GMAC-RFC and Countrywide

[transformer999]

Good information about lenders underwriting process...or lack of shall I say.

GMAC-RFC and Countrywide

(Paratus AMC Ltd & Anor v Countrywide Surveyors Ltd [2011])

http://www.bailii.org/ew/cases/EWHC/Ch/2011/3307.html

[transformer999]

Re: GMAC-RFC and Countrywide

I am trying to get hold of this judgment if anyone can help please?

Nationwide Building Society v. Balmer Radmore & Ors (1999)

[Never-In-Doubt]

Re: GMAC-RFC and Countrywide

I am trying to get hold of this judgment if anyone can help please?

Nationwide Building Society v. Balmer Radmore & Ors (1999)

You mean this ---> http://www.bailii.org/ew/cases/EWHC/Ch/1999/844.html

1. MR. JUSTICE BLACKBURNE: I will deal with costs and I will deal with them fairly shortly. I take the view that -- there having been a direction at an earlier stage that the trial before me should be concerned with issues of liability and causation and that is what I have tried -- the costs order that I should make should reflect the outcome of that event.
2. In some of the cases I have dismissed the claims and there is no argument about the order that should be made.
3. So far as the other cases are concerned -- that is to say Singh & Garland Wells, Richard Grosse & Co., Archdeacons, Waters & Co., J.R. Jones, Littlestone & Cowan, Goodwin Harte, Vanderpump & Sykes and Abdullahs -- the outcome of my decision is that the Society has succeeded. My understanding of the way to approach these matters is as set out in Oksuzoglu v. Kay in the Court of Appeal to which I was referred. The Court of Appeal in that case emphasised the importance of considering what the issue was with which the court was concerned. As I say, here the questions were those of liability and causation.
4. So in all of those cases, notwithstanding that questions of assessment and mitigation are yet to be dealt with, I order that the plaintiff should have its costs.
5. I draw particular attention to Archdeacons and Abdullah where I found the actual damages recoverable to be relatively small. I do not consider that that conclusion ought to deter me from the order I make having regard to the issues which were before me.
6. That I think leaves only the question of whether I should direct that the costs in the Goodwin Harte case should be on an indemnity basis. That case involved the conduct of a solicitor who was quite plainly dishonest. It is appropriate, in my judgment, that that fact should be reflected in the taxation of costs which is to be made. Mr. Davidson submitted that a taxation on an indemnity basis is not appropriate for two reasons: firstly, because I have in my decision in that case found that the Society's lending decision was seriously flawed and that its decision to make the loan was one which I think I described as "wholly imprudent", but where, nevertheless, because of the law as I have declared it to be, the Society is entitled to recover its loss in full. I do not regard the fact that the Society's lending decision was imprudent as a reason why, if it is otherwise appropriate, I should not order a taxation on an indemnity basis.
7. The second reason advanced is that the dishonest conduct was that of Mr. Lewis. He, however, is now bankrupt, has long since ceased to be a partner in Goodwin Harte and, I daresay, has long since ceased to be in practice as a solicitor. The question of costs therefore affects his former partners. That does not seem to me to be a reason why, if otherwise indemnity costs are appropriate, I should not order them. I take the view that it is appropriate that the court's view of the conduct of Mr. Lewis should be reflected in the costs order I make. I, therefore, accede to the application that in that case the Society's costs be taxed on an indemnity basis.
8. Beyond that I think the only matter I am concerned with is what I do about the managed litigation costs. It seems to me that that is a matter which should be deferred for consideration to a later date. I propose, in relation to that, to give further consideration to it when I come to give directions at some stage, I think later this term, in relation to the assessment of damages and the directions for the next stage of this managed litigation.
9. One final matter remains, and that is in relation to the order for costs in the Society's favour in those cases where there is to be an assessment of costs. I will give to the defendant firms involved liberty to apply should it turn out that there has been a payment into court and that the amount of the payment is one which ought to be reflected in the ultimate costs order.
   LATER:
10. MR. JUSTICE BLACKBURNE: This is a most unfortunate matter. Last summer I adjourned for hearing the batch four Thimbleby cases. At that time the Thimbleby cases included an action relating to a borrower called Persad. Thereafter, although there has been a certain amount of correspondence between the parties --the solicitors that is -- in relation to the Thimbleby claims the Society's solicitors have come to be under the impression that what would be tried, starting next week, would be the claims against Thimbleby & Co. relating to loans in which Mr. Shefket was involved, but not a quite separate loan in relation to Mr. Persad in which, as I understand it, Mr. Shefket was not in any shape or form involved.
11. On the other hand, Browne Jacobson, who were the solicitors acting for Thimbleby & Co., say -- this is Mr. Timson -- and I accept, that it was understood that the batch four cases being listed for trial next week would include the Persad action.
12. It is fair to say, looking at the correspondence, that there was remarkably little said in relation to the Persad action but I do not think that the defendants' solicitors can be blamed for that.
13. The fact is, as I am told by Mr. Higginson and I accept, that the Society is not ready to proceed to trial in relation to the Persad action. They will wish, he tells me, to seek to amend their points of claim. It is also possible that witness statements will have to be, as it is put by Miss Pike in her affidavit, "revisited".
14. I take the view that it would not be sensible for the Persad action to be tried next week. I say that for several reasons. First of all, the programme of events next week, as it has now taken shape, will be restricted to what is really an issue of law in relation to the Shefket claims. The Persad claim, if it were to be tried, would be, as it were, on its own.
15. Secondly, I confess my own understanding was that all of the Thimbleby actions forming part of batch four were related. I am certainly aware that there was a distinction between thirteen of them and one other, but I confess I had not appreciated that the one other was of an entirely different type from the Shefket actions in that it did not involve Mr. Shefket.
16. Thirdly, whilst of course the court is most reluctant to accede very late in the day to an application to take a case out of the list for trial it does seem to me that in the circumstances of this managed litigation the fact that so far as the Society's solicitors are concerned this particular action, the Persad action, which is one out of many, has been, as it were, put to one side in the belief that it would not be coming on for trial is understandable.
17. It therefore seems to me somewhat unreal to suppose that if the matter does come on for trial next week it can be properly tried having regard, as I accept, to the Society's wish to apply to amend the statement of claim.
18. For all of those reasons, and it is very much a matter of discretion, I take the view that the claim relating to Mr. Persad should not be tried next week, but I will -- if this is the wish and I suspect it may be -- give directions for the speedy trial of that action to come on as part of the next batch, whenever that may be.

[transformer999]

Re: GMAC-RFC and Countrywide

Thanks Niddy your fantastic...yes that's the one!

[Never-In-Doubt]

Re: GMAC-RFC and Countrywide

your fantastic..

I know I am - it's hard at times but I do try and have bad days where I am only super, and not fantastic.

Hey ho - its a hard life but someones gotta do it!

[transformer999]

Re: GMAC-RFC and Countrywide



what ever makes you feel happy Niddy you just carry on mate.

[Never-In-Doubt]

Re: GMAC-RFC and Countrywide

what ever makes you feel happy Niddy you just carry on mate.

That was actually quite funny, I was laughing as I was typing it

[transformer999]

Re: GMAC-RFC and Countrywide

Just some more additional info on contributory negligence and the GMAC case


FSB principles add weight to contributory negligence arguments against lenders

• RPC
• Simon Chandler, Alexandra Anderson, Paul Castellani and Simon Mathews,
• United Kingdom
• April 30 2012

The Financial Stability Board (FSB), the international regulatory task force set up following the recent global financial crisis with the aim of developing and promoting effective regulatory policies in the interest of improved financial security, has just published its Principles for Sound Residential Mortgage Underwriting Practices.

Whilst the principles are, by design, high-level, they provide further authoritative ammunition in support of arguments of contributory negligence in claims pursued by lenders against their professional advisors. Such cases have seen a significant increase in the wake of the 2007 global crisis as lenders seek to recoup their losses.


Paratus AMC Limited v Countrywide Surveyors Limited (December 2011)
The High Court decision in Paratus was the first UK case to deal with contributory negligence of lenders in the current recession and should be familiar to all defendant firms and their Professional Indemnity insurers. In that case, the Court held that the lender’s conduct justified a reduction of 60% of any damages due to the lender as a result of the lender’s contributory negligence during the mortgage application and approval process. The shortcomings in that case related to lack of proper assessment of loan affordability and failure to investigate discrepancies in the information provided in the loan application.


The FSB Principles
The Principles provide useful guidance as to the nature and extent of the measures which a responsible lender should take when underwriting secured residential lending. The Principles, which cover five key areas, are seen by the FSB as a minimum acceptable loan underwriting standard. Set out below are the key recommendations relevant to assessing lender vulnerability in professional negligence cases; they can be applied equally to past as to current and future lending.

1. Effective verification of prospective borrower’s income and other financial information

• Lenders should verify and document each applicant’s current employment status, relevant income history and other financial information (eg credit score, credit registers) submitted for mortgage qualification.
• Lenders should be concerned not only with a borrower’s “ability to repay” but also their “propensity to repay”.
• Sufficient income history should be obtained and variability in income (eg overtime or bonuses which are not guaranteed to continue in future years) should be identified and factored into any decision.
• For borrowers who are self-employed or entrepreneurs and those with seasonal incomes, lenders should require more extensive financial history or third party verification.
• Lenders should make and maintain a proper record of the documentation obtained.

1. Reasonable debt service coverage

• A fundamental component of loan underwriting; lenders must make an accurate assessment of the borrower’s ability to repay the mortgage, both immediately and in the foreseeable future.
• Lenders should establish, review and maintain appropriate processes to assess the borrower’s ability to repay the loan including appropriate consideration of existing debt levels, interest rate fluctuations, introductory loan rates and discounting of temporarily high income levels.
• The assessment of ability to repay should not be based on an assumption of appreciation in value of the property or a significant increase in the borrower’s repayment capability.

1. Appropriate loan-to-value (LTV) ratios

• Lenders should adopt prudent LTV ratios with appropriate levels of deposit from the borrower’s own resources.
• A better consideration of the “real value” of the available equity should be made, to include a robust and prudent approach to property valuations.

1. Effective collateral management

• Lenders should ensure sound valuation processes, standards and methods by their surveyors.
• Lenders should ensure that valuations are realistic and sustainable.
• The scope and extent of the valuation report should be commensurate with the property value and the inherent risks.

1. Prudent use of mortgage insurance

• Where mortgage indemnity insurance is used, lenders should not rely upon this as a substitute for sound underwriting practices.

Comment
The standard of loan underwriting in the period up to 2008 was, in many cases, exceptionally poor. Although the FSB Principles post-date the lending involved, they provide authoritative guidance on the minimum standard to be expected of a reasonable lender whenever that lending takes place. As demonstrated by the decision in Paratus, a lender’s failure to implement and apply reasonably prudent measures during the mortgage application process can lead to substantial reductions in any damages recoverable. t may well be useful to refer to the FSB Principles to reduce exposure to existing lender claims where these principles were breached.