• Mortgage servicing misconduct. Such conduct, involving borrowers and underwater homeowners, was at the heart of a $25 billion national mortgage servicing settlement between the government and the five largest mortgage servicers in 2012. The cases are far from over: In October, SunTrust Banks Inc., a top-ten mortgage lender, agreed to pay $1.5 billion to federal agencies to settle fraud allegations related to its loan servicing and origination conduct. Now, “every nonsettling mortgage servicer is still facing such liability,” says BuckleySandler’s Andrew Schilling, former chief of the Manhattan U.S. attorney’s civil division.
• Loan origination problems. Banks face potential FCA and FIRREA liability for any soured mortgage loans they issued in the run-up to the financial crisis, whether federally insured or not. The five bank signatories to the national mortgage servicing settlement obtained limited releases from liability for FCA violations related to origination, but an appeals court found that those releases didn’t cover FCA liability over specific defective loans. In what is viewed as a template for future penalties, JPMorgan agreed in February to pay another $614 million to settle such claims.
