Mortgage Banking Newsletter – November, 2018

In this newsletter we cover the following:

• Over 60 lenders sued by Lehman in ongoing bankruptcy claims relating to crisis-era legacy loans
• Complimentary materials available from recent Webinars
• The Legal Services we offer at Johnston & Associates

Welcome to the November Installment of Johnston & Associates’s Newsletter

To all our preexisting clients, industry friends and strategic partners whom are in receipt of the Johnston & Associates Newsletter, as well as any and all the new readers whom have decided to subscribe hereto, we welcome and thank you for taking the time to read about those topics that we believe to be of great importance to the mortgage banking industry in which we all are fortunate enough to be a part of and to those mortgage banking professionals whom we count ourselves lucky to work alongside.

As part of our ongoing effort to provide our readers with content rich Newsletters, including timely discussions on those topics that are of great concern and interest to many within our industry, we always welcome any and all follow-up questions and/or feedback that you and/or your companies may have.

Finally, as many of you already know, the professionals who comprise Johnston & Associates’s 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, assisting with the negotiation and review of Broker and Correspondent LPAs, and much, much more.

LBHI Litigation update: Over 60 lenders sued by Lehman in ongoing bankruptcy claims relating to crisis-era legacy loans.

Three days before the October 29, 2018 hearing on the two motions that Lehman Brothers Holdings Inc. (“LBHI”) filed in the beginning of this month, LBHI filed numerous adversary complaints against mortgage lenders and brokers alleging indemnification claims relating to LBHI’s settlements with RMBS Trustees. At present, LBHI has filed at least 60 new adversary complaints and many more are anticipated to be filed in the coming days and weeks.  For a complete list of adversary complaints click here.

To summarize, LBHI is demanding indemnification for allegedly defective mortgages in connection with its recent $2.38 billion settlement with private-label RMBS Trustees.  The complaints are copycat templates that provide little defendant-specific information beyond a list of loan numbers, abbreviated reasons for the claims, and LBHI’s claimed damages. In many cases, LBHI seeks damages in the low-to-mid seven figure range, but there are some demands in the low eight figures. The important thing to remember is that LBHI’s demands are likely inflated based on several faulty assumptions, and, in many cases, defendants will have solid loan-level factual and legal defenses.

At yesterday’s hearing in New York, the debtors’ motion for leave to file a third amended complaint against certain defendants as to whom the debtor had previously filed GSE Claims was granted.

Regarding the motion to amend and extend the prior ADR procedures to cover RMBS related indemnification claims, the judge ordered the parties to work out individual deals and the ADR will also go ahead.  The upshot is that parties who have filed objections will receive preferential treatment. This preferential treatment may include, but is not limited to, longer times to object, the right to strike LBHIs first mediator pick and the right to have LBHI pay for at least 50% or more of the mediation costs, LBHI paying all the mediation costs in the event the parties had already mediated GSE related claims and more. However, separate side deals have been and continue to be negotiated with LBHI, whereby certain additional non-objecting parties will also be able to receive the same preferential treatment as the objecting parties and more.

Insofar as how the court will manage the preexisting GSE related claims with the new RMBS claims, the court has indicated that the GSE claims will be handled separate from the RMBS claims. In other words, even if you decided to join a defense group that is handling many GSE related cases, you are not likely to benefit that much due to the RMBS claims being handled separately. However, given the fact that our office is representing one of the largest groups of RMBS and GSE clients, all our clients will enjoy an economy of scale in the defense of their matters. Further, as there are different response dates depending upon whether you are an adversary defendant, a recipient of an ADR notice, or both, it is critical you understand all of your rights and obligations.

Finally, if interested in finding our more about the Johnston & Associates LBHI defense group and how such can benefit your companies, please contact Mr. James Brody to schedule a complimentary conference call by clicking here.

Complimentary Webinar Recordings and Presentation Materials Available from Johnston & Associates Mortgage Banking 

We are pleased to offer complimentary recordings and other presentation materials from our recent webinars:

• July 26, 2018 – “Loan Officer Compensation Tips and Trends: How to Gain a Competitive Edge While Remaining Compliant” webinar
• June 28, 2018 – “Repurchase and Indemnification Claims in 2018 and Beyond: A Comprehensive Update” webinar
• May 10, 2018 – “Mergers and Acquisitions in the Mortgage Banking Industry: Expert Insights and Forecasts for 2018 and Beyond” webinar

These materials may be downloaded from our Johnston & Associates website or, for more information concerning any of the foregoing webinars and/or the subject matter of these webinars, please contact its Chairman James Brody.

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 and/or its Co-Chair Ingrid Peterson.

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.

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