Articles Posted in Banking

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The DC Circuit reversed the district court's dismissal of a complaint for lack of subject matter jurisdiction. This appeal stemmed from plaintiff's efforts to recover fraudulent transfers made as a part of a Ponzi scheme. The complaint alleged that because plaintiff's letter to the president of Washington Mutual had advised Washington Mutual and the FDIC of her claim, she was entitled to receive, and had not received, mailed notice of the bar date under the Financial Institution Reform, Recovery, and Enforcement Act (FIRREA), 12 U.S.C. 1821. The court held that, taken together, the allegations in the amended complaint showed that although plaintiff mailed a letter to the bank's subsidiary, she did not receive mailed notice of the bar date from the FDIC, and consequently she did not file her claim with the FDIC until months after the bar date had passed, despite being an experienced trustee actively pursuing related bankruptcy claims. View "Feldman v. FDIC" on Justia Law

Posted in: Banking

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Relator filed a quit tam action under the False Claims Act against Chase, alleging that Chase falsely claimed compliance with a Settlement. Relator also alleged that Chase falsely claimed compliance with the Home Affordable Modification Program (HAMP). The DC Circuit disagreed with the district court's conclusion that plaintiff was required to exhaust his contentions pursuant to the procedures of the Settlement. However, the court affirmed the dismissal of the claims regarding the Settlement on a related basis. In this case, the Monitor was aware of the practices and concluded that Chase was in compliance. To the extent that relator vaguely alleged that Chase sought credit for loans that otherwise did not qualify for relief under the Settlement, the complaint nowhere identified any ineligible loan Chase submitted for credit, alleged that the Monitor was unaware of any such loan's disqualifying characteristics, or claimed that the cumulative value of any such loans exceeded the $250 million buffer. Finally, the court agreed with the district court that relator failed to state a claim that Chase falsely certified HAMP compliance because he did not allege, with factual allegations in support, that the certifications were materially false. View "United States ex rel. Schneider v. JPMorgan Chase Bank, N.A." on Justia Law

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The D.C. Circuit held that the district court properly entered summary judgment for judicial foreclosure to the property at issue, because D.C. law allows the holder of a note to enforce the deed of trust by judicial foreclosure. In this case, there was no genuine dispute of material fact that the Bank holds the Note. The court rejected defendant's counterclaim for declaratory and injunctive relief, as well as defendant's counterclaim under the Fair Debt Collection Practices Act (FDCPA). Furthermore, the Bank has carried its burden of showing there was no genuine dispute of material fact with respect to the quiet title counterclaim; defendant forfeited his claim under the Fair Credit Reporting Act (FCRA); and, in regard to the civil conspiracy claim, defendant failed to meet the heightened pleading requirements for fraud. View "Bank of New York Mellon v. Henderson" on Justia Law

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Appellants, the majority shareholder of Banca Privada d'Andorra S.A., filed suit claiming that FinCEN violated the Administrative Procedure Act (APA) by issuing a Notice of Finding and a Notice of Proposed Rulemaking proposing to cut off the Bank's ties to the United States' financial system. While the case was pending, FinCEN withdrew both Notices and the district court subsequently granted FinCEN's motion to dismiss on mootness grounds. The DC Circuit held that the case should be dismissed, but for different reasons than the district court. The DC Circuit explained that when FinCEN withdrew the Notices, appellants received full relief on their first claim. Therefore, the first claim of relief was moot. As for appellants' second claim, they no longer have standing to press this claim, because appellants have not met their burden of demonstrating that they still had standing to seek a declaratory order that the Notices were unlawful. Furthermore, even assuming that appellants do have the requisite injury and causation to support standing, they failed to show that a judicial order would effectively redress their alleged injuries. View "Cierco v. Mnuchin" on Justia Law

Posted in: Banking, Criminal Law

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Under the Housing and Economic Recovery Act of 2008, Pub. L. No. 110-289, 122 Stat. 2654, the Federal Housing Finance Agency (FHFA) became the conservator of Fannie Mae and Freddie Mac. In 2012, FHFA and Treasury adopted the Third Amendment to their stock purchase agreement, which replaced the fixed 10% dividend with a formula by which Fannie and Freddie just paid to Treasury an amount (roughly) equal to their quarterly net worth. Plaintiffs, Fannie Mae and Freddie Mac stockholders, filed suit alleging that FHFA's and Treasury's alteration of the dividend formula through the Third Amendment exceeded their statutory authority under the Recovery Act, and constituted arbitrary and capricious agency action in violation of the Administrative Procedure Act (APA), 5 U.S.C. 706(2)(A). The court held that plaintiffs' statutory claims are barred by the Recovery Act's strict limitation on judicial review; the court rejected most of plaintiffs' common law claims; insofar as the court has subject matter jurisdiction over plaintiffs' common-law claims against Treasury, and Congress has waived the agency's immunity from suit, those claims are also barred by the Recovery Act's limitation on judicial review; in regard to claims against FHFA and the Companies, some are barred because FHFA succeeded to all rights, powers, and privileges of the stockholders under the Recovery Act, and others failed to state a claim upon which relief could be granted; and, as to the remaining claims, which are contract-based claims regarding liquidation preferences and dividend rights, the court remanded for further proceedings. View "Perry Capital LLC v. Mnuchin" on Justia Law

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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

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This case concerns an IRS regulation that imposes a “penalty” on U.S. banks that fail to report interest paid to certain foreign account-holders. Two Bankers Associations challenged the legality of the regulation. At issue was whether a challenge to a tax-related statutory or regulatory requirement that is enforced by a “penalty” – as opposed to a challenge to a statute or regulation that imposes a tax – is covered by the Anti-Injunction Act, 26 U.S.C. 7421. The court concluded that the Tax Code defines some penalties as taxes for purposes of the Anti-Injunction Act. In those cases, such as the one here, the Anti-Injunction Act ordinarily applies because the suit, if successful, would invalidate the regulation and thereby directly prevent collection of the tax. The penalty at issue here is located in Chapter 68, Subchapter B of the Tax Code. The Tax Code provides that penalties in Chapter 68, Subchapter B are treated as taxes under the Anti-Injunction Act. Accordingly, the Anti-Injunction Act bars this suit as premature. The court vacated the district court's judgment and remanded with directions to dismiss the case. View "Florida Bankers Ass'n v. US Dep't of the Treasury" on Justia Law

Posted in: Banking, Tax Law

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This dispute stemmed from a house that Debra Stevenson and her son Eugene Smith both own. After Stevenson refinanced her mortgage twice and then filed for bankruptcy, HSBC filed suit in Bankruptcy Court seeking equitable subrogation, which permits courts to declare that the owner of a mortgage (HSBC) has the same rights as an earlier-in-time owner of another mortgage (Wells Fargo). Only Stevenson signed the paperwork for the second refinancing with HSBC and Smith refused to sign because he thought the interest rate was too high. HSBC went ahead with the mortgage in full without Smith's signature. The court affirmed the Bankruptcy Court's conclusion that HSBC is entitled to equitable subrogation and rejected Stevenson and Smith’s claims that the mortgage is invalid under D.C. and federal lending laws. The court affirmed the judgment. View "In Re: Debra M. Stevenson" on Justia Law

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Plaintiff filed suit against defendants in state court, challenging the foreclosure proceedings that ultimately resulted in the sale of his property. Defendants removed to federal court and moved for judgment on the pleadings. The court affirmed the district court's order denying leave to amend plaintiff's complaint to add additional federal claims; vacated the district court's orders relating to the state-law claims against Chase and Shapiro & Burson because the D.C. statutory and common law claims against the bank and its foreclosing agent should have been decided by the local courts; and remanded to the district court with instructions to remand to Superior Court for determination of plaintiff's state-law claims against those parties. View "Araya v. JPMorgan Chase Bank, N.A." on Justia Law

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The United States and others filed suit against several mortgage servicers, including Wells Fargo, alleging claims under the False Claims Act, 31 U.S.C. 3729 et seq., and the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA), 12 U.S.C. 1833(a), based on Wells Fargo's alleged misconduct in issuing home mortgage loans insured by the FHA. The parties agreed on a settlement where the United States agreed to release certain claims. On appeal, Wells Fargo challenged the district court's order denying its motion to enforce the consent judgment. The court concluded that the Release's plain text forecloses Wells Fargo's interpretation. View "United States, et al. v. Bank of America Corp., et al." on Justia Law