PHH Reaches Nationwide Settlement Over Crisis-Era Mortgage Servicing

PHH will pay $45 million in settlement with 49 states

January 3, 2018 | HousingWire         PHH Corp. will pay $45 million as part of a nationwide settlement over mortgage servicing and foreclosure issues during the housing crisis, a group of nearly every state attorney general announced Wednesday.

The settlement requires PHH to adopt new servicing standards and provide monetary relief to affected borrowers, though the company counters it already currently uses said standards.

The settlement covers the company’s mortgage servicing practices, including foreclosure activities, between Jan. 1, 2009 and Dec. 31, 2012.

The settlement is between PHH and the Multi-State Mortgage Committee, including more than 45 state mortgage regulators, along with 49 state attorneys general, and the District of Columbia.

Every state took part in the settlement, with the exception of New Hampshire. It is unknown at this time why New Hampshire is not a party in the settlement. HousingWire contacted the New Hampshire Attorney General, and this article will be updated should the AG respond.

According to the complaint filed by the state attorneys general, PHH “threatened foreclosure and conveyed conflicting messages to certain borrowers engaged in loss mitigation.”  Read more here.

Wells Fargo to Pay $50 Million to Settle Home Appraisal Overcharges

The New York Times | November 1, 2016       In the latest hit to the battered bank, Wells Fargo has agreed to pay $50 million to settle a class-action lawsuit that accused the bank of overcharging hundreds of thousands of homeowners for appraisals ordered after the homeowners defaulted on their mortgage loans.

The proposed settlement calls for Wells Fargo to automatically mail checks to more than 250,000 customers nationwide whose home loans were serviced by the bank between 2005 and 2010.

The checks will typically be for $120, according to Roland Tellis, a lawyer with Baron & Budd, the law firm that represented Wells Fargo’s customers. If a judge signs off on the settlement, as expected, the checks will be distributed next year.

When a borrower falls behind on a loan, mortgage contracts typically let the lender order an appraisal of the home’s current value. The cost of that appraisal, known as a “broker price opinion,” can be passed on to the borrower, but Wells Fargo used one of its own subsidiaries to conduct appraisals and then routinely marked up the cost, according to the lawsuit.

Borrowers would be charged $95 to $120 for a service that cost the bank $50 or less, the complaint said. The charges were then listed cryptically on mortgage statements, with vague descriptions like “other charges” or “other fees.”

“People who are behind on their loans are the people who can least afford to be charged marked-up fees, but unfortunately, that’s exactly what happened,” Mr. Tellis said.

Several homeowners filed suit against Wells Fargo in 2012 in a Northern California federal court. Last year, a judge granted class-action status to a portion of the claims related to racketeering charges.  Read more here.

Airbnb Income: How It Can Mess With Your Mortgage ‘Refi’

Homeowners who rent rooms are facing additional scrutiny when applying for loans

The Wall Street Journal | August 29, 2016         Room-rental services such as Airbnb Inc. are blurring the line between residential and commercial property. That is causing problems for some homeowners looking to refinance mortgages. (Read what Airbnb hosts need to know.)

Big banks including Bank of America Corp. and Wells Fargo & Co. are subjecting some refinance customers who rent rooms to additional scrutiny. Some borrowers have been told they were no longer eligible for certain kinds of loans or would have to pay higher interest rates, according to the customers.

“This is kind of novel,” said Jeffrey Naimon, a consumer-finance attorney and partner at law firm BuckleySandler LLP. “I don’t think the market has gotten its arms around it.”

The issue for lenders is how to classify loans in the Airbnb age. Historically, that has been easy: A house usually was either a principal residence or an investment property. Mortgages on the latter are often viewed as riskier because owners had less of a personal connection to the house and rental income isn’t always reliable.

Now, the distinction isn’t so clear-cut. Online-rental services are spreading rapidly; Airbnb’s website had 455,223 active listings in the U.S. as of July, up 80% from a year earlier, according to research firm YipitData. That is posing challenges to lenders and frustrating some customers, illustrating how fast-paced technological change can reverberate in unexpected ways.

The issue comes up when borrowers report income from services such as Airbnb when applying for a new loan, often in hope of improving their credit profile. That, they hope, can lead to a better interest rate on a loan.  Read more here.

 

Rule on Arbitration Would Restore Right to Sue Banks

The New York Times | May 5, 2016      The nation’s consumer watchdog is unveiling a proposed rule on Thursday that would restore customers’ rights to bring class-action lawsuits against financial firms, giving Americans major new protections and delivering a serious blow to Wall Street that could cost the industry billions of dollars.

The proposed rule, which would apply to bank accounts, credit cards and other types of consumer loans, seems almost certain to take effect, since it does not require congressional approval.

In effect, the move by the Consumer Financial Protection Bureau — the biggest that the agency has made since its inception in 2010 — will unravel a set of audacious legal maneuvers by corporate America that has prevented customers from using the court system to challenge potentially deceitful banking practices.

Honing their plan over decades, credit card companies, banks and other lenders devised a way to use the fine print of their contracts to push consumers out of court and into arbitration, where borrowers must battle powerful companies on their own. Without the ability to pool resources, most people abandon their claims and never make it to arbitration.

The new rules would mean that lenders could not force people to agree to mandatory arbitration clauses that bar class actions when those customers sign up for financial products. The changes would not apply to existing accounts, though consumers would be free to pay off their old loans and open new accounts that are covered.

And while those rules are not final yet — there will be a 90-day public comment period — financial industry lawyers say they are tough to derail.   Read more here.

Who Can Go After Banks for the Foreclosure Crisis?

Cities are arguing that they, too, were damaged by risky loans, and that they should be able to take the lenders to court to regain their losses.

The Atlantic | May 3, 2016     In the wake of the housing crisis, surprisingly few people or institutions have been held accountable for the risky lending practices that nearly wrecked the U.S. economy.  That’s partly because the people who were most damaged by the foreclosure crisis—the people who lost their homes—don’t have the resources to bring lawsuits.

But the families who lost their homes weren’t the only ones hurt by the foreclosure crisis. So there’s an argument to be made that they shouldn’t be the only ones who can go after the lenders. Cities, for example, lost tax revenue when homes sat vacant, and saw property values within their boundaries decrease when vacant and boarded-up homes sat empty. Cities had to pay for police and fire protection to keep those homes from being vandalized and to respond to reported break-ins and criminal activity at the houses.

So should cities be able to sue the banks, too?

That’s the question making its way through courts across the country after municipalities including Los Angeles, Miami, Oakland, and Providence all filed lawsuits against lenders under the Fair Housing Act. The lawsuits, which the banks are fighting to have dismissed, argue that the lending practices of these banks harmed the cities too. When lenders targeted minorities for risky loans, knowing that the borrowers would likely lose their homes, they knowingly deprived cities of tax revenue while making them shoulder the expenses of blocks of foreclosures, the lawsuits allege. Oakland, for instance, argues in its complaint against Wells Fargo that the city “has suffered economic injury based upon reduced property tax revenues resulting from (a) the decreased value of the vacant properties themselves, and (b) the decreased value of properties surrounding the vacant properties.” Last month a judge declined to dismiss the suit.

In these cases, the municipalities have accused lenders, including Wells Fargo, JP Morgan, and Bank of America, of “redlining,” or the practice of denying credit to people in particular neighborhoods because of their race, and “reverse redlining,” or the practice of flooding a minority neighborhood with exploitative loan products. These practices, they say, violate parts of the Fair Housing Act.  Read more here.

UBS Blamed in U.S. Trial for $2.1 Billion in Mortgage Bond Losses

Reuters | April 18, 2016     UBS AG went to trial on Monday over $2.1 billion in losses that investors incurred on mortgage-backed securities after the collapse of the U.S. housing market.

The non-jury trial in Manhattan federal court stems from a lawsuit being pursued by U.S. Bancorp on behalf of three trusts established for mortgage-backed securities, the type of financial product at the heart of the 2008 financial crisis.

Sean Baldwin, the trusts' lawyer, in his opening statement said UBS contractually agreed that the mortgages underlying those securities would meet certain standards. When pervasive defects emerged, the bank refused to buy them back, he said.

"UBS's strategy has always been the same throughout this process: Turn a blind eye to the problems and ignore its contractual obligations," he said.

But Thomas Nolan, a lawyer for UBS, told U.S. District Judge Kevin Castel that the trusts' lawyers were looking at the loans with a "hindsight bias," and the question was whether the loans were seen as defective when they were issued in 2006 and 2007.

"Sophisticated parties on both sides knew what they were getting into," Nolan said.

The case is one of a handful to go to trial in recent years over losses incurred on mortgage bonds following the U.S. housing market meltdown.  Read more here.

Widows, Divorcees Struggle with Foreclosure Rules, Consumer Group Finds

Boston Globe |  March 23, 2016      Lenders and mortgage companies have been doing a better job in recent years helping homeowners avoid foreclosures, but widows, as well as other surviving family members, and the recently divorced continue to struggle to stay in their homes, according to a new report from the National Consumer Law Center.

The Boston-based consumer group estimates that thousands of homeowners, usually women who didn’t sign the original loan documents, are having trouble getting access to relief that new federal guidelines have provided other homeowners since the recent foreclosure crisis.

The center’s network of lawyers and housing counselors reports that while other foreclosure-related problems have declined, this remains an area of growing concern. It can still take years, reams of paperwork, and thousands in additional costs for spouses facing death, divorce, or domestic violence, who are seeking a loan modification to stay in the house, said Alys Cohen, a staff attorney at the consumer law center and author of the report.

“Every month of delay increases the interest that a homeowner owes, increases the fees on the loan amount, and decreases the chances of a loan modification,” Cohen said.

The law center is urging the federal Consumer Financial Protection Bureau to adopt rules that would expand protections to others who may have homeownership interest in a property, aside from just the primary borrower.  Read more here.

JPMorgan Fined $48 Million for Failures in U.S. Robo-Signing Settlement

Reuters |  January 6, 2016    JPMorgan Chase has been fined $48 million for failing to meet terms of a settlement to resolve mortgage servicing violations, U.S. bank regulators said on Tuesday.  The fine will be on top of $2 billion that JPMorgan had been ordered to pay to cover remediation costs and foreclosure assistance to borrowers, the Office of the Comptroller of the Currency said.

JPMorgan was among a number of banks that participated in a 2013 nationwide settlement with regulators over the practice of robo-signing, where banks pursued faulty foreclosures by using defective or fraudulent documents.

The OCC also said on Tuesday that EverBank will pay a $1 million fine for similar violations connected to the mortgage servicing case.   Read more here

Goldman Reaches $5 Billion Settlement Over Mortgage-Backed Securities

The Wall Street Journal | January 15, 2016      Goldman Sachs Group Inc. agreed to the largest regulatory penalty in its history, resolving U.S. and state claims stemming from the Wall Street firm’s sale of mortgage bonds heading into the financial crisis.

In settling with the Justice Department and a collection of other state and federal entities for more than $5 billion, Goldman will join a list of other big banks in moving past one of the biggest, and most costly, legal headaches of the crisis era.  Read more here

Lenders Ask Court to Toss Foreclosure Verdict Favoring Homeowners

Houston Chronicle | December 24, 2015    Wells Fargo Bank and its mortgage servicer are asking a state district judge in Houston to throw out a jury verdict in favor of a West University couple facing foreclosure and to order a sheriff's sale of their house.  Read more here.