Major Ruling on Borrower Class Actions on the Way

Posted on August 12, 2008 by Isaac Gradman

The Washington Post published this article today about the Seventh Circuit Court of Appeals’ impending decision on whether homeowners can bring class action lawsuits against lenders to cancel predatory, misleading, or defective loans. The case was brought by a Wisconsin couple against Chevy Chase bank.

Given the rise in the incidence of predatory or manipulative lending practices over the past few years (as brought to light in cases such as People v. Countrywide, filed in Los Angeles County), this case could have a significant impact on Wall Street and the major banks. While the ruling will not change borrowers’ eligibility for relief, it will determine whether borrowers can band together to bring class action lawsuits. As it has up to now proven prohibitively expensive for most individuals to initiate and pursue these cases, the ruling could open the doors to relief for hundreds of thousands of homeowners. Chevy Chase bank alone has estimated that 7,000 of its borrowers have received loans from the bank similar to that of the Wisconsin plaintiffs.

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SEC Requests Subprime Mortgage Docs from National City

Posted on August 11, 2008 by Isaac Gradman

From a story published in the Louisville Courier-Journal:
“The Securities and Exchange Commission (SEC) has requested documents from National City Corp. relating to the sale of its former subprime mortgage unit and other matters as part of an informal probe, the regional bank revealed Friday in a regulatory filing…

National City spokeswoman Kelly Wagner Amen would not comment on the nature of the probe or whether it would financially affect the company. But she did say it would not impact customer accounts, and that the SEC has not said that National City has acted improperly or illegally. National City said it intends to cooperate with the SEC…

Merrill Lynch & Co. agreed to acquire First Franklin for $1.3 billion at the height of the real estate boom in late 2006. But the collapse of the subprime mortgage market and the deterioration of the credit market led Merrill to announce in March that it would stop funding loans at the unit and pursue a sale of the business.”

We are likely to see a lot more of this back-and-forth between banks and the SEC or other regulators as banks attempt to cabin their losses from the subprime crisis and regulators try to ensure accountability.

Posted in acquisitions, banks, probes, SEC, subprime | Leave a comment

FDIC places Indymac Bancorp in Conservatorship

Posted on July 15, 2008 by Isaac Gradman
Southern California’s IndyMac, one of the nation’s largest mortgage lenders, is the fifth bank to be taken over by the Federal Deposit Insurance Corporation (FDIC) this year. Overall, the banking system appears to be in less danger now than it was in the late 1980s and early 1990s when about 1,000 federally insured institutions failed in the savings-and-loan debacle. “All bank depositors should understand that their insured deposits are safe,” says Sheila Bair, chairman of the FDIC. “The chance that your own bank will be taken over by the FDIC is extremely remote. And if that does happen, you will continue to have virtually uninterrupted access to your insured deposits. No bank depositor has ever lost a penny of insured deposits.”The FDIC insures deposits at about 8,500 banks and thrifts; insurances ranges to $100,000 per institution, $250,000 on some retirement accounts. It has $53 billion to reimburse customers for deposits lost in bank failures.IndyMac, a spin-off of Countrywide (CFC), was the largest American lender to fail in about 20 years; it’ll require at least $4 billion, if not $8 billion, to cover depositors’ losses. Bank of America (BAC) bought Countrywide this year in an all-stock deal valued at about $4 billion.
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