General Counsel Helen Kanovsky of HUD.  “This agreement is another example of how multiple agencies in the federal government and state attorneys general across the country are working to make sure the mortgage industry treats consumers fairly.”

“This agreement not only provides relief to borrowers affected by HSBC’s past practices, it puts in place protections for current and future homeowners through tough mortgage servicing standards,” said Iowa Attorney General Tom Miller.  “For years we’ve worked together to hold mortgage servicers responsible for their past conduct.  We’re doing that here through this settlement and we’ll continue to address bad conduct in the future.”

The settlement reflects a continuation of enforcement actions by the department and its federal and state enforcement partners to hold financial institutions accountable for abusive mortgage practices.  The settlement parallels the $25 billion National Mortgage Settlement (NMS) reached in February 2012 between the federal government, 49 state attorneys general and the District of Columbia’s attorney general and the five largest national mortgage servicers, as well as the $968 million settlement reached in June 2014 between those same federal and state partners and SunTrust Mortgage Inc.  This settlement with HSBC is the result of negotiations that, as has been reported in HSBC Holdings plc’s Annual Report and Accounts, began following the announcement of the NMS.

Under the agreement announced today, HSBC has agreed to provide more than $470 million in relief to consumers and payments to federal and state parties, and to be bound to mortgage servicing standards and be subject to independent monitoring of its compliance with the agreement.  More specifically, the settlement provides that:

  • HSBC will pay $100 million: $40.5 million to be paid to the settling federal parties; $59.3 million to be paid into an escrow fund administered by the states to make payments to borrowers who lost their homes to foreclosure between 2008 and 2012; and $200,000 to be paid into an escrow fund to reimburse the state attorneys general for investigation costs.
  • By July 2016, HSBC will complete $370 million in creditable consumer relief directly to borrowers and homeowners in the form of reducing the principal on mortgages for borrowers who are at risk of default, reducing mortgage interest rates, forgiving forbearance and other forms of relief.  The relief to homeowners has been underway and will likely provide more than $370 million in direct benefits to borrowers because HSBC will not be permitted to claim credit for every dollar spent on the required consumer relief.
  • HSBC will be required to implement standards for the servicing of mortgage loans, the handling of foreclosures and for ensuring the accuracy of information provided in federal bankruptcy court.  These standards are designed to prevent foreclosure abuses of the past, such as robo-signing, improper documentation and lost paperwork, and create new consumer protections.  The standards provide for oversight of foreclosure processing, including third-party vendors, and new requirements to undertake pre-filing reviews of certain documents filed in bankruptcy court.  The servicing standards ensure that foreclosure is a last resort by requiring HSBC to evaluate homeowners for other loss-mitigation options first.  In addition, the standards restrict HSBC from foreclosing while the homeowner is being considered for a loan modification.

The agreement will be filed as a consent judgment in the U.S. District Court for the District of Columbia.  Compliance with the agreement will be overseen by an independent monitor, Joseph A. Smith Jr., who is also the monitor for the NMS and SunTrust settlement.  Smith has served as the North Carolina Commissioner of Banks and is also the former chairman of the Conference of State Banks Supervisors.  Smith will oversee implementation of the servicing standards required by the agreement, will certify that HSBC has satisfied its consumer relief obligations and will file regular public reports that identify any quarter in which HSBC fell short of the standards imposed in the settlement.  The parties may seek penalties for non-compliance.

The agreement resolves potential violations of civil law based on HSBC’s deficient mortgage loan origination and servicing activities.  The agreement does not prevent state and federal authorities from pursuing criminal enforcement actions related to this or other conduct by HSBC, or from punishing wrongful securitization conduct that is the focus of President Barack Obama’s Financial Fraud Enforcement Task Force Residential Mortgage-Backed Securities Working Group.  State attorneys general also preserved, among other things, all claims against Mortgage Electronic Registration Systems.  Additionally, the agreement does not prevent any action by individual borrowers who wish to bring their own lawsuits.

The Department of Treasury, the Federal Trade Commission, the Department of Agriculture, the Veterans Administration and the Special Inspector General for the Troubled Asset Relief Program also made critical contributions to reaching this settlement.

[Source: US Department of Justice, press release]

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For more information about OnlineEd and their education for real estate brokers, principal brokers, property managers, and mortgage brokers, visit www.OnlineEd.com.

 All information contained in this posting is deemed correct as of the date of publication, but is not guaranteed by the author and may have been obtained by third-party sources. Due to the fluid nature of the subject matter, regulations, requirements and laws, prices and all other information may or may not be correct in the future and should be verified if cited, shared or otherwise republished.

Deutsche Bank to Face US Lawsuit for $3.1 billion

Bank to answer for allegations of toxic residential mortgage backed securities

By Jeff Sorg, OnlineEd Blog

(February 4, 2016) -A federal judge ruled on yesterday that Deutsche Bank must face a US lawsuit seeking to hold it liable for causing $3.1 billion  of investor losses by failing to properly monitor 10 trusts backed by toxic residential mortgages.

“Plaintiff’s allegations of high default rates, large economic losses, and widespread investigation into RMBS securitization allow the court to draw the reasonable inference that defendant had actual knowledge” of defective loans, the judge wrote.

The case is Royal Park Investments SA/NV v. Deutsche Bank National Trust Co, US District Court, Southern District of New York, No. 14-04394.

[Source: Reuters]

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For more information about OnlineEd and their education for real estate brokers, principal brokers, property managers, and mortgage brokers, visit www.OnlineEd.com.

 All information contained in this posting is deemed correct as of the date of publication, but is not guaranteed by the author and may have been obtained by third-party sources. Due to the fluid nature of the subject matter, regulations, requirements and laws, prices and all other information may or may not be correct in the future and should be verified if cited, shared or otherwise republished.

 

 

 

The case is Royal Park Investments SA/NV v. Deutsche Bank National Trust Co, US District Court, Southern District of New York, No. 14-04394.

Read more: http://www.afr.com/business/banking-and-finance/financial-services/deutsche-bank-in-us31b-us-lawsuit-over-toxic-mortgage-losses-in-the-gfc-20160204-gmldtw#ixzz3zDrbf02w
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Judge Says Gov. Brown and Legislature Illegally Raided Homeowners Fund

thief at safe door(Jeff Sorg, OnlineEd) SF Gate is reporting that a judge has ruled Gov. Jerry Brown and the Legislature illegally raided a state fund that was created to help distressed homeowners and took $331 million to balance the budget.

The article alleges that money was taken from a fund that contained California’s share of a $5 billion nationwide settlement of a fraud suit by states and the federal government against the nation’s five largest mortgage lending companies: Bank of America, Citigroup, J.P. Morgan Chase, Wells Fargo and Ally Financial, formerly known as GMAC. Here’s the original story.

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For more information about OnlineEd and their education for real estate brokers, principal brokers, property managers, and mortgage brokers, visit www.OnlineEd.com.

  This article was published on June 16, 2015. All information contained in this posting is deemed correct and current as of this date, but is not guaranteed by the author and may have been obtained by third-party sources. Due to the fluid nature of the subject matter, regulations, requirements and laws, prices and all other information may or may not be correct in the future and should be verified if cited, shared or otherwise republished.

Standard and Poor’s / McGraw Hill Financial Reach $1.375 Billion Settlement With DOJ

(C) Can Stock Photo(Jeff Sorg, OnlineEd) – Attorney General Eric Holder recently announced that the Department of Justice has reached an agreement totaling nearly $1.4 billion with the credit rating agency Standard & Poor’s Financial Services, or S&P – along with its parent corporation, McGraw Hill Financial. This agreement will resolve the Justice Department’s 2013 lawsuit against S&P, in addition to suits brought by 19 states and the District of Columbia. The DOJ lawsuit alleged that S&P engaged in a scheme to defraud investors in structured financial products known as Residential Mortgage-Backed Securities, or RMBS, and Collateralized Debt Obligations, or CDOs.

The press release alleges that on more than one occasion, the company’s leadership ignored senior analysts who warned that the company had given top ratings to financial products that were failing to perform as advertised. As S&P admits under this settlement, company executives complained that the company declined to downgrade underperforming assets because it was worried that doing so would hurt the company’s business. While this strategy may have helped S&P avoid disappointing its clients, it did major harm to the larger economy, contributing to the worst financial crisis since the Great Depression.

Holder reports that under the terms of this settlement, S&P will pay a total of $1.375 billion, which will be divided between the federal government, 19 states, and the District of Columbia. S&P has also agreed to comply with the consumer protection statutes of every state involved – as well as Washington, D.C. – and to respond, in good faith, to requests for information or material concerning any possible violation of those laws. Finally, the company has agreed to a detailed statement of facts acknowledging the improper conduct that led to this settlement – contrasting what S&P said it was doing with what the company actually did.

Read more about this in Attorney General Holder’s Press Release

 

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For more information about OnlineEd and their education for real estate brokers, principal brokers, property managers, and mortgage brokers, visit www.OnlineEd.com.

  This article was published on February 4, 2015. All information contained in this posting is deemed correct and current as of this date, but is not guaranteed by the author and may have been obtained by third-party sources. Due to the fluid nature of the subject matter, regulations, requirements and laws, prices and all other information may or may not be correct in the future and should be verified if cited, shared or otherwise republished.

Lender to Pay $4.2 Million to Settle Alleged False Claims Act Violations

(Jeff Sorg, OnlineEd) –  A Southfield mortgage lender has agreed to pay $4.2 million to resolve allegations that it violated the False Claims Act in its origination of loans backed by the federal government.

GTL Investments, Inc., doing business as John Adams Mortgage Company (JAMCO), reached agreement with the U.S. Attorney’s Office for the Eastern District of Michigan to resolve allegations that it originated mortgage loans that had material underwriting deficiencies. The loans were guaranteed by the Federal Housing Administration.

The FHA makes home financing available by insuring residential mortgages for the purchase of properties with modest down-payments for purchasers meeting certain criteria, known as underwriting standards. The original lender or loan originator is responsible for making sure that the borrower meets these underwriting standards to minimize the possibility of default and the need for the FHA to pay the mortgage holder for the losses caused by the default.

An investigation by the Office of Inspector General for the Department of Housing and Urban Development found that GTL originated 31 FHA mortgage loans between January 2008 and April 2012 that had material underwriting deficiencies. Twenty-nine of these loans went to claim, causing the FHA damages of $2,445,912. The investigation also identified two loans that had not yet been presented for payment by the FHA with approximately $250,000 in potential losses. GTL has agreed to indemnify the FHA for these two loans.

“By holding accountable lenders who fail to comply with underwriting requirements, we hope to send a message to all lenders that they must comply with government standards for federally insured loans,” McQuade said.

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For more information about OnlineEd and their education for real estate brokers, principal brokers, property managers, and mortgage brokers, visit www.OnlineEd.com.

  This article was published on January 7, 2015. All information contained in this posting is deemed correct and current as of this date, but is not guaranteed by the author and may have been obtained by third-party sources. Due to the fluid nature of the subject matter, regulations, requirements and laws, prices and all other information may or may not be correct in the future and should be verified if cited, shared or otherwise republished.