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Show seller's interest in 330 loans. Payments the word The pledge. mortgage contract calls for the borrower to pledge money on a monthly basis for those insurance and tax bills. It doesn't say anything about paying interest or not paying interest. But of course the money being held was being used by the lending institution investments. for short-terAt one point, Judge Croft granted summary judgment for Prudential, saying there was no unjust enrichment or implied trust for the plaintiffs benefit. An appeal to the Utah Supreme Court followed. The high court reversed Croft and came up with a definition of pledge: payments made to secure performance in which possession but not title are trnasferred. The lending institution is still not liable to pay the tax and insurance bills (even though they do), the borrowers are. The pledgee (i.e. the lender) must account to the borrower for any profits made with the pledged property. m Didn't end there But the reversal Area is savings poor" Continued from page six didnt end the case. The high court simply said Crofts decision was reversed and returned the case to the district court for further proceedings. Arguments followed as to what exactly the effect of that Supreme Court decision was and Croft finally ruled it meant exactly what it said his summary judgement was reversed and they were to go ahead with further proceedings. de-disi- on Other legal maneuvers both preceded and followed that decision. Prudential filed a complaint against the Madsens in federal court for a ruling that federal law did not require them to make the payments. It also counterclaimed for attorney fees and costs of the litigation. The Utah Mortgage Bankers Association and the Utah Bankers Association filed briefs on the matter. Finally, Prudential, last month, petitioned for removal of the entire case to federal court. That request led to a stay of the third district action pending a decision on removal by Federal District Judge Aldon Anderson. The potential ramifications of the suit are indicated by several documents in the case file. Information from Prudential provided in September of 1975 showed the S & L to have approximately 20,388 trust deeds or mortAbout gages outstanding. 3,749 of those were sold to 17 investors, including the Federal National Mortgage Association, the Government National Mortgage Association, the Federal Home Loan Corporation, the Utah State Retirement Fund, and savings and loan companies. Prudential continued to service those accounts. About 4,301 participation interests in mortgages had also been sold to about 33 investors in about 65 transac- explained the intermountain area has been traditionally savings poor. That means there havent been enough savings to sustain the demand for new construction. As a result, according to Calvert, local lenders depend on the secondary market (to which mortgages are sold) for building capital. Thus, that market is important to sustain the economy. If lending institutions are required to pay the interest the Madsens are asking for, Calvert maintained, they would are some 100 lending institutions that could be involved in Utah, you're dealing with a rather huge hunk of change that would have to be repaid if the Madsens win. Without a doubt, the lenders would be hurt if they lost, but the winning members of the class wouldn't get all that much per person. The Madsens, for example, would probably only get $200 or $300 worth of interest at most. And that sum wont nearly equal the bucks theyve put out prosecuting this suit. But Madsen, who runs a firm that arranges educational trips for students groups, doesnt seem to care about not breaking even. It's the principle of the thing that matters, and he figures a lot of other people with the same kind of loans feel the same way he does but never thought of suing. He doesnt even seem to mind the possibility that interest rates would go up if he wins. At least that way, the lenders wouldnt be making money by a surreptitious route. The lenders should have to demonstrate they need the income or charge dum filed last month asserted In an affidavit filed Nov. 11, 1975, Prudential executive vice president H.M. Calvert states require the collections for security. A plaintiffs memoran- have no ability to collect the items on loans sold to others because theyre sold on the basis of a fixed net yield after servicing expenses. An adverse result in the case could stop the secondary market from dealing with Utah lenders due to the complications involved, and that, said Calvert, would seriously hurt the states economy. Such a ruling would also lead to increased service charges or interest rates. Prudential's exposure for past and future interest could be a million dollars. As a result, other banks and s& l's in the state should be included in the suit to maintain a competitive balance, resolve the issue on an industry-wid- e basis, and make a possible settlement more likely. Theoretically, if Prudential alone stood to lost $1 million (immediately, anyway), it would be much less likely to settle. The same memorandum also noted the theory of the case was that the lending institutions get the moeny as a windfall and ought to be able to repay it. Plaintiffs counsel also filed a report on the Massachusetts experience where the legislature has required payment of interest on escrow accounts. The report concludes that bank losses were not the result of the legislation but one of bank policies which were claiming expenses that far exceeded those reported by lenders in other states for the same kind of service. It you consider Prudential's potential liability to be $1 million and realize there less. hell If I become provoked, I tell you, get pretty dogmatic. Not making money out-of-sta- te tions. In those cases, the investor bought a percentage of the income or loss on each mortgage. Finally, about 100 loans were sold without service agreements each year. Prudential also had bought about 603 participations and the Calvert also noted the average earned account S15.95 a year. Direct costs for maintaining it, however, amounted to $10.19 and direct overhead costs were more than $5. Thus, Prudential wasn't making anything on the accounts. The collections are required on FHA loans and loans over 80 percent of the propertys value. Such loans amount for over 30 percent of Prudential's volume, and many government purchasers also in- The sights and sounds of Net profits at question McCulloch Oil Corp. and its Utah subsidiary Braztah Corp. have filed in federal district court for a declaratory judgement clearing up rights in a net profits agreement concerning sale of coal from a piece of land in Carbon The complaint asks the court to determine rights of the parties under an agreement to pay defendants a portion of the net profit from the sale of coal. Although no profit, allegedly, had been made from such a sale, defendants had sought a share of the money made from a sale of the entire property. County. Defendants in the action include: Glen Explorations, Inc., Don S. Simpson, A.K. Simpson, Owens Laboratories, Inc., J.R. Dominick, Jack According to the plaintiffs, the agreement only applied to sale of coal actually mined and delivered to a Bretoglio, Jack R. Fraser, G.F. Industries, Ben Both, Ben H. Sparkman, Federated Financial Corporation, Fidelity Corporation, and Fidelity National Corporation. - pHT The complaint also asked for a correction of the description of property in the contract. purchaser. JO: EESTTAUEAOT 350 So. 3rd E. 521-379- 4 The sights and sounds of Christmas arc here at the Christmas Store Modem Display. Miniature lights and regular lights. Indoor and outdoor decorations, ornaments, festive decor and figurines. The Unusual and the Unique - from the world over. Artificial Christmas Trees that look real as real. And, our items arc reasonably priced. Holiday Decoration Specialists for Business & Home 436 South 7th Hast Monday - Friday 8 til 8 8 til 6 Saturday 353-742- 7 LUNCHES Monday through Friday 11:30-2:3- 0 DINNERS Seven days a week beginning at six. |