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Privately held Quicken Loans is making a bold move in counter-suing the U.S. government, saying that federal prosecutors cherry-picked 55 FHA-insured loans out of the nearly 250,000 the company has closed on since 2007, the Wall Street Journal reported today. In April, the Justice Department accused Quicken Loans of defrauding taxpayers, charges that Quicken denies. The government says that the company submitted mortgages for insurance by the Federal Housing Administration that it knew, or should have known, were ineligible. Prosecutors say that between 2007 and March 2015, the government paid out over half a billion dollars in insurance claims on defaulted mortgages endorsed by Quicken. Prosecutors didn’t specify how many of those claims they allege were linked to fraudulent loans. Quicken Loans last year extended $59 billion in mortgages, surpassing Bank of America Corp. to become the third-largest mortgage lender in the U.S., according to Inside Mortgage Finance. Quicken executives added that they are fulfilling the mission of the FHA program by lending to low- and middle-income consumers, an area in which they have picked up market share as banks such as JPMorgan Chase & Co. have retreated from the business. The executives added that prosecutors’ actions are resulting in fewer lenders making loans to marginal borrowers and first-time home buyers.

A U.S. Supreme Court ruling this week ensuring banks can pursue home-equity borrowers for payments in bankruptcy may give a boost to lending, Bloomberg News reported yesterday. The Court overturned a decision by a federal appeals court that extinguished a home-equity mortgage on an underwater property in Florida. The practice, known as lien stripping, had become common in some states after the Court of Appeals in Atlanta approved it more than two years ago, according to bank lawyers. Banks are originating home-equity loans at the fastest pace in seven years as Americans tap into rising home prices to pay for home renovations, college and cars, according to Equifax Inc. The unanimous court decision may spur even more home-equity lending by reassuring lenders they can try to recoup losses in a chapter 7 bankruptcy, said Thomas Norton, president of Norton Group, a bank consulting firm in Princeton, N.J. The court’s ruling on June 1 comes as rising home prices make it more likely that lenders can collect payments from bankrupt borrowers. The median price of a U.S. existing home has surged 42 percent in the last three years, according to the National Association of Realtors. Almost 1.2 million properties regained equity in 2014, according to CoreLogic Inc.

The U.S. Supreme Court yesterday handed a win to Bank of America Corp., and, by extension, to other commercial lenders, by ruling that a second mortgage on an "underwater" home — one with a mortgage balance exceeding its current value — cannot be voided during bankruptcy, Reuters reported yesterday. On a unanimous vote, the Court ruled against two homeowners, David Caulkett and Edelmiro Toledo-Cardona, in Florida, where many homeowners have struggled to pay their mortgages following the recent housing crisis. Caulkett and Toledo-Cardona had both won before the regional appeals court that oversees Florida. The U.S. Court of Appeals for the 11th Circuit had ruled that homeowners in chapter 7 bankruptcy can void a second mortgage when the debt owed to the holder of the first mortgage is more than the property's current value. But Bank of America, which is the second mortgage holder in both cases, argued in court papers that the approach taken by the 11th Circuit was different than that used in other appeals courts around the country. The cases are Bank of America v. Caulkett and Bank of America v. Toledo-Cardona, U.S. Supreme Court, Nos. 13-1421 and 14-163. Read more.

For the decisions in these Supreme Court cases and others, make sure to visit ABI’s Newsroom. 

A Florida court on Friday sided with the Consumer Financial Protection Bureau and the state over claims that a law firm charged illegal fees to consumers seeking foreclosure relief, National Mortgage Servicing News reported today. The Southern District Court of Florida found Hoffman Law Group, a firm in North Palm Beach, Fla., and its affiliates liable for $11.7 million in illegal upfront fees. The lawsuit said that the firm charged consumers for foreclosure mitigation services that often went nowhere. In addition to the liability, the firm was ordered to pay a $10 million civil money penalty to the CFPB, and a $6 million penalty to the state. However, much of the penalty appears to be uncollectable. A receiver appointed by the court to take charge of the company will pay $655,737, which is the remainder of the Hoffman Law Group and its affiliates' assets. The state and the CFPB last year had obtained a temporary restraining order and asset freeze against the companies.

Two law firms and their lead attorney on Wednesday lost a default judgment in New York County Supreme Court after allegedly participating in a fraudulent mortgage rescue scheme, Collections & Credit Risk reported today. Litvin Law Firm; Litvin, Torrens & Associates PLLC; and the firms’ principal attorney Gennady Litvin were ordered to stop illegal business practices, including preying upon consumers by claiming to offer a full legal services plan that would help them avoid foreclosure. The court also ordered Litvin Law Firm and Gennady Litvin, which have recently filed for bankruptcy, and Litvin, Torrens & Associates to provide a full accounting so that New York Attorney General Eric Schneiderman’s office can determine an appropriate amount for restitution for victims, who commonly paid hundreds of dollars in monthly fees for services that were never provided. Last year, Schneiderman’s office filed a lawsuit against the firms and Gennady Litvin for allegedly offering fraudulent legal services and other foreclosure assistance to consumers in New York and other states.

The Consumer Financial Protection Bureau filed a lawsuit in federal district court against Nationwide Biweekly Administration, Loan Payment Administration, and Daniel Lipsky, the owner of both companies, accusing the companies of deceptive mortgage practices, HousingWire.com reported yesterday. According to the CFPB, Nationwide and Loan Payment Administration transmit money from consumers to their mortgage servicers. The CFPB alleges that the companies misrepresent the savings that customers will achieve by using the companies’ biweekly mortgage payment program and mislead consumers about the costs associated with the program.

New York Attorney General Eric T. Schneiderman announced yesterday that the introduction of a newly expanded “Abandoned Property Neighborhood Relief Act,” legislation aimed at curbing the number of abandoned foreclosed homes, also known as zombie foreclosures, CollectionsCreditRisk.com reported today. The state bill requires banks and mortgage servicers to maintain vacant and abandoned residential properties throughout the foreclosure process, a responsibility that banks often neglect, Schneiderman said. Banks that fail to maintain the properties will be forced to pay penalties that local governments can then use to enhance their enforcement efforts under the Act. The bill, sponsored in the New York Senate by Senate Coalition Co-Leader Jeffrey D. Klein and in the Assembly by Judiciary Committee Chair Helene Weinstein, comes amid new data showing a troubling increase in the number of zombie properties statewide. According to RealtyTrac data, zombie property foreclosures increased by nearly 50 percent from 2013 to 2014, bringing the total number in the state to 16,701. As a result, almost one in five residential foreclosures is now considered a zombie property. On Long Island, the problem continues to grow with the number of zombie homes increasing by 62 percent between 2013 and 2014, bringing the total number to 4,048 — the highest in the state.

There was plenty of fanfare last August when Bank of America agreed to a record $16.7 billion settlement with the Justice Department over dubious mortgage practices. But now that the settlement has faded from the public eye, questions are arising about whether the promised assistance is actually getting to the right people and whether the bank will be allowed to claim credit for consumer relief that far exceeds its actual value, the New York Times reported today. As outlined in the settlement, Bank of America is required to make a wide array of loans more affordable for borrowers. The bank was expected to forgive or reduce the amounts owed on the first and second mortgages it held. In exchange, the bank would receive credit for these reductions in dollar amounts outlined in the settlement. Eric D. Green, a retired Boston University law professor, is the independent monitor charged with overseeing Bank of America’s performance under the settlement. He is responsible for validating the bank’s claims for credit under the consumer assistance part of the agreement. Green, who has served as a court-appointed mediator and special master in hundreds of cases, said the bank had not yet submitted claims for credit under the settlement. “We are working out the definitions and methodology of checking the credits the bank seeks,” Green said. Loans that have been discharged in bankruptcy will not be acceptable for credit, he said.