As home lenders defend themselves against alleged violations of Federal Housing Administration policy and credit reporting errors, one non-compliance case is being considered by the highest court in the land.
The nation’s top court has decided to hear a case involving a borrower’s right to rescind a mortgage. The U. S. Supreme Court granted cert in Jesinoski v Countrywide Home Loans on April 28.
Under the Truth in Lending Act, a borrower has the right to cancel the loan three days after signing the mortgage contract. In addition, borrowers also have a right of rescission — generally three years — if legally required disclosures have not been delivered.
The Supreme Court said it will decide whether a borrower who wants to rescind a mortgage must file a lawsuit within the three-year period or whether it is enough to notify the lender in writing — a question that has been the subject of several lawsuits under TILA.
The Third, Fourth, and Eleventh Circuits have held that a borrower has the right to rescind if they notify the lender in writing. However, the First, Sixth, Eighth, Ninth, and Tenth Circuits have held that a borrower must file a lawsuit within the three-year time period.
The case stems from a Minnesota couple who refinanced their loan through Countrywide Home Loans in 2007 and alleged that the lender failed to furnish them with all the required disclosures.
On May 16, the court extended the time to file respondents’ briefs in the case. The date for oral arguments has not been set but the court’s next term begins in October.
Mason v. Chase Home Finance stems from a contested foreclosure proceeding. In 1999, Kevin and Mary Mason obtained a mortgage for their Orange, N.J., home. Chase serviced the loan.
In 2010, after a disagreement about whether plaintiffs were required to pay property taxes and homeowner’s insurance directly to the City of Orange or into escrow, Chase filed a foreclosure action against the couple. The Masons provided the company with proof that they were current on their tax and insurance payments. Chase consented to a dismissal of the foreclosure complaint. However, the foreclosure was reported to the credit reporting agencies.
“The crux of this lawsuit is that Chase Home Finance’s decision to report the state court foreclosure action to the CRA defendants and subsequently verify this information without supplementing it violates the Fair Credit Reporting Act,” court documents said.
The Masons also alleged several state law claims — New Jersey Consumer Fraud Act, intentional infliction of emotional distress and defamation.
Chase’s motion for summary judgment was denied by the court on Jan. 6. An order was filed on April 6 for a telephone conference between the parties.
Attorneys sparred on May 13 in oral arguments over Wells Fargo & Co.’s liability in allegedly making bad government loans. Lawyers for Wells argued that the government’s case relies on compliance reports to federal agencies for which the bank received immunity, according to a story from Bloomberg.
A motion to move a pretrial conference to June 24 has been granted in U.S.A v. Golden First and David Movtady. Golden First Mortgage and owner David Movtady were accused in court of violating quality control and underwriting obligations in FHA loans.
Golden First’s motion to dismiss was denied on April 2014, allowing the case to go forward on claims of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 and False Claims Act violations. Claims of gross negligence, negligence and breach of fiduciary duty were, however, thrown out. More than 60 percent of Golden First’s FHA loans since 2002 have resulted in defaults, according to information from the U.S Attorney’s office.
Reunion Mortgage Inc. agreed on May 19 to a $1 million settlement over allegations that it falsely certified loans that its loans met the guidelines for FHA insurance. The Milpitas, Calif.-based lender, according to Law360, provided false certification to the FHA that 12 loans that defaulted met the standards set by HUD for FHA insurance between September 2007 and May 2012. The defaulted loans cost FHA more than $1.63 million. The case is the result of an investigation by HUD’s Office of the Inspector General’s Civil Fraud Division, and is part of HUD’s High Default Lender Initiative, according to a press release issued by the U.S. Department of Justice.
Taylor Bean & Whitaker Mortgage Corp. And Home America Mortgage Inc. have agreed to pay $320 million to settle a False Claims Act whistleblower suit alleging that they falsified loan applications in order to obtain federally funded insurance for home loans that defaulted, according to Law360. The lawsuit was filed in 2006 by a former Home America vice president and a former Home America loan processor.
