July 30, 2012

A Hillsborough County (Tampa) Florida Circuit Judge has entered a Final Judgment in favor of a borrower, ordering that the loan and all loan documents be reinstated effective back to June 30, 2009 (pre-“default”); that the terms of the loan remain in effect as they would have been as of that date; and that BB&T credit the principal of the Note with all payments received by BB&T from the FDIC and with no payments due from the borrower until BB&T credits all such payments it has received against principal and the parties agree on a new payment schedule.

The May 18, 2012 Final Judgment found that the original lender (Colonial Bank) improperly demanded that the borrower make “curtailment” payments on the loan, basing its demand on the status of other, unrelated loans. Colonial was shut down by the Alabama State Banking Department and the FDIC was appointed as its receiver. The evidence at trial demonstrated that BB&T breached its duties of good faith and fair dealing with the borrowers, and that BB&T was motivated to behave as such due to the terms of a Purchase and Assumption Agreement with the FDIC where BB&T stood to profit by declaring a fraudulent default under the loan, collecting from the FDIC under the Agreement for such default, and then enforcing the loan against the borrowers and retaining the property until a turn around in the real estate market.

The “troubled assets” manager of BB&T (who had been a former Colonial Bank manager) testified that BB&T may have already applied to the FDIC for a loss share payment, and the borrowers’ expert testified that BB&T may have already applied for and received a payment from the FDIC as high as $1,800,000.00. The Court found that BB&T totally failed to credit this potential payment from the FDIC against amounts sought in the litigation, thereby giving the impression that BB&T might be “double dipping” and possibly “triple dipping” if market conditions favorably changed and the property increased in value. The Court concluded that BB&T “committed significant wrongdoing and breached the implied duty of good faith and fair dealing of a financial institution, such that the instant cause of action should be denied in its entirety.”

This Final Judgment supports what we have been requesting in discovery for the past five years: documents related to third party sources of payment against the Note, which evidence goes directly to the amount claimed to be in default. Significant in this decision is the fact that the Court entered judgment for the borrower on the premise that there COULD HAVE BEEN a payment made to BB&T through the Agreement; it was not necessary that a payment actually have been made for the credit to apply.

In securitizations, the documents expressly provide for insurances and credit enhancements (including credit default swaps) to protect against and provide payment on mortgage loans which default. Discovery of these potential sources of payment and amounts is thus more than relevant, as this evidence goes directly to not only the veracity of the amount claimed to be in default, but to claims of breach of duty of good faith and fair dealing as well.

The case is Branch Banking and Trust v. Kraz LLC, Hillsborough County, Florida Circuit Couert Case No. 10-CA-000304-K. We thank one of our dedicated followers for providing this decision to us.

Jeff Barnes, Esq., www.ForeclosureDefenseNationwide.com