A Houston mortgage servicer may be one of the few companies to avoid an unfavorable court decision or complicated settlement for allegedly over-escrowing mortgage accounts, but it will have to wait until an appeal by the Louisiana attorney general is resolved before it can celebrate. The case, the State of Louisiana vs. Bisys Loan Services, Civil Action No. 94-1768, was filed in by Louisiana Attorney General Richard P. Ieyoub, who charged that Bisys and 86 other mortgage lenders and servicers had over-escrowed borrowers mortgage accounts. The state charged that the servicers had violated the Real Estate Settlement Procedures Act, Racketeer Influenced and Corrupt Organizations Act, the Louisiana Unfair Trade Practices and Consumer Protection Law, and other statutes. The state later dropped its charges to all claims except Respa and UTP. A bevy of lenders and servicers has faced over-escrowing litigation recently, the latest being Barclays American/Mortgage Corp. and PNC Mortgage Corp., both of which are arranging settlement agreements with the class under separate legal actions. But Bisys, which was the only servicer of the 87 named to be brought to court by the state, had persuaded a court that it had not deliberately over-escrowed the mortgage accounts of its borrowersor so it thought. Eastern District of Louisiana Judge Ginger Berrigan dismissed Louisianas Respa claim citing another case, Allison vs. Liberty Savings, and the courts finding that Respas Section 2609 did not provide a remedy for violation of 2609. Berrigan also applied a four-part test established by the Supreme Court in Cort vs. Ash, and, giving further support for her decision, found that Section 2609 does not give rise to private rights of action. She also threw out the states UTP claims. Attorneys for Bisys thought the proceedings were nearly finished, but after Berrigan recused herself from the case after discovering she owned stock in a parent company of one of the defendants, the state asked the court to allow it to amend its complaint to renew the RICO claim it had previously abandoned, along with the Respa and UTP claims Berrigan had dismissed. The court, under another judge, Martin L.C. Feldman, denied that request May 23 and dismissed the case June 7. The state, in addition to appealing the decision to the U.S. 5th Circuit Court of Appeals, also filed a new complaint that Bisys claims is virtually identical to the complaint dismissed by Berrigan. Roger Stetter, of Lemle & Kelleher in New Orleans, has represented Bisys and contends the new charges should be barred from proceedings based on res judicata, which the 5th Circuit Court uses to bar legal actions based on whether parties in both suits are identical, prior judgments were rendered by a court of competent jurisdiction, a final judgment rendered and the same cause of action is involved.
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