Cost Centers to Profit Centers

Over the past few years, financial institutions that originate or purchase mortgages have sustained (and many continue to sustain) significant losses when borrowers defaulted on their obligations and as property values sank. In many instances the financial institutions write down or completely write off the debt.

However, financial institutions should not give up the possibility of recovery without a full investigation of the facts and potential for claims against third parties. Potential sources of recovery include the following entities and their insurers.

• Appraisers: Where a loan is procured based on an inflated or otherwise negligently prepared appraisal, the financial institution may have a claim against the appraiser for negligence, fraud, or breach of contract (depending upon the relationship and intent of the parties).
• Real Estate Brokers or Attorneys: Where an individual real estate broker or attorney is involved in a scheme to defraud the financial institution or provide lenders with loan applications with inflated asset or income statements, those third parties may be liable.
• Closing Agents: Where closing agents fail to provide an accurate account of the transaction or fail to follow closing instructions of the originator of the loan, they may be found to be responsible for the ultimate loss of the lender.
• Title Insurers: Title insurers who issue closing service letters in which they agree to indemnify the lender (and frequently its successors and assigns) for losses arising out of the fraud or negligence of their closing agent in connection with the handling of the lender's funds may also have some liability.
• Originators: Where lenders purchase loans from other financial institutions, they generally do so pursuant to contracts with the originator in which the originators make representations and warranties to the purchaser of the loans. Where the originator breaches those warranties, the purchaser of the mortgage may have recourse against the originator of the loan.

White and Williams LLP has a long history of representing financial institutions in business transactions and litigation. We represent financial institutions in litigation arising out of residential or commercial loans/mortgages that are alleged to have been procured by fraud and/or where professionals associated with the transactions allegedly failed to exercise reasonable care to prevent the fraud and eventual loss.

Our method is to leverage the strength of our real estate attorneys with the experience of our litigators in our Financial Institution Litigation Group to help analyze real estate transactions, identify suspicious transactions, and bring legal action to attempt to recover losses for our clients.

Mortgage fraud and related actions can provide "found money" because the funds arise from loans that lenders and servicers no longer expect to be repaid. Depending upon the case and agreement with our clients, we can accept these matters on hourly or contingent fee bases-thereby allowing financial institutions who may be reluctant to expend money until there is a recovery to obtain high quality legal services without significant expense.