Spanish Banks Ordered to Repay Customers Over Unfair Mortgages

The New York Times | December 21, 2016         MADRID — Europe’s highest court ruled on Wednesday that customers of banks in Spain can reclaim billions of euros because lenders did not pass on savings from interest rate cuts on variable-rate mortgages, sending shares in several of the country’s top lenders crashing.

The ruling centered on the use of a “floor clause” in Spanish mortgage contracts during the aftermath of the global financial crisis. Such agreements meant that the interest rate on an adjustable-rate mortgage was always held above a predetermined level, regardless of how low central bank rates fell.

Spain’s lenders began to use the clauses in 2009, after the global financial crisis pushed central banks around the world to slash interest rates. That helped preserve bank profit margins but failed to pass rate cuts on to customers beyond a certain level.

In 2013, Spain’s supreme court ruled that such deals were illegal, in part because the country’s banks did not adequately explain them to customers. The court did not, however, penalize lenders retroactively.

The European Court of Justice on Wednesday confirmed that the agreements were illegal, but went further by ruling that customers could claim reimbursement, without any time limit, for all payments made at a rate that was judged to be too high.

The decision, which cannot be appealed, means Spain’s banks could have to return 4.5 billion euros, or about $4.68 billion, to customers, according to Afi, a Spanish financial consultancy.  Read more here.

Texas Mortgage Companies, Founder Must Pay $93 Million in Fraud Case: Jury

Reuters | December 1, 2016        A federal jury has ordered two Texas-based home mortgage entities and their chief executive to pay nearly $93 million for defrauding the U.S. government into insuring thousands of risky loans, according to court records.

Americus Mortgage Corp, AllQuest Home Mortgage Corp, and their founder, Jim Hodge, were found liable on Tuesday by a Houston federal jury for violating the False Claims Act and the Financial Institutions Reform, Recovery, and Enforcement Act.

The jury awarded nearly $93 million in damages, including $7.37 million against Hodge, a sum that is subject to mandatory tripling under the False Claims Act. Further penalties are expected, which U.S. District Judge George Hanks will set at a later date, Manhattan U.S. Attorney Preet Bharara's office said in a press statement released late on Wednesday.

During the period at issue, the companies were known as Allied Home Mortgage Capital Corp and Allied Home Mortgage Corp.

Wendell Odom, their lawyer, said he anticipated an appeal in the case, one of several the U.S. government has brought against lenders following the 2008 financial crisis.  Read more here.

California Supreme Court Lets Borrowers Challenge Wrongful Foreclosures

National Mortgage News |  February 18, 2016     The California Supreme Court on Thursday ruled that borrowers may challenge a wrongful foreclosure on the grounds that the assignment of the deed of trust was invalid.

The decision in Yvanova v. New Century Mortgage Corp. has the potential to radically increase the number of lawsuits brought by borrowers, particularly on loans that were pooled into securitized trusts, experts on both sides of the issue said.

"There will be a flood of litigation only because the lending industry was not diligent in doing its paperwork during the housing finance boom," said Richard Antognini, who represented the plaintiff, California homeowner Tsvetana Yvanova.

The decision tackles a question that became important after the housing market's collapse in 2008: can a defaulted homeowner contest the validity of the chain of assignments involved in the securitization of loans?  Read more here.

Bankers Ask Judge to Disregard $5.4 Million Foreclosure Verdict

Houston Chronicle |  January 11, 2016   In a case that's being watched by legal and real estate interests, the bankers who lost a $5.4 million jury verdict against a pair of homeowners in West University asked State District Judge Mike Engelhart to set aside the jury's decision and allow the bank to foreclose.  

Lawyers for Wells Fargo and Carrington Mortgage Services appeared before Engelhart Monday to argue that David and Mary Ellen Wolf shouldn't receive the $5.4 million that a Harris County jury awarded them in November nor should they be able to keep their house. The bankers argued that the Wolfs, who were sitting on the front row of the courtroom listening to the proceedings, were not victims of fraud as the jury found, and that if the banks did file documents improperly at the courthouse, it wasn't intended to harm the couple.

At worst, it was a "paperwork slipup or negligence," said Thomas Panoff, a commercial litigation lawyer with Mayer Brown in Chicago who is representing Wells Fargo and Carrington.  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.