Robert Maddox has been on the front lines during much of the servicing litigation and enforcement actions over the last decade. This senior Bradley Arant Boult Cummings LLP attorney also represented a major servicer during the many months it took to negotiate the National Mortgage Settlement.
Robert Maddox, CMB, is a partner with Bradley Arant Boult and Cummings law firm. He has represented many financial services industry clients in both trial practice and in compliance matters. He was directly involved in the litigation that mushroomed over servicing practices during the foreclosure crisis. Notably, he represented GMAC (now Ally Bank) during the many months leading up to the massive National Mortgage Settlement (NMS) between the top five servicers and 49 of the nation's attorneys general (AGs). His trial practice has led Maddox to trial and appellate courts in more than 40 different states from Florida to California.
Q: Describe your very first involvement with mortgage servicing litigation.
A: My first case involving mortgage servicing was one of the first cases I ever had. It was quite interesting. It involved a closing attorney who, instead of paying off the mortgage, was essentially making the monthly payments on the house [that was supposedly being sold]. He was never actually doing a real estate closing. Instead of paying off the prior mortgage company when it wired the new money into his account, he was just paying off the monthly payment the earlier borrower had.
It was a pretty successful closing business, so he was able to do that for about two or three months. This was during the refinance boom--when people went back to refinance, [they found] there were two liens on their property instead of one, which was complicating their servicing.
It was a cross between mortgage origination fraud and servicing litigation, and that was in 2000. It was the first year I started practicing law.
Q: Then how did you get more deeply involved in mortgage servicing litigation?
A: I was supposed to be a medical malpractice attorney, but that didn't work for me. All those biology, genetics and organic chemistry classes aren't doing too much for me these days.
We did the origination fraud work, and gradually more and more mortgage companies began to hire us in 2000, 2002, 2003, 2004,2005 and 2006. We worked through the origination issues popping up during that time, and then comes the financial crisis.
The first sign we had that things were changing was [when] clients abruptly started suing on their warehouse lines. That had never happened before because warehouse lines were [non-bank mortgage] lenders' lifelines.
If they didn't have money, they couldn't close loans, and if you stopped that process--industrywide--you shut down everything. In late 2007, that was the first inkling we had that something was definitely going wrong.
In 2008 and 2009, the foreclosure crisis hit; our litigation matters were taking place across the entire country. Lawsuits were ramping up, and then in 2009 you began to see some relief in the form of loan modifications.
Then into 2010, we represented Ally Bank and GMAC in what would eventually become the National Mortgage Settlement.
Those negotiations took a great deal of time, ultimately culminating in 2012. That agreement [with the state attorneys general and the Department of Justice] had a monitoring compliance factor included in it as part of the settlement. The settlement established both servicing standards and metrics built into the consent judgment to measure servicer compliance with the settlement terms and metrics. Compliance with the terms was to be tracked for three and a half years, so that monitoring of compliance still is ongoing.
Q: What more recent cases have you worked on that followed in the wake of the National Mortgage Settlement?
A: Ocwen Financial Corporation had a consent judgment that was filed in December 2013 and entered in February 2014. We served as counsel for Ocwen and there were some similar parties involved, including the Consumer Financial Protection Bureau [CFPB], state attorneys general and state banking regulators. Then SunTrust Mortgage filed a consent judgment in June 2014 that was entered Sept. 30 by Judge Rosemary Collyer, who is the same judge for all the NMS matters.
In 2013, we worked on the Southern District of New York/HSBC [Bank] matter that was public, and Ocwen settled a matter with the Massachusetts attorney general.
In addition to the National Mortgage Settlement cases, throughout this same period you had a great deal of enforcement actions on [individual servicers with] regard to subpoenas and civil investigative demands. We worked fairly closely with government entities at multiple levels, whether on the regulatory side or on the enforcement side.
Additionally, we worked with quite a few mortgage servicers in settling some of their [legal and enforcement] matters. But the ones I mentioned are the public ones.
Q: Has your practice grown, in terms of number of attorneys and in other ways, during this period of stepped-up servicing litigation and enforcement?
A: Yes, there's no question. I think our practice is a reflection of the financial services industry as a whole. We were a corporate counsel to regional banks and some nationals, and as we stepped in more and did more and more enforcement work, our practice has grown substantially since 2008.
Q: What are some of the most common practices by servicers that resulted in costly litigation?
A: Looking back, I think there were two of them. The first was dual tracking, with that being defined [as] foreclosing on a borrower while at the same time trying to work with them [using] loss-mitigation techniques.
When the negotiations for the National Mortgage Settlement were taking place, servicers were in a very difficult position. [They faced] predominantly GSE [government-sponsored enterprise] timelines [that consisted of] foreclosure timelines in states, to ensure the foreclosure took place in a timely manner. Yet at the same time, you were working...