USTP Reaches $81.6 Million Settlement with Wells Fargo Bank N.A. over Errors in Homeowner Bankruptcies
The Department of Justice's U.S. Trustee Program (USTP) has entered into a national settlement agreement with Wells Fargo Bank N.A. that requires Wells Fargo to pay $81.6 million in remediation for its repeated failure to provide homeowners with legally required notices, thereby denying homeowners the opportunity to challenge the accuracy of mortgage payment increases, according to a DOJ press release today. These failures violated federal bankruptcy rules that took effect in December 2011 and imposed more detailed disclosure requirements to ensure proper accounting of fees and charges on homeowners in bankruptcy. Bankruptcy Rule 3002.1 requires mortgage creditors to file and serve a notice 21 days before adjusting a chapter 13 debtor's monthly mortgage payment. Wells Fargo acknowledges that it failed to timely file more than 100,000 payment change notices (PCNs) and failed to timely
perform more than 18,000 escrow analyses in cases involving nearly 68,000 accounts of homeowners in bankruptcy between Dec. 1, 2011, and March 31, 2015. Under the settlement, Wells Fargo will also change internal operations and submit to oversight by an independent compliance reviewer. The proposed settlement has been filed in the U.S. Bankruptcy Court for the District of Maryland, where it is subject to court approval. Read more.
Commentary: Puerto Rico's Debt Crisis and the 1975 Law Complicating Matters
To appreciate why it is proving to be hard for the federal government to help debt-burdened Puerto Rico, it helps to go back to 1975, the year New York City went broke, and consider the role played in that crisis by a prominent Republican senator from Texas named John Tower, according to a commentary in today's New York Times. Fearing more financial failures in other municipalities, federal securities regulators wanted Congress to force states and cities to provide truthful financial information about bonds they were going to sell to raise money. But cities were having none of it, instead rallying around the cause of states' rights. The fight was resolved by Senator Tower, the first Texas Republican elected to the Senate since Reconstruction. He introduced a bill that kept federal regulators at bay. As a result, the Securities and Exchange Commission has no power to make
states and local governments submit to the same kind of scrutiny that companies must endure before sending their securities to market -- which may help explain how a small, impoverished island like Puerto Rico managed to borrow $72 billion before the markets saw that it was insolvent. Read more.
Will a form of chapter 9 bankruptcy protection help Puerto Rico's debt crisis? Register your vote on ABI's new Twitter poll!
Report: Mortgages Continue to Decrease for Borrowers with Weak Credit Scores
Real estate data firm Black Knight Financial Services said that 21 percent of mortgages to buy homes in August went to borrowers with credit scores below 700, the Wall Street Journal reported on Tuesday. That was down from 24 percent in August 2014 and from 40 percent in August 2005. While the upper echelon of mortgage borrowers has piled into the market with home purchases and refinances at rock-bottom rates, borrowers with any sort of tarnish on their credit reports continue to be shut out or stay away. Overall purchase mortgages rose 11 percent in July and August versus a year earlier, while the volume of purchase loans to sub-700 borrowers actually fell 5 percent, Black Knight said. In practice, for the last several years, mortgage lenders have established their own more stringent requirements, with some eschewing borrowers with scores below 640, even if the government backs the mortgage.
Senators Seek Information About RushCard�s Breakdown
Two senators sent a letter to the chief executive of the prepaid debit card company RushCard today seeking information about the technical issues that prevented thousands of RushCard customers from accessing their money for days at a time last month and about the company's efforts to remedy the problems, the New York Times reported today. The letter was sent by Sens. Sherrod Brown (D-Ohio) and Robert Menendez (D-N.J.). It asks for details about the number of customers who were affected, a reimbursement fund RushCard has established to cover late fees and other charges customers had to pay during the issues, the nature of the glitch and how arbitration clauses will affect customers who may seek settlements. The letter also asks about monthly and other fees and whether RushCard will waive fees outside of a "fee holiday" it has declared from Nov. 1 to the end of
February. The senators have asked for answers by the end of the month.
Commentary: In Arbitration, a "Privatization of the Justice System"
Over the last 10 years, thousands of businesses across the country -- from big corporations to storefront shops -- have been using arbitration to create an alternate system of justice, according to a commentary in Monday's New York Times. There, rules tend to favor businesses, and judges and juries have been replaced by arbitrators who commonly consider the companies their clients, commentary found. "This amounts to the whole-scale privatization of the justice system," said Myriam Gilles, a law professor at the Benjamin N. Cardozo School of Law. All it took was adding simple arbitration clauses to contracts that most employees and consumers do not even read. Yet at stake are claims of medical malpractice, sexual harassment, hate crimes, discrimination, theft, fraud, elder abuse and wrongful death, records and interviews show. For companies, the allure of arbitration
grew after a 2011 Supreme Court ruling cleared the way for them to use the clauses to quash class-action lawsuits. Prevented from joining together as a group in arbitration, most plaintiffs gave up entirely, records show. Little is known about arbitration because the proceedings are confidential and the federal government does not require cases to be reported.
November ABI Journal Now Online!
The November issue of the ABI Journal is now online! Read on your computer or download to your preferred reading device. Included in the November issue:
- James J. Haller and Tara Twomey argue that debt collectors should not get a "free pass" in bankruptcy.
- John Cardinal Parks discusses evaluating antitrust exposure when purchasing a competitor's assets.
- Shmuel Vasser and Negisa Balluku present a modest proposal on exculpatory clauses.
Upcoming abiLIVE Webinars Provide Insights on Pending Changes in Bankruptcy Forms, Tax Credit Projects in Distress
Two abiLIVE webinars, presented by two of ABI�s membership committees, will provide insight on key bankruptcy developments for practitioners in November. ABI�s Consumer Bankruptcy Committee will host the first webinar on Nov. 16, presenting experts who will discuss pending changes to bankruptcy forms. The second webinar on Nov. 19, hosted by ABI�s Bankruptcy Taxation and Real Estate Committees, will feature experts discussing tax credit projects in distress. Attendees for both webinars will have the ability to purchase CLE credit. to learn about the new forms.
New on ABI's Bankruptcy Blog Exchange: Final Rules for Title III Crowdfunding Solve a Number of Problems
A recent blog post looked at the problems solved by the SEC's Oct. 30 approval of final rules for securities crowdfunding under Title III of the Jumpstart Our Business Startups (JOBS) Act of 2012. Title III lets startups raise up to $1 million per year by selling securities exclusively through registered online intermediaries, i.e., crowdfunding portals and broker-dealer offering platforms.
To read more on this blog and all others on the ABI Blog Exchange, please click here.