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News & Press: Montana News

4th Circuit clashes with 9th Circuit on loan origination

Friday, September 29, 2017  
Posted by: Joe Menden
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A recent Fourth Circuit Court opinion on a financial institution's classification as a loan originator or a loan purchaser is at odds with a 2014 decision from the Ninth Circuit.

JD Supra reports that while the Fourth Circuit’s opinion in U.S. v. Ritchie, which views an acquiring bank as stepping into the shoes of the actual loan originator for restitution purposes, can be interpreted as taking an expansive view of when an entity can be classified as a loan originator, its decision clashes with the Ninth Circuit in U.S. v. Luis.

Under an almost identical fact pattern, the Ninth Circuit analogized the acquiring bank to a purchaser of a loan on the secondary market and not as a loan originator. As such, the Ninth Circuit’s starting point in calculating restitution is the amount that the acquiring bank actually paid for the loan, instead of starting with the outstanding balance on the loan.

This distinction between loan originator and loan purchaser can significantly impact the amount of restitution a financial entity can potentially recover as a mortgage fraud victim.