Opinion ID: 177521
Heading Depth: 2
Heading Rank: 1

Heading: The Alleged Predatory Lending Scheme

Text: The complex factual and procedural history of these matters is set out at length in our prior opinion, and we only summarize it here. See In re Community Bank of N. Va., 418 F.3d 277 (3d Cir.2005) ( Community Bank I ). These class actions involve the alleged predatory lending scheme of the Shumway/Bapst Organization (Shumway), a residential mortgage loan business involved in facilitating the making of high-interest, mortgage-backed loans to debt-laden homeowners. Because Shumway is not a depository lenderand thus subject to fee caps and interest ceilings under various state lawsit allegedly formed relationships with defendants Community Bank of Northern Virginia (CBNV) and Guarantee National Bank of Tallahassee (GNBT), both financially distressed banks, [1] to circumvent those restrictions. This allegedly permitted Shumway to conceal the origin of the loans, thus creating the appearance that fees were paid solely to a depository institution when [i]n reality . . . the overwhelming majority of fees and other charges associated with the loans were funneled to Shumway. Id. at 284. The class action complaint claimed defendant GMAC Residential Funding Corporation (RFC) was a co-conspirator in this scheme, deriving a substantial portion of its business by purchasing jumbo and high loan-to-value loans from CBNV and GNBT in the secondary market. The named plaintiffs asserted that RFC acted with knowledge that CBNV and GNBT were mere straw parties used to funnel origination and title services fees to Shumway. Because these fees were incorporated into the principal on the loan, RFC purportedly benefitted from the practice through increased interest income. In 2001, the federal Comptroller of the Currency investigated and audited GNBT, and imposed tighter restrictions on the bank. Shortly thereafter, RFC announced that it would no longer purchase high interest mortgage loans like those originated by CBNV and GNBT. RFC's withdrawal, in turn, caused the Shumway organization to shut down in early 2003. [2]