Focus, Banking & Finance, and Law

Law firm with expertise in financial sector comes to GR

Talcott Franklin made a name for itself suing money center banks during financial crisis.

May 15, 2015
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A Texas law firm with a history of taking on money center banks during the financial crisis has joined the Grand Rapids community by acquiring a firm in the area.

Dallas-based Talcott Franklin PC announced the acquisition of The Law Office of Jordan C. Hoyer in Grand Rapids last week.

Talcott Franklin specializes in deciphering and explaining complex transactions and has litigated some of the highest profile cases stemming from the financial crisis.

Talcott Franklin founded his firm in 2010 at the height of the fallout from the financial crisis as investors were looking for a way to sue money center banks without revealing important information to one another about their businesses.

Franklin had already built a strong practice in the area of mortgage-backed securities as a partner with Dallas firm Patton Boggs, where he served as deputy head of litigation.

“I was always suing the big money center banks,” he said. “Sometimes we’d be representing trusts against these banks; other times we’d represent smaller lenders.”

He noted mortgage-backed securities were a little known area at that time.

“Before 2008, nobody knew what a mortgage-backed security was,” Franklin said.

He publish a book in 2008 on mortgage-backed securities litigation, just as the financial crisis was hitting the nation, and he represented a group of investors opposing a 2009 piece of legislation aiming to implement a servicer safe harbor law that would absolve banks of any liability.

“It was broad and sneaky by the banks to try and get out of the obligations they had,” Franklin said. “They were going to modify a bunch of loans and then say, ‘All my liability to anyone on the planet is wiped out now because I made these modifications.’”

Franklin helped get the safe harbor piece removed from the legislation.

He said following that success, the group of investors presented him with their next issue, which was a need to collaborate that was hindered by an equal need for secrecy within their industry.

The investors told Franklin, “Our big problem is we can’t really communicate with each other; we are all competitors. We own these different bonds and we need to talk with each other so we can unite against some of these banks and get them to perform on their obligations under these contracts we have with them.”

Franklin said he was able to use attorney-client privilege to help competing investors unite against the banks. It was at that point that he left Patton Boggs and formed Talcott Franklin, bringing seasoned attorneys on board with him.

The firm became an immediate success, representing small and large institutional investors from around the world such as insurance companies, banks and asset managers.

Today, Talcott Franklin has grown to a 20-member firm. Its attorneys are licensed to practice law in a dozen states and the District of Columbia, and the firm also has offices in North Carolina and West Virginia.

Franklin said he became acquainted with the Law Office of Jordan C. Hoyer, a boutique litigation firm, through one of its four members, Derek Witte. He met with founder Jordan Hoyer shortly after that.

“The development of Jordan’s firm is a great story about tenacity and resilience, about overcoming tough times and re-tooling to reflect an economic reality,” Franklin said.

Hoyer launched the firm in her parents’ Grand Haven basement in 2011 after completing a law clerkship with the United Nations. She had hoped the U.N. experience would lead to a permanent job, but that didn’t turn out to be the case. So she struck out on her own.

Today, Hoyer’s firm is housed in The Trust Building, 40 Pearl St. NW, Suite 922, and includes three more attorneys: Curt Benson, Erika Hunting and Witte. The firm specializes in commercial and financial services litigation.

Franklin and Hoyer think the acquisition will combine both firms’ strengths and bring an important asset to Grand Rapids and the state of Michigan.

“The attorneys at Talcott Franklin PC are of the highest caliber, typically graduating at the top tiers of their law school class, serving on law review, and going on to distinguished careers at corporations or in government before joining Talcott Franklin,” Hoyer said.

Franklin said up until now Michigan has not had a firm with Talcott Franklin’s expertise in financial services. He said that area of law has been under-represented in the state. He said he can’t think of a single Michigan company that filed a suit against any money centered bank following the financial crisis and he expects that is because the opportunity didn’t exist in the form of legal representation.

“Now it exists,” he said.

Franklin said he’s committed to being part of Michigan and specifically the Grand Rapids community. He said getting his license to practice in Michigan is representative of that commitment.

“We hope to earn the privilege of working with the businesses and people of Grand Rapids,” he said. “We predict Grand Rapids will help lead a renaissance in Michigan, and we want to be a part of that.”

Franklin mentioned three big trends he expects will impact the country in the coming years, including West Michigan.

First, he said, student debt will have a major impact. “It’s becoming a crushing factor on young people,” he said, adding that even bankruptcy doesn’t absolve someone of student debt.

“You’re on the hook for life,” he said. “That’s going to have an impact.”

Second, the housing market will have an impact because “everyone has to live somewhere.”

He pointed to a similar phenomenon with the housing bubble in the early 2000s, but said instead of California and Florida, it’s occurring in places like Grand Rapids, Portland, Oregon, and Texas, where home values are rising — possibly too high.

“Anecdotally you are hearing a lot more about the sort of things that were going on in California or Florida during the boom: people putting a house on the market and getting three offers that day above the asking price and people selling for more than it was worth.”

He said during the previous housing bubble, appraisers were “inflating values, and lenders were making loans that were out of whack with reality to people who couldn’t pay them back.

“Lending standards have loosened so we are going to see whether we are repeating that,” Franklin said. “I can’t speak to that right now because I don’t know what impact lending standards are having. Obviously, interest rates are incredibly low right now.”

He also highlighted what he called a new entrant in the housing market, which he said his firm is keeping a close eye on. He said investors bought up a bunch of foreclosed homes and then securitized them.

“It’s a new securitization instrument we are watching closely,” Franklin said. “Basically, you buy a bunch of houses, you fix them up and rent them out and then, to get more money, you bundle them together and you securitize them. You sell interest in that rent pool so it works like any other security.

“We don’t know how it’s going to perform and we don’t know what the integrity is with respect to those investments right now. Time will tell.”

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