Sun West claims FNB ducked $900K repurchase obligation despite losing similar case in 2024
A California mortgage servicer claims a major bank refused to honor a settlement agreement for the second time, forcing it to absorb nearly $900,000 in loan repurchases.
Sun West Mortgage Company filed suit against First National Bank of Pennsylvania on October 28 in federal court in Los Angeles, accusing the Pittsburgh-based bank of repeatedly ducking its obligations to buy back defective reverse mortgage loans.
The case centers on a 2017 settlement that was supposed to resolve disputes over who should bear the cost when serious flaws emerge in loans originated years earlier. But according to Sun West, the bank has made a habit of ignoring that agreement.
This is the second time in three years that Sun West has taken FNB to court over the same issue. In September 2022, Sun West filed a lawsuit against FNB over two other loans. Following a three-day trial in November 2024, a federal judge ruled in Sun West's favor on one of those loans, the Hastings Loan, finding the bank had breached the settlement and had not acted fairly and in good faith.
Now Sun West says the bank is doing it again with two more loans.
The dispute traces back more than a decade to when First Mariner Bank originated a portfolio of approximately 2,200 reverse mortgages and later transferred servicing rights to Sun West in March 2011. First Mariner merged with and into Howard Bank in or about March 2018, which in turn merged with and into First National Bank of Pennsylvania in or around January 2022.
Under the 2017 settlement, FNB inherited an obligation: if Fannie Mae demands Sun West repurchase a loan due to defects that arose during the originator's solicitation, processing, origination, underwriting, funding, or closing, the bank must step in and buy it back within 21 days.
The Garcia Loan, originated and closed by First Mariner in or about October 2007, came undone over a title problem. According to Sun West, a $10,000 lien recorded on November 2, 1998, in favor of Commercial Credit Corp. against the borrower was never released, meaning the reverse mortgage was not actually in first position as represented. When Fannie Mae discovered the error, it called the defect "uncorrectable" and demanded action.
Sun West says it alerted FNB to the problem on October 8, 2024, and provided a copy of Fannie Mae's notice. The deadline to repurchase passed on January 5, 2025. The bank did not act. Sun West had to buy the loan back from Fannie Mae on January 3, 2025, for $339,727, and now claims FNB owes it $355,300 as of October 15, 2025, a figure that continues to grow with interest and fees.
The Besner Loan presented a different problem. Sun West says the recorded deeds of trust simply don't exist in the loan file—documents that should have been transferred when First Mariner handed over servicing but apparently never were. Without recorded mortgages, the loan became a serious liability.
Fannie Mae flagged the missing documents as creating "a very large loss risk" and declared the loan ineligible for delivery. Sun West says it notified FNB on July 10, 2025, and sought help locating the paperwork. When nothing materialized and Fannie Mae refused an extension, Sun West repurchased the Besner Loan on September 12, 2025, for $513,661. It now seeks $517,432 from FNB as of October 15, 2025, plus mounting fees.
In its filing, Sun West accuses the bank of stalling deliberately. FNB is "fully aware of its obligations," the suit alleges, "but is delaying the process in bad faith."
The case underscores a tension in the mortgage industry as banks consolidate and acquire rivals. When a successor bank inherits a predecessor's loan portfolio, who is responsible when old origination defects come to light? And what happens when settlements meant to answer that question are allegedly ignored?
Sun West is seeking at least $872,733 in damages, along with an order compelling FNB to honor the settlement terms going forward. The settlement agreement itself includes a provision requiring the party that doesn't perform its obligations to cover attorneys' fees in enforcement litigation.
For mortgage servicers navigating complex portfolios with murky provenance, the case serves as a reminder that origination defects don't disappear with time or corporate reorganizations. And when the bill finally comes due, the fight over who pays can stretch on for years.
The bank has not yet responded to the allegations in court.
