Daily Archives: March 18, 2015

KABOOM: BANK OF AMERICA, N.A., VS PATE AFFIRMED – HOMEOWNERS AWARDED $250,000 IN PUNITIVE DAMAGES DUE TO UNCLEAN HANDS AND FRAUD

BANK OF AMERICA, N.A., AND THIRD-PARTY DEFENDANT, HOMEFOCUS SERVICES, LLC,
Appellants,
v.
PHILLIP V. PATE AND BARBARA PATE, ROBERT L. POHLMAN AND MARCIA L. CROOM,
Appellees.
IN THE DISTRICT COURT OF APPEAL
FIRST DISTRICT, STATE OF FLORIDA
NOT FINAL UNTIL TIME EXPIRES TO FILE MOTION FOR REHEARING AND DISPOSITION THEREOF IF FILED
CASE NO. 1D14-251
_____________________________/

In this civil foreclosure case, the trial court found that Appellant Bank of America (the Bank) engaged in egregious and intentional misconduct in Appellee Pates’ (Pate) purchase of a residential home. Thus, based on the trial court’s finding that the Bank had unclean hands in this equity action, it did not reversibly err in denying theforeclosure action and granting a deed in lieu of foreclosure. In addition, the trial court did not err in ruling in favor of the Pates in their counterclaims for breach of contract and fraud, and awarding them $250,000 in punitive damages and $60,443.29 in compensatory damages, against the Bank and its affiliate, Homefocus Services, LLC, which provided the flawed appraisal discussed below. Finally, the trial court did not reversibly err in granting injunctive relief and thereby ordering the Bank to take the necessary measures to correct the Pates’credit histories.

In the bench trial below, the trial court found that the Bank assured the Pates, based on the appraisal showing the home’s value far exceeded the $50,000 mortgage loan, that it would issue a home equity loan in addition to the mortgage loan. This was a precondition to the Pates’ agreement to purchase the home, which was in very poor condition but had historical appeal for the Pates. The Pates intended to restore the home, but needed the home equity loan to facilitate restoration.

Before the closing on the property, the Bank informed the Pates that it would close on the home equity loan “later,” after the mortgage loan was issued. The Bank later refused to issue the home equity loan, in part on the ground that the appraisal issued by Homefocus was flawed. The Pates were forced to invest all of their savings and much of their own labor in extensive repairs. Thus, the trial court found that the Pates detrimentally relied on the representations of the Bank that it would issue the home equity loan. The record supports the trial court’s conclusion that the Bank acted with reckless disregard constituting intentional misconduct by the Bank. See generally, Lance v. Wade, 457 So. 2d 1008, 1011 (Fla. 1984) (“[E]lements for actionable fraud are (1) a false statement concerning a material fact; (2) knowledge by the person . . . that the representation is false; (3) the intent . . . [to] induce another to act on it; and (4) reliance on the representation to the injury of the other party. In summary, there must be an intentional material misrepresentation upon which the other party relies to his detriment.”).

The trial court further found that the Pates complied with the Bank’s demand to obtain an insurance binder to provide premiums for annual coverage, and that the Bank agreed to place these funds in escrow, utilizing the binder to pay the first year of coverage and calculate future charges to the Pates. Although the Pates fulfilled this contractual obligation, the Bank failed to correctly utilize the escrow funds. Consequently, the Pates’ insurance policy was ultimately cancelled due to nonpayment. The Pates attempted to obtain additional coverage but were unsuccessful due to the home’s structural condition.The Bank then obtained a force-placed policy with $334,800 in coverage and an annual premium of $7,382.98, which was included on the mortgage loan, quadrupling the Pate’s mortgage payment.

The Pates offered to pay the original $496.34 monthly mortgage payment, but the Bank refused, demanding a revised mortgage payment of $2,128.74. The trial court found it “disturbing that Bank of America could financially profit due to [the Bank’s] failure to pay the home insurance. . . . [T]he profits for one or more months of forced place insurance would have been substantial.”

The trial court further found that during the four years of litigation following the Pates’ default, the Bank’s agents entered the Pate’s home several times while the Pates resided there, attempted to remove furniture, and placed locks on the exterior doors. Following the Bank’s action, the Pates had to have the locks changed so their family could enter the residence. During two of the intrusions, the Pates were required to enlist the aid of the sheriff to force the Bank’s agent to leave their home. The trial court found as fact that, due to the Bank’s multiple intrusions into their home, the Pates were forced to obtain alternative housing for 28 months, at a cost of thousands of dollars.

The Bank’s actions supported the trial court’s finding that punitive damages were awardable. In Estate of Despain v. Avante Group, Inc., 900 So. 2d 637, 640 (Fla. 5th DCA 2005), the court held that “[p]unishment of the wrongdoer and
deterrence of similar wrongful conduct in the future, rather than compensation of the injured victim, are the primary policy objectives of punitive damage awards.” See also Owens-Corning Fiberglas Corp. v. Ballard, 749 So. 2d 483 (Fla. 1999); W.R. Grace & Co.-Conn. v. Waters, 638 So. 2d 502 (Fla. 1994).

In Estate of Despain, the court held that “[t]o merit an award of punitive damages, the defendant’s conduct must transcend the level of ordinary negligence and enter the realm of willful and wanton misconduct . . . .” 900 So. 2d at 640. Florida courts have defined such conduct as including an “entire want of care which would raise the presumption of a conscious indifference to consequences, or which shows . . . reckless indifference to the rights of others which is equivalent to an intentional violation of them.” Id. (quoting White Constr. Co. v. Dupont, 455 So. 2d 1026, 1029 (Fla. 1984)). Here, the Bank’s intent to defraud was shown by its reckless disregard for its actions. The facts showing the Bank’s “conscious indifference to consequences” and “reckless indifference” to the rights of the Pates is the same as an intentional act violating their rights. See White Constr. Co., 455 So. 2d at 1029. The record evidence provides ample support for the trial court’s ruling in favor of the Pates’ claim for punitive damages against the Bank.

The learned trial judge found that the Bank’s actions demonstrated its unclean hands; therefore, the Bank was not entitled to a foreclosure judgment in equity. Unclean hands is an equitable defense, akin to fraud, to discourage unlawful
activity. See Congress Park Office Condos II, LLC v. First-Citizens Bank & Trust Co., 105 So. 3d 602, 609 (Fla. 4th DCA 2013) (“It is a self-imposed ordinance that closes the doors of a court of equity to one tainted with inequitableness or bad faith relative to the matter in which he seeks relief[.]”) (quoting Precision Instrument Mfg. Co. v. Auto. Maint. Mach. Co., 324 U.S. 806, 814 (1945))). The totality of the circumstances established the Bank’s unclean hands, precluding it from benefitting by its actions in a court of equity. Thus, the trial court did not err by denying the foreclosure action.

AFFIRMED.
ROWE and OSTERHAUS, JJ., CONCUR; THOMAS, J., CONCURS SPECIALLY WITH OPINION.

PDF of the opinion below…

Hat tip to 4closurefraud:

Nationstar fights racketeering suit over home inspection fees

Reuters:

(Reuters) – Lawyers for Nationstar Mortgage have urged a federal judge to dismiss a lawsuit accusing the loan servicer of billing homeowners for needless property inspections, saying plaintiffs are trying to create a conspiracy out of a contract dispute.

Filed in January in a Fort Lauderdale federal court, the proposed class action accused Nationstar of colluding with its affiliate Solutionstar to push up fees for “drive-by” inspections ordered after homeowners defaulted on their mortgage loans.

To read the full story on WestlawNext Practitioner Insights, click here: bit.ly/19yW7LU

Ocwen to Sell $9.6 Billion of Servicing Rights to Green Tree

On a side note: Green Tree is part of the Walter Investment Management group. Green Tree’s sister companies are ditech, Security 1 Lending, and Reverse Mortgage Solutions.

Ocwen Loan Servicing, a subsidiary of Ocwen Financial Corporation, and Green Tree Loan Servicing, for the sale by Ocwen of an Agency mortgage servicing rights portfolio with a total principal balance of $9.6 billion, according to an announcement from Ocwen on Wednesdaymorning.

According to Ocwen, the portfolio consists of approximately 55,000 performing loans owned by Freddie Mac. The transaction is subject to approval by Freddie Mac and its conservator, the Federal Housing Finance Agency (FHFA), as well as other customary conditions. Ocwen reported that it expects the transaction to close by April 30, 2015, and expects the loan servicing to transfer in May 2015.

“We are pleased with the progress we are making on executing our plan,” Ocwen CEO Ron Faris said. “Over the next several months, we expect to generate proceeds of at least $650 million from sales and transfers of mortgage servicing rights. We are also committed to ensuring a smooth and accurate transfer of information to the buyers of these mortgage servicing rights.”

Read on.

Wells Fargo CEO’s compensation flat at $19.3M, pay packages for other bank CEOs have been mixed

The article should be titled: The bank CEO awards himself compensation.. Board of Directors (compensation committee members) decided on the pay. And who is the Chairman of the Board, to whom those same directors report?  Why, none other that the CEO himself.

bank CEO pay

Wells Fargo & Co. awarded Chief Executive John Stumpf $19.3 million in compensation for 2014, as the bank executive’s pay remained near its peak.

Mr. Stumpf’s pay package for 2014 fell below that of Goldman Sachs Group Inc.’s Lloyd Blankfein, who so far has the largest pay package of major U.S. bank executives. Mr. Blankfein’s awarded pay was $24 million for 2014, up from $23 million a year earlier, The Wall Street Journal previously reported.

Mr. Stumpf, also chairman of the San Francisco bank, received $2.8 million in base pay, with a bonus that included shares valued at $12.5 million, most tied to the company’s performance. He also received a $4 million cash bonus.

Wells Fargo is the fourth-largest U.S. bank by assets, though it hit the record market capitalization for U.S. banks in recent months and now stands at about $287 billion.

Mr. Stumpf received $19.3 million in compensation in 2013 as well. Mr. Stumpf was the highest- paid big-bank CEO, with $22.9 million in 2012, in part driven by boosts in the bank’s pension value.

The pay of Wells Fargo’s top executives has often paled in comparison with Wall Street chiefs that run large trading and merger-advisory operations. But the gap has closed in recent years.

Gains in Mr. Stumpf’s pension in 2014 and deferred compensation were valued at $2.1 million. Those figures are included in a separate calculation of Mr. Stumpf’s pay done in accordance with Securities and Exchange Commission methodology.

Read on.

Shareholder Proposal To Break Up Bank Of America Wins SEC Approval: EXCLUSIVE

The Securities and Exchange Commission is giving the go-ahead to a shareholder proposal that seeks to break up the mighty Bank of America. Bartlett Naylor, the financial policy adviser for the consumer-rights advocacy group Public Citizen who filed the proposal, said it could be a matter “of galactic proportions for the bank.”

The nonbinding referendum is unlikely to lead to major shakeups when shareholders consider it at the next Bank of America shareholder meeting later this year. But the SEC’s ruling signals an important shift at the agency, and a strong showing from shareholders in support of the proposal could invite pressure from other activist investors and a larger public broadly in favor of downsizing financial titans.

The proposal marks the first time the SEC has supported a shareholder vote on splitting up a major bank. A round of shareholder breakup bids from labor groups in 2013 failed to win SEC support, as did proposals Naylor submitted to a trio of banks last year. At least seven such proposals have been filed since 2009.

Read on.

U.S. Treasury Drops a Bombshell Yesterday: “Quicksilver Markets”

Yesterday, an agency of the Federal government, the U.S. Treasury’s Office of Financial Research (OFR), released a study warning that by three separate measures the U.S. stock market is approaching dangerous “two-sigma thresholds” which can lead to “quicksilver markets.” Translation: we could be heading for a big crash.

A two-sigma threshold is when market valuation metrics move at least two standard deviations above the historical mean. The study notes that “valuations approached or surpassed two-sigma in each major stock market bubble of the past century.” Think 1929, 2000 and 2007. A quicksilver market, as defined by the study, is when stable markets turn on a dime and “change rapidly and unpredictably.”

The study was authored by Theodore (Ted) Berg and notes that it may not necessarily reflect the official position or policy of the OFR or Treasury. Berg is a Chartered Financial Analyst with the OFR, an agency created under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.

Read on.

Argentina will not let Citigroup quit custody business: govt source

Argentina will not allow Citigroup Inc. to exit its local custody business, a senior source in the government said on Wednesday, setting up a possible showdown between the leftist government and the banking giant over sovereign debt payments.

The bank has found itself at the center of a bitter court battle between Argentina and a group of New York-based hedge funds that were awarded full payment on their defaulted sovereign bonds by U.S. District Judge Thomas Griesa.

Griesa barred Argentina from servicing other debt and blocked financial institutions from processing payments, including an upcoming March 31 payment, until it paid the funds.

Read on.