Whistleblower Attempts to Revive RMBS Suit Against Wells Fargo

first_imgHome / Daily Dose / Whistleblower Attempts to Revive RMBS Suit Against Wells Fargo Whistleblower Attempts to Revive RMBS Suit Against Wells Fargo Sign up for DS News Daily Share Save Data Provider Black Knight to Acquire Top of Mind 2 days ago Servicers Navigate the Post-Pandemic World 2 days ago Tagged with: Lawsuits Mortgage-Backed Securities Wells Fargo Previous: Share of SFR Built-for-Rent Homes Remains Low Next: Freddie Mac’s Credit Risk Transfer Continues With Last Offering of 2015 Governmental Measures Target Expanded Access to Affordable Housing 2 days ago in Daily Dose, Featured, News Related Articles The Week Ahead: Nearing the Forbearance Exit 2 days ago The Best Markets For Residential Property Investors 2 days ago Governmental Measures Target Expanded Access to Affordable Housing 2 days agocenter_img Subscribe Servicers Navigate the Post-Pandemic World 2 days ago Demand Propels Home Prices Upward 2 days ago November 23, 2015 1,320 Views About Author: Brian Honea The Best Markets For Residential Property Investors 2 days ago Brian Honea’s writing and editing career spans nearly two decades across many forms of media. He served as sports editor for two suburban newspaper chains in the DFW area and has freelanced for such publications as the Yahoo! Contributor Network, Dallas Home Improvement magazine, and the Dallas Morning News. He has written four non-fiction sports books, the latest of which, The Life of Coach Chuck Curtis, was published by the TCU Press in December 2014. A lifelong Texan, Brian received his master’s degree from Amberton University in Garland.  Print This Post Elizabeth Jacobson, a former subprime loan officer from Wells Fargo Bank, has attempted to revive her whistleblower suit against the bank in the Second Circuit Court of Appeals.Jacobson, who originally filed her suit in 2012, claims that Wells Fargo knowingly packaged and sold toxic mortgage-backed securities to investors and that those securities did not qualify for a tax exemption under law. Wells Fargo claims the securities qualify as real estate mortgage investment conduits, which made them eligible for both city and state tax exemptions in New York. The law states that nearly all mortgages in a securities bundle must be qualified mortgages—defined by a lower court as being secured by real property.The lawsuit, filed by Jacobson on behalf of both the city and the state of New York, claims that Wells Fargo engaged in the scheme to gain the both city and state tax exemptions by falsely qualifying the mortgage-backed securities as REMICs. Jacobson claims the tax exemptions saved the bank more than $1 billion.Jacobson’s attorney, Geoffrey Bestor, told the three-judge panel in the Second Circuit Court that the Wells Fargo loans in the securities bundle fit the IRS’s definition of “defective obligations.” Under that definition, a) the borrower reasonably expected to default on the loan, b) the borrower committed fraud with the loan, c) the mortgage isn’t secured by real property, or d) the loan doesn’t conform to RMBS investors’ usual representations and warranties. Based on that definition, Bestor told the judges that a “defective obligation” cannot be defined as a qualified mortgage.Wells Fargo attorney Daniel Rapport contended that the law requires only an interest in real probably and does not require the REMICs to be perfect.Jacobson also made an attempt to have her case remanded to state court, making an appeal to the Second Circuit Court to reverse the district court’s decision that denied her bid to remand. Jacobson contended that there is no federal cause of action in her case; although New York uses a federal standard to determine if some companies qualify for state tax exemptions, Jacobson claimed in her appeal that this is irrelevant. Wells Fargo’s attorney, Rapport, countered that the case is an issue of federal law and that the Supreme Court has said the U.S. Supreme Court has said the federal courts should decide a certain category of cases.The panel of judges reserved a decision on Jacobson’s appeal. Demand Propels Home Prices Upward 2 days ago Data Provider Black Knight to Acquire Top of Mind 2 days ago Lawsuits Mortgage-Backed Securities Wells Fargo 2015-11-23 Brian Honealast_img read more