July 13, 2012

The recent litigation involving Barclays and other banks concerning the fraudulent manipulation of the LIBOR index rate has opened up a number of avenues for borrower actions against “lenders” and servicers claiming monies owed on a Note subject to a floating LIBOR index. We expect a significant amount of litigation to be instituted against the “lenders” and servicers for claims sounding in fraud and/or unjust enrichment and/or breach of duty of good faith and fair dealing in addition to other causes of action.

The LIBOR index is represented to the borrower as a basis for the lender’s pricing of the long-term mortgage loan, with the supposition being that the index on the loan is based on the bank’s cost to borrow the money to fund the loan. There are approximately 20 large banks (both domestic and foreign, including Deutsche Bank, Barclays, JPMorgan Chase, and Citigroup) who determine the LIBOR index.

Barclays settled their claim in this action. What the Barclays suit has reveladed is that the banks fraudulently manipulated the LIBOR index for purposes of misrepresenting the cost of the loan to the borrower so that the lenders could reap additional profits from the borrowers under false pretenses. What this means, in reality, is that any mortgage loan originated since at least the late 1990s which was based on a LIBOR index resulted in a deliberate overcharges to the borrower. We are in the process of preparing litigation against various banks for claims resulting from the fraudulent misrepresentation of the LIBOR index to borrowers.

The information revealed in the Barclays litigation could be of particular importance to borrowers in the State of Washington, which has a “use it or lose it” statute as to foreclosure challenges. Under the Statute, the borrower has 90 days from the time that a Notice of Trustee’s (or foreclosure) sale is provided to the date of the sale during which to file an action challenging the sale and to obtain a court order stopping the sale. If that is not done by the sale date, the borrower is forever barred from filing an action seeking to undo the foreclosure or placing a lien on the foreclosed property. However, the companion Statute provides that a borrower may institute an action after the sale for damages only resulting from a wrongful foreclosure.

FDN has associated with a banking expert who has over 25 years experience in this area and securitization who will be assisting us in asserting these claims. Other experts in this area are also being interviewed so that the claims are bolstered with expert testimony from all aspects and issues.

Jeff Barnes, Esq., www.ForeclosureDefenseNationwide.com