Banks' mortgage practices reap more lawsuits

NEW YORK/WILMINGTON, Delaware Tue Nov 9, 2010 5:07pm EST

An auction sign for a property is seen at the front garden of a foreclosed house in Miami Gardens, Florida, September 15, 2009. REUTERS/Carlos Barria

An auction sign for a property is seen at the front garden of a foreclosed house in Miami Gardens, Florida, September 15, 2009.

Credit: Reuters/Carlos Barria

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NEW YORK/WILMINGTON, Delaware (Reuters) - Lawsuits against banks over their mortgage lending and foreclosure practices continue to pile up, with JPMorgan, PNC Financial Services and Ally Financial disclosing suits on Tuesday.

JPMorgan Chase & Co faces two possible class action lawsuits related to foreclosures, the No. 2 U.S. bank said in a regulatory filing.

The suits allege "common law fraud and misrepresentation, as well as violations of state consumer fraud statutes," JPMorgan said in the Securities and Exchange Commission filing, without disclosing who filed them.

Banks, under investigation by state and federal officials for sloppy or even fraudulent foreclosure paperwork, face suits from both borrowers and investors in mortgage-backed securities.

Ally Financial Inc said it has been sued by hedge fund Cambridge Place Investment Management, which has ramped up a legal scrap with Wall Street to recoup money lost on subprime mortgages.

PNC Financial Services Group said it had been sued by the Federal Home Loan Bank of Chicago, alleging misrepresentations and omissions in connection with the sale of mortgage-backed securities.

Goldman Sachs Group Inc, meanwhile, is reviewing the practices of its Litton Loan Servicing unit and has temporarily suspended evictions and foreclosures in several states, according to a regulatory filing on Tuesday.

Bank of America, JPMorgan and Ally's GMAC Mortgage voluntarily imposed brief moratoriums on foreclosures to review their practices but have begun to resume evictions of delinquent borrowers.

U.S. attorneys general for all 50 states are jointly investigating whether banks failed to review documents properly or submitted false information to evict delinquent borrowers.

JPMorgan said in Tuesday's quarterly SEC filing, that it believes the information it provided about the foreclosures was "materially accurate."

Since September, at least two lawsuits seeking class action status have named JPMorgan in federal court for the Northern District of Illinois: one by a Chicago homeowner claiming Wall Street banks were acting together to illegally foreclose on homes, and another by Kentucky homeowners seeking class action status for having home equity lines cut.

It was unclear whether either of these were referred to in the SEC filing. JPMorgan did not respond to requests for information on the lawsuits.

The KBW index of bank stocks was down 1.3 percent in afternoon trading. JPMorgan shares slipped 0.9 percent, PNC shares were off 1.9 percent and Goldman Sachs fell 0.8 percent.

MORTGAGE-BACKED SUITS

JPMorgan also acknowledged it faced suits related to mortgage-backed securities brought by Cambridge Place and brokerage Charles Schwab Corp.

Schwab is also among those bond investors that are suing Citigroup Inc, which, with Bank of America, last week disclosed suits related to mortgage underwriting.

"There is a lot of damage from investors buying RMBS (residential mortgage-backed securities) from investment banks in '05, '06 and '07," said Gerald Silk, a partner at Bernstein Litowitz Berger & Grossmann LLP, who filed the Cambridge Place lawsuit in Massachusetts.

"Enormous damages were sustained from those vintages of RMBS," he said.

JPMorgan added that it was the parent defendant in "nine separate individual actions filed by the Federal Home Loan Banks of Pittsburgh, Seattle, San Francisco, Chicago and Indianapolis in various state courts around the country."

In October, the Federal Home Loan Bank of Chicago sued several banks over $3.3 billion of mortgage-backed securities it had purchased. PNC said in a filing it is being sued over $345 million of the securities, sold by National City, which was acquired by PNC in December 2008.

Also on Tuesday, Ally said it has been named in six mortgage bond-related lawsuits filed by investors including Cambridge place, Charles Schwab, and the Federal Home Loan Banks of Chicago and Indianapolis.

MBIA Insurance Corp also filed two lawsuits against Ally over mortgage bonds, Ally disclosed in an SEC filing.

(Reporting by Jonathan Spicer, Maria Aspan and Helen Kearney in New York, and Tom Hals in Wilmington, Delaware; Editing by Tim Dobbyn)

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Comments (6)
lajla wrote:
If a person submits a false information on Mortgage Loan Application that is considered a Mortgage Fraud with Criminal Charges ahead.
I wonder how many of those bank execs will do “hard time” …. I think I got the number in my head already …

Nov 09, 2010 3:28pm EST  --  Report as abuse
Phuzzy wrote:
Oh, how I long for the good ole days before O’Bastrd stepped in and rescued the lenders. We could blackmail the lenders into short sales on our clients’ behalf by paying an attorney to review the loan docs and use the improprieties as fuel. Believe me, it was like shooting fish in a barrel.

Look for the imposter in the White House to rescue them again.

Nov 09, 2010 6:22pm EST  --  Report as abuse
xyz2055 wrote:
Phuzzy (and that handle fits perfectly with your post by the way)..the rescue of the lenders started during the Bush administration (Citibank was bailed out on 24 Nov 2008, AIG in Aug of 2008, for just 2 examples). Both of those dates predate Obama taking office. While it’s true that Obama continued to feed the bailout, George W and Henry Paulson would be the two guys most responsible for selling the deal to Congress. Of course you do realize that Congress has write and approve such legislation (not the President) right?

Nov 09, 2010 8:24pm EST  --  Report as abuse
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