According to the law firm press release, Flagstar is the holding company for Flagstar Bank, FSB ("Flagstar Bank"). Flagstar Bank accepts deposits from the general public and originates or acquires residential mortgage loans. Flagstar Bank also originates consumer, commercial real estate, and non-real estate commercial loans and it operates predominantly in Michigan and Indiana, as well as throughout the United States.
The Complaint alleges that throughout the Class Period, Defendants made materially false and/or misleading statements, and failed to disclose material adverse facts about the Company's business, operations, prospects, performance, and compliance with federal law. Specifically, during the Class Period, Defendants made false and/or misleading statements and/or failed to disclose that: (i) dating back to 2011, the Company's loss mitigation practices and default servicing operations were not in compliance with various federal consumer financial laws promulgated by the Consumer Financial Protection Bureau ("CFPB"); (ii) the Company lacked proper internal controls; and (iii) as a result of the above, the Company's financial statements were materially false and misleading at all relevant times.
On August 26, 2014, the Company filed a Form 8-K with the Securities and Exchange Commission ("SEC"), announcing that it has begun settlement discussions with the CFPB over alleged violations of consumer finance laws dating back to 2011.
As a result of these allegations, an analyst at BTIG investment bank downgraded its rating on Flagstar to sell, noting that the "allegations raise questions regarding servicing operations amid uncertainty of potential rebound of its mortgage business."
On this news, Flagstar stock fell $0.83, or almost 4.5%, on unusually heavy trading volume, to close at $17.66 on August 27, 2014.
On February 10, 2016, the Court issued an Order granting Defendants' motion to dismiss.