In the first of what will probably the year that everyone sues the banks, Citigroup got the early jump by reaching settlements with homeowners who accused the bank of filing fraudulent mortgage documents to prove its legal standing to collect debts in bankruptcy proceedings.
The Citibank settlement offers an even more bizarre twist to the robo-signing, document losing situations that have arisen during this housing downturn. The homeowners claimed that Citigroup had flaws in the mortgage assignments because they had dates after the homeowners had filed bankruptcy. It might have been less conspicuous to use a time machine to go back in time to date those documents.
Depending on the bank, these mortgage assignments can be processed in-house but they may also be contracted out to companies, in this case a Texas company called Orion Financial Group.
In the homeowner settlement, Citigroup did not admit wrongdoing but agreed to cover their legal costs and cut their interest rates. In a few cases, the bank also reduced the amount outstanding on mortgages. That’s one way to get a loan mod and principal reduction.
Citigroup paid almost $82,000 in opponents’ legal costs when settling challenges to four bankruptcy claims that used Orion letters in 2010, according to agreements filed with federal bankruptcy courts in New York and Arkansas. The bank reduced interest rates on the remaining debt by an average of 49 percent, while cutting the outstanding mortgage balance in three cases by a combined $55,000, the filings show.
Stay tuned for more fun the courts.
Photo courtesy of thegraph.com