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Bank Dealings That Have Caused Lawsuits

Bank dealings that have caused lawsuits continue as homeowners, city governments and investors file lawsuits to recoup their losses from banks across the U.S.

Some of The Bank Dealings That Have Caused Lawsuits in the U. S.

Citigroup to Pay Homeowners Forced to Buy Insurance $110 Million

Citigroup will have to pay $110 million to homeowners that were made to buy costly property, hazard, flood, wind and other insurances to protect the value of homes for which the bank held mortgages.

The lawsuit in a New York federal court also asked plaintiffs be paid because premiums gave a Citigroup insurance receiving unit a 15% commission on insurances placed when homeowners didn’t get the insurances on their own.

Plaintiffs were charged $758 million in hazard, and $173 million in flood insurance premiums. Plaintiffs will receive 12.5% back on premiums paid when they file claims.

Banks were told by the Consumer Financial protection bureau in 2012 that homeowners would have to be told rates, options and advance warning before being given forced insurance policies.

City of Detroit Files Federal Lawsuit to Challenge Pension Debt Deal

The City of Detroit filed a lawsuit against two legal subsidiaries known as service corporations and two trusts that the city of Detroit created in 2005 and 2006.

The city challenges a complex pension debt deal that eliminated unfunded pension liabilities in the lawsuit.

The suit questions the legal structure of the “pension obligation certificates of participation” deal which show Michigan laws were gone around by the initial securing of the debt. The deal is being described as “a thinly disguised municipal bond issue using shell entities to exceed the city’s statutory debt limit.”

The lawsuit was filed in U.S. Bankruptcy Court’s Eastern District of Michigan against the service corporations and the trusts the city created to do the deal.

During a court proceeding in January it was suggested that Detroit could possibly challenge the debt deal, because it was a questionable manner in which to avoid the state’s ban on municipalities borrowing more than 10% of the assessed value of privately owned property within the city.

The lawsuit will be fought by predominantly European banks and key bond insurers that backed the debt and pension certificates.

The lawsuit does not allege any corruption on the part of Kilpatrick or the partners in the deal who championed the debt structure deal as a way out of financial ruin for the city in 2005 and 2006.

“This deal was bad for the city from its onset, despite reassurances it would adequately resolve the city’s pension issues,” the city of Detroit said in a statement.

At issue for the city is the legal structure of the $1.4 billion in debt that was given to the city of Detroit and which led to filing of Detroit bankruptcy. The city had a steady interest rate, but when the interest rates rose, it caused a $50 million annual debt for Detroit.

Bank of America $8.5 Billion Settlement Delayed

Mortgage securities investors will receive a court-approved $8.5 billion Bank of America settlement over complaints by the investors over loan modifications.

Bank of America Corp settled claims regarding loan modifications without evaluating potential value or validity. The trustee representing the investors did not make adequate effort to recover money for investors. The insurer major stated that the settlement amount was inadequate to compensate the losses incurred by investors.

The settlement took place with 22 investors who had suffered significant losses when Countrywide sold securities over bad-quality loans. The loans were not managed well. This is why the investors asked for a buyback relief when offloaded by Countrywide.

Analysts suggest there may be additional litigation and financial negotiations to settle potential claims on this group of loans, which could ultimately cost Bank of America to pay more than the $8.5 billion settlement. 

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