Justia Banking Opinion Summaries

Plaintiff-Appellant Federal Deposit Insurance Corporation (FDIC) sought to recover on a financial institution crime bond and appealed the district court’s grant of summary judgment in favor of Defendant-Appellee Kansas Bankers Surety Co. (KBS) and the subsequent denial of reconsideration. The district court held that the underlying bank, the New Frontier Bank of Greeley, Colorado, (Bank) had failed to submit a timely and complete proof of loss, thereby barring FDIC’s recovery on the bond. Finding no error in the district court's decision, the Tenth Circuit affirmed. View "FDIC v. Kansas Bankers Surety Company" on Justia Law

In the Dodd-Frank Act of 2010, 12 U.S.C. 5491, Congress established a new independent agency, the Consumer Financial Protection Bureau (CFPB), an independent agency headed not by a multi-member commission but rather by a single Director. PHH is a mortgage lender that was the subject of a CFPB enforcement action that resulted in a $109 million order against it. PHH seeks to vacate the order, arguing that the CFPB’s status as an independent agency headed by a single Director violates Article II of the Constitution. The court concluded that CFPB’s concentration of enormous executive power in a single, unaccountable, unchecked Director not only departs from settled historical practice, but also poses a far greater risk of arbitrary decisionmaking and abuse of power, and a far greater threat to individual liberty, than does a multi-member independent agency. The court noted that this new agency lacks that critical check and structural constitutional protection, yet wields vast power over the U.S. economy. The court concluded that, in light of the consistent historical practice under which independent agencies have been headed by multiple commissioners or board members, and in light of the threat to individual liberty posed by a single-Director independent agency, Humphrey’s Executor v. United States cannot be stretched to cover this novel agency structure. Therefore, the court held that the CFPB is unconstitutionally structured. To remedy the constitutional flaw, the court followed the Supreme Court’s precedents and simply severed the statute’s unconstitutional for-cause provision from the remainder of the statute. With the for-cause provision severed, the court explained that the President now will have the power to remove the Director at will, and to supervise and direct the Director. Because the CFPB as remedied will continue operating, the court addressed the statutory issues raised by PHH and agreed with PHH that Section 8 of the Act allows captive reinsurance arrangements so long as the amount paid by the mortgage insurer for the reinsurance does not exceed the reasonable market value of the reinsurance; CFPB’s order against PHH violated bedrock principles of due process; and the CFPB on remand still will have an opportunity to demonstrate that the relevant mortgage insurers in fact paid more than reasonable market value to the PHH-affiliated reinsurer for reinsurance, thereby making disguised payments for referrals in contravention of Section 8. Accordingly, the court granted the petition for review, vacated the order, and remanded for further proceedings. View "PHH Corp. v. CFPB" on Justia Law

Claimants-Appellants appealed an award of summary judgment which forfeited to the United States various claimants’ interests in multiple properties, including a 36‐story office building located at 650 Fifth Avenue in Manhattan, real properties in Maryland, Texas, California, Virginia, and New York, and the contents of several bank accounts. Also at issue is the September 9, 2013 order denying a motion to suppress evidence seized from the Alavi Foundation’s and the 650 Fifth Avenue Company’s office. The court vacated the judgment as to Claimants Alavi Foundation and the 650 Fifth Ave. Co., of which Alavi is a 60% owner because there are material issues of fact as to whether the Alavi Foundation knew that Assa Corporation, its partner in the 650 Fifth Ave. Co. Partnership, continued after 1995, to be owned or controlled by Bank Melli Iran, which is itself owned or controlled by the Government of Iran, a designated threat to this nation’s national security; the district court erred in sua sponte considering and rejecting claimants’ possible statute of limitations defense without affording notice and a reasonable time to respond; in rejecting claimants’ motion to suppress evidence seized pursuant to a challenged warrant, the district court erred in ruling that claimants’ civil discovery obligations obviate the need for any Fourth Amendment analysis; and the district court erred in its alternative ruling that every item of unlawfully seized evidence would have been inevitably discovered. Accordingly, the court vacated and remanded for further proceedings. View "In re 650 Fifth Avenue and Related Properties" on Justia Law

Plaintiff filed a qui tam action under the New York False Claims Act (NYFCA), N.Y. Stat Fin. Law 187 et seq., on behalf of the State and the City against Wells Fargo for fraudulent avoidance of New York tax obligations. The district court dismissed for failure to state a claim. The court concluded that, with no special state interest, and with no indication of congressional preference for state-court adjudication, the exercise of federal jurisdiction in this case is fully consistent with the ordinary division of labor between federal and state courts. The court also concluded that the complaint did not plausibly allege that the Wells Fargo trusts were not qualified to be treated as Real Estate Mortgage Investment Conduits (REMICs). Therefore, the complaint failed to state a claim on which relief could be granted under the NYFCA for any false statement or record affecting the trusts' entitlement to exemption from income tax under the New York tax laws. Accordingly, the court affirmed the judgment. View "State of New York ex rel. Jacobson v. Wells Fargo" on Justia Law

Relators filed a qui tam action under the False Claims Act (FCA), 31 U.S.C. 3729(a)(1)(A), alleging that Wells Fargo defrauded the government within the meaning of the FCA by falsely certifying that they were in compliance with various banking laws and regulations when they borrowed money at favorable rates from the Federal Reserve’s discount window. The district court granted defendants’ motion to dismiss. The district court held that the banks’ certifications of compliance were too general to constitute legally false claims under the FCA and that relators had otherwise failed to allege their fraud claims with particularity. The court agreed, concluding that it has long recognized that the FCA was not designed to reach every kind of fraud practiced on the Government. Even assuming relators’ accusations of widespread fraud are true, they have not plausibly connected those accusations to express or implied false claims submitted to the government for payment, as required to collect the treble damages and other statutory penalties available under the FCA. Accordingly, the court affirmed the dismissal of the suit. View "Bishop v. Wells Fargo" on Justia Law

U.S. Bank participates in an FHA-backed mortgage insurance program that encourages lending to high-risk borrowers. U.S. Bank had to certify that it would meet certain requirements, and each time it requested an insurance payment, had to certify that it had followed 24 C.F.R. 203.500 requirements, including engaging in “loss mitigation” measures, such as attempting to arrange a face-to-face meeting with the defaulting borrower, before foreclosing. According to ABLE, an Ohio non-profit organization, U.S. Bank did not satisfy the loss mitigation requirement, wrongfully foreclosed on 22,000 homes, and wrongfully collected $2.3 billion in federal insurance benefits. ABLE alleged violation of the False Claims Act, 31 U.S.C. 3729. The Department of Justice declined to intervene. The district court found that ABLE premised its case on information that had already been publicly disclosed, precluding it from bringing suit as a qui tam plaintiff. The Sixth Circuit agreed, noting a 2011 consent order between U.S. Bank and the government, requiring U.S. Bank to implement reforms, including measures “to ensure [that] reasonable and good faith efforts, consistent with applicable Legal Requirements, are engaged in Loss Mitigation and foreclosure prevention for delinquent loans,” and a 2011 foreclosure practices review by three federal agencies, which noted that U.S. Bank had failed to take various mitigation measures. View "ABLE v. U.S. Bank, N.A." on Justia Law

Relators filed suit under the False Claims Act, 31 U.S.C. 3729(b)(2)(A), against various lenders and loan servicers, alleging that defendants certified that loans purchased by Fannie Mae and Freddie Mac were free and clear of certain home owner association liens and charges when they were not. At issue was whether Fannie Mae and Freddie Mac are officers, employees, or agents of the federal government for purposes of the Act. The court concluded that the district court properly held that a claim presented to Fannie Mae or Freddie Mac is not presented to an “officer, employee or agent” of the United States. Fannie Mae and Freddie Mac are private companies, albeit companies sponsored or chartered by the federal government. The court's prior decision in Rust v. Johnson, where it held that Fannie Mae was a federal instrumentality for state/city tax purposes, does not change the result, because Rust does not address Fannie Mae or Freddie Mac’s status under the False Claims Act. Accordingly, the court affirmed the judgment. View "United States ex rel. Adams v. Aurora Loan Servs." on Justia Law

At issue in this case was Connecticut’s debt negotiation statutes, Conn. Gen. Stat. 36a-671 through 36a-671e, which authorize the Banking Commissioner to license and regulate persons engaged in the debt negotiation. Plaintiff, a national consumer advocate law firm, petitioned the Commissioner for a declaratory ruling stating that Plaintiff qualified for exemption from the debt negotiation statutes under the attorney exception. This exception exempts only those attorneys admitted to the practice of law in Connecticut who engage or offer to engage in debt negotiation as an ancillary matter to the attorneys’ presentation of a client. The Commissioner concluded that Plaintiff did not qualify for exemption. The superior court affirmed. The Supreme Court reversed, holding that the debt negotiation statutes impermissibly intrude on the Judicial Branch’s exclusive authority to regulate attorney conduct and licensure and, therefore, violate the separation of powers provision contained in article II of the state Constitution. View "Persels & Assocs., LLC v. Banking Comm’r" on Justia Law

Mortgage Electronic Registration Systems (MERS) is a national electronic loan registry system that permits its members to transfer, among themselves, promissory notes associated with mortgages, while MERS remains the mortgagee of record in public records as “nominee” for the note holder and its successors and assigns. MERS facilitates the secondary market for mortgages by permitting members to transfer the right to repayment pursuant to the terms of the promissory note, recording such transfers in the MERS database to notify one another and establish priority, instead of recording such transfers as mortgage assignments in local land recording offices. It permits note holders to avoid recording fees. Recorders of deeds in Pennsylvania counties sued, seeking an injunction, and to recover millions of dollars in unpaid recording fees, contending that the MERS entities violated 21 Pa. Cons. Stat. 351. The Third Circuit rejected the claims, holding that section 351 does not create a duty to record all land conveyances and is so clear that certification to the Supreme Court of Pennsylvania was unnecessary. The transfers of promissory notes among MERS members do not constitute assignments of the mortgage itself. View "Cnty. of Montgomery Recorder v. MERSCorp Inc" on Justia Law

Plaintiffs obtained a home loan and granted a mortgage that was eventually assigned to Bank of America (BOA). Plaintiffs defaulted in 2007. In 2011, plaintiffs received a letter explaining the right to seek a loan modification. Plaintiffs sought assistance from NMCA; met with BOA’s counsel; provided information and forms prepared with help from NMCA; and were offered reduced payments for a three-month trial period. If all trial period payments were timely, the loan would be permanently modified. Plaintiffs allege that they made the three payments, but did not receive any further information, and that BOA returned two payments. BOA offered plaintiffs a permanent loan modification, instructing plaintiffs to execute and return a loan modification agreement. Plaintiffs do not allege that they returned the agreement. BOA never received the documents. BOA sent a letter informing them that because they were in default and had not accepted the modification agreement, a nonjudicial foreclosure would proceed. Notice was published. The property was sold at a sheriff’s sale. BOA purchased the property, and executed a quitclaim deed to Federal National Mortgage Association, which filed a possession action after the redemption period expired. Six months later, plaintiffs sued, claiming Quiet Title; violations of due process rights; and illegal/improper foreclosure and sheriff’s sale. The district court dismissed all claims. The Sixth Circuit affirmed, holding that the Michigan foreclosure procedure does not violate due process. View "Garcia v. Fed. Nat'l Mortg. Ass'n" on Justia Law