Individuals and institutions who own mortgage-backed securities may be due restitution from banks and servicers over shoddy loan origination’s. The sloppy mortgage servicing and underwriting practices lenders like GMAC Mortgage, Bank of America, JP Morgan Chase and others engaged in has cost investors in mortgage-backed securities billions of dollars. In some quarters, efforts are even underway to force banks to buy back mortgage-backed securities.
Lawyers at our firm who specialize exclusively in the area of securities fraud are actively investigating the legal remedies available to investors. Our securities fraud lawyers are offering free case evaluations to individual and institutional investors who have been burned because of the sloppy mortgage practices the banks engaged in. We urge you to contact us today to discuss ways you may be able to recoup your losses in mortgage-backed securities.
The Mortgage Foreclosure Mess
There are several ways the banks’ sloppy practices have damaged, and will likely continue to damage, investors in mortgage bank securities. First and foremost is the careless way home loans were originated. In many instances, banks overstated how many loans were taken out by borrowers using their properties as primary residences or inflated appraisals, which made the mortgages seem less risky than they actually were.
Problems with the way foreclosures have been processed could create more havoc for investors. Across the country, embattled homeowners have begun challenging home seizures because of disclosures by banks regarding irregularities in the way foreclosure documents were processed. This scandal involves the banks’ use of “robo-signers” – employees who signed thousands of foreclosure affidavits without even reading, much less verifying them. In many cases the documents weren’t properly notarized. In the fall of 2010, several banks, including GMAC Mortgage, JP Morgan Chase, Bank of America, and PNC Bank, suspended foreclosures in certain states because of the document problems.
Now, the banks and mortgage processors are facing the specter of thousands of wrongful foreclosure lawsuits, as well as federal and state investigations into their practices. There are concerns in some quarters that banks will try to pass along the costs of cleaning up this mess to bondholders.
There are several legal remedies investors embroiled in the shoddy loan processing and mortgage foreclosure mess can pursue against the banks. Among other things, they can attempt to prove there were material inaccuracies in collateral used when the securities were issued. This could force the banks to refund the bond purchase, something known as a “put-back.” Put-backs require a bank to repurchase a loan from investors at par.
Investors may be able to force put-backs by proving banks violated the representations and warranties laid out by pooling-and-servicing agreements. According to the Wall Street Journal, it is estimated that 45 percent of the residential-backed mortgage securities issued from 2005 to 2007 have likely breached reps and warranties.
Investors also could sue banks and mortgage-servicing firms for problems such as robo-signing or questionable affidavits used in foreclosure proceedings. The robo-signing practice made it impossible for banks to assure that it serviced loans in accordance with the law.