Flagstar Bancorp is the holding company for Flagstar Bank, which has more than $9.6 billion in assets, and is currently the largest banking company based in Michigan. Flagstar Bank originates non-real estate commercial, consumer, residential mortgage and commercial real-estate loans.
Pomerantz LLP announced on Oct. 19, 2014, that it had brought forth the legal claim to represent all organizations and individuals who bought the holding company's securities between Jan. 22, 2014 and Aug. 26, 2014. These dates are inclusive, and constitute the class period.
The law firm filed the securities class action suit in the United States District Court, Eastern District of Michigan, and docketed the legal motion under 14-cv-13459. The legal claim alleged that defendants breached federal securities laws contained in the Securities Exchange Act of 1934, and sought to recover damages stemming from these violations.
Securities class action claims
The lawsuit filed by Pomerantz LLP claimed that during the class period, defendants made statements that were materially false and or misleading, and failed to disclose important adverse facts about Flagstar Bancorp's business, performance, compliance with federal law, operations and prospects.
More specifically, the legal claim alleged that during the class period, the financial institution did not reveal that it lacked adequate internal controls, that as far back as 2011, its loss mitigation practices and default servicing operations had breached certain consumer financial laws promulgated by the Consumer Financial Protection Bureau and that as a result of the aforementioned, its financial statements were materially false and misleading at all relevant times.
Rosen Law Firm suit
It is worth noting that The Rosen Law Firm previously filed a securities class action suit that made similar allegations. This particular legal action represented purchasers of the holding company's securities during the same class period, and alleged that Flagstar Bancorp, as well as specific directors and officers, misstated and or failed to reveal that the financial institution did not have sufficient internal controls.
In addition, the suit claimed the aforementioned defendants failed to reveal that the organization's loss mitigation processes and default servicing operations did not comply with several consumer financial laws adopted by the CFPB. The law firm announced on Oct. 2, 2014, that eligible purchasers had until Nov. 4, 2014, to move the court.
CFPB settlement discussions revealed
The company filed a Form 8-K with the U.S. Securities and Exchange Commission on Aug. 26, 2014, announcing that it had entered settlement discussions with the CFPB based around the financial institution allegedly violating consumer finance laws as far back as 2011, Pomerantz stated.
Mark Palmer, an analyst at BTIG investment bank, lowered the organization's rating of Flagstar Bank to sell because of these claims, emphasizing that the "allegations raise questions regarding servicing operations amid uncertainty of potential rebound of its mortgage business."
After this news was released, the holding company's shares dropped $0.83, or nearly 4.5 percent, to close at $17.66 each on Aug. 27, 2014. This decline happened amid rather high trading volume. Pomerantz stated that eligible shareholders have until Nov. 4, 2014, to request the court appoint them as lead plaintiff.