On June 10, the U.S. Court of Appeals for the District of Columbia affirmed the district court’s decision not to enjoin the federal government from pursuing alleged False Claims Act violations against a bank that argued such claims were precluded by the terms of the National Mortgage Settlement. United States v. Bank of Am. Corp., No 13-5112, 2014 WL 2575426 (D.C. Cir., Jun. 10, 2014). The bank sought to halt a suit filed by the government in the Southern District of New York (SDNY), in which the government alleges that the bank’s certification of loans as eligible for FHA insurance under the FHA’s Direct Endorsement Lender Program violated the False Claims Act. The bank asserted that the National Mortgage Settlement contains a comprehensive release for certain liability with respect to its alleged FHA mortgage lending conduct. The appeals court held that the agreement releases only the narrower category of liability for loans based on allegations that the bank’s annual certification was false without regard to whether any such loans contain material violations of HUD-FHA requirements, , and held that distinct loan-level violations for such loans would provide an independent basis for liability. However, the appeals court agreed that the SDNY must construe the government’s complaint and “ensure that the claims are litigated in a manner that comports with the [National Mortgage Settlement] Release’s limitations.” The appeals court agreed with the bank that some of the government’s claims “tread on the verge of the released claims, referencing false annual certifications explicitly.” The appeals court noted that the government repeatedly conceded that, to comport the SDNY suit with the National Mortgage Settlement release terms, “material violations do need to be demonstrated with respect to individual loans,” and cautioned the government that, should prosecution of its claims depart from that concession, the bank may seek appropriate relief.
On March 31, the office of Massachusetts AG Maura Healey launched a new webpage designed to help eligible homeowners clear property titles in order to refinance or sell their properties. The webpage follows a $2.7 million settlement with four national banks that allegedly foreclosed on Massachusetts property without having the legal authority to do so. Because the alleged unlawful foreclosures affected thousands of Massachusetts titles, the new webpage is intended to “[enable] consumers to file online complaints and have their title issues reviewed by the banks in a single process.”
On March 18, the National Mortgage Settlement (NMS) Monitor Joseph Smith Jr., announced that four banks subject to the NMS satisfied the consumer relief and refinancing obligations established by the agreement. The monitor filed reports in the U.S. District Court for the District of Columbia certifying the banks’ compliance. The monitor had previously certified satisfaction by a fifth bank. The monitor stated that in many cases the banks exceeded the agreement’s requirement that the majority of the relief be provided through first and second lien modifications—among the five banks, 37% of credited total relief was in the form of first lien principal forgiveness and 15% was in the form of second lien principal forgiveness. Refinancing assistance made up 17% of total credited relief, while the remaining 31% of relief included assistance for short sales and deeds in lieu of foreclosure.
On December 19, the CFPB and attorneys general for 49 states and the District of Columbia, and a nonbank mortgage servicer, filed a proposed consent order in the U.S. District Court for the District of Columbia, pursuant to which the servicer will be required to provide $2 billion in principal reduction to certain borrowers and refund $125 million to nearly 185,000 borrowers who were foreclosed upon.
The agreement is modeled on the 2012 national mortgage servicing settlement between five banks and federal and state authorities, and it is the first such agreement with a nonbank mortgage servicer. The proposed order would resolve allegations that the servicer, and two other servicers it acquired in recent years, engaged in unfair and deceptive acts and practices in the servicing of residential mortgages and foreclosure processing in violation of state consumer protection laws and the Consumer Financial Protection Act. Those allegations are detailed in a complaint filed by the CFPB and states on the same day.
Along with the monetary settlement, the agreement requires the servicer to implement numerous servicing policy changes, which incorporate the standards established in the national servicing settlement and add requirements related to transferred loans. The servicing requirements included in the settlement are in addition to new servicing standards the CFPB finalized earlier this year, which take effect on January 10, 2014. Compliance with the agreement will be overseen by the monitor of the national settlement. The agreement does not include releases for any potential claims of criminal liability and does not prohibit private actions.
On October 16, Joseph A. Smith, Jr., the National Mortgage Settlement Monitor, announced that his office filed with the U.S. District Court for the District of Columbia reports on credited consumer relief and refinancing provided through December 31, 2012 by four of the five servicers subject to the National Mortgage Servicing Settlement. A summary report and fact sheet released by the Monitor provide additional detail about the relief certification procedures and a breakdown of each servicer’s relief activities.