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FDIC Names Pulte Mortgage and Subsidiary as Defendants in Lawsuit Over $3B in Losses
August 31, 2023 at 04:43

A wave of cases filed in the wake of Washington Mutual’s December 2008 collapse has continued with a breach of contract suit filed by the Federal Deposit Insurance Company (FDIC), as receiver for the bank, over mortgages sold to Deutsche Bank that were packaged into residential mortgage-backed securities.

Washington Mutual (WaMu), held mortgages which were brokered by defendant CTX Mortgage, the financial services subsidiary of homebuilder, Centex. Pulte Homes merged with Centex in 2009, according to the complaint. That merger resulted in Pulte absorbing both CTX’s assets and the legal responsibility for damages arising from claims against that company.

The complaint, filed in California Central District Court, Federal Deposit Insurance Corp., as Receiver for Washington Mutual Bank v. CTX Mortgage Co. LLC et al., alleged that CTX promised to indemnify WaMu for either direct or indirect losses resulting from inaccurate or incomplete application or other documentation prepared by, or at the direction of CTX. WaMu funded the loans from CTX and then sold them into mortgage-backed securitized trusts with Deutsche Bank Trust serving as trustee, according to the complaint. Both Pulte Mortgage and CTX Mortgage were named as defendants in the suit.

Deutsche Bank asserted claims for losses to the trusts which included at least 24 loans brokered by CTX. The complaint included the example of the loan application and documents submitted for two unnamed borrowers. Centex prepared and submitted the loan application and documentation for “RP” and “MP” which misrepresented their monthly income as $13,380 when, in fact, their tax returns reflected their income as $6,900 per month.

In August 2009, Deutsche Bank filed a lawsuit in U.S. District Court for the District of Columbia against FDIC as Receiver for WaMu (FDIC-R) for losses resulting from the loans WaMu sold to the residential mortgage-backed securitized trusts which included the CTX defective loans, according to the complaint. FDIC-R eventually settled with Deutsche Bank in September 2017 when it paid a more than $3 billion receivership certificate to settle the trustee’s claims.

The complaint stated that FDIC-R is entitled to indemnification for losses and liabilities suffered settling Deutsche Bank’s claims which arose from inaccurate or incomplete applications or documentation prepared by CTX. It went on to claim that the defendant breached their obligations to indemnify FDIC-R which resulted in damages to be proven at trial.

FDIC-R seeks judgments against CTX and Pulte Mortgage in an amount to be proven at trial for their breach of their indemnification obligations, pre-judgment interest under 12 U.S.C. § 1821(l) or applicable state law, and reasonable attorneys’ fees, costs, and expenses, according to the complaint.

Counsel to the FDIC-R included Paul A. Levin and Lauren M. Gibbs of Mark Migdal & Hayden in Miami, Michael H. Delbick of Mortgage Recovery Law Group, and Joshua H. Packman of Federal Deposit Insurance Corporation. The FDIC declined to comment.

Counsel have not yet appeared for the defendants.

Looks like we are back in court for a while...

https://www.law.com/therecorder/2023/08/31/fdic-names-pulte-mortgage-and-subsidiary-as-defendants-in-lawsuit-over-3b-in-losses/?slreturn=20230910191949