Mortgage Foreclosure Settlement

by Bilzin Sumberg Baena Price & Axelrod LLP
Contact

Skepticism

We have long been skeptical of most loan “repurchase” or “indemnification” demands made by big banks against the third-party originators (i.e., correspondent lenders) who sold those loans to the big banks many years ago. Our skepticism arises not just from a loan-by-loan analysis of the demands being made against our clients (the correspondent lenders). We are also highly skeptical because of all sorts of issues related to what the big banks did with these loans after acquiring them from our clients.

Those issues include all the assurances that the big banks gave their investors about the accuracy of the loan files and high quality of the loans. They also include the long periods of time between (i) when the big banks would have surely discovered a “breach” if one truly existed and (ii) when any such “breaches” were finally called to our clients’ attention. And, as much as anything else, we are also tremendously skeptical about whether the big banks have truly suffered any damage at all related to these loans, and, if so, whether anything our clients or the borrowers did years ago is the true cause of any such damage.

Multi-billion Dollar Settlements

Our long-time skepticism is only increasing now, with news of the latest multi-billion dollar settlement payments made by a group of major banks, this time for mortgage foreclosure and servicing abuses. One of the biggest abuses that led to the demands that led to this settlement was “wrongful foreclosures.” So let’s think this through, to see how it relates to loan repurchase and indemnification demands by these same big banks (Countrywide/Bank of America, Wells Fargo, Chase, Aurora, Citibank, U.S. Bank and SunTrust, among others) against our clients.

The connection is pretty simple — and disturbing. Virtually all buy-back demands come about because a big bank claims to have suffered a “loss” related to the loan, and says that the “loss” came about because of breached representations and warranties made by the correspondent lender at the time the loan was sold. That theory about why the “loss” occurred is pretty dubious to begin with. But what do the banks point to when they talk about the “loss”? Quite often, they are pointing to the fact that the loan had to be foreclosed upon, and the sale of the underlying property did not cover the amount owed on the loan.

Well, now we have further confirmation that loans that were foreclosed upon should not have been — and that this type of abuse, among others, happened so extraordinarily often that the big banks were pretty much compelled to pay out billions to settle the claims being made against them.

So what will the big banks say when they continue to make their repurchase and indemnification demands to the correspondent lenders: “sure, we did not really need to foreclose at all, and doing so was abusive, but pay us back for the so-called losses that we suffered when we committed this abuse”? Probably not.

That level of honesty is not in their best interests. More likely, they will try to persuade our clients, and, if necessary, judges, that how and why the big banks suffered their “losses” is nobody’s business, and just oh-so-irrelevant. They don’t want us to peer behind the curtain at the great and powerful Oz.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Bilzin Sumberg Baena Price & Axelrod LLP | Attorney Advertising

Written by:

Bilzin Sumberg Baena Price & Axelrod LLP
Contact
more
less

Bilzin Sumberg Baena Price & Axelrod LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.
Feedback? Tell us what you think of the new jdsupra.com!