Supreme Court says cities can sue banks over predatory loans

WASHINGTON — The Supreme Court ruled Monday that cities can sue banks for discriminatory mortgage lending practices, but they must prove that predatory loans led to damages such as lost tax revenue and higher spending on municipal services.

The decision was a partial victory both for Miami, which sought standing to sue banks under the Fair Housing Act, and for Bank of America and Wells Fargo, which argued that the city's damages were too many steps removed from the original loans. The dispute now returns to lower courts for further action.

The 5-3 ruling was written by Justice Stephen Breyer and backed by the court's liberal justices and Chief Justice John Roberts. Three justices — Clarence Thomas, Anthony Kennedy and Samuel Alito — argued that the city had no right to sue under the landmark 1968 civil rights law in the first place. Newly confirmed Justice Neil Gorsuch did not take part in the decision.

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Creditors’ And Debtors’ Rights

Plaintiff moved for summary judgment, appointment of a referee to compute and a default judgment against non-appearing defendant. The original balloon note and mortgage was between Home Funds Direct and defendants, who allegedly defaulted by failing to make payments. US Bank Trust (USBT) moved for summary judgment, while defendants argued USBT did not have standing claiming MERS was never authorized by the original lender to assign the note and mortgage to USBT. They alleged the note was in the possession of a "custodian,"—Wells Fargo Bank, not USBT. The court found USBT failed to meet its burden of proving standing, finding it failed to prima facie establish it was in possession of the note as Wells Fargo continued to possess the original. Also, while USBT may establish standing by showing the note was assigned to them, it failed to succeed as there was no endorsement to MERS on the note giving it authority to assign. As there was no evidence indicating MERS had a right to assign the note, as MERS could not transfer what it did not hold, no factual details of a physical delivery were provided and USBT failed to establish it had physical possession at the time the action was commenced. USBT's motion was denied, and the case was dismissed.

The full text decision and summary can be found HERE

High Court Says Fannie Mae Has Limited Path To Fed. Court

Law360, Minneapolis (January 18, 2017, 10:55 AM EST) -- The nation's high court on Wednesday reversed a Ninth Circuit ruling that found Fannie Mae can remove state suits to federal court, striking a blow to Fannie, which has argued that its charter allows it to bring suits to federal courts.

Fannie Mae, which is currently involved in tens of thousands of cases in state courts, has lost its U.S. Supreme Court battle to move those suits into federal court. 

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