CASE LAW

Exposing Fraud and Damages in Home Mortgage Loans

In addition to the news and media coverage, there is a substantial amount of cases that have gone to trial in which trial courts has found in favor of the borrower for being a victim of predatory lending and awarded damages:

Sealy Davis vs. Ocwen

Jury Texas Awards 11.5 Million Dollars against Ocwen Financial Corporation.  A jury in Galveston, Texas, has awarded $11.5 million to a customer of Ocwen Financial Corp. and its former Ocwen Federal Bank subsidiary, after determining they committed fraud in servicing her home equity loan.

The verdict against West Palm Beach-based Ocwen Financial (NYSE: OCN) and Ocwen Federal was issued Tuesday in Texas's 212th District Court. The jury ordered the Ocwen companies to pay Sealy Davis $10 million in actual damages and about $1.5 million for mental anguish and economic damages. Ocwen Financial had $1.3 billion in assets on Sept. 30, according to its Securities and Exchange Commission filings.

The jury found the Ocwen companies made fraudulent, deceptive and misleading representations to Davis after she missed a loan payment while hospitalized in 2003. Documents filed in the civil suit assert Ocwen began demanding additional money to make up for the missed payment and then began foreclosure proceedings on Davis's home in Texas City, Texas. Davis retained the home after filing for Chapter 13 bankruptcy protection, court documents state. Davis, in 2002, got a $31,000 home equity loan from Aames Home Loan with Deutsche Bank as trustee. Ocwen Federal Bank serviced the loan, including collecting payments.

The jury determined Ocwen contributed 100 percent to a wrongful foreclosure and none of that activity was attributable to the other defendants, Deutsche Bank, its law firm Baxter & Schwartz and several attorneys with that firm. William Erbey, Ocwen's chairman and chief executive officer, and Kelly Herzik, a Wichita, Kan.-based attorney who represented Ocwen, did not return phone calls.

The Business Journal's questions included whether Ocwen might appeal the verdict to a Texas court of appeals. Ocwen "has a specific plan and scheme to take homes that have equity in them," said Robert Hilliard, a partner in Corpus Christi, Texas-based Hilliard & Munoz, which represented Davis.

Hilliard said he represents about 100 people who are considering similar suits against Ocwen in Texas state courts. In April 2004, Ocwen Federal Bank, which was based in Fort Lee, N.J., signed a written agreement with the U.S. Office of Thrift Supervision, agreeing to improve its compliance with the Real Estate Settlement Procedures Act, the Fair Debt Collection Practices Act and the Fair Credit Reporting Act.

The OTS written agreement is no longer in force because Ocwen Federal has ceased operations, OTS spokeswoman Erin Hickman said. Nearly six months ago, the OTS approved Ocwen Financial's request for "voluntary dissolution" of Ocwen Federal.

In that arrangement, Ocwen Financial sold the bank's Fort Lee office to Marathon National Bank of Astoria, N.Y., and transferred its assets and liabilities to several other banks. Ocwen Financial's activities include servicing commercial and residential loans, and conducting activities for companies that are attempting to recover unsecured receivables, including credit cards

Maxwell v. Fairbanks Capitol

“The 1991 transaction was unconscionable and [took] notice that it and the 1988 transaction satisf[ied], in all material respects, the paradigm of predatory lending”.    In holding that the 1991 transaction was unconscionable and that ITT had failed to provide Ms. Maxwell and her granddaughter the required disclosures under MCCDA, Judge Feeney stated that Ms. Maxwell would be entitled to rescind the loan by way of recoupment.” see: 

http://mortgage-home-loan-bank-fraud.com/legal/Maxwell v Fairbanks.htm

Glover vs. Standard Federal

Named plaintiffs Lonnie and Dawn Glover acquired an adjustable rate mortgage for the purchase of their home in the late 1980s. In 1996, they refinanced their loan and obtained a fixed-rate mortgage. Heartland brokered the 1996 transaction and Standard Federal funded and acquired the 1996 mortgage. As part of the 1996 refinancing, Heartland brokered a mortgage for the Glovers with an "above par" interest rate and was subsequently paid a yield spread premium ("YSP") by Standard Federal. The payment of this YSP is the focus of the current dispute.

The Glovers argue that the payment of the YSP constitutes a fee for the referral of a mortgage negotiated with interest rates that are disadvantageous to borrowers, and that this payment violates the Real Estate Settlement Procedures Act ("RESPA"), 12 U.S.C. § 2601, et. seq. RESPA was enacted to initiate significant reforms in the real estate settlement process "to insure that consumers throughout the Nation are provided with greater and more timely information on the nature and costs of the settlement process and are protected from unnecessarily high settlement charges caused by certain abusive practices." 12 U.S.C. § 2601(a). RESPA prohibits the payment of some referral fees, stating: (see 12 U.S.C. § 2601(a)) see:

http://mortgage-home-loan-bank-fraud.com/legal/Glover_v_Standard_Federal.htm