Sun West files new lawsuit against FNB over reverse mortgage repurchases
Sun West Mortgage Co. (SWM) has filed a lawsuit against First National Bank of Pennsylvania (FNB) for failing to repurchase two reverse mortgages worth more than $850,000 from Fannie Mae, alleging a breach of a 2017 settlement agreement.
The case involves reverse mortgages transferred from a bank acquired by FNB to Sun West. Fannie Mae later demanded that Sun West repurchase the loans due to “various errors which arise out of FNB’s solicitation, processing, origination, underwriting, funding and/or closing of the loans,” Sun West stated in court documents.
The lawsuit was filed on Oct. 28 in the U.S. District Court for the Central District of California. Mortgage Professional America first reported on the topic.
Spokespeople for Sun West and FNB did not immediately respond to requests for comment from HousingWire‘s Reverse Mortgage Daily.
Sun West initially made a deal with First Mariner Bank in March 2011, acquiring the servicing rights for a portfolio of 2,200 reverse mortgage loans owned by Fannie Mae. First Mariner was sold in 2018 to Howard Bank, which was later acquired by FNB in 2022.
In May 2017, Sun West and First Mariner settled a lawsuit over issues stemming from the transfer, requiring First Mariner to repurchase certain reverse mortgages. Sun West asserts that as First Mariner’s successor, FNB is bound by that agreement.
According to the complaint, Fannie Mae determined that one loan, originated in October 2007, was misrepresented as a first lien and requested a repurchase. Sun West contacted FNB regarding the matter, but the bank did not repurchase the loan, prompting Sun West to do so for $339,727.25.
Another loan was found to have a mortgage eligibility issue. The loan lacked a first or second deed of trust, making it ineligible for liquidation or assignment to the U.S. Department of Housing and Urban Development (HUD). Sun West repurchased it from Fannie Mae for $513,661.82.
“Despite FNB’s obligations under the settlement agreement, FNB has failed to repurchase the two subject loans as required,” Sun West stated in the lawsuit.
Sun West claims it has suffered more than $872,733.11 in financial losses from repurchasing the loans — values that were up to date as of Oct. 15 — or more than $950,000 when including interest, attorneys fees and other costs.
This is not the first legal dispute between the parties.
In September 2022, Sun West sued FNB for allegedly breaching the same settlement agreement concerning two other loans. Following a three-day bench trial in November 2024, the court entered judgment in favor of Sun West in one case and in favor of FNB in the other.
The complaint alleges breach of contract, breach of covenant, and breach of the implied duty of good faith and fair dealing in connection with two loans. Sun West is seeking compensatory damages to be determined at trial for an amount no less than $872,733.11.