About two weeks ago I blogged about the financial problems of New Century Mortgage, which incidentally just filed for Bankruptcy. Most of the news around New Century and the whole sub-prime loan mess center on the sub-prime loan mess, as if this is an isolated financial area — except that nothing is an isolated financial area anymore.
In December Super Future Equities, Inc. filed its Third Amended Complaint in Super Future Equities, Inc. v. Wells Fargo National Bank, et al. with the U.S. District Court fot the Northern District of Texas, Dallas Division. This Complaint is 95 pages long. The Defendants are Wells Fargo Bank, as Trustee of certain mortgage backed certificates and a number of related corporations and their principals. Those corporations provide mortgage servicing and default servicing for commercial mortgages.
Like all Complaints this one is just a set of unproven allegations. However, this particular 95-page Complaint includes quotes from Pooling and Servicing Agreements, flow charts, and other detailed information that makes it look like whoever wrote it knew what he was talking about. It appears from info available on the web that the Plaintiffs are a pair of young adults who may — or may not– have an ax to grind.
I don’t know if any of the allegations in this Complaint are true. Although it certainly appears to describe the extent to which it may be possible for mortgage servicers, default servicers, and in this case the trustee, to serve their own best interests and not the interests of the actual mortage holders or the borrowers. In fact, the gist of this Complaint is to allege that the Defendants have conspired to effectively steal millions of dollars from the investors in the mortgage pool. The complaint makes it clear that this is actually stealing from the mortgage borrowers as well as from the investors, but the borrowers aren’t parties to the litigation.
This strikes home for me, because I was trying to explain to a client last week why a mortgage servicer would want to essentially manufacture an event of default — which is happening with her consumer mortgage controlled by completely different parties than those in this lawsuit. However, intentionally manufacturing events of default is one of the allegations raised against the servicers in the Super Future Equities case, only it is being raised by the underlying investor, not the borrower.
The really scary part of this Complaint is that some part of it might be true. If that turns out to be the case, the events involving New Century and its recent Bankruptcy filing may become as much a symbol of needed change as the failure of Penn Square Bank. The real question will then be what is the extent of the needed change, how great will the repurcussions be and who will wind up holding the bag. I am afraid that the answer to the first part of that question is going to require analysis of what the financial markets now consider to constitute basic business ethics. (That does not mean to imply that New Century had anything to do with the loans involved inthe Super Future Equities lawsuit. )
I have linked to the Complaint if anyone wants to read it. I am only about half way through it myself, but I will be back with more on this lawsuit later. Mortgage backed securities and their servicing is a many hundreds of $billions a year business. It warrants more attention than it has been getting, especially for those of us who deal with credit issues, mortgages and foreclosures — consumer or commercial.
I love this article…
Will refer to my friends