Tuesday, June 19, 2018

Class Action Accuses Banks of Violating Truth

By on July 15, 2017

Editor’s note: This article originally appeared in the July 13, 2017, print edition of Caribbean Business.

One of the financial institutions, along with other Puerto Rico banks and lenders charged in a class-action lawsuit in U.S. District Court for violating the Truth in Lending Act, accused the plaintiffs of writing copied and pasted paragraphs from unattributed sources and a 2010 California case.

“As demonstrated…by attaching the materials to the instant motion, the unattributed sources range from a copy and paste of most of the complaint in the case Beverly King and Nancy Glennon v. CitiMortgage Inc.…to the ‘overview’ section of a federal housing program website, to online legal blogs on the subject, such as a Nasdaq market analyst blog,” lawyers for Oriental Bank wrote in a request for dismissal of the case that also denied the claims.

Besides Oriental Bank, the class action filed in April included as defendants other local banks, such as Banco Popular, Banco Santander, Island Finance and Scotiabank, as well as mortgage loan services. It also includes as defendants the Farm Service Agency, U.S. Department of Agriculture’s Rural Development, Federal Home Mortgage, Federal Mortgage Association, Wells Fargo & Co., Rushmore Loan Management Services and Roosevelt Cayman Asset Co.

The lawsuit states that toward the end of 2007 and throughout 2008, the real-estate market collapsed. Because lenders made wrong bets on asset-backed securities, they found themselves on the brink of financial collapse and had to be bailed out with $45 billion from the federal government.

In response to the crisis, former President Obama filed the Financial Stability Act in 2009 to help prevent foreclosures. The Home Affordable Modification Program (HAMP) was also introduced in 2009 to help modify loans for homeowners in financial need. The program provided for servicers to receive a payment of $1,000 for each eligible modification; for the temporary suspension of any foreclosure during a trial period while borrowers are considered for alternative foreclosure prevention options; for the trial modification period to last 90 days after which the borrower would be current at the end of the trial period; and that the loan servicer had to inform borrowers about the availability and advantages of counseling, provide a list of U.S. Department of Housing & Urban Development approved counselors and that counseling was a requirement for modification of the terms.

The program stated that unpaid late fees will be waived for the borrower and that there were no modification fees or charges borne by the borrower.

The program also called for loan servicers to provide information designed to help borrowers understand the modifications being offered. It also called for the servicers to have procedures in place to be able to answer inquiries and complaints related to loan modifications.

The plaintiffs said they contacted the banks and loan servicers to reduce their loan payments after losing their jobs or having their income reduced. The lenders said they would help by submitting them to loss mitigation and putting them in a trial mortgage-modification program that would become permanent if they made reduced payments during the three-month trial period, or simply deny them of their right to be qualified for a loan modification under the Home Affordable Refinance Program, HAMP and local laws.

Despite making the monthly reduced payments and submitting documents, the plaintiffs said they were hounded by the defendants a few months later for delinquency, that their creditworthiness was ruined and they were rejected for permanent loan modification.

“Plaintiffs story is typical. Defendants did not live up to promises of providing borrowers with reduced loan payments and/or simply submit plaintiffs to a lengthy loss mitigation process with no result and, at the same time, filing a foreclosure claim against them. This constitutes dual tracking and is prohibited by law. Moreover, consumers emerged from the trial modification in worse shape than they entered it, despite doing everything the defendants requested of them,” the suit says.

Oriental Bank, however, sought a dismissal of the case contending the plaintiffs did not include a discussion of their experience in dealing with banks and financial institutions that gives rise to their causes of action or any discussion of the facts of their negotiation with the defendants or any explanation of defendants’ handling of their loans.

“At the end of most paragraphs copied from those sources, without referring to a single loan modification process or narrating the alleged challenges faced by a single member of the purported class, plaintiffs included short, abstract, conclusory allegations claiming that defendants violated whatever regulation was summarized or discussed in the preceding, copied text. There is nothing in the complaint that resembles even closely the type of pleading that is required under [federal rules],” Oriental Bank said.

“Other than answering the complaint with a blanket denial of any wrongdoing and an affirmation that Oriental Bank complies with all applicable statutory and regulatory requirements (which are enforced diligently by numerous state and federal regulatory agencies), Oriental Bank is not in a position to answer any allegations against it for anything that could render it liable to plaintiffs because Oriental Bank and the defendants in this case are not really accused of anything in particular by the complaint,” the bank said.


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