Mortgage Banking Newsletter – April, 2018

In this month’s newsletter we cover the following:
  • Welcome to our inaugural newsletter
  • Johnston & Associates and collaborators set to host a complimentary Mergers and Acquisitions webinar on Thursday, May 10
  • Repurchase and Make-Whole Update: JPMorgan Chase’s RMBS Demand Letters
  • Repurchase and Make-Whole Update: CitiMortgage v. Platinum
  • The legal services we offer at Johnston & Associates
  • Upcoming webinars and conferences that Johnston & Associates will be attending
Welcome to Johnston & Associates Inaugural Mortgage Banking Newsletter

In January 2018, Johnston & Associates welcomed the addition of attorneys James Brody and Ingrid Petersen, both of whom were brought on board to lead the Law Firm’s Mortgage Banking Practice Group.  Managing a group of highly trained mortgage banking professionals, which include litigation attorneys, compliance attorneys, paralegals, investigators/underwriters and more, Mr. Brody, Mrs. Petersen and the rest of the Mortgage Banking Practice Group represent Banks, Credit Unions, Lenders, Brokers and other mortgage banking companies all across the country.

The professionals who comprise Johnston & Associates Mortgage Banking Practice Group represent our clients in matters that include, but are not limited to, repurchase and make-whole lawsuits, Servicer litigation, third-party mortgage fraud litigation, appeals to HUD’s Mortgagee Review Board, preparation of policies and procedures, creation of Loan Officer Compensation plans, formation of Marketing Service Agreements, negotiation and review of Broker and Correspondent Loan Purchase Agreements, and much, much more.

In addition, in order to best serve the interests of Johnston & Associates’ mortgage banking clientele, as well the mortgage banking industry as a whole, all of the professionals at Johnston & Associates remain ever committed to providing complimentary webinars of substance, providing thoughtful analyses and updates on legal and industry related issues, participating in panels at legal and industry conferences, and more.

On behalf of the entire Johnston & Associates team, we would like to thank all of you for taking the time to read over our inaugural mortgage banking newsletter.  If there is anything that we can ever do to assist you and/or your companies, we welcome your outreach and will always be happy to schedule a complimentary legal consultation to discuss how we may be of assistance.

Johnston & Associates – in collaboration with the MBA, Nations Reliable Lending, and Richey May – will host a complimentary webinar, entitled “Mergers and Acquisitions in the Mortgage Banking Industry: Expert Insights and Forecasts for 2018 and Beyond”

Date: Thursday, May 10, 2018
Time: 10:30 a.m. PST / 1:30 p.m. EST
Duration: One Hour

This complimentary webinar, which will be hosted by Johnston & Associates, in collaboration with the Mortgage Bankers Association (“MBA”), Nations Reliable Lending, and Richey May, brings together some of the biggest names in their respective fields, to discuss a topic that is of great interest, as well as sensitivity, to a large number of the many entrepreneurs who comprise the mortgage banking industry.  Whichever side of an M&A transaction you are interested in learning more about, the special guest speakers for this webinar will provide you and your companies with the critical insights that are needed to make informed and strategic business decisions.  Some of the many issues that will be discussed during this comprehensive webinar include, but are in no way limited to, the following:

  • Forecast for mortgage rates and industry volume
  • Current trends in origination and servicing profitability
  • A snapshot of 2017 and Q1 2018 IMB financial performance metrics
  • Seller attributes that buyers are most looking for in this market
  • Key deal points in today’s acquisition transactions
  • Possible deal killers
  • Post tax reform choice of entity
  • Changes in market share among different business models
  • The importance and appropriate use of the NDA
  • Tips on how to best manage employee concerns

Moderator: James Brody, Esq., Chairman of Mortgage Banking Practice Group, Johnston & Associates, Attorneys at Law, P.C.

Joe DeDominicis,CFO, Nations Reliable Lending
Mike Fratantoni, Ph.D., Chief Economist, Mortgage Bankers Association
Ken Richey, Partner, Richey May & Co.

Repurchase and Make-Whole Status Update: JPMorgan Chase’s RMBS Demand Letters

As many of you may now know, J.P. Morgan Chase (“Chase”) is sending out two types of demands on aged legacy loan claims.

First, Chase is again demanding to be made whole and/or indemnified on legacy loan claims from between 2006-2008, which correspondents sold to Chase or its subsidiary, EMC Mortgage, LLC.  Chase generally sends the demands via a law firm it has hired to pursue these old loan claims.

Second, in 2013, Chase entered into in a settlement with RMBS institutional investors and trustees.  Very recently, Chase has now started to send letters to a large number of correspondent lenders, wherein it demands to be made-whole and/or indemnified for the correspondents’ alleged pro rata share of those losses that were incurred by Chase in connection with its payment on this RMBS settlement in 2017.  The RMBS settlement is a complex agreement and there are significant issues regarding how Chase will, among other things, prove a causal connection between its settlement payment and the alleged loan-level breaches at issue, as well as many issues regarding its calculation of alleged damages.  For this second type of demand, the demands generally come from Chase’s own legal department. In addition, along with its demand letters, Chase is requesting that correspondents enter into confidentiality or non-disclosure agreements (“NDA”s) prior to its willingness to commence discussions about its demands, which raises a number of potential issues.

Finally, due to the fact that Chase has escalated matters through involvement of both outside legal counsel and its own legal department, we caution the recipients of these demands against signing off on the proposed NDAs or even responding to such demands without first seeking legal advice in connection therewith.  Due to the complexity of the issues presented in both types of demands, the fact that we have identified potentially strong defenses to both, and the fact that our attorneys have a significant amount of experience defending claims made by Chase both in and out of court, should you and your company receive any such demands, please contact the Mortgage Banking Practice Group’s Chairman, James Brody, or its Co-Chair, Ingrid Petersen, to arrange for a complimentary consultation.

Repurchase and Make-Whole Status Update:  CitiMortgage v. Platinum

On 3/30/2018, Platinum filed its appellee brief responding to CitiMortgage’s (“CMI’s”) appeal in CitiMortgage v. Platinum Home Mortgage Corporation, Case No. 17-3158, presently pending in the Eighth Circuit Court of Appeals.  This case is significant because if Platinum prevails, it will call into question the validity of potentially thousands of repurchase demands that CMI has issued over the years, based on its Form 200 Correspondent Agreement and could mean that CMI has forfeited its right to enforce repurchase on such loans.

In its appeal, Platinum continued the argument advanced in its successful motion for summary judgment in the district court – that CMI had violated Section 11’s cure provision by failing to provide the “time prescribed by CMI” to “correct or cure” a defect – “a period CMI concedes must expire before any repurchase obligation arises”.   The issue was that CMI’s demand letters never expressly provided the prescribed time, but CMI contended a 30-day period, contained in the DU Addendum, “supplied the time prescribed.”

Platinum argued that the contractual amendment pertained only to delegated underwriting issues and had nothing to do with CMI’s obligation to notify correspondents about defective loans and thus did not provide the prescribed time.  Platinum argued that arguments and evidence first raised in CMI’s Rule 59(e) motion are not reviewed de novo; rather, denial of that motion is reviewed for clear abuse of discretion.  Therefore, CMI faces an uphill battle in winning on its Rule 59(e) arguments regarding substantial performance, waiver, estoppel and futility, as it must persuade the Court of Appeals that the District Court’s decision was grossly unsound, unreasonable or illegal.

To defeat the condition precedent defense, CMI had also argued in its Rule 59(e) motion that substantial performance was an “alternative” theory.  However, Platinum pointed out that CMI had already conceded that there was a condition precedent.  In addition, a condition precedent requires strict performance. See Missouri Goodwill Industries, Inc. v. Johannsmeyer, 901 S.W.2d 154, 156 (Mo.App. 1995) (“[s]ubstantial compliance is not sufficient”); Central Bank v. St. Paul Fire & Marine Ins., 929 F.2d 431, 433-34 (8th Cir. 1991) (prejudice irrelevant to condition precedent).  Therefore, CMI’s alternative theory of substantial compliance appears meritless.

CMI requested and was granted an extension to April 27, 2018 to file its reply brief, so it will be at least several more weeks before this appeal is concluded.  Until then, we will monitor the progress of the appeal and will keep all our CMI clients apprised of how such developments may affect their own cases.Of course, in the event you and your company received any demands from CMI and wish to learn more about how this case may affect your rights and/or obligations, please contact the Mortgage Banking Practice Group’s Chairman, James Brody, or its Co-Chair, Ingrid Petersen, to arrange for a complimentary consultation.

Legal Services Offered by Johnston & Associates in the Mortgage Banking Industry

Johnston & Associates is a full suite boutique law firm, which amongst other practices such as real estate and commercial litigation, has a nationally recognized Mortgage Banking Practice Group.  With an experienced team of mortgage banking lawyers (including senior litigation attorneys, former in-house General Counsel and in-house Compliance Counsel from a well-known bank and mortgage company, etc.), certified fraud examiner and forensic underwriters, and an extremely competent support staff, all of whom are dedicated to aggressively and competently serving the needs of our valued clientele, Johnston & Associates’ Mortgage Banking Practice Group is known all across the country for the experience and results that it brings to the areas of regulatory compliance, mortgage banking litigation, and a broad range of mitigation services.

Amongst the many legal services Johnston & Associates offers the mortgage banking industry (e.g., brokers, lenders, servicers, vendors and more), such include, but are in no way limited to, as follows:

  • Mortgage Repurchase and Make-Whole Indemnification Litigation and Mitigation (e.g., Secondary Market Investors, Agencies, etc.)
  • Mortgage Industry Litigation (e.g., Servicer and Sub-Servicer Disputes, 3rd Party Fraud Recovery, CPL and Title Policy Actions, Appraiser E&O Claims, Loan Officer Actions, etc.
  • Mortgage Repurchase and Make-Whole Alternative Dispute Resolution (e.g., Arbitration, Mediation, etc.)
  • Regulatory Compliance, Administrative and Business Services (e.g., Mock Audits, LO Compensation, MSAs, Licensing, CA Dep’t of Business Oversight, HUD Review Board, etc.)
  • Transactional Matters (e.g., Drafting and Negotiating Broker and Correspondent Loan Purchase Agreements, Mergers & Acquisitions, etc.)

Should you have any questions regarding how Johnston & Associates’ Mortgage Banking Practice Group can be of assistance to you and/or your company, please contact its Chairman James Brody or its Co-Chair Ingrid Petersen.

Webinar & Conference Attendance by Johnston & Associates

Johnston & Associates will have a number of its attorneys in attendance and/or speaking at the following upcoming conferences and webinars:

  • April 29 – May 2, 2018: Mr. Brody will be in attendance and giving a presentation on Repurchase and Make-Whole Litigation at the MBA’s Legal Issues and Regulatory Compliance Conference, in Los Angeles, CA
  • May 10, 2018: Mr. Brody will be moderating and participating in a webinar hosted by Johnston & Associates, in collaboration with the MBA, Richey May and Nations Reliable Lending, covering Mergers and Acquisitions, in the mortgage banking industry, in 2018 and beyond
  • May 20-23, 2018: Mr. Brody and certain of his colleagues will be in attendance at the MBA’s National Secondary Market Conference and Expo in New York City

If you or someone from your company will also be in attendance at the foregoing conferences and would like to set up a complimentary appointment to meet with Johnston & Associates’ Mortgage Banking Practice Group, please contact its Chairman, James Brody, to schedule a date and time. We hope to see you there!

Although this communication may contain or possibly be considered attorney advertising, it is meant to be for informational and commentary purposes only. As such, it is not intended as legal advice and does not create an attorney-client relationship. Because of the generality of this update, the information and opinions provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations. All opinions expressed herein are solely the opinion of the individual author and do not necessarily reflect the opinions of Johnston & Associates Law Firm, its attorneys, or any other individual.

Copyright © 2018 Johnston & Associates, Attorneys at Law, PC, All rights reserved.