Saturday, February 19, 2011
Man Forges a Deed, Has it Notarized, Files with County, Gets Arrested – Banks do the Same and Get Billions
UPLAND – A couple living in a five-bedroom home on North Euclid Avenue were arrested Tuesday after investigators suspected an illegal case of squatting on the upscale property.
Richard and Pamela Scott were arrested by Upland police on suspicion of felony forgery, burglary and filing a false document with the county recorder’s office.
Richard Scott allegedly had forged a deed trust document for the property, in which he claimed ownership of it, and filed the document with the county, said Vance Welch, a deputy district attorney with the San Bernardino County District’s Attorney’s real estate fraud unit.
Scott had tried to cloud up the title owner sequence for the property by indicating on the deed that he was
granting the home to the Moorish Science Temple of America, and they were in turn granting it back to him, Welch said.
“What Mr. Scott did was doctor a false document and he had it notarized and he filed it in the County of San Bernardino,” Welch said. “At that point, your victim is not (only) the person who owns the house. The victim is the county because it impedes the county’s record-keeping ability.”
Police officers, who arrived with an arrest warrant Tuesday morning, had trouble getting the couple to open the door so they forced it open.
Richard Scott had run to the back of the house, but police were stationed behind it.
Richard and Pamela Scott were arrested by Upland police on suspicion of felony forgery, burglary and filing a false document with the county recorder’s office.
Richard Scott allegedly had forged a deed trust document for the property, in which he claimed ownership of it, and filed the document with the county, said Vance Welch, a deputy district attorney with the San Bernardino County District’s Attorney’s real estate fraud unit.
Scott had tried to cloud up the title owner sequence for the property by indicating on the deed that he was
granting the home to the Moorish Science Temple of America, and they were in turn granting it back to him, Welch said.
“What Mr. Scott did was doctor a false document and he had it notarized and he filed it in the County of San Bernardino,” Welch said. “At that point, your victim is not (only) the person who owns the house. The victim is the county because it impedes the county’s record-keeping ability.”
Police officers, who arrived with an arrest warrant Tuesday morning, had trouble getting the couple to open the door so they forced it open.
Richard Scott had run to the back of the house, but police were stationed behind it.
Check out the rest here…
Man bites dog. Man bites Wells Fargo
We heard so much on major banks foreclosing on so many homeowners in this economic crisis. But, this is the first case that I have ever heard of a homeowner foreclosing on a bank's local office. Yes, it is true. His name is Patrick Rodgers. His case is not about robo-signing, illegal foreclosing on his home, seeking loan modification, or questioning his deed on his home but about his homeowners policy.
Mr. Rodgers' nightmare started in 2009 when he first wrote to Wells Fargo, requesting itemized information about the mortgage on his home in Philadelphia. Mr. Rodgers said that Wells insisted on what's known as forced-place home insurance, which cost $2,400 a year. Then, the bank began to force him to take out a $1 million homeowners policy on his home, which he maintained the value of his home is not $1 million. He bought his 3-story Victorian home in West Philadelphia for $180,000 in 2002. So, over the next year Mr. Rodgers sent at least four letters demanding answers under the Real Estate Settlement Procedures Act, or RESPA to Wells Fargo from June to September and received no reply from them. Real Estate Settlement Procedures Act, or RESPA, is a consumer protection stature that passed in 1974 that requires that a mortgage company to acknowledge written requests of a borrower within 20 business days, or face damages or penalties. As a result of Wells Fargo not responding to Mr. Rodgers' letter, Mr. Rodgers took Wells Fargo to court. And here is what happened:
So he went to court, citing the law, and received a $1,173 judgment against Wells Fargo. The bank did not respond to his action and he won a default judgment. Then Rodgers placed a sheriff's levy against Wells Fargo's local mortgage office for the judgment, plus interest.
On Tuesday the court placed a temporary stay on the sale, and ordered a hearing on Feb. 23 to determine the final status.
Rodgers said he is now awaiting $50 from Wells Fargo for the cost of initiating that sale. He said the sheriff's sale can continue until then, barring an unfavorable judgment from the hearing, which he does not expect.
However, Wells Fargo sent two checks to Mr. Rodgers – $1,078.00 on January 14 and $95.00 on January 26, but he said he still hadn't received a response from the bank to his letters. And why won't Wells Fargo send a response to Mr. Rodgers which is required under the federal law? Here is Wells Fargo's response:
Wells Fargo spokeswoman Vickee Adams didn't speak to why Rodgers' inquiries went unanswered, but said that the obligation of the mortgage contract is that the homeowner carry insurance.
"We were surprised to learn about the sheriff's sale because we sent him the funds and we thought the matter was resolved," she said. "We fully expect this to be concluded later this month."
It is amazing that Wells still don't get it that they violated that RESPA law and, no one from the executive office from Wells Fargo responded to this story despite Wells Fargo's local office is being foreclosed on. Well, finally Mr. Rodgers has received a phone to call today from Wells. CNBC reports:
Today Mr. Rodgers received his first telephone call from Wells Fargo—from a Senior Vice-President of Customer Relations—who reports directly to Mr. Stumpf (Wells Fargo CEO).
Rodgers described his conversation with the senior VP as cordial, and focused on finding a resolution to their dispute. He added that he is cautiously optimistic.
He said of his situation, where an individual is dealing with a large company: "The moral of the story is don't back down. Do your research. Know your rights. And don't be intimidated."
Mr. Rodgers is inspiring to the struggling homeowners and gives them hope. As he said: do your research and stand up to the banks. Mr. Rodgers certainly showed Wells Fargo as bullies and as idiots. And the other banks should really pay attention to Mr. Rodgers' case because others will follow his footsteps.
Mr. Rodgers' nightmare started in 2009 when he first wrote to Wells Fargo, requesting itemized information about the mortgage on his home in Philadelphia. Mr. Rodgers said that Wells insisted on what's known as forced-place home insurance, which cost $2,400 a year. Then, the bank began to force him to take out a $1 million homeowners policy on his home, which he maintained the value of his home is not $1 million. He bought his 3-story Victorian home in West Philadelphia for $180,000 in 2002. So, over the next year Mr. Rodgers sent at least four letters demanding answers under the Real Estate Settlement Procedures Act, or RESPA to Wells Fargo from June to September and received no reply from them. Real Estate Settlement Procedures Act, or RESPA, is a consumer protection stature that passed in 1974 that requires that a mortgage company to acknowledge written requests of a borrower within 20 business days, or face damages or penalties. As a result of Wells Fargo not responding to Mr. Rodgers' letter, Mr. Rodgers took Wells Fargo to court. And here is what happened:
So he went to court, citing the law, and received a $1,173 judgment against Wells Fargo. The bank did not respond to his action and he won a default judgment. Then Rodgers placed a sheriff's levy against Wells Fargo's local mortgage office for the judgment, plus interest.
On Tuesday the court placed a temporary stay on the sale, and ordered a hearing on Feb. 23 to determine the final status.
Rodgers said he is now awaiting $50 from Wells Fargo for the cost of initiating that sale. He said the sheriff's sale can continue until then, barring an unfavorable judgment from the hearing, which he does not expect.
However, Wells Fargo sent two checks to Mr. Rodgers – $1,078.00 on January 14 and $95.00 on January 26, but he said he still hadn't received a response from the bank to his letters. And why won't Wells Fargo send a response to Mr. Rodgers which is required under the federal law? Here is Wells Fargo's response:
Wells Fargo spokeswoman Vickee Adams didn't speak to why Rodgers' inquiries went unanswered, but said that the obligation of the mortgage contract is that the homeowner carry insurance.
"We were surprised to learn about the sheriff's sale because we sent him the funds and we thought the matter was resolved," she said. "We fully expect this to be concluded later this month."
It is amazing that Wells still don't get it that they violated that RESPA law and, no one from the executive office from Wells Fargo responded to this story despite Wells Fargo's local office is being foreclosed on. Well, finally Mr. Rodgers has received a phone to call today from Wells. CNBC reports:
Today Mr. Rodgers received his first telephone call from Wells Fargo—from a Senior Vice-President of Customer Relations—who reports directly to Mr. Stumpf (Wells Fargo CEO).
Rodgers described his conversation with the senior VP as cordial, and focused on finding a resolution to their dispute. He added that he is cautiously optimistic.
He said of his situation, where an individual is dealing with a large company: "The moral of the story is don't back down. Do your research. Know your rights. And don't be intimidated."
Mr. Rodgers is inspiring to the struggling homeowners and gives them hope. As he said: do your research and stand up to the banks. Mr. Rodgers certainly showed Wells Fargo as bullies and as idiots. And the other banks should really pay attention to Mr. Rodgers' case because others will follow his footsteps.
Friday, February 18, 2011
Nevada Supreme Court announces changes to foreclosure program
The Nevada Supreme Court has announced modifications to its Foreclosure Mediation Program, including creation of an advisory committee to recommend program improvements.
The modifications, which take effect March 1, address the program that was created in 2009 by the Legislature to address Nevada's foreclosure crisis.
“Periodic revisions of Foreclosure Mediation Program rules have always been anticipated,” said Chief Justice Michael L. Douglas. “The Supreme Court intent is to ensure that the program works for those who need and use it – both homeowners and lenders.”
Read on.
The modifications, which take effect March 1, address the program that was created in 2009 by the Legislature to address Nevada's foreclosure crisis.
“Periodic revisions of Foreclosure Mediation Program rules have always been anticipated,” said Chief Justice Michael L. Douglas. “The Supreme Court intent is to ensure that the program works for those who need and use it – both homeowners and lenders.”
Read on.
Biloxi Buzz for Friday
Mortgage Electronic Registration Systems, or MERS, told its members Wednesday not to foreclose on residential mortgages in its name. The electronic registry of mortgage records built by Fannie Mae, Freddie Mac and the nation’s major lenders more than a decade ago...
Baghdad: U.S. Owes $1 Billion For Turning City Into 'Camp'
Out of Control in the House — Are there any adults in charge of the House? Watching this week's frenzied slash-and-burn budget contest, we had to conclude the answer to that is no. — First Speaker John Boehner's Republican leadership proposed cutting the rest of the 2011 budget by $32 billion.
Republicans adjourn state Senate until Friday — Democrats said to be at Rockford, Ill., resort — By Jason Stein, Patrick Marley and Steve Schultze of the Journal Sentinel — Madison — Amid the third straight day of chaotic but largely peaceful protests at the Capitol …
Obamas Heading To England
House Republicans Block Unemployment Amendment
Darrell Issa's Agenda: Condoms, Yoga & Pot
Joe The Plumber Gets A Teevee Show
Republican Amendment Would Strip Funds For Obama 'Czars,' Plus Elizabeth Warren
Powell Chief Of Staff: We Were 'Manipulated' Into Making Case For Iraq War
Oregon bill would force lenders to hold mortgages 5 years after origination
The Oregon Legislature introduced a bill this week that would prohibit a lender from in any way transferring a mortgage loan for half a decade after the deal closes. In addition, the lender cannot transfer servicing rights or obligations for the same time period.
As Oregon Senate Bill 663 reads, a mortgage banker, broker, or originator that makes a loan within the state "may not, for a period of five years after the closing date for the loan, sell, assign, convey or otherwise transfer the loan."
The Senate Committee on General Government, Consumer and Small Business Protection sponsored the bill. Members of the committee were not immediately available for comment on the motivation behind it.
The Oregon Association of Mortgage Professionals, which is lobbying against the proposed act, said the consequences of such a bill would be devastating to the industry as well as consumers.
"This is another bill intended to inaccurately attack non-depository lending institutions in hopes of improving quality to the consumer which if passed would drastically create the exact opposite result," the firm said.
Read on.
As Oregon Senate Bill 663 reads, a mortgage banker, broker, or originator that makes a loan within the state "may not, for a period of five years after the closing date for the loan, sell, assign, convey or otherwise transfer the loan."
The Senate Committee on General Government, Consumer and Small Business Protection sponsored the bill. Members of the committee were not immediately available for comment on the motivation behind it.
The Oregon Association of Mortgage Professionals, which is lobbying against the proposed act, said the consequences of such a bill would be devastating to the industry as well as consumers.
"This is another bill intended to inaccurately attack non-depository lending institutions in hopes of improving quality to the consumer which if passed would drastically create the exact opposite result," the firm said.
Read on.
Thursday, February 17, 2011
GOP pushes birth control for horses?
Republican representative has introduced a spending bill amendment aimed at promoting the use of contraception – by horses.
Rep. Dan Burton (R-Ind.) introduced the amendment, which would control the population of wild horses and burros as an alternative to the costly practice of capturing the animals and holding them in pens, which the Bureau of Land Management currently employs.
The amendment would modify the budget to bar “funds made available by this Act [from being] used for the gathers and removals of free-roaming wild horses and burros, except for the purpose of fertility control.”
Burton’s amendment comes as Republicans seek to cut off funding for Title X, the only federal program devoted to family planning among humans.
Read more: http://www.politico.com/news/stories/0211/49689.html#ixzz1EBYiUr9q
Rep. Dan Burton (R-Ind.) introduced the amendment, which would control the population of wild horses and burros as an alternative to the costly practice of capturing the animals and holding them in pens, which the Bureau of Land Management currently employs.
The amendment would modify the budget to bar “funds made available by this Act [from being] used for the gathers and removals of free-roaming wild horses and burros, except for the purpose of fertility control.”
Burton’s amendment comes as Republicans seek to cut off funding for Title X, the only federal program devoted to family planning among humans.
Read more: http://www.politico.com/news/stories/0211/49689.html#ixzz1EBYiUr9q
Arizona SB1259 Foreclosures; Proof of Ownership Passes Senate
A. FOR ANY BENEFICIARY WHO IS NOT THE ORIGINATING BENEFICIARY ON THE DEED OF TRUST, THE BENEFICIARY SHALL RECORD A SUMMARY DOCUMENT REGARDING THE BENEFICIARY’S LEGAL INTEREST IN THE DEED OF TRUST THAT CONTAINS THE FOLLOWING INFORMATION IN CHRONOLOGICAL ORDER:
THE FULL NAME AND ADDRESS OF RECORD OF EVERY PRIOR BENEFICIARY ON THE DEED OF TRUST.
THE DATE, RECORDATION NUMBER OR OTHER UNIQUE DESIGNATION OF THE INSTRUMENT, AND A DESCRIPTION OF THE INSTRUMENT THAT CONVEYED THE INTEREST OF EACH BENEFICIARY.
THE SUMMARY DOCUMENT PRESCRIBED BY THIS SECTION SHALL BE RECORDED AT THE SAME TIME AND PLACE THAT THE NOTICE OF TRUSTEE’S SALE IS RECORDED PURSUANT TO SECTION 33-808 AND A COPY OF THE SUMMARY DOCUMENT SHALL BE ATTACHED TO ANY NOTICE OF TRUSTEE’S SALE THAT IS REQUIRED TO BE PROVIDED AS PRESCRIBED IN SECTION 33-809.
C. FAILURE TO PROPERLY RECORD THE SUMMARY DOCUMENT THAT DEMONSTRATES EVIDENCE OF TITLE FOR THE FORECLOSING BENEFICIARY AS OF THE DATE OF THE TRUSTEE’S SALE AS PRESCRIBED BY THIS SECTION RESULTS IN A VOIDABLE SALE.
D. ANY PERSON WITH AN INTEREST IN THE TRUST PROPERTY MAY FILE AN ACTION TO VOID THE TRUSTEE’S SALE FOR FAILURE TO COMPLY WITH THIS SECTION AND IS ENTITLED TO AN AWARD OF ATTORNEY FEES AS WELL AS DAMAGES AS OTHERWISE PROVIDED BY LAW IF THE PERSON SUBSTANTIALLY PREVAILS, INCLUDING AN AWARD OF ATTORNEY FEES FOR ANY INJUNCTION OR OTHER PROVISIONAL REMEDIES RELATED TO THE CLAIM.
To view the testimony on this bill click the link below.
http://azleg.granicus.com/MediaPlayer.php?view_id=13&clip_id=8276
SB 1259 - Introduced Version - Arizona State Legislature via MyGov365.com
THE FULL NAME AND ADDRESS OF RECORD OF EVERY PRIOR BENEFICIARY ON THE DEED OF TRUST.
THE DATE, RECORDATION NUMBER OR OTHER UNIQUE DESIGNATION OF THE INSTRUMENT, AND A DESCRIPTION OF THE INSTRUMENT THAT CONVEYED THE INTEREST OF EACH BENEFICIARY.
THE SUMMARY DOCUMENT PRESCRIBED BY THIS SECTION SHALL BE RECORDED AT THE SAME TIME AND PLACE THAT THE NOTICE OF TRUSTEE’S SALE IS RECORDED PURSUANT TO SECTION 33-808 AND A COPY OF THE SUMMARY DOCUMENT SHALL BE ATTACHED TO ANY NOTICE OF TRUSTEE’S SALE THAT IS REQUIRED TO BE PROVIDED AS PRESCRIBED IN SECTION 33-809.
C. FAILURE TO PROPERLY RECORD THE SUMMARY DOCUMENT THAT DEMONSTRATES EVIDENCE OF TITLE FOR THE FORECLOSING BENEFICIARY AS OF THE DATE OF THE TRUSTEE’S SALE AS PRESCRIBED BY THIS SECTION RESULTS IN A VOIDABLE SALE.
D. ANY PERSON WITH AN INTEREST IN THE TRUST PROPERTY MAY FILE AN ACTION TO VOID THE TRUSTEE’S SALE FOR FAILURE TO COMPLY WITH THIS SECTION AND IS ENTITLED TO AN AWARD OF ATTORNEY FEES AS WELL AS DAMAGES AS OTHERWISE PROVIDED BY LAW IF THE PERSON SUBSTANTIALLY PREVAILS, INCLUDING AN AWARD OF ATTORNEY FEES FOR ANY INJUNCTION OR OTHER PROVISIONAL REMEDIES RELATED TO THE CLAIM.
To view the testimony on this bill click the link below.
http://azleg.granicus.com/MediaPlayer.php?view_id=13&clip_id=8276
SB 1259 - Introduced Version - Arizona State Legislature via MyGov365.com
Biloxi Buzz for Thursday
FORECLOSED: But Never Missed A Payment
Cat Thief Steals From Neighbors In California (VIDEO)
Last week's poll had asked:
A mother has been given an official police caution for leaving her 14-year-old in charge of his young brother in England. When is a child old enough to be left? JL readers answered it is the decision of the parent. This week's poll is now up.
Cat Thief Steals From Neighbors In California (VIDEO)
House Votes to End Alternate Jet Engine Program — In a sign that more than half the Republican freshmen are willing to cut military spending, the House voted 233-198 on Wednesday to cancel an alternate fighter jet engine that the Bush and Obama administrations had tried to kill for the last five years.
Scott Brown: I Was Sexually Abused
PBS stars fight for funding — Rep. Ed Markey (D-Mass.) rarely holds press conferences with animated aardvarks, but he went for it on Wednesday, coaxing the shy Arthur the Aardvark up to the podium. — “Come over here Arthur,” Markey beckoned to the human-sized title character in the PBS series …
Last week's poll had asked:
A mother has been given an official police caution for leaving her 14-year-old in charge of his young brother in England. When is a child old enough to be left? JL readers answered it is the decision of the parent. This week's poll is now up.
Big Banks Face Fines on Role of Servicers By Regulators
A review of mortgage-servicing practices by U.S. regulators found serious problems with internal controls and staffing levels at the companies, which are likely to result in formal enforcement action against more than a dozen major financial institutions, according to people familiar with the situation.
The penalties against Bank of America Corp., J.P. Morgan Chase & Co., Wells Fargo & Co. and 11 other home-loan servicers being investigated since last fall over breakdowns in procedures for payment collection, loan modifications and foreclosures could include fines and changes in how the companies operate, these people said.
While regulators haven't agreed on exact details of the punishment, some banks could be notified within days of the enforcement action being taken against them.
In testimony prepared for a Senate Banking Committee hearing Thursday, John Walsh, acting head of the Office of the Comptroller of the Currency, which oversees most of the nation's biggest banks, said the probe found "critical deficiencies and shortcomings" in document procedures, oversight of outside law firms and other areas.
"By emphasizing timeliness and cost efficiency over quality and accuracy, examined institutions fostered an operational environment that is not consistent with conducting foreclosure processes in a safe and sound manner," Mr. Walsh said in his remarks. The problems violated state laws and had "an adverse affect on the functioning of mortgage markets and the U.S. economy as a whole."
Resd on.
The penalties against Bank of America Corp., J.P. Morgan Chase & Co., Wells Fargo & Co. and 11 other home-loan servicers being investigated since last fall over breakdowns in procedures for payment collection, loan modifications and foreclosures could include fines and changes in how the companies operate, these people said.
While regulators haven't agreed on exact details of the punishment, some banks could be notified within days of the enforcement action being taken against them.
In testimony prepared for a Senate Banking Committee hearing Thursday, John Walsh, acting head of the Office of the Comptroller of the Currency, which oversees most of the nation's biggest banks, said the probe found "critical deficiencies and shortcomings" in document procedures, oversight of outside law firms and other areas.
"By emphasizing timeliness and cost efficiency over quality and accuracy, examined institutions fostered an operational environment that is not consistent with conducting foreclosure processes in a safe and sound manner," Mr. Walsh said in his remarks. The problems violated state laws and had "an adverse affect on the functioning of mortgage markets and the U.S. economy as a whole."
Resd on.
Allstate sues JPMorgan Chase over sale of toxic loans
Written by Biloxi
This is the second lawsuit by Allstate to sue a major bank over sales of toxic loans. Last year, Allstate sued Bank of America and eighteen other defendants including several former Countrywide officials and ex-CEO Angelo Mozillo. According to the complaint, Allstate, alleged that Countrywide officials misled the company into believing the mortgage-backed securities it bought were safe, and the company suffered on more than $700 million of mortgage debt that it bought from Countywide. Allstate used sampling to prove and confirm that Countrywide lied to Allstate when the selling mortgages.
Now, Allstate has sued JP Morgan Chase and subsidiaries Bear Stearns and Washington Mutual for fraudulently selling the company more than $750 million in residential mortgage-backed securities (RMBS) backed by toxic loans. Like the Countrywide lawsuit, Allstate used sampling to prove its case against JP Morgan Chase according to the lawsuit:
Allstate selected a random sample of loans from each offering in which it invested to test Defendants’ representations on a loan-level basis. Using techniques and methodologies that only recently became available, Allstate conducted loan-level analyses on nearly 26,809 mortgage loans underlying its Certificates, across 17 of the offerings at issue here.
For each offering, Allstate attempted to analyze 800 defaulted loans and 800 randomly-sampled loans from within the collateral pool. These sample sizes are more than sufficient to provide statistically-significant data to demonstrate the degree of misrepresentation of the Mortgage Loans’ characteristics. Analyzing data for each Mortgage Loan in each Offering would have been cost-prohibitive and unnecessary. Statistical sampling is an accepted method of establishing reliable conclusions about broader data sets, and is routinely used by courts, government agencies, and private businesses. As the size of a sample increases, the reliability of its estimations of the total population’s characteristics increase as well. Experts in RMBS cases have found that a sample size of just 400 loans can provide statistically significant data, regardless of the size of the actual loan pool, because it is unlikely that such a sample would yield results markedly different from results for the entire population.
In a nutshell from the lawsuit, Allstate summarizes that JP Morgan Chase lied:
the disclosed underwriting standards were systematically ignored in originating or otherwise acquiring non-compliant loans. For instance, recent reviews of the loan files underlying some of Allstate’s Certificates reveal a pervasive lack of proper documentation, facially absurd (yet unchecked) claims about the borrower’s purported income, and the routine disregard of purported underwriting guidelines. Based on data compiled from third-party due diligence firms, the federal Financial Crisis Inquiry Commission (“FCIC”) noted in its January 2011 report:
The Commission concludes that firms securitizing mortgages failed to perform adequate due diligence on the mortgages they purchased and at times knowingly waived compliance with underwriting standards. Potential investors were not fully informed or were misled about the poor quality of the mortgages contained in some mortgage-related securities. These problems appear to be significant.
The good news is that this new bombshell gives the green light for any company who believes that the banks or its predecessor was dishonest in representing any and all deal components, and wishes to use statistical sampling to prove its case. The bad news for banks is that they inherited its predecessor or predecessor's toxic mortgages which left the banks holding the bag.
This is the second lawsuit by Allstate to sue a major bank over sales of toxic loans. Last year, Allstate sued Bank of America and eighteen other defendants including several former Countrywide officials and ex-CEO Angelo Mozillo. According to the complaint, Allstate, alleged that Countrywide officials misled the company into believing the mortgage-backed securities it bought were safe, and the company suffered on more than $700 million of mortgage debt that it bought from Countywide. Allstate used sampling to prove and confirm that Countrywide lied to Allstate when the selling mortgages.
Now, Allstate has sued JP Morgan Chase and subsidiaries Bear Stearns and Washington Mutual for fraudulently selling the company more than $750 million in residential mortgage-backed securities (RMBS) backed by toxic loans. Like the Countrywide lawsuit, Allstate used sampling to prove its case against JP Morgan Chase according to the lawsuit:
Allstate selected a random sample of loans from each offering in which it invested to test Defendants’ representations on a loan-level basis. Using techniques and methodologies that only recently became available, Allstate conducted loan-level analyses on nearly 26,809 mortgage loans underlying its Certificates, across 17 of the offerings at issue here.
For each offering, Allstate attempted to analyze 800 defaulted loans and 800 randomly-sampled loans from within the collateral pool. These sample sizes are more than sufficient to provide statistically-significant data to demonstrate the degree of misrepresentation of the Mortgage Loans’ characteristics. Analyzing data for each Mortgage Loan in each Offering would have been cost-prohibitive and unnecessary. Statistical sampling is an accepted method of establishing reliable conclusions about broader data sets, and is routinely used by courts, government agencies, and private businesses. As the size of a sample increases, the reliability of its estimations of the total population’s characteristics increase as well. Experts in RMBS cases have found that a sample size of just 400 loans can provide statistically significant data, regardless of the size of the actual loan pool, because it is unlikely that such a sample would yield results markedly different from results for the entire population.
In a nutshell from the lawsuit, Allstate summarizes that JP Morgan Chase lied:
the disclosed underwriting standards were systematically ignored in originating or otherwise acquiring non-compliant loans. For instance, recent reviews of the loan files underlying some of Allstate’s Certificates reveal a pervasive lack of proper documentation, facially absurd (yet unchecked) claims about the borrower’s purported income, and the routine disregard of purported underwriting guidelines. Based on data compiled from third-party due diligence firms, the federal Financial Crisis Inquiry Commission (“FCIC”) noted in its January 2011 report:
The Commission concludes that firms securitizing mortgages failed to perform adequate due diligence on the mortgages they purchased and at times knowingly waived compliance with underwriting standards. Potential investors were not fully informed or were misled about the poor quality of the mortgages contained in some mortgage-related securities. These problems appear to be significant.
The good news is that this new bombshell gives the green light for any company who believes that the banks or its predecessor was dishonest in representing any and all deal components, and wishes to use statistical sampling to prove its case. The bad news for banks is that they inherited its predecessor or predecessor's toxic mortgages which left the banks holding the bag.
Wednesday, February 16, 2011
JPMorgan Faces Texas Sheriff in Showdown Over Eviction Case Fees
A JPMorgan Chase & Co. branch in El Paso, Texas, may have furniture and computers seized by the sheriff unless the bank complies with a judge’s order to pay the legal bills of a single mother whose eviction case he dismissed.
The manager of the Chase branch was served on Jan. 26 with court papers that instructed the New York-based company to pay attorney Richard A. Roman’s $5,000 in fees, according to Detective Hector Lara, an El Paso County sheriff’s officer. The manager, Jose Gomez, told Lara that the branch’s gear is protected by the Federal Deposit Insurance Corp. and that he would contact the bank’s security staff and the Federal Bureau of Investigation, Lara said today in a telephone interview.
Lara said he’s waiting for an opinion from the county attorney on whether the bank’s property can be seized.
“They don’t have a problem putting my client out in the street,” Roman said. “But when somebody prevails against a bank, they pull every string in the book to avoid paying.”
Read on.
The manager of the Chase branch was served on Jan. 26 with court papers that instructed the New York-based company to pay attorney Richard A. Roman’s $5,000 in fees, according to Detective Hector Lara, an El Paso County sheriff’s officer. The manager, Jose Gomez, told Lara that the branch’s gear is protected by the Federal Deposit Insurance Corp. and that he would contact the bank’s security staff and the Federal Bureau of Investigation, Lara said today in a telephone interview.
Lara said he’s waiting for an opinion from the county attorney on whether the bank’s property can be seized.
“They don’t have a problem putting my client out in the street,” Roman said. “But when somebody prevails against a bank, they pull every string in the book to avoid paying.”
Read on.
Phila. homeowner wins judgment against Wells Fargo over mortgage fees
It’s not clear how this story will turn out, but right now Patrick Rodgers is living a pay-back fantasy probably shared by millions of struggling U.S. homeowners.
Frustrated by a dispute with Wells Fargo Home Mortgage and by his inability to get answers to questions, the West Philadelphia homeowner took the mortgage company to court last fall.
When Wells Fargo still didn’t respond, Rodgers got a $1,000 default judgment against it for failing to answer his formal questions, as required by a federal law called the Real Estate Settlement Procedures Act.
And when the mortgage company didn’t pay – does something sound familiar? – Rodgers turned to Philadelphia’s sheriff.
The result: At least for the moment, the contents of Wells Fargo Home Mortgage, 1341 N. Delaware Ave., are scheduled for sheriff’s sale on March 4 to satisfy the judgment and pay about $200 for court and sheriff’s costs.
Rodgers has even written his own headline: “Philadelphia homeowner ‘forecloses’ on Wells Fargo.”
Read more of this awesome story here…
Frustrated by a dispute with Wells Fargo Home Mortgage and by his inability to get answers to questions, the West Philadelphia homeowner took the mortgage company to court last fall.
When Wells Fargo still didn’t respond, Rodgers got a $1,000 default judgment against it for failing to answer his formal questions, as required by a federal law called the Real Estate Settlement Procedures Act.
And when the mortgage company didn’t pay – does something sound familiar? – Rodgers turned to Philadelphia’s sheriff.
The result: At least for the moment, the contents of Wells Fargo Home Mortgage, 1341 N. Delaware Ave., are scheduled for sheriff’s sale on March 4 to satisfy the judgment and pay about $200 for court and sheriff’s costs.
Rodgers has even written his own headline: “Philadelphia homeowner ‘forecloses’ on Wells Fargo.”
Read more of this awesome story here…
New York to Assure Legal Aid in Foreclosure Cases
New York court officials outlined procedures Tuesday aimed at assuring that all homeowners facing foreclosure were represented by a lawyer, a significant shift that could give thousands of families a chance to strike a better deal with lenders.
Criminal defendants are guaranteed a lawyer, but New York will be the first state to try to extend that pledge to foreclosures, which are civil matters. There are about 80,000 active foreclosure cases in New York courts.
Under the procedures, which will be put in place in Queens and Orange Counties in the next few weeks and then across the entire state, any homeowner in foreclosure who does not have a lawyer will be supplied one by legal aid groups or other volunteer groups.
New York has been successful in getting foreclosure defendants to show up at settlement meetings overseen by a judge and attended by the lender, but most are unassisted and have little idea how to proceed. The cases are overwhelming the courts.
The state’s chief judge, Jonathan Lippman, said the current system was “such an uneven playing field.”
“Banks wind up with the property and the homeowner winds up over the cliff, on the street,” Judge Lippman said. “It doesn’t serve anyone’s interest, including the bank’s.”
Check out the rest here…
Criminal defendants are guaranteed a lawyer, but New York will be the first state to try to extend that pledge to foreclosures, which are civil matters. There are about 80,000 active foreclosure cases in New York courts.
Under the procedures, which will be put in place in Queens and Orange Counties in the next few weeks and then across the entire state, any homeowner in foreclosure who does not have a lawyer will be supplied one by legal aid groups or other volunteer groups.
New York has been successful in getting foreclosure defendants to show up at settlement meetings overseen by a judge and attended by the lender, but most are unassisted and have little idea how to proceed. The cases are overwhelming the courts.
The state’s chief judge, Jonathan Lippman, said the current system was “such an uneven playing field.”
“Banks wind up with the property and the homeowner winds up over the cliff, on the street,” Judge Lippman said. “It doesn’t serve anyone’s interest, including the bank’s.”
Check out the rest here…
California Citigroup assignment fraud
Written by Biloxi
An anonymous homeowner wrote a letter of complaint of U.S. Bank National Association, Citimortgage and Acqura Loan Services to the Office of Comptroller of Currency. Office of Comptroller of Currency or OCC is an independent bureau of the United States Department of the Treasury that serves to charter, regulate, and supervise all national banks and the federal branches and agencies of foreign banks in the United States. In the letter to OCC, the anonymous homeowner provide details and proof of fraudulent document in the ownership of his/her home. U.S. Bank failed to address any of his/her issues and concerns from his/her letter dated January 18, 2010. The anonymous homeowner claimed to have proof that the bank fabricated and recorded another fraudulent document in the San Diego Recorder Office on February 7, 2011.
In addition, the anonymous homeowners provide proof of documents that the assignor identified in the assignment of the mortgage is not the original lender of the homeowner's note. The assignment was electronically filed by Mortgage Electronic Registration Service (MERS). And documents recorded in the San Diego Recorder office was robo-signed by an employee of Orion Financial Services located in Texas.
The anonymous homeowners presented an excellent case against the banks including Citimortgage. Citimortgage is no stranger to robo-signing. CitiMortgage admitted to foreclosure paperwork problems, robo-signing, and halted foreclosure procedures last year according to Harold Lewis, an executive with the CitiMortgage subsidiary:
The other 4,000 documents that are being reviewed were prepared at its Dallas processing center and "may not have been signed in the presence of a notary, to assure that these affidavits are substantively correct and properly executed." Lewis said these affidavits were also be refilled.
Last year, Citigroup settled fraud cases tied to Texas employee of Orion Financial Group Inc. that robo-signed mortgage assignments. If I were Citimortgage, I would contact the anonymous homeowner before the anonymous homeowner decide to take his proof in the courtroom. In the anonymous homeowner's letter to the OCC, D.M. Wileman, an employee of Orion Financial Group, robo-signed the homeowner's mortgage assignment. In fact, Mr. Wileman is on a list (see pg. 9) with other employees at other financial institutions and companies hired by the financial institutions that participated in robo-signing and signing fraudulent documents. Now, the real question is what action with OCC take in the anonymous homeowner's case since the Citigroup admitted to robo-signing.
An anonymous homeowner wrote a letter of complaint of U.S. Bank National Association, Citimortgage and Acqura Loan Services to the Office of Comptroller of Currency. Office of Comptroller of Currency or OCC is an independent bureau of the United States Department of the Treasury that serves to charter, regulate, and supervise all national banks and the federal branches and agencies of foreign banks in the United States. In the letter to OCC, the anonymous homeowner provide details and proof of fraudulent document in the ownership of his/her home. U.S. Bank failed to address any of his/her issues and concerns from his/her letter dated January 18, 2010. The anonymous homeowner claimed to have proof that the bank fabricated and recorded another fraudulent document in the San Diego Recorder Office on February 7, 2011.
In addition, the anonymous homeowners provide proof of documents that the assignor identified in the assignment of the mortgage is not the original lender of the homeowner's note. The assignment was electronically filed by Mortgage Electronic Registration Service (MERS). And documents recorded in the San Diego Recorder office was robo-signed by an employee of Orion Financial Services located in Texas.
The anonymous homeowners presented an excellent case against the banks including Citimortgage. Citimortgage is no stranger to robo-signing. CitiMortgage admitted to foreclosure paperwork problems, robo-signing, and halted foreclosure procedures last year according to Harold Lewis, an executive with the CitiMortgage subsidiary:
The other 4,000 documents that are being reviewed were prepared at its Dallas processing center and "may not have been signed in the presence of a notary, to assure that these affidavits are substantively correct and properly executed." Lewis said these affidavits were also be refilled.
Last year, Citigroup settled fraud cases tied to Texas employee of Orion Financial Group Inc. that robo-signed mortgage assignments. If I were Citimortgage, I would contact the anonymous homeowner before the anonymous homeowner decide to take his proof in the courtroom. In the anonymous homeowner's letter to the OCC, D.M. Wileman, an employee of Orion Financial Group, robo-signed the homeowner's mortgage assignment. In fact, Mr. Wileman is on a list (see pg. 9) with other employees at other financial institutions and companies hired by the financial institutions that participated in robo-signing and signing fraudulent documents. Now, the real question is what action with OCC take in the anonymous homeowner's case since the Citigroup admitted to robo-signing.
Tuesday, February 15, 2011
Open thread for Tuesday
"If the American People allow private banks to control the issuance of the currency, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the People of all their Property until their Children will wake up homeless on the continent their Fathers conquered."---Thomas Jefferson
Jamie Dimon: Don't be hatin' on bankers when it's all YOUR fault!
Jamie Dimon kicked off his Sunday morning appearance on Fareed Zakaria's show with a bit of whine about how mean, mean, mean we all are to bankers. He kicks things right off by blaming the victims:
DIMON: OK. In the United States of America, only one-third of credit is provided by banks. Bank lending actually went up after Lehman Brothers failed, not down. It's a huge misconception. Two- thirds of credit is provided by individuals, corporations, pension plans, you know, et cetera. The huge reduction in credit supplied was the credit supplied in directly to the marketplace. In fact, if you go to any place around the world, you ask people, did you do something more conservative with your money after Lehman went down? Which everyone says, yes.
I would say, well, you caused the crisis. You got scared. You ran. It's perfectly legitimate as an individual protecting yourself. And JPMorgan last year lent or financed $1.4 trillion for corporations, individual around the world, up pretty substantially from the year before and I believe substantially from the year before that.
Funny how the story changes. When he testified before the Financial Crisis Inquiry Commission, he said this:
"Reflecting on the causes of the crisis, Jamie Dimon, CEO of JPMorgan testified to the FCIC, "I blame the management teams 100% and...no one else. (Page 18)"
Or here, where he realizes what gambling with those brokered subprime loans cost JP Morgan (Page 91):
"JP Morgan CEO Jamie Dimon testified to the FCIC that his firm eventually ended its [mortgage] broker-originated business in 2009 after discovering the loans had more than twice the losses of the loans that JP Morgan itself originated."
DIMON: OK. In the United States of America, only one-third of credit is provided by banks. Bank lending actually went up after Lehman Brothers failed, not down. It's a huge misconception. Two- thirds of credit is provided by individuals, corporations, pension plans, you know, et cetera. The huge reduction in credit supplied was the credit supplied in directly to the marketplace. In fact, if you go to any place around the world, you ask people, did you do something more conservative with your money after Lehman went down? Which everyone says, yes.
I would say, well, you caused the crisis. You got scared. You ran. It's perfectly legitimate as an individual protecting yourself. And JPMorgan last year lent or financed $1.4 trillion for corporations, individual around the world, up pretty substantially from the year before and I believe substantially from the year before that.
Funny how the story changes. When he testified before the Financial Crisis Inquiry Commission, he said this:
"Reflecting on the causes of the crisis, Jamie Dimon, CEO of JPMorgan testified to the FCIC, "I blame the management teams 100% and...no one else. (Page 18)"
Or here, where he realizes what gambling with those brokered subprime loans cost JP Morgan (Page 91):
"JP Morgan CEO Jamie Dimon testified to the FCIC that his firm eventually ended its [mortgage] broker-originated business in 2009 after discovering the loans had more than twice the losses of the loans that JP Morgan itself originated."
Warren Buffett dumps Bank of America shares, loads up on Wells Fargo
Warren Buffett, the widely followed chairman of Berkshire Hathaway, sold the company’s entire stake in Bank of America while adding to his holdings in Wells Fargo, one of Bershire’s core holdings for more than two decades.
Berkshire’s stake in BofA (NYSE: BAC) was relatively small at just 5 million shares, worth about $745 million. California’s largest bank has not been among Buffett’s long-term financial holdings that include American Express (NYSE: AXP) and M&T Bank (NYSE: MTB) in addition to Wells. (NYSE: WFC)
Buffett picked up 6.2 million shares of Wells Fargo in the fourth quarter, according to a filing with the Securities and Exchange Commission. The Wells Fargo stake of about 342 million shares now accounts for a fifth of Berkshire’s $52 billion investment portfolio.
Read on.
Berkshire’s stake in BofA (NYSE: BAC) was relatively small at just 5 million shares, worth about $745 million. California’s largest bank has not been among Buffett’s long-term financial holdings that include American Express (NYSE: AXP) and M&T Bank (NYSE: MTB) in addition to Wells. (NYSE: WFC)
Buffett picked up 6.2 million shares of Wells Fargo in the fourth quarter, according to a filing with the Securities and Exchange Commission. The Wells Fargo stake of about 342 million shares now accounts for a fifth of Berkshire’s $52 billion investment portfolio.
Read on.
Biloxi Buzz for Tuesday
Hillary Clinton Talks Hair Clip, Handbags & Being A Grandmother
State Department Tweets To Iranians
GOP Facing Grassroots Pressure Over 'War On Contraception'
New Civil Rights Commission Suspends Printing Of New Black Panther Report — Newly appointed members of the U.S. Commission on Civil Rights closed their investigation of the New Black Panther Party voter intimidation case and suspended publication of hard copies of the report at a meeting last weekPopular Arizona sheriff considering a U.S. Senate run — Maricopa Sheriff Joe Arpaio said Monday he is open to the possibility of running for the seat of retiring Sen. Jon Kyl (R-Ariz.) in 2012. — Arpaio, the conservative sheriff famous for his hard-line anti-immigration stances …
Shirley Sherrod Sues Andrew Breitbart Over Video
Shirley Sherrod has filed a lawsuit against Andrew Breitbart over a video released by the conservative personality that lead to her ouster as an official at the USDA.
Breitbart was served on Saturday at the Conservative Political Action Conference (CPAC), according to the New York Times: "In the suit, which was filed in Washington on Friday, Ms. Sherrod says the video has damaged her reputation and prevented her from continuing her work."
The video first gained widespread public attention when it was posted on Breitbart's BigGovernment.com. The two-minute, 38-second clip was widely received as an admission by Sherrod, who is African American, that she had discriminated against a white farmer. Under immediate pressure from the Obama administration, Sherrod resigned from her position as the USDA's director of rural development in Georgia.
Read on.
Breitbart was served on Saturday at the Conservative Political Action Conference (CPAC), according to the New York Times: "In the suit, which was filed in Washington on Friday, Ms. Sherrod says the video has damaged her reputation and prevented her from continuing her work."
The video first gained widespread public attention when it was posted on Breitbart's BigGovernment.com. The two-minute, 38-second clip was widely received as an admission by Sherrod, who is African American, that she had discriminated against a white farmer. Under immediate pressure from the Obama administration, Sherrod resigned from her position as the USDA's director of rural development in Georgia.
Read on.
Foreclosure Fraud Class Action | National Organization of Assistance for Homeowners vs Wells Fargo
The National Organization of Assistance For Homeowners of California say Wells Fargo and a slew of others violated their own guidelines to sell plaintiffs’ mortgages above their actual vales to bulk investors, knowing the scheme would result in a liquidity crisis that would gravely damage plaintiffs.
National Organization of Assistance for Homeowners vs Wells Fargo
National Organization of Assistance for Homeowners vs Wells Fargo
Monday, February 14, 2011
Programs of youth and families on House Appropriations chopping block
Late Friday, the House Appropriations Committee released its proposed continuing resolution bill, which includes plans to eliminate completely the Corporation for National and Community Service and the Job Corps, and to make severe reductions in many other programs.
Read the detailed summary of the bill here.
This is a list of the programs that affect youth and families which are currently on the House Appropriations chopping block.
Program: Job Training Programs
Cut: $2 billion
Notes: There is much fear among youth advocates that this cut could actually include AmeriCorps or the entire Corporation for National and Community Services. The Republican Study Group proposed eliminating CNCS in recently submitted legislation, and an action alert sent today by Voices for National Service said that the appropriations bill “will eliminate [2011] funding for programs of the Corporation for National and Community Service, including AmeriCorps.”
CNCS Chief of Field Operations Michael Berning sent an e-mail to state service commissions encouraging them to maintain level heads.
“I’ve participated in several discussions with CNCS senior leadership within the past 24 hrs and I assure you that no one yet knows with certitude about specific numbers,” Berning said in the e-mail.
Program: Office of National Drug Control Policy
Cut: $69 million
Notes: This could be the end (for now) of ONDCP’s media campaign, which received $70 million in 2009 and $45 million in 2010.
Program: State and Local Law Enforcement Assistance
Cut: $256 million
Notes: The number matches up roughly with the Byrne Discretionary and Competitive Grants appropriation for 2010 ($225 million). That pot of money usually funds a slew of congressional earmarks every year, many of them for juvenile justice ventures, but could be viewed as largely expendable by appropriators given the resolve to ban earmarks.
Program: Juvenile Justice
Cut: $2.3 million
Notes: A miniscule amount of the overall juvenile justice budget, but advocates are concerned because backwards movement of appropriations tend to build momentum that way, and the 2012 appropriations battle may not be much better than the current one.
Program: Maternal and Child Health Block Grants
Cut: $210 million
Notes: Received $662 million in 2009 and 2010. The home visitation program, which was part of the health care reform bill, is authorized for $250 million within the Maternal and Child Health Block Grants in 2011.
Program: Substance Abuse and Mental Health Services
Cut: $96 million
Notes: The budget for SAMHSA is $3.4 billion, so there is no telling where this would come from.
Program: Community Services Block Grant
Cut: $405 million
Notes: Funded at $746 million last year. President Obama mentioned in the State of the Union that his budget would propose “cuts to things I care deeply about, like community-action programs.” Those programs are a major recipient of CSBG funds.
Program: Community Health Centers
Cut: $1.3 billion
Notes: The National Association of Community Health Centers said in a statement this week that the cut would cause the centers to “lose the capacity to serve 11 million patients over the next year, with well over 3.3 million current patients losing their care within the next few months.”
Program: Women, Infants and Children
Cut: $758 million
Notes: Would cut about 10 percent of the $7.3 billion appropriated last year for WIC, which provides assistance with food and health care for women with young children who are living in poverty.
http://republicans.appropriations.house.gov/_files/ProgramCutsFY2011ContinuingResolution.pdf
JPMorgan to Start Social Media Fund
Hoping to seize upon investor excitement over social-networking companies like Facebook, JPMorgan Chase is planning to start a new fund to invest in an array of Internet and new media companies, people briefed on the matter told DealBook on Sunday.
The proposed fund, which will be run by JPMorgan’s asset-management unit, is seeking to raise between $500 million and $750 million from wealthy investors to pour into privately held technology companies like Twitter and the social-buying site Groupon, these people said.
The idea is to place bets on companies with established business models and steady revenues before they go public in widely anticipated stock sales.
Several popular social-media companies, including the professional social network LinkedIn and the Internet radio company Pandora, have already filed to go public. Those filings presage even more eagerly-anticipated stock sales by Groupon and especially Facebook.
Interest in these companies has been running high recently. Groupon raised $950 million in financing from several big investment firms, after having spurned a $6 billion takeover offer by Google. And trading in existing shares of these companies on private markets has been frenzied over the past few months, with Facebook valued at $53 billion on SharesPost, a so-called “secondary market.”
JPMorgan plans to buy and sell shares in these companies on behalf of clients, and will not directly invest the firm’s own money, one of these people said. But simply having a base of ready base of retail investors could give JPMorgan’s investment bank a competitive edge in winning business from the fledgling technology firms. Analysts have long viewed retail customers as a more stable source of capital, compared to money that moves in and out of stocks owned by hedge funds and other institutional investors.
Read on.dealbook.nytimes.com/2011/02/13/jpmorgan-to-start-social-media-fund/
The proposed fund, which will be run by JPMorgan’s asset-management unit, is seeking to raise between $500 million and $750 million from wealthy investors to pour into privately held technology companies like Twitter and the social-buying site Groupon, these people said.
The idea is to place bets on companies with established business models and steady revenues before they go public in widely anticipated stock sales.
Several popular social-media companies, including the professional social network LinkedIn and the Internet radio company Pandora, have already filed to go public. Those filings presage even more eagerly-anticipated stock sales by Groupon and especially Facebook.
Interest in these companies has been running high recently. Groupon raised $950 million in financing from several big investment firms, after having spurned a $6 billion takeover offer by Google. And trading in existing shares of these companies on private markets has been frenzied over the past few months, with Facebook valued at $53 billion on SharesPost, a so-called “secondary market.”
JPMorgan plans to buy and sell shares in these companies on behalf of clients, and will not directly invest the firm’s own money, one of these people said. But simply having a base of ready base of retail investors could give JPMorgan’s investment bank a competitive edge in winning business from the fledgling technology firms. Analysts have long viewed retail customers as a more stable source of capital, compared to money that moves in and out of stocks owned by hedge funds and other institutional investors.
Read on.dealbook.nytimes.com/2011/02/13/jpmorgan-to-start-social-media-fund/
Biloxi Buzz for Monday
New charges to be filed against Loughner
AP Source: Obama to seek changes in Pell Grants — WASHINGTON - President Barack Obama's budget plan would cut $100 billion from Pell Grants and other higher education programs over a decade through belt-tightening and use the savings to keep the maximum college financial aid award at $5,550, an administration official said.
Boehner on birthers: 'It's not my job to tell the American people what to think' — House Speaker John Boehner (R-Ohio) said Sunday that while he believes President Obama is an American citizen and a Christian, Americans have a right to think otherwise if they so choose.
No Argument: Thomas Keeps 5-Year Silence — WASHINGTON — The anniversary will probably be observed in silence. — A week from Tuesday, when the Supreme Court returns from its midwinter break and hears arguments in two criminal cases, it will have been five years since Justice Clarence Thomas has spoken during a court argument.
Home-loan program hobbled by lax oversight
Treasury not ‘getting tough’ with banks to stem foreclosures, report finds
With millions of homeowners still struggling to stay in their homes, the Obama administration’s $75 billion foreclosure prevention program has been weakened, perhaps fatally, by lax oversight and a posture of cooperation—rather than enforcement—with the nation’s biggest banks. Those banks, Bank of America, Wells Fargo, JPMorgan Chase, and Citibank, service the majority of mortgages.
Despite a dismal showing for the program, rising complaints from homeowners, and repeated threats from officials, the government has levied no penalties against even the most error-prone banks and mortgage servicers. In fact, despite issuing public warnings for more than a year about imposing penalties, the Treasury Department told ProPublica this week they don’t even have the power to punish servicers for wrongfully denying help to homeowners. Instead of toughening the program, Treasury has actually loosened it in the face of industry lobbying.
Over the past year, ProPublica has been exploring why the government’s program has helped so few homeowners. Over the coming weeks, we will be detailing how the administration quietly retreated from a plan to get tough on banks, why the mortgage servicing industry lacks incentives to invest in helping homeowners, how the industry succeeded in thwarting oversight, and what reforms could lead to more help for homeowners.
The stories are based on newly disclosed data, lobbying disclosures, dozens of interviews with insiders, members of Congress, and others. Today’s story looks at the timidity of Treasury’s oversight, a conclusion echoed in a government report Wednesday.
“At some point, Treasury needs to ask itself what value there is in a program under which not only participation, but also compliance with the rules, is voluntary,” says the new report, from the special inspector general for the TARP. “Treasury needs to recognize the failings of [the program] and be willing to risk offending servicers. And if getting tough means risking servicer flight, so be it; the results could hardly be much worse.”
The administration launched the program nearly two years ago, in early 2009, promising it would help three million to four million troubled American borrowers rework the terms of their mortgages. Amid widespread reports that servicers have been wrongly rejecting homeowners, losing paperwork, and otherwise breaking the program’s rules, it appears the program will fall far short. The Congressional Oversight Panel now estimates fewer than 800,000 homeowners will ultimately get lasting mortgage modifications.
An early problem for the program was that banks and other mortgage servicing companies were quickly letting homeowners into the program on a trial basis, but failing to make decisions regarding hundreds of thousands of homeowners while multiple government deadlines passed.
To push banks to solve the problem, senior Treasury official Michael Barr, who has since left the department, warned in a November 2009 conference call with journalists that if the banks didn’t clear their backlogs, the firms would “suffer consequences.” Treasury issued a press release the same day saying banks could face “monetary penalties and sanctions.”
It turns out Treasury had already taken most penalties off the table.
The program rests on contracts that Treasury drafted and banks signed onto. To participate in the program and receive potentially billions in government incentives, banks and mortgage servicers agreed to offer homeowners modifications under guidelines subsequently drawn up by the government. In exchange, they would receive $1,000 for a completed modification and up to $4,000 if the loan continued to perform.
The contracts say Treasury can withhold or claw back incentive payments to servicers when they violate the contract. Members of Congress and homeowner advocates have long pushed Treasury to issue such penalties. There have also been calls within Treasury itself.
Read on.
With millions of homeowners still struggling to stay in their homes, the Obama administration’s $75 billion foreclosure prevention program has been weakened, perhaps fatally, by lax oversight and a posture of cooperation—rather than enforcement—with the nation’s biggest banks. Those banks, Bank of America, Wells Fargo, JPMorgan Chase, and Citibank, service the majority of mortgages.
Despite a dismal showing for the program, rising complaints from homeowners, and repeated threats from officials, the government has levied no penalties against even the most error-prone banks and mortgage servicers. In fact, despite issuing public warnings for more than a year about imposing penalties, the Treasury Department told ProPublica this week they don’t even have the power to punish servicers for wrongfully denying help to homeowners. Instead of toughening the program, Treasury has actually loosened it in the face of industry lobbying.
Over the past year, ProPublica has been exploring why the government’s program has helped so few homeowners. Over the coming weeks, we will be detailing how the administration quietly retreated from a plan to get tough on banks, why the mortgage servicing industry lacks incentives to invest in helping homeowners, how the industry succeeded in thwarting oversight, and what reforms could lead to more help for homeowners.
The stories are based on newly disclosed data, lobbying disclosures, dozens of interviews with insiders, members of Congress, and others. Today’s story looks at the timidity of Treasury’s oversight, a conclusion echoed in a government report Wednesday.
“At some point, Treasury needs to ask itself what value there is in a program under which not only participation, but also compliance with the rules, is voluntary,” says the new report, from the special inspector general for the TARP. “Treasury needs to recognize the failings of [the program] and be willing to risk offending servicers. And if getting tough means risking servicer flight, so be it; the results could hardly be much worse.”
The administration launched the program nearly two years ago, in early 2009, promising it would help three million to four million troubled American borrowers rework the terms of their mortgages. Amid widespread reports that servicers have been wrongly rejecting homeowners, losing paperwork, and otherwise breaking the program’s rules, it appears the program will fall far short. The Congressional Oversight Panel now estimates fewer than 800,000 homeowners will ultimately get lasting mortgage modifications.
An early problem for the program was that banks and other mortgage servicing companies were quickly letting homeowners into the program on a trial basis, but failing to make decisions regarding hundreds of thousands of homeowners while multiple government deadlines passed.
To push banks to solve the problem, senior Treasury official Michael Barr, who has since left the department, warned in a November 2009 conference call with journalists that if the banks didn’t clear their backlogs, the firms would “suffer consequences.” Treasury issued a press release the same day saying banks could face “monetary penalties and sanctions.”
It turns out Treasury had already taken most penalties off the table.
The program rests on contracts that Treasury drafted and banks signed onto. To participate in the program and receive potentially billions in government incentives, banks and mortgage servicers agreed to offer homeowners modifications under guidelines subsequently drawn up by the government. In exchange, they would receive $1,000 for a completed modification and up to $4,000 if the loan continued to perform.
The contracts say Treasury can withhold or claw back incentive payments to servicers when they violate the contract. Members of Congress and homeowner advocates have long pushed Treasury to issue such penalties. There have also been calls within Treasury itself.
Read on.
Sunday, February 13, 2011
Lawsuit claim banks and Fannie/Freddie avoided state transfer taxes
Written by Biloxi
Two states accused banks and Fannie Mae and Freddie Mac made false statements in order to avoid paying required realty transfer taxes to states and municipalities. Last year, the state of Massachusetts sued Fannie and Freddie. Here is the description of the case brought by Massachusetts:
TAUNTON, Mass. (CN) - Massachusetts and 14 of its counties claim Fannie Mae and Freddie Mac conspired to duck property transfer taxes by falsely claiming to be government agencies. The commonwealth and its counties claim the defendants are corporations - not governmental bodies - and owe money for tens of thousands of property transfers and conveyances.
Now, the state of Nevada filed a similiar lawsuit and major banks are included. Fannie Mae is accused of lying and claiming that it was a government agency and therefore exempt from the taxes. From the filing:
Fannie Mae used those false records and/or statements to conceal and/or avoid its obligations to pay or transmit money owed to the State for payment of taxes upon the conveyance or transfer of title to real estate in the State by intentionally misrepresenting to the State that defendant Fannie Mae was a government agency exempt from conveyance or transfer taxes.
And I agree and Fannie and Freddie's claim that they are government entities appear to be false because Fannie and Freddie were a private and profit sharing corporation. As the lawsuit pointed out:
The statements and/or records in the Declaration of Value Forms that
Fannie Mae and Freddie Mac ("these entities") were exempt from transfer taxes under
NRS 375.090 because those entities were government agencies or government entities
were false for reason including without limitation as follows:
(1) Fannie and Freddie were and are private, for-profit corporations;
(2) in foreclosure activities, these entities are not fulfilling a governmental objective;
(3) the Government has not retained for itself the permanent right to appoint a majority of the directors of these entities;
(4) a majority of the directors of these entities were and are elected by the shareholders; and law.
Keep in mind that the lawsuits covered a period prior to the take over/conservatorship by U.S. Treasury in 2008. It will be interesting how Fannie and Freddie are going to defend themselves since they function like the major banks.Whatever the outcome is, this will cost Fannie and Freddie big time.
Two states accused banks and Fannie Mae and Freddie Mac made false statements in order to avoid paying required realty transfer taxes to states and municipalities. Last year, the state of Massachusetts sued Fannie and Freddie. Here is the description of the case brought by Massachusetts:
TAUNTON, Mass. (CN) - Massachusetts and 14 of its counties claim Fannie Mae and Freddie Mac conspired to duck property transfer taxes by falsely claiming to be government agencies. The commonwealth and its counties claim the defendants are corporations - not governmental bodies - and owe money for tens of thousands of property transfers and conveyances.
Now, the state of Nevada filed a similiar lawsuit and major banks are included. Fannie Mae is accused of lying and claiming that it was a government agency and therefore exempt from the taxes. From the filing:
Fannie Mae used those false records and/or statements to conceal and/or avoid its obligations to pay or transmit money owed to the State for payment of taxes upon the conveyance or transfer of title to real estate in the State by intentionally misrepresenting to the State that defendant Fannie Mae was a government agency exempt from conveyance or transfer taxes.
And I agree and Fannie and Freddie's claim that they are government entities appear to be false because Fannie and Freddie were a private and profit sharing corporation. As the lawsuit pointed out:
The statements and/or records in the Declaration of Value Forms that
Fannie Mae and Freddie Mac ("these entities") were exempt from transfer taxes under
NRS 375.090 because those entities were government agencies or government entities
were false for reason including without limitation as follows:
(1) Fannie and Freddie were and are private, for-profit corporations;
(2) in foreclosure activities, these entities are not fulfilling a governmental objective;
(3) the Government has not retained for itself the permanent right to appoint a majority of the directors of these entities;
(4) a majority of the directors of these entities were and are elected by the shareholders; and law.
Keep in mind that the lawsuits covered a period prior to the take over/conservatorship by U.S. Treasury in 2008. It will be interesting how Fannie and Freddie are going to defend themselves since they function like the major banks.Whatever the outcome is, this will cost Fannie and Freddie big time.
The revamp of Fannie and Freddie revealed
U.S. Treasury Secretary Timothy Geithner had laid out plans on Friday to reform Fannie Mae and Freddie Mac. The government took over the two troublesome mortage giants since 2008. A blueprint plan of Fannie and Freddie reform was supposed to be released last month, but Mr. Geithner pushed the date into February. Mr. Geithner laid out three options to reform the housing market:
Option 1: No government role, except for existing agencies like the Federal Housing Administration and guaranteeing mortgages for low and moderate income Americans.
Option 2. A government role that supports the mortgage market directly and explicitly guarantees mortgages only when the market is in trouble.
Option 3. A government role at all times, though not through government supported entities like Fannie and Freddie.
Here is more from the U.S. Treasury report:
Our plan champions the belief that Americans should have choices in housing that make sense for them and for their families. This means rental options near good schools and good jobs. It means access to credit for those Americans who want to own their own home, which has helped millions of middle class families build wealth and achieve the American Dream. And it means a helping hand for lower-income Americans, who are burdened by the strain of high housing costs.
But our plan also dramatically transforms the role of government in the housing market. In the past, the government’s financial and tax policies encouraged housing purchases and real estate investment over other sectors of our economy, and ultimately left taxpayers responsible for much of the risk incurred by a poorly supervised housing finance market.
Going forward, the government’s primary role should be limited to robust oversight and consumer protection, targeted assistance for low- and moderate-income homeowners and renters, and carefully designed support for market stability and crisis response. Our plan helps ensure that our nation’s economic health will not be jeopardized again by the fundamental flaws in the housing market that existed before the financial crisis. At the same time, this plan recognizes the fragile state of our housing market and is designed to ensure that reforms are implemented at a stable and measured pace to support economic recovery over the next several years.
Under our plan, private markets – subject to strong oversight and standards for consumer and investor protection – will be the primary source of mortgage credit and bear the burden for losses. Banks and other financial institutions will be required to hold more capital to withstand future recessions or significant declines in home prices, and adhere to more conservative underwriting standards that require homeowners to hold more equity in their homes.
Securitization, alongside credit from the banking system, should continue to play a major role in housing finance subject to greater risk retention, disclosure, and other key reforms. Our plan is also designed to eliminate unfair capital, oversight, and accounting advantages and promote a level playing field for all participants in the housing market.
The Administration will work with the Federal Housing Finance Agency (“FHFA”) to develop a plan to responsibly reduce the role of the Federal National Mortgage Association (“Fannie Mae”)
and the Federal Home Loan Mortgage Corporation (“Freddie Mac”) in the mortgage market and, ultimately, wind down both institutions. We recommend FHFA employ a number of policy levers – including increased guarantee fee pricing, increased down payment requirements, and other measures – to bring private capital back into the mortgage market and reduce taxpayer risk. As the market improves and Fannie Mae and Freddie Mac are wound down, it should be clear that the government is committed to ensuring that Fannie Mae and Freddie Mac have sufficient capital to perform under any guarantees issued now or in the future and the ability to meet any of their debt obligations. We believe that under our current Preferred Stock Purchase Agreements (PSPAs), there is sufficient funding to ensure the orderly and deliberate wind down of Fannie Mae and Freddie Mac, as described in our plan.
It sounds like Mr. Geithner wants to unwind down the role of the government in the housing market. Mr. Geithner said, " I think it is absolutely the case that the U.S. government provided too much support for housing, too strong incentives for investment in housing and we just took that too far." So far, it has cost the taxpayers about $150 billion. Fannie and Freddie have almost 90% of the mortgages that are being originated and we really got to start weaning the housing market off the government.
Option 1: No government role, except for existing agencies like the Federal Housing Administration and guaranteeing mortgages for low and moderate income Americans.
Option 2. A government role that supports the mortgage market directly and explicitly guarantees mortgages only when the market is in trouble.
Option 3. A government role at all times, though not through government supported entities like Fannie and Freddie.
Here is more from the U.S. Treasury report:
Our plan champions the belief that Americans should have choices in housing that make sense for them and for their families. This means rental options near good schools and good jobs. It means access to credit for those Americans who want to own their own home, which has helped millions of middle class families build wealth and achieve the American Dream. And it means a helping hand for lower-income Americans, who are burdened by the strain of high housing costs.
But our plan also dramatically transforms the role of government in the housing market. In the past, the government’s financial and tax policies encouraged housing purchases and real estate investment over other sectors of our economy, and ultimately left taxpayers responsible for much of the risk incurred by a poorly supervised housing finance market.
Going forward, the government’s primary role should be limited to robust oversight and consumer protection, targeted assistance for low- and moderate-income homeowners and renters, and carefully designed support for market stability and crisis response. Our plan helps ensure that our nation’s economic health will not be jeopardized again by the fundamental flaws in the housing market that existed before the financial crisis. At the same time, this plan recognizes the fragile state of our housing market and is designed to ensure that reforms are implemented at a stable and measured pace to support economic recovery over the next several years.
Under our plan, private markets – subject to strong oversight and standards for consumer and investor protection – will be the primary source of mortgage credit and bear the burden for losses. Banks and other financial institutions will be required to hold more capital to withstand future recessions or significant declines in home prices, and adhere to more conservative underwriting standards that require homeowners to hold more equity in their homes.
Securitization, alongside credit from the banking system, should continue to play a major role in housing finance subject to greater risk retention, disclosure, and other key reforms. Our plan is also designed to eliminate unfair capital, oversight, and accounting advantages and promote a level playing field for all participants in the housing market.
The Administration will work with the Federal Housing Finance Agency (“FHFA”) to develop a plan to responsibly reduce the role of the Federal National Mortgage Association (“Fannie Mae”)
and the Federal Home Loan Mortgage Corporation (“Freddie Mac”) in the mortgage market and, ultimately, wind down both institutions. We recommend FHFA employ a number of policy levers – including increased guarantee fee pricing, increased down payment requirements, and other measures – to bring private capital back into the mortgage market and reduce taxpayer risk. As the market improves and Fannie Mae and Freddie Mac are wound down, it should be clear that the government is committed to ensuring that Fannie Mae and Freddie Mac have sufficient capital to perform under any guarantees issued now or in the future and the ability to meet any of their debt obligations. We believe that under our current Preferred Stock Purchase Agreements (PSPAs), there is sufficient funding to ensure the orderly and deliberate wind down of Fannie Mae and Freddie Mac, as described in our plan.
It sounds like Mr. Geithner wants to unwind down the role of the government in the housing market. Mr. Geithner said, " I think it is absolutely the case that the U.S. government provided too much support for housing, too strong incentives for investment in housing and we just took that too far." So far, it has cost the taxpayers about $150 billion. Fannie and Freddie have almost 90% of the mortgages that are being originated and we really got to start weaning the housing market off the government.
Biloxi Buzz for Sunday
Administration rails against GOP plan to block funding for climate regulations
Sen. Lee Bright: SC should coin own money
Sen. Lee Bright: SC should coin own money
CPAC Straw Poll Results — Attendees vote on the presidential candidates. — The results of the CPAC straw poll of presidential candidates are in, and the winner is Ron Paul, with 30% of the vote. Mitt Romney was the runner-up with 23%, and all other candidates tied with about 6% each.
Another Soldier’s Home Foreclosed and Sold While Serving Abroad
Excerpts from the report…
Army Capt. Tania Garcia said she was on active duty in South Korea when she got the news.
Garcia’s Realtor informed her that her south Orange condominium had been foreclosed upon. Suddenly, a soldier serving abroad had no home to return to.
“I couldn’t believe it,” Garcia said. “I was in shock.”
More shocking news was ahead. Court files from the foreclosure showed an affidavit had been filed that stated Garcia was not in the active military and that the notice of foreclosure was served on her husband.
Two problems: Garcia said this week she was on active duty — and she is not married. Now, Garcia is fighting to win back the home she thinks was taken from her unfairly.
Garcia’s condo initially was bought back by Flagstar Bank and then resold… (No, it was Fannie Mae!)
Garcia’s real-estate broker, Celia Ruiz of Casa Latino Real Estate, said she worked with the bank during the short sale, in which the lender allows a home to be sold at a price often far below the amount owed on the mortgage. She has e-mails from a bank employee stating the sale was approved.
Five days before the scheduled sale, Ruiz said, she received the bad news. Ruiz was flabbergasted.
“I’ve done a lot of short sales,” Ruiz said. “I have never seen a property go to foreclosure while we are working on a short sale.”
The “non-military affidavit” included in the court file attested to the fact that Garcia was not in the active military, and a military status report from the Department of Defense was attached, stating: “Based on the information you have furnished, the DMDC [Department of Defense Manpower Data Center] does not possess any information indicating that the individual is currently on active duty.”
If a person is on active duty, the military must be served notice of the foreclosure to make sure the person is aware of it, Kaufman said. Garcia said there was “no way” that the bank could claim to be unable to contact her.
Still in the service, Garcia shipped off to Iraq on Friday with the legal battle serving as a constant distraction in a place where, she said, distractions cost lives.
“When I was not in this country, I was working to protect my country,” she said. As she prepared to leave again this week, Garcia was hopeful that she would return to find the situation resolved.
Read the article in its entirety here…
Flagstar Bank f s b vs. Garcia, Tania Et Al.
Non Military Affidavit
White House backs standard for mortgage servicers
(Reuters) - The Obama administration favors creating a national standard for mortgage servicers such as Bank of America Corp and JPMorgan Chase & Co that have been accused of botching home foreclosure procedures.
In unveiling its plan to overhaul the housing finance system, the White House said on Friday it supports reforms to correct problems in the mortgage servicing and foreclosure process.
These include adopting national standards for mortgage servicing and requiring that mortgage documents disclose the presence of second liens, such as a second mortgage or a home equity loan.
Influential banking regulators have already called for one standard after allegations surfaced that banks used "robo-signers" to sign hundreds of unread documents a day to advance foreclosures without proof they held mortgages.
Bank regulators are considering a federal servicing standard but may need Congress to act to establish a national registry, for example, for first and second mortgage loans on residential properties.
The Federal Deposit Insurance Corp has been pushing hard to include servicing standards in a risk retention rule regulators are drafting. Other banking regulators, however, have questioned whether there is the legal authority to use it as a vehicle for cracking down on servicers, and it remains unclear how or when new standards will be moved.
There is general agreement, however, something needs to be done.
The draft standard from the Office of the Comptroller of the Currency would require banks and other mortgage servicers to safeguard and account for borrowers' funds.
Servicers would also be required, among other things, to provide borrowers with full and accurate information about their accounts and payment records, according to the OCC's draft.
In Friday's housing proposal, the Obama administration said that mortgage documents should disclose second liens or second mortgages and define the process for modifying it if the first loan becomes delinquent.
Critics argue the four biggest banks own the bulk of the second liens and have been reluctant to take write-downs when modifying terms of the first mortgage loan.
Read on.
In unveiling its plan to overhaul the housing finance system, the White House said on Friday it supports reforms to correct problems in the mortgage servicing and foreclosure process.
These include adopting national standards for mortgage servicing and requiring that mortgage documents disclose the presence of second liens, such as a second mortgage or a home equity loan.
Influential banking regulators have already called for one standard after allegations surfaced that banks used "robo-signers" to sign hundreds of unread documents a day to advance foreclosures without proof they held mortgages.
Bank regulators are considering a federal servicing standard but may need Congress to act to establish a national registry, for example, for first and second mortgage loans on residential properties.
The Federal Deposit Insurance Corp has been pushing hard to include servicing standards in a risk retention rule regulators are drafting. Other banking regulators, however, have questioned whether there is the legal authority to use it as a vehicle for cracking down on servicers, and it remains unclear how or when new standards will be moved.
There is general agreement, however, something needs to be done.
The draft standard from the Office of the Comptroller of the Currency would require banks and other mortgage servicers to safeguard and account for borrowers' funds.
Servicers would also be required, among other things, to provide borrowers with full and accurate information about their accounts and payment records, according to the OCC's draft.
In Friday's housing proposal, the Obama administration said that mortgage documents should disclose second liens or second mortgages and define the process for modifying it if the first loan becomes delinquent.
Critics argue the four biggest banks own the bulk of the second liens and have been reluctant to take write-downs when modifying terms of the first mortgage loan.
Read on.
New Details Emerge About Morgan Stanley and Citi In the Crisis
Big banks like Citigroup and Morgan Stanley, which were battered by the 2008 financial crisis, are once again on solid ground.
But a set of documents, e-mail messages and minutes of crucial regulatory meetings released recently by the Financial Crisis Inquiry Commission provide fresh detail about just how close to the brink both firms came.
This week the commission will release another set of documents on its Web site, including an interactive timeline that goes back to the Great Depression. The site will also feature hours of previously unreleased audio recordings of interviews with major players in the crisis, like Joseph Cassano of the American International Group, who was at the center of the credit-default swaps business.
The current documents paint an especially desperate picture of Citigroup, one of the most troubled big banks, which needed several cash infusions from the government during the crisis.
“In short, I will characterize the liquidity and confidence situation as negative and deteriorating such that viability may be threatened without outside support,” a Federal Deposit Insurance Corporation official, Christopher J. Spoth, wrote of Citigroup in an e-mail on Nov. 21, 2008, to the F.D.I.C. chairwoman, Sheila C. Bair.
That late-night missive also contained a chilling summary of a call earlier that day between Citigroup’s risk management team and regulators.
Shares of Citi fell 20 percent, to $3.77, on Nov. 21, 2008, and were down about 60 percent in that week. The liquidity pool of the bank, which had received its first bailout funds just a few weeks earlier, was shrinking and customers were panicking.
The call summary shows that private bank deposits fell $1 billion that day, with $353 million “withdrawn due to Citi name concerns.” The bank was bleeding money elsewhere as well. At 5 p.m., the so-called broker-dealer cash box — the equity and cash that Citigroup keeps on hand to cover short sales — was valued at $15.3 billion. The pot of money had dwindled to $11.4 billion by the end of the day.
Amid the turmoil, counterparties were backing away from Citigroup. “UBS initially cut equity finance lines in half to Citi, from $1.8 billion to $900 million,” the call summary said. UBS temporarily reversed its decision after Citigroup’s senior management reached out to the banks. But the call summary said UBS planned on Monday to ask Citigroup to post additional collateral and would no longer accept certain collateral.
That Sunday, documents show, Ms. Bair chaired a closed-door meeting of F.D.I.C. directors to discuss Citigroup’s rapidly deteriorating financial position. Directors gathered in person and by phone to determine whether Citigroup’s ailing health posed a systemic risk.
Click here for full story
But a set of documents, e-mail messages and minutes of crucial regulatory meetings released recently by the Financial Crisis Inquiry Commission provide fresh detail about just how close to the brink both firms came.
This week the commission will release another set of documents on its Web site, including an interactive timeline that goes back to the Great Depression. The site will also feature hours of previously unreleased audio recordings of interviews with major players in the crisis, like Joseph Cassano of the American International Group, who was at the center of the credit-default swaps business.
The current documents paint an especially desperate picture of Citigroup, one of the most troubled big banks, which needed several cash infusions from the government during the crisis.
“In short, I will characterize the liquidity and confidence situation as negative and deteriorating such that viability may be threatened without outside support,” a Federal Deposit Insurance Corporation official, Christopher J. Spoth, wrote of Citigroup in an e-mail on Nov. 21, 2008, to the F.D.I.C. chairwoman, Sheila C. Bair.
That late-night missive also contained a chilling summary of a call earlier that day between Citigroup’s risk management team and regulators.
Shares of Citi fell 20 percent, to $3.77, on Nov. 21, 2008, and were down about 60 percent in that week. The liquidity pool of the bank, which had received its first bailout funds just a few weeks earlier, was shrinking and customers were panicking.
The call summary shows that private bank deposits fell $1 billion that day, with $353 million “withdrawn due to Citi name concerns.” The bank was bleeding money elsewhere as well. At 5 p.m., the so-called broker-dealer cash box — the equity and cash that Citigroup keeps on hand to cover short sales — was valued at $15.3 billion. The pot of money had dwindled to $11.4 billion by the end of the day.
Amid the turmoil, counterparties were backing away from Citigroup. “UBS initially cut equity finance lines in half to Citi, from $1.8 billion to $900 million,” the call summary said. UBS temporarily reversed its decision after Citigroup’s senior management reached out to the banks. But the call summary said UBS planned on Monday to ask Citigroup to post additional collateral and would no longer accept certain collateral.
That Sunday, documents show, Ms. Bair chaired a closed-door meeting of F.D.I.C. directors to discuss Citigroup’s rapidly deteriorating financial position. Directors gathered in person and by phone to determine whether Citigroup’s ailing health posed a systemic risk.
Click here for full story
Subscribe to:
Posts (Atom)