PNC sues N.C. firm over subprime loan claims
By Thomas Olson and Brian Bowling
Published: Thursday, October 11, 2012, 2:02 p.m.
Updated: Tuesday, February 19, 2013
PNC Bank claims in a federal lawsuit that a North Carolina mortgage insurance company is trying to avoid paying claims on thousands of subprime loans PNC picked up when it acquired National City Corp. in 2008.
Republic Mortgage Insurance Co., a subsidiary of Old Republic International Corp., covered the loans during the height of the real estate boom but is trying to reinterpret the terms of its policies or claim the loans were fraudulently obtained, in order to avoid paying claims on loans that defaulted, PNC claims.
The lawsuit, filed in Pittsburgh on Wednesday, requests that a judge determine the amount of damages at a trial.
The Tribune-Review could not reach Republic spokesmen or Robert Owen, a PNC lawyer. PNC spokesman Fred Solomon declined to comment.
Subprime mortgages are those written for less-creditworthy borrowers. Mortgage insurance from providers such as Republic is required when borrowers put down less than 20 percent toward a home.
“(Republic's) refusal to pay has nothing to do with PNC and/or National City's loan origination practices and everything to do with (its) financial condition,” PNC asserts in its claim.
Based in Winston-Salem, N.C., Republic was placed under the supervision of the North Carolina Insurance Department in August 2011 and directed to stop writing insurance policies.
“Everyone connected with the mortgage industry has been pressured because of the blow-up in the housing industry,” said John Johnson, CEO of MortgageAmerica Inc. in Birmingham, Ala., and a 47-year industry veteran. “So, every participant in the mortgage industry had resorted to more drastic and extreme defensive actions than has previously been the case,” said Johnson, calling the lawsuit “not uncommon.”
PNC's acquisition of Cleveland-based National City more than doubled PNC's loan portfolio in early 2009 to $171 billion from about $70 billion the year earlier. But PNC was compelled to raise its reserves against bad loans to $880 million in early 2009 from $151 million.
“Thousands of loans are covered under the policies” and more claims are submitted regularly, the lawsuit says.There are currently no comments for this story.
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