Wells Fargo

S.D.N.Y. Denies Plaintiffs’ Sampling Motion in Consolidated Actions Against RMBS Trustee

 

On August 21, 2017, Judge Katherine Polk Failla of the United States District Court for the Southern District of New York upheld a magistrate’s order denying plaintiff-certificateholders’ motion to attempt to prove their claims by re-underwriting a sample of the loans at issue in a consolidated action against Wells Fargo Bank, National Association, in its capacity as RMBS trustee. Judge Failla, after reviewing the magistrate’s order for clear error, affirmed that under the governing agreements, to prevail on a breach of contract claim against an RMBS trustee with respect to the loans underlying the trust, Plaintiffs must demonstrate a breach on a loan-by-loan and trust-by-trust basis. Accordingly, Plaintiffs cannot utilize sampling in their efforts to prove that the RMBS trustee breached its contractual obligations. Judge Failla also noted that Plaintiffs, rather than needing to prove that the trustee had actual knowledge of breaches of representations and warranties, could potentially demonstrate the trustee’s discovery of breaches through a showing of conscious avoidance or implied actual knowledge. Wells Fargo Sampling Order.

New York Federal Judge Approves Wells Fargo $1.2 Billion Settlement with FHA

On April 8, U.S. District Judge Jesse M. Furman approved a $1.2 billion settlement paid by Wells Fargo NA to the Federal Housing Administration (“FHA”) over allegations that Wells Fargo submitted insurance claims for defaulted loans that failed to meet FHA standards.  The Settlement Order states that “Wells Fargo Bank admits, acknowledges, and accepts responsibility” for certain allegations in the FHA’s complaint (October 15, 2012 FIWIR coverage), filed October 9, 2012 in the Southern District of New York. Wells Fargo Settlement Order.

Phoenix Light Sues Five RMBS Trustees Over $2.4 Billion in RMBS

On December 23 and 24, Phoenix Light SF Limited and other RMBS certificateholders filed suit against HSBC, Wells Fargo, Deutsche Bank, Bank of New York Mellon, U.S. Bank, and Bank of America in the United States District Court for the Southern District of New York regarding $2.4 billion in RMBS. The complaints assert causes of action under the Trust Indenture Act and a provision of the New York Real Property Law known as the Streit Act, as well as under state law for breach of contract, breach of fiduciary duty, negligence, gross negligence, and negligent misrepresentation. Plaintiffs allege that the trustees breached their duties under the governing trust agreements by failing to notify the investors of deficiencies in the loans, failing to take action to address those alleged deficiencies, and failing to require the repurchase of defective loans. Plaintiffs seek compensatory damages and unspecified equitable relief.  HSBC ComplaintWells Fargo ComplaintDeutsche Bank ComplaintBNY Mellon ComplaintU.S. Bank and Bank of America Complaint.

NCUA Sues Wells Fargo for Allegedly Failing to Comply with RMBS Trustee Duties

On December 22, National Credit Union Administration sued Wells Fargo, as an RMBS trustee, in the United States District Court for the Southern District of New York. NCUA filed the suit in its capacity as liquidating agent for five credit unions, collectively alleged to have purchased $2.4 billion in 27 RMBS trusts for which Wells Fargo served as trustee. NCUA alleges that Wells Fargo breached its duties under the governing trust agreements by failing to properly review and monitor the loans underlying the RMBS, failing to notify the investors of deficiencies in the loans, failing to take action to address those alleged deficiencies, and failing to require the repurchase of defective loans. The complaint asserts causes of action under the Trust Indenture Act and a provision of the New York Real Property Law known as the Streit Act.  Complaint.

U.S. Bank Sued Over Management of 28 RMBS Trusts

On May 24, several banks and asset management companies sued U.S. Bank in a Missouri state court over U.S. Bank’s alleged mismanagement of 28 RMBS trusts.  Plaintiffs allege that U.S. Bank disregarded its duties as trustee by, among other things, ignoring master servicer Wells Fargo’s alleged misconduct related to its foreclosure practices in connection with loans owned by the trusts.  Plaintiffs further allege that U.S. Bank’s inaction made it difficult and costly to pursue foreclosures on mortgages in the trusts, thus causing them substantial damage.  Plaintiffs seek unspecified monetary and injunctive relief against U.S. Bank under claims for breach of contract, breach of the duty to avoid conflict of interest, breach of fiduciary duty, negligence and breach of express contract.  Complaint.

Washington Mutual Settles RMBS Suit Brought by Union Central Life Insurance Co.

On December 17, 2012, two Washington Mutual affiliates settled a lawsuit brought against them by Union Central Life Insurance Co. concerning $4.3 million in Washington Mutual-sponsored RMBS purchased by Union Central.  In its amended complaint, Union Central alleged that Washington Mutual knowingly made false and misleading statements in the RMBS offering materials concerning the loans underlying the certificate, Washington Mutual’s compliance with its underwriting standards, and the accuracy of credit ratings assigned to the offered certificate.  Union Central asserted three causes of action against the Washington Mutual affiliates for common law fraud, unjust enrichment, and aiding and abetting.  Amended Complaint.  Judge George B. Daniels of the Southern District of New York so ordered Union Central’s notice of dismissal of the action with prejudice as to the two Washington Mutual defendants.  No terms of the settlement were provided.  Earlier this year in the same action, Union Central settled its claims against Wells Fargo.  The action continues against other defendants. Order. 

Mortgage Servicing and Foreclosure Consent Judgments Approved

On April 4, U.S. District Court Judge Collyer approved the previously announced consent judgments resolving claims by by the DOJ and 49 state AGs against Ally, Bank of America, Citi, JPMorgan and Wells Fargo relating to alleged mortgage servicing and foreclosure practices.  Ally Financial Consent Judgment.  Bank of America Consent Judgment.  Citigroup Consent Judgment.  JP Morgan Consent Judgment.  Wells Fargo Consent Judgment.

SEC Files Lawsuit to Compel Compliance with Subpoenas Related to RMBS

On March 23, 2012, the SEC filed an administrative enforcement action against Wells Fargo & Co. in the Northern District of California seeking an order compelling Wells Fargo to comply with six subpoenas the agency issued to obtain information about the quality of RMBS that the bank sold. According to the SEC’s application, Wells Fargo has failed to respond adequately to the subpoenas, which seek documents regarding, among other things, the bank’s underwriting practices, the quality of the mortgage loans, compensation matters, and training materials. The SEC initiated the investigation in November 2010. Wells Fargo received a Wells notice from the SEC on February 24, 2012, following the issuance of the six subpoenas, and, according to the SEC, has refused to produce any documents since the Wells notice was issued. Application.

Attorneys General Complaint on Mortgage Practices

On March 12, a complaint was filed in the U.S. district court for the District of Columbia by the DOJ and the attorneys general of 49 states and the District of Columbia against Bank of America, JPMorgan Chase, Wells Fargo, Citigroup, and Ally.  The complaint, which was filed as part of the $25 billion mortgage servicing and foreclosure settlement entered into on February 9, contains allegations of: (i) unfair and deceptive loan servicing consumer practices; (ii) unfair and deceptive foreclosure processing consumer practices; (iii) unfair and deceptive loan origination consumer practices; (iv) violations of the False Claims Act; (v) violation of FIRREA; (vi) violation of the Servicemembers Civil Relief Act; and (vii) bankruptcy misconduct.  Consent judgments implementing the terms of the February 9 settlement agreement were also filed in the U.S. district court in Washington, D.C.  Complaints and Settlements.  Orrick Alert on the February 9 Settlement.

Wall Street Firms Disclose Government Investigations Of RMBS Activities

Bank of America, Citigroup, Wells Fargo, JP Morgan, and Goldman Sachs announced in their respective 2011 Forms 10-K filed with the SEC that they have received requests and subpoenas seeking documents, testimony and other information from government regulators including the SEC, DOJ Civil Division, state attorneys general, and bank regulators. These requests and subpoenas appear to be focused on issues relating to the sale and offering of mortgage-backed securities. Goldman Sachs, JP Morgan, and Wells Fargo also acknowledged that they have received Wells notices advising them of possible SEC civil or administrative action.  Bank of America.  Citigroup.  Wells Fargo.  JP Morgan.  Goldman Sachs.