- The United States Supreme Court holds that debtors do not have an absolute right to appeal a denial of a proposed bankruptcy plan (mentioned in April 6 post).
- Maryland federal judge approves settlement between CFPB and Genuine Title and participants for illegal mortgage-kickback scheme (mentioned in May 4 post).
- CFPB settles with Florida law firm for nearly $12 million for collecting over $5 million in illegal fees. The firm enlisted homeowners to bring “mass-joinder” suits against mortgage lenders.
- Lead plaintiff in class action against Bank of America asks the Third Circuit to rehear case alleging violations of Fair Debt Collection Practices Act decided last month. The Third Circuit held that the FDCPA covers foreclosure complaints (mentioned in April 13 post).
- The Clearing House Association LLC, the American Bankers Association, the Financial Services Roundtable and the U.S. Chamber of Commerce support Bank of America in its Second Circuit appeal of $1.3 billion fine for allegedly defrauding Fannie Mae and Freddie Mac through its mortgage program, “Hustle.”
- In stipulation, Massachusetts Federal District Court voluntarily dismisses claims against JPMorgan Chase & Co. and other institutions in $5.9 billion MBS suit brought by Bank of Boston.
Tag Archives: District of Massachusetts
Battle of the Mortgage Experts
Judge Saris of the United States District Court (D. Mass.) issued a Memorandum and Order in Massachusetts Mutual Life Insurance Company v. Residential Funding Company, et al., No. 11-30035-PBS (Dec. 9, 2013). The opinion addresses a battle of statistical experts over the proper way to sample some of the hundreds of thousands of mortgages at issue in this litigation.
Mass Mutual, the plaintiff, alleges that the defendants misrepresented material aspects of many of those mortgages. To prove this, Mass Mutual intends to “reunderwrite” about 3.5% of loans by reviewing the “original loan file to determine whether it was originated in accordance with applicable standards.” (3) . More particularly, Mass Mutual alleged that
the defendants marketed the [RMBS] certificates with representations that the loans backing the securities were underwritten in accordance with prudent underwriting standards and the underlying properties were appraised in accordance with sound appraisal standards, in order to ensure that the borrower could repay the loan and to decrease the risk of default. Plaintiff asserts that the loans underlying each [loan pool] were, in reality, far riskier than represented. Plaintiff also alleges that the defendants knowingly reported false loan-to-value (“LTV”) ratios, and in the case of defendant HSBC, inaccurate owner-occupancy rates for underlying properties. The defendants deny that they made any material misrepresentations in the marketing and sale of the certificates. (4)
The Court stated that while the defendants had identified various methodological errors that would render the report of Mass Mutual’s expert unreliable, similar challenges had failed in four other RMBS litigations. The Court ultimately denied the defendants’ motion to exclude the opinions of the plaintiff’s expert.
A body of law about expert evaluation of misrepresentations in securitization is slowly developing as cases are moving from the motion to dismiss stage to the pretrial discovery phase. This will have broader significance than just securitization litigation, but I find it particularly interesting to watch experts attempt to reduce “questions of misrepresentation” regarding RMBS to yes/no answers. (15) Such attempts to quantify misrepresentation will be useful to resolve cases such as this but also to regulators and researchers down the line.
