Bank Sued over Government Loan Service

Following a bank’s refusal to enroll their client into a government loan service in Delaware, she decided to sue. The client, a working single mother, had asked her employer for an advance payment due to financial hardship, believing she would soon be enrolled in the loan program through her bank. For the employer to give her hardship funds, however, it required a letter from the bank, which was requested multiple times without ever being sent. Additionally, some of the bank’s employees told the woman that she would soon be in the loan program, while others instituted foreclosure on her home and personal assets. The woman never received any reinstatement letter from the bank, and the ensuing lawsuit over loan benefits necessitated an expert in banking, specifically in dual tracking of foreclosing and pursuing business with a client simultaneously, the use of cash pooling, and service agreements.

Question(s) For Expert Witness

Expert Witness Response E-009408

To understand whether there was dual tracking in this case is first and foremost a question of timing. Negotiating business while still foreclosing on a client was not illegal throughout the United States until the Dodd-Frank Act restricted it as of January 2014, though there are requirements the bank will have to have met if this case occurred before then. However, before January 2014 only a handful of states had laws prohibiting dual tracking, so this may be unlikely. Having worked in investment banking and with rating agencies I am familiar with securitizations, and assume that in this case the plaintiff mortgage was “pooled” with other mortgages and securitized or held by an investor in a pool. With these agreements, it is important to note that the servicer is not frequently the party which holds the mortgages.

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