It seems more mortgage brokers are receiving notices from the FDIC that they may be sued for delivering bad loans to failed banks that were major wholesalers.
But Federal Deposit Insurance Corp. attorneys insist they are not targeting brokers.
"Mortgage loan brokers are not being singled out to be special targets of FDIC mortgage malpractice and fraud claims," FDIC deputy general counsel Rick Osterman says in a letter to a mortgage broker group — the National Association of Independent Housing Professionals.
The Aug. 17 letter points out that FDIC has 172 pending mortgage malpractice and fraud (MMF) lawsuits in the courts. And these cases are against individual appraisers, attorneys, closing agents and title companies as well as mortgage brokers. A few weeks ago, there were 142 pending MMF lawsuits.
The 172 cases involve individuals and companies that refused to settle with FDIC.
FDIC prefers to settle the civil lawsuits out of court, according to NAIHP president Marc Savitt.
First the agency notifies the broker that they may be sued for negligence, breach of contract or fraud that caused losses to a bank that eventually failed.
Second, FDIC issues a subpoena for financial information to make sure the individual has the resources or errors & emission insurance to pay a claim.
"They are only pursuing cases that are cost effective," Savitt said. The NAIHP president met with Osterman on Aug. 9.
Once a broker is notified of a potential lawsuit, Osterman told National Mortgage News that FDIC attorneys will generally talk with the broker about "what we found" and to hear the broker's explanation.
"It is possible we don't have all the facts. We are open to discussing that and getting all the information before making a decision to go forward," he said.
NAIHP has retained the Law Offices of Herman Thordsen, Santa Ana, Calif., to provide legal advice for its members.
If FDIC contacts a broker, "my advice is don't give them anything until you talk with a lawyer," Savitt said.
