Court Approves ResCap’s Request to Utilize Different AVM Methodology

On June 30, 2017 the U.S. District Court for the District of Minnesota approved the ResCap Liquidating Trust’s request to utilize a new and different AVM methodology to support its value-based breach allegations. The reason ResCap sought permission to utilize this new methodology stems from an ongoing shift in how courts around the country view AVM methodology. Courts have begun to hold, generally, that, what are described as “commercially available, off-the-shelf black-box AVMs,” are no longer acceptable or admissible to prove and support value-based breach allegations. This is because, as ResCap itself pointed out and attested to in its motion seeking approval of the new methodology, commercial AVMs are “proprietary” and commercial AVM providers “generally do not publicly reveal information about the AVMs’ design, operation, limitations, analyses, algorithms, coding, data, or validation.” Furthermore, commercial AVM providers “are generally unwilling to produce individuals knowledgeable about the inner workings of a commercial AVM to answer technical questions, or to give deposition testimony.” Courts have found this troubling as those seeking to use commercial AVMs to support value-based breach allegations must essentially ask courts to “take their word” that the AVM methodologies are accurate and/or reliable. Now, ResCap has retained a non-commercial AVM “expert” who can testify about the specifics of his individual AVM method. Finally, ResCap has also indicated that this new methodology results in fewer value-based breach allegations. This is not only a major development in the ongoing litigation but could also have a significant effect on the numerous pre-litigation demands that ResCap has issued. If your company has received a pre-litigation demand from ResCap that includes an allegation of... read more

Chase, EMC Mortgage, and Washington Mutual Mortgage Securities Corp. Becoming More Active in Repurchase Activity

AMLG continues to be contacted by clients who have received repurchase or indemnification demands from either Chase, EMC Mortgage, or Washington Mutual Mortgage Securities Corp. or who have been named as a defendant in a lawsuit from one of these parties. AMLG also continually monitors both federal and state dockets around the country and has noticed that these three entities have been consistently filing new lawsuits against correspondent lenders for the past year. If your company has received or is continuing to receive demands from either Chase, EMC Mortgage, or Washington Mutual Mortgage Securities Corp. or if your company has been threatened with or named in a lawsuit by any of these parties and would like to speak with us about our extensive experience in handling and navigating these claims, please feel free to contact Jack Valinoti or Tracy... read more

2018 Home Mortgage Disclosure Act (HMDA) Changes

The January 1, 2018 HMDA implementation date is fast approaching. The new rules announced in 2015 add 25 new data points to be collected. The number of new data points collected ends up being much more when accounting for the type of loan, number of borrowers, and how certain questions are answered. New data points are added for age, credit score, automated underwriting system information, unique loan identifier, property value, application channel, points and fees, borrower-paid origination charges, discount points, lender credits, loan term, prepayment penalty, non-amortizing loan features, interest rate, and loan originator identifier, among others. Institutions must report how information about the applicant’s/borrower’s ethnicity, race, and sex was collected. Institutions must also permit applicants to self-identify their ethnicity and race using disaggregated ethnic and racial subcategories. For profit lending institutions (other than a bank, savings association, or credit union) are subject to HMDA if they originated at least 25 mortgage loans or at least 100 covered open-end lines of credit in each of the two preceding calendar years and satisfy the existing location test. Beginning January 1, 2018, covered institutions must collect, record, and report information for approved but not accepted preapproval requests for home purchase loans. Lenders will need to obtain a legal entity identifier (LEI) and loans will be reported using a Universal Loan Identifier (ULI). Recently proposed “technical” revisions are also effective in 2018. They attempt to address how lenders report loans already in process, give that they may lack data that was not required or uncollectable at application. Key terms such as “temporary financing” and “automated underwriting system” are clarified. Revisions also establish... read more

LBHI’s Third Wave of Claims Against Lenders and Brokers May be Starting

For several years, Lehman Brother’s Holdings, Inc.’s (“LBHI”) has been stating it has RMBS Trust Claims that could be forthcoming against the mortgage industry. RMBS Trustees filed claims in LBHI’s bankruptcy, not unlike the Fannie Mae and Freddie Mac claims, in 2009. When pressed for information, the position has always been that they may never materialize as the liability has yet to be established. However, this week, LBHI filed a Motion for Approval of a Compromise (“Motion”) which specifically asks the Bankruptcy Court to approve the “RMBS Settlement Agreement.” In the motion, it represents that the initial demand filed in LBHI’s bankruptcy was for 37 billion in claims. The motion further states that the universe of loans has been established by a “protocol” and that the Trustees have provided the LBHI Plan Administrator with the loan files along with the evidentiary support for their claims. After much litigation since 2009, the clams purportedly total approximately 16.7 billion. LBHI and the Trustees have agreed to reserve 2.4 billion and, at this point, the parties agree that the non-final settlement number for the claims is 2.416 billion. However, the next step is for the Court to conduct an estimation proceeding to determine the final amount of the allowed claim. The estimation proceeding is to take place by October 17, 2017. LBHI is serving this motion on numerous entities, which it is important for you to look out for. In short, if you receive a notice of settlement, it is important to keep in mind that such may very well carry legal consequences if you then fail to respond in a timely... read more

LBHI Litigation Update

AMLG, as part of a joint defense group in the pending litigation in bankruptcy court in New York, has joined in the drafting and filing of an omnibus motion attacking LBHI’s complaint on two grounds: subject matter jurisdiction (“SMJ”) and improper venue (“Venue”). Both attacks have a reasonable opportunity to succeed. However, if they do not due to the strong propensity of the bankruptcy judge to more often than not to find for the debtor in these matters, are poised to be certified to the Second Circuit Court of Appeals. The basic argument for SMJ is that after a bankruptcy plan is confirmed in a bankruptcy matter (different from regular civil litigation), jurisdiction shrinks, and the debtor is required to establish a “close nexus” to the administration or implementation of the plan. The claims LBHI is making are non-core state law contract claims and have very little, if any, “close nexus” to the bankruptcy plan. As for the venue argument, the basic idea is that venue is improper because the entities sued by LBHI are not New York corporations nor did they do business in New York rendering the choice of venue in the bankruptcy court in the southern district of New York improper. This omnibus opposition was just filed on March 31, 2017 and LBHI’s Reply is now due May 31, 2017. AMLG does not expect hearings to be held until July or August on the matter as further briefing schedules are being set by the... read more

Third Wave of Demands from the ResCap Liquidating Trust?

AMLG has been contacted by both new and existing clients who have received a fresh set of demands from the ResCap Liquidating Trust. This signals a “third wave” of such demands from the Trust and follows the pattern the Trust has engaged in to date. The Trust filed its “second phase” or “second wave” round of lawsuits in late 2016 and early 2017 so lenders facing new and recent demands from the Trust could be the target of a third wave. If your company has recently received one of these new demands from the ResCap Liquidating Trust and you would like to speak with AMLG about our experience and strategy in handling such demands, please feel free to contact please feel free to contact Jack... read more

CitiMortgage, Inc. Increasing Demand Activity

AMLG continues to see a significant increase in demands from CitiMortgage, Inc. to correspondent lenders. A large majority of these demands appear to focus on second mortgages, which could mean that Citi is shifting its focus to lenders that sold second mortgages to Citi under the Correspondent Agreement Form 200 Loan Purchase Agreement. However, even with this recent uptick in repurchase activity, CitiMortgage has not filed any new lawsuits against correspondent lenders since early 2016. It is unclear whether this trend will continue but such activity can often signal that more litigation from CitiMortgage could be on the horizon. If your company has received or is continuing to receive demands from CitiMortgage, Inc. or was recently named or threatened to be named in a lawsuit by CitiMortgage and would like to speak with us about how to address the claim, please feel free to contact Jack Valinoti or Tracy... read more

Responsive Pleading Deadline in LBHI Omnibus Matter of March 31, 2017 is Fast Approaching

Lehman Brothers Holdings, Inc. (“LBHI”) is again adding new defendants to the omnibus adversary proceeding pending in their bankruptcy matter in Southern District of New York against some 140 current defendants. The claims against some are only contractual indemnification based on allegations of breaches of representations and warranties in Loan Purchase or Broker Agreements. For others, the Second Amended Complaints include a claim for declaratory relief which seeks a determination from the Court that LBHI’s claims accrued in January and February 2014. In the pending action in November 2016, a group of joint defense attorneys which includes American Mortgage Law Group, negotiated a Case Management Order (“CMO”) that drives the process of the adversary proceedings. The CMO requires collaboration between defense counsel in the drafting and filing of omnibus responsive pleadings to the Second Amended Complaint. The group is finalizing a response based on the Federal Rules that is due March 31, 2017. Further, if a defendant has been recently served, they may be bound by the CMO and required to participate in this responsive pleading and the deadline of March 27, 2017 to file a request for a pre-motion conference for unique responsive pleading issues. If you have been served a Complaint and would like to take advantage of our experience in these matters, as AMLG is presently defending as many as nineteen (19) lenders and brokers in the current adversary proceeding and may therefore be representing the largest bloc of defendants in these disputes, please feel free to contact Tracy... read more

CitiMortgage, Inc. Increasing Repurchase Demand Activity, Especially for Second Liens

On behalf of several of its clients, AMLG has been defending against more and more repurchase demands from CitiMortgage, Inc. (“Citi”), the focus of which have largely been for Second Lien loans. While Citi has not filed a new lawsuit against a correspondent lender in the Eastern District of Missouri since February 2016, this flurry of new activity from Citi suggests it could be gearing up for a new round of lawsuits and, given the increase in demands that AMLG is handling, we are continuing to monitor the docket on behalf of our clients. In addition, new demands, AMLG continues to assist its clients with numerous demands legacy demands that Citi continues to pursue, including demands issued as many as seven or more years ago. While AMLG maintains that such demands would be barred by the applicable statute of limitations in Missouri, Citi has not backed down. If your company has received or is continuing to receive demands from CitiMortgage, Inc. or was recently named or threatened to be named in a lawsuit by CitiMortgage and would like to speak with us about how to address the claim, please feel free to contact Jack Valinoti or Tracy... read more

Cordray and Trump – Round 2

Consumer Financial Protection Bureau Director, Richard Cordray, has evaded termination at the hands of President Trump-at least for now. On January 12, 2017, the Trump administration gave a clear sign that it intended to dismiss Mr. Cordray.  Although Mr. Cordray technically has a term that stretches until July 2018, President Trump has already interviewed former Texas Representative Randy Neugebauer for Mr. Cordray’s position.  President Trump’s spokesman, Sean Spicer, announced that the interview had occurred during a January 2017 conference call with reporters, showing that the President Trump wasn’t exactly keeping his plan to replace Mr. Cordray “under wraps.” Under the Dodd-Frank Act, Mr. Cordray can only be fired “for cause.”  However, In October 2016, the United States Court of Appeals for the District of Columbia Circuit ruled that it was unconstitutional for the CFPB Director to be removable by the President of the United States only for cause, such as “inefficiency, neglect of duty or malfeasance.”   12 U.S.C. § 5491(c)(3). This leadership structure, according to the D.C. Circuit panel decision, conferred power on the agency that was “massive in scope” and made the CFPB “unaccountable to the President.”  Circuit Judge Brett Kavanaugh, and Judge A. Raymond Randolph, wrote that the law was “a threat to individual liberty” and instead found that the President could remove the CFPB director at will. This paved the way for President Trump to potentially fire Mr. Cordray for no reason whatsoever. Fortunately for Mr. Cordray, on February 16, 2017, the D.C. Circuit granted the CFPB’s petition to rehear, en banc, the same court’s October 2016 decision.  An en banc session is a session in... read more

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