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Judge Dismisses Mortgage Fraud-related Class Action Lawsuit
A federal judge in Philadelphia, Pennsylvania, has thrown out a lawsuit against lenders who supplied funds to a mortgage broker who previously pled guilty to charges of mortgage fraud, finding that lenders are not obliged to monitor mortgage broker actions. The decision is a major setback for 842 victims of Wesley A. Snyder‘s company, Personal Financial Management, who could have used the strategy to recover some of their losses, had it succeeded. The victims are said to have approximately $30 million in the scam.
The claim rejected by U.S. District Judge James Giles started in the fall of 2007, when a Fleetwood, Pennsylvania, couple–Douglas and Andrea Jones–filed a lawsuit, hoping to have it certified as a class action suit. According to paperwork filed with the court, defendants in the complaint included:
- ABN AMRO Mortgage Group, Inc.
- Chase Home Mortgage Corporation
- Citimortgage, Inc.
- Citicorp Home Mortgage Services, Inc.
- Countrywide Home Loans, Inc.
- Fifth Third Mortgage Company
- Florida Capital Bank Mortgages
- GMAC Mortgage Corporation
- GMAC Mortgage Asset Management, Inc.
- GMAC Mortgage Group, Inc.
- HSBC Mortgage Corporation (USA)
- Indymac Financial Services Corporation
- Moorequity, Inc.
- National City Mortgage, Inc.
- nBank, N.A.
- Provident Funding Group, Inc.
- Saxon Home Mortgage
- Saxon Mortgage, Inc.
- Sovereign Bank
- SunTrust Mortgage, Inc.
- U.S. Bank, N.A.
- Wachovia Mortgage Corporation
- Washington Mutual Home Loans, Inc.
- Wells Fargo
- Home Mortgage, Inc.
- John Doe Mortgage Companies
In their suit, Douglas and Andrea Jones alleged that several Pennsylvania companies, owned or controlled by Wesley Snyder, offered them Equity Slide Down Mortgages as part of what they say was a mortgage servicing Ponzi scheme. The Joneses said Snyder failed to monitor and supervise his companies, which did not credit them properly for payments and pre-payments of interest and principal on their mortgages. They further alleged that, following the bankruptcy of Snyder’s companies, the defendants in the case–the companies listed above–failed to notify them properly that they had taken over as servicing agents on the mortgage loans and demanded payments from them in amounts substantially higher than owed on the loans serviced by Snyder’s companies. The Joneses also claimed that each defendant was guilty of having committed numerous RESPA violations.
Specifically,the Joneses alleged that they applied for and closed on two separate Equity Slide Down mortgages through Snyder’s companies–one for each of their two properties–in 2002 and 2005, respectively. They alleged that at all times after closing they remitted their monthly mortgage payments to Snyder’s company and that they were current on all payments owed and had pre-paid a large portion of the principal balance by way of a large principal reduction payment made soon after closing.
They further alleged that in September 2007, after the bankruptcy filing of the Snyder’s company, they learned for the first time that SunTrust and Countrywide claimed to hold their respective mortgages and notes. According to the Joneses, SunTrust and Countrywide demanded payment for amounts that were duplicative and excessive and that failed to credit properly the payments and pre-payments they had made to the Snyder. The Joneses say that the Snyder’s companies were the “servicing agents” of each Defendant, as defined by the Real Estate Settlement Procedures Act (RESPA), and that Snyder’s companies were otherwise the Defendants’ agents under Pennsylvania agency law.
More specifically, the Joneses alleged that:
- Each defendant employed one or more of the Snyder’s companies to originate, close, and service all the mortgage loans at issue.
- Each Defendant knew the Joneses were making all mortgage payments to the Snyder Entities.
- Each Defendant knew it was sending all mortgage statements and federal tax forms to Snyder rather than to the Joneses.
In dismissing the suit, U.S. District Judge Giles said the Joneses’ recollections were trumped by documents they signed stating payments would be made to mortgage bank ABN Amro Mortgage Group, meaning, Snyder was not ABN’s agent and ABN had no duty to oversee him.
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