Saturday, December 24, 2011
The Market Ticker – More Illegal Conduct By Banks Excused?
Wow man, another story of illegal conduct that is unpunished and excused.
A personal bankruptcy is supposed to cut borrowers loose from lenders and debt collectors, but Capital One Financial Corp.—one of the nation’s largest credit-card issuers—sometimes doesn’t want to let go.
….
It wasn’t the first time the company went after its customers for debts that had been snuffed out in bankruptcy, even though the practice is illegal. A court-appointed auditor concluded earlier this year that Capital One pursued 15,500 “erroneous claims” seeking money previously erased by a bankruptcy-court judge.
A personal bankruptcy is supposed to cut borrowers loose from lenders and debt collectors, but Capital One Financial Corp.—one of the nation’s largest credit-card issuers—sometimes doesn’t want to let go.
….
It wasn’t the first time the company went after its customers for debts that had been snuffed out in bankruptcy, even though the practice is illegal. A court-appointed auditor concluded earlier this year that Capital One pursued 15,500 “erroneous claims” seeking money previously erased by a bankruptcy-court judge.
Must read: A Dear Jamie Dimon letter
Joshua Brown, New York City-based investment advisor, wrote a Dear Jamie Dimon (Chase CEO) letter on his blog The Reformed Broker and responded to Dimon's whine to the public and clueless on how the rich bankers are being picked on because they are rich:
Here in New York, we hated watching real estate and financial services elitists drive up the prices of everything from affordable apartments to martinis in midtown with the reckless speculation that would eventually lead to mass layoffs, rampant joblessness and the wreckage of so many retirement dreams. No one ever asked the rest of us if we minded, it just happened. I’m sure people across the country can tell similar stories.
So please, do us all a favor and come to the realization that the loathing you feel from your fellow Americans has nothing to do with your “success” or your “wealth” and it has everything to do with the fact that your wealth and success have come at a cost to the rest of us. No one wants your money or opportunities, what they want is the same chance that their parents had to attain these things for themselves. You are viewed, and rightfully so, as part of the machine that has removed this chance for many — and that is what they hate.
America hates unjustified privilege, it hates an unfair playing field and crony capitalism without the threat of bankruptcy, it hates privatized gains and socialized losses, it hates rule changes that benefit the few at the expense of the many and it hates people who have been bailed out and don’t display even the slightest bit of remorse or humbleness in the presence of so much suffering in the aftermath.
Nobody hates your right to make money, Jamie. They hate how you and certain others have made it.
Don’t be confused on this score for a moment longer.
Details of Mortgage Servicing Settlement Between Banks and AGs Begin to Emerge
“In return for the $5 billion in cash and the $20 billion in credits, the banks would be released from claims against them for servicing and foreclosure abuses that might be brought against them by the states and the federal government. The states also release the banks from origination claims, that is, claims they might face for all the fraud and duplicity they engaged in when they made bad loans at the height of the housing craze.”
The never-ending negotiations between the 50 state attorneys general (minus a few big ones) and five major banks over penalties and standards for past, present and future mortgage servicing are finally ending, and some details are beginning to emerge from sources familiar with the deal. The big number is the $25 billion that the banks will commit to three categories of the settlement: $5 billion in cash payments, mostly to the states, $3 billion in refinancing for underwater mortgages, and $17 billion in principal reduction. Here’s the breakdown:
Of the $5 billion, $1.5 billion will go to people who have been foreclosed on and were abused in some way during the process. The claims are nearly instantaneous–”we don’t read anything, it’s check the box,” says one state AG negotiator. But the payments are also small: $1,500 to $2,000. Now, the vast majority of people who lost their homes over the last several years probably would not have been able to make their payments even if the banks had been behaving well. For them a no-questions-asked $2,000 check from the bank for the poor treatment they received in the process may be fair. On the other hand, those who were unfairly evicted may be insulted by the small amount. But no one taking the payment would be giving up any rights to bring cases against the banks for wrongful eviction or other claims they may have. The federal regulator with oversight of the issue, the Office of the Comptroller of the Currency, has sent out 4.5 million forms to potentially wrongfully evicted families; processing those claims will be paid for by the banks.
Around $2.75 billion of the $5 billion in cash the banks are coughing up will go to state programs for foreclosure mitigation efforts like legal aid hotlines, mediation between homeowners and banks and counseling. Some $750 million to the federal government for its foreclosure mitigation programs.
The $3 billion for refinancing underwater loans targets a limited population: only those who are current on their payments and who have been current for several months. The Obama administration has launched its own less-than-ambitious program in this regard. Mortgage refis tend to help those who need it least–particularly if they’re limited to people who are current on their payments. Refis also only reduce interest payments, not the actual value of the underlying loan.
The bulk of the money—$17 billion—would go to principal reduction for homeowners and a menu of other elements aimed at reducing the impact of the country’s massive housing debt. The $17 billion also is a credit rather than a cash payment by the banks, but it will give some individuals a chance to lower their mortgages. The $17 billion is a minimum number the banks need to hit in principal and secondary lien reduction and other kinds of forbearance. For every dollar of principal reduction, the banks pay off $1 of the $17 billion commitment.
Read the rest here…
Friday, December 23, 2011
iWatch News: Ex-WaMu worker claims he was shunned for refusing to push toxic loans on borrowers
In the case of the salesman who wouldn’t sell, the two sides have starkly different tales to tell.
Greg Saffer says conscience and common sense prevented him from pushing the product his bosses wanted him to sell – “Option ARM” home loans that, he says, put homeowners at risk.
“I’m not going to steer people into a loan program that might not be good for them just because it’s more profitable for the company,” he says.
JP Morgan Chase Bank counters that Saffer didn’t sell because he didn’t have the chops to close deals.
“Rather than a paragon of virtue, Saffer was simply a guy who could not sell loans in an increasingly tough market,” the bank’s lawyers say in legal papers.
JP Morgan is matched against Saffer because it bought Saffer’s ex-employer, Seattle-based Washington Mutual Bank, in September 2008, after regulators seized WaMu in what was the largest bank failure in U.S. history.
Saffer charged in a lawsuit filed in 2009 in Los Angeles Superior Court that he was forced out of his job for refusing to take part in “fraudulent schemes.” In testimony in the lawsuit and in documents in arbitration proceedings, he claims WaMu retaliated against him because he refused to push “toxic” Option ARMs and mislead borrowers about how the loans worked and how much they would cost.
A judge ordered the case into arbitration last year. It could be months before an arbitrator rules on whether Saffer’s claims are valid.
Saffer’s case is notable because, as a salesman, his job description was different from most of the ex-employees who’ve made whistleblower claims against mortgage lenders. Many were fraud investigators or loan underwriters who claim they were punished for uncovering fraud by sales reps and sales executives.
Saffer’s legal claims paint him as one of what may have been a distinct minority among the mortgage industry’s sales corps during the nation’s home-loan frenzy – a salesman who said no to the dirty tactics that became pervasive during the boom. Former industry insiders say salespeople who refused to go along were often weeded out, to make way for others who had a more pliable sense of right and wrong.
Read on.
Greg Saffer says conscience and common sense prevented him from pushing the product his bosses wanted him to sell – “Option ARM” home loans that, he says, put homeowners at risk.
“I’m not going to steer people into a loan program that might not be good for them just because it’s more profitable for the company,” he says.
JP Morgan Chase Bank counters that Saffer didn’t sell because he didn’t have the chops to close deals.
“Rather than a paragon of virtue, Saffer was simply a guy who could not sell loans in an increasingly tough market,” the bank’s lawyers say in legal papers.
JP Morgan is matched against Saffer because it bought Saffer’s ex-employer, Seattle-based Washington Mutual Bank, in September 2008, after regulators seized WaMu in what was the largest bank failure in U.S. history.
Saffer charged in a lawsuit filed in 2009 in Los Angeles Superior Court that he was forced out of his job for refusing to take part in “fraudulent schemes.” In testimony in the lawsuit and in documents in arbitration proceedings, he claims WaMu retaliated against him because he refused to push “toxic” Option ARMs and mislead borrowers about how the loans worked and how much they would cost.
A judge ordered the case into arbitration last year. It could be months before an arbitrator rules on whether Saffer’s claims are valid.
Saffer’s case is notable because, as a salesman, his job description was different from most of the ex-employees who’ve made whistleblower claims against mortgage lenders. Many were fraud investigators or loan underwriters who claim they were punished for uncovering fraud by sales reps and sales executives.
Saffer’s legal claims paint him as one of what may have been a distinct minority among the mortgage industry’s sales corps during the nation’s home-loan frenzy – a salesman who said no to the dirty tactics that became pervasive during the boom. Former industry insiders say salespeople who refused to go along were often weeded out, to make way for others who had a more pliable sense of right and wrong.
Read on.
Utah Federal Judges Decisions Conflict in ReconTrust Utah Home Foreclosure Actions
(Salt Lake City, UT) - Utah senior federal Judges Dee Benson and Bruce Jenkins have ruled Bank of America's foreclosure arm, ReconTrust Company, N.A. (NYSE: "BAC") may not be qualified to perform non-judicial foreclosures in Utah. However, this week senior federal Judge David Sam ruled that ReconTrust is operating under the National Bank Act regulated by the Office of the Comptroller of the Currency (OCC), is a trustee under the Texas law where ReconTrust is located rendering Utah Code 57-1-21(3) inapplicable. Ruling
The ruling comes in a case filed by attorney John Christian Barlow, in which ReconTrust is being sued by Utah homeowner Garry Franklin Garrett accusing ReconTrust of conducting an unlawful foreclosure sale because it's is not a qualified trustee under Utah Law.
The judge's decision conflicts with rulings by other Utah federal judges over the Bank of America's Utah foreclosure activities. The Utah Attorney General intervened in another Utah homeowner's lawsuit filing an Amicus Curiae petition charging that the Bank of America was illegally foreclosing on Utah homeowners. Peni Cox vs ReconTrust
Read on.
I6J6 Federa Judge Sam Rules for Rec on Trust
The ruling comes in a case filed by attorney John Christian Barlow, in which ReconTrust is being sued by Utah homeowner Garry Franklin Garrett accusing ReconTrust of conducting an unlawful foreclosure sale because it's is not a qualified trustee under Utah Law.
The judge's decision conflicts with rulings by other Utah federal judges over the Bank of America's Utah foreclosure activities. The Utah Attorney General intervened in another Utah homeowner's lawsuit filing an Amicus Curiae petition charging that the Bank of America was illegally foreclosing on Utah homeowners. Peni Cox vs ReconTrust
Read on.
I6J6 Federa Judge Sam Rules for Rec on Trust
CA Foreclosed Homeowners File Class Action Against Fannie, Freddie
LOS ANGELES (CN) - In a federal class action, foreclosed homeowners sued Fannie Mae, Freddie Mac and other "leading providers of residential real estate mortgages," claiming their disregard for underwriting standards caused the mortgage meltdown, which brought more than 930,000 foreclosure filings in the third quarter of 2010 alone.
IndyMac Bank and Countrywide Financial are among the host of mortgage originators named in the 101-page complaint, which seeks damages for the 11 named plaintiffs whose "credit ratings and histories were damaged or destroyed."
"The fraud perpetrated by the originator defendants from 2000 through 2009 was willful and pervasive," the complaint states. "It began with simple greed and then accelerated when said defendants discovered they could not sustain their businesses, unless they systematically and significantly reduced their underwriting standards and created increasingly complex, esoteric, and high-risk loan products to induce plaintiffs and other borrowers into ever larger loans on increasingly risky terms. As the originator defendants knew from no later than 2004, these loans were unsustainable for the borrowers and to a certainty would result in a crash that would destroy the equity invested by plaintiffs and other California borrowers. Further, those actions would cause the high risk pools of mortgages the originator defendants had sold to Real Estate Mortgage Investment Conduits (REMICs) and/or trusts to default on a nationwide scale. ...
IndyMac Bank and Countrywide Financial are among the host of mortgage originators named in the 101-page complaint, which seeks damages for the 11 named plaintiffs whose "credit ratings and histories were damaged or destroyed."
"The fraud perpetrated by the originator defendants from 2000 through 2009 was willful and pervasive," the complaint states. "It began with simple greed and then accelerated when said defendants discovered they could not sustain their businesses, unless they systematically and significantly reduced their underwriting standards and created increasingly complex, esoteric, and high-risk loan products to induce plaintiffs and other borrowers into ever larger loans on increasingly risky terms. As the originator defendants knew from no later than 2004, these loans were unsustainable for the borrowers and to a certainty would result in a crash that would destroy the equity invested by plaintiffs and other California borrowers. Further, those actions would cause the high risk pools of mortgages the originator defendants had sold to Real Estate Mortgage Investment Conduits (REMICs) and/or trusts to default on a nationwide scale. ...
Banks could face more investor lawsuits thanks to a lost JP Morgan case
Investors in financial stocks have a new reason to be nervous: On Tuesday, New York's highest court made it easier for disgruntled investors to sue banks and Wall Street firms. As a result, JPMorgan Chase (JPM +3.50%), Bank of America (BAC +4.59%) and Goldman Sachs (GS +2.63%) -- among the many other possible targets of investors -- may face many new lawsuits in the coming months.
Depending on how many new cases are filed and their cumulative stakes, they might add up to real money, even for the largest banks. The financial meltdown, after all, created huge numbers of angry investors.
At issue in the case was whether or not New York's strong securities law, the Martin Act, prevented investors from suing companies that mistreated them illegally under the "common law" -- the law developed by judges over the centuries rather than enacted by New York’s legislature. If the Act blocked common law claims, investors would have to use the less protective federal securities laws in any situation other than outright fraud.
However, the Court decided that the Martin Act didn’t block investors' common law suits, a result that shocked many even though it was unanimous and firmly grounded in the statute's text and public policy. The surprise stemmed from the fact that in over 50 cases cited by JPMorgan Chase -- the loser in Tuesday's case -- judges had dismissed common law claims as preempted by the Martin Act.
Special Report: The watchdogs that didn’t bark
(Reuters) – Four years after the banking system nearly collapsed from reckless mortgage lending, federal prosecutors have stayed on the sidelines, even as judges around the country are pointing fingers at possible wrongdoing.
UNPRECEDENTED FRAUD
Reuters has identified one pending federal criminal investigation into suspected improper foreclosure procedures. That inquiry has been under way since 2009.
The investigation focuses on a defunct subsidiary of Jacksonville, Florida-based Lender Processing Services, the nation’s largest subcontractor of mortgage servicing duties for banks.
People close to the investigation said indictments may come as early as the end of this month. Nationwide press reports had showed photos of what appeared to be obviously forged signatures on foreclosure affidavits.
The Justice Department doesn’t disclose pending investigations, making it impossible to say if other criminal inquiries are underway. Officials in state attorneys’ general offices and lawyers in foreclosure cases say they have seen no signs of any other federal criminal investigation.
“I think it’s difficult to find a fraud of this size on the U.S. court system in U.S. history,” said Raymond Brescia, a visiting professor at Yale Law School who has written articles analyzing the role of courts in the financial crisis. “I can’t think of one where you have literally tens of thousands of fraudulent documents filed in tens of thousands of cases.”
Spokesmen for the five largest servicers – Bank of America Corp., Wells Fargo & Co., JP Morgan Chase & Co, Citigroup Inc., and Ally Financial Group – declined to comment about the possibility of widespread fraud for this article.
Be sure to check out this one in full here…
UNPRECEDENTED FRAUD
Reuters has identified one pending federal criminal investigation into suspected improper foreclosure procedures. That inquiry has been under way since 2009.
The investigation focuses on a defunct subsidiary of Jacksonville, Florida-based Lender Processing Services, the nation’s largest subcontractor of mortgage servicing duties for banks.
People close to the investigation said indictments may come as early as the end of this month. Nationwide press reports had showed photos of what appeared to be obviously forged signatures on foreclosure affidavits.
The Justice Department doesn’t disclose pending investigations, making it impossible to say if other criminal inquiries are underway. Officials in state attorneys’ general offices and lawyers in foreclosure cases say they have seen no signs of any other federal criminal investigation.
“I think it’s difficult to find a fraud of this size on the U.S. court system in U.S. history,” said Raymond Brescia, a visiting professor at Yale Law School who has written articles analyzing the role of courts in the financial crisis. “I can’t think of one where you have literally tens of thousands of fraudulent documents filed in tens of thousands of cases.”
Spokesmen for the five largest servicers – Bank of America Corp., Wells Fargo & Co., JP Morgan Chase & Co, Citigroup Inc., and Ally Financial Group – declined to comment about the possibility of widespread fraud for this article.
Be sure to check out this one in full here…
Private Actions Are Not Precluded Under Martin Act, Panel Decides
ALBANY – A decade after Attorney General Eliot Spitzer dusted off the long dormant Martin Act and deployed it to become the “Sheriff of Wall Street,” the Court of Appeals has essentially deputized private citizens in holding for the first time that common-law tort claims are not preempted by the law.
In affirming the Appellate Division, First Department, yesterday, the Court of Appeals doused what had been conventional wisdom in other state and federal courts, and handed a significant consumer victory to investors and current Attorney General Eric T. Schneiderman.
“Today’s decision is an important recognition that private lawsuits brought by harmed investors are compatible with our office’s public enforcement role under the Martin Act,” said Jennifer Givner, a spokeswoman for the attorney general. “As the Court’s decision reflects, the purpose of the Martin Act is in no way impaired by private legal claims, since actions by the Attorney General and harmed investors both further the same goal: to fight fraud and deception in the securities marketplace.”
Rest here…
In affirming the Appellate Division, First Department, yesterday, the Court of Appeals doused what had been conventional wisdom in other state and federal courts, and handed a significant consumer victory to investors and current Attorney General Eric T. Schneiderman.
“Today’s decision is an important recognition that private lawsuits brought by harmed investors are compatible with our office’s public enforcement role under the Martin Act,” said Jennifer Givner, a spokeswoman for the attorney general. “As the Court’s decision reflects, the purpose of the Martin Act is in no way impaired by private legal claims, since actions by the Attorney General and harmed investors both further the same goal: to fight fraud and deception in the securities marketplace.”
Rest here…
Thursday, December 22, 2011
NAKED CAPITALISM- THE OCC “INDEPENDENT” REVIEWS ARE A SHAM
Naked Capitalism
“There Goes the Neighborhood,” which ran on 60 Minutes last Sunday, is a must-see piece. Scott Pelley walks through a pillaged house in Cleveland, slated for demolition in a county neighborhood stabilization program. This abandoned house is owned by Structured Asset Investment Trust 2003-BC11. An investor reports lists the property as “in foreclosure” despite no court filing. Ohio is a judicial foreclosure state, so a foreclosure filing requires a lawsuit, but there isn’t one.
According to the prospectus, Trust 2003-BC11 was underwritten by Lehman Brothers. Aurora Loan Services is the Master Servicer, though the entire trust was passed to sub-servicers. Specifically Chase, Option One, Ocwen, and Wells Fargo serviced 30.46%, 29.47%, 26.84%, and 12.19% of the loans.
NAKED CAPITALISM
“There Goes the Neighborhood,” which ran on 60 Minutes last Sunday, is a must-see piece. Scott Pelley walks through a pillaged house in Cleveland, slated for demolition in a county neighborhood stabilization program. This abandoned house is owned by Structured Asset Investment Trust 2003-BC11. An investor reports lists the property as “in foreclosure” despite no court filing. Ohio is a judicial foreclosure state, so a foreclosure filing requires a lawsuit, but there isn’t one.
According to the prospectus, Trust 2003-BC11 was underwritten by Lehman Brothers. Aurora Loan Services is the Master Servicer, though the entire trust was passed to sub-servicers. Specifically Chase, Option One, Ocwen, and Wells Fargo serviced 30.46%, 29.47%, 26.84%, and 12.19% of the loans.
NAKED CAPITALISM
Wednesday, December 21, 2011
FBI LAUNCHES PROBE OF FANNIE, FREDDIE
Federal investigators want to know whether executives at mortgage finance giants Fannie Mae and Freddie Mac misled investors and the public about risky mortgages in the lead-up to the 2008 financial crisis.
High-ranking sources with the Department of Justice told The Daily that the FBI and other federal authorities have launched investigations into the matter. The development comes as the Securities and Exchange Commission filed suit yesterday against six former top executives at Fannie and Freddie.
The suits represent the most aggressive moves to date by federal regulators against financial executives at the heart of the housing market meltdown.
The civil suits claim execs at Fannie and Freddie — both now under federal control and propped up by $169 billion in taxpayer money — deliberately downplayed the danger and the volume of subprime mortgage holdings in the years leading up to the credit crisis.
High-ranking sources with the Department of Justice told The Daily that the FBI and other federal authorities have launched investigations into the matter. The development comes as the Securities and Exchange Commission filed suit yesterday against six former top executives at Fannie and Freddie.
The suits represent the most aggressive moves to date by federal regulators against financial executives at the heart of the housing market meltdown.
The civil suits claim execs at Fannie and Freddie — both now under federal control and propped up by $169 billion in taxpayer money — deliberately downplayed the danger and the volume of subprime mortgage holdings in the years leading up to the credit crisis.
Calif AG sues mortgage giants Fannie Mae, Freddie Mac for foreclosure details
SAN FRANCISCO — California’s attorney general filed lawsuits against mortgage giants Fannie Mae and Freddie Mac on Tuesday, demanding that the companies that own some 60 percent of the state’s mortgages respond to questions in a state investigation.
Attorney General Kamala Harris, whose office filed the lawsuits in San Francisco Superior Court, is investigating Freddie Mac’s and Fannie Mae’s involvement in 12,000 foreclosed properties in California where they served as landlords. She also wants to find out what role the companies played in selling or marketing mortgage-backed securities.
The essentially identical lawsuits ask the mortgage firms to respond to 51 investigative subpoenas that call on Fannie Mae and Freddie Mac to identify all the California homes on which they foreclosed. They also want the mortgage firms to reveal whether they have information on the decreased value of those homes due to drug dealing or prostitution, as well as explosives and weapons found on those vacant properties.
“Foreclosures not only affect the families who lose their homes, but also the safety, health and welfare of the entire community,” the lawsuit said.
Harris also called on Fannie Mae and Freddie Mac to disclose whether they have complied with civil rights laws protecting minorities and members of the Armed Forces against unlawful convictions and foreclosures.
Read on.
Attorney General Kamala Harris, whose office filed the lawsuits in San Francisco Superior Court, is investigating Freddie Mac’s and Fannie Mae’s involvement in 12,000 foreclosed properties in California where they served as landlords. She also wants to find out what role the companies played in selling or marketing mortgage-backed securities.
The essentially identical lawsuits ask the mortgage firms to respond to 51 investigative subpoenas that call on Fannie Mae and Freddie Mac to identify all the California homes on which they foreclosed. They also want the mortgage firms to reveal whether they have information on the decreased value of those homes due to drug dealing or prostitution, as well as explosives and weapons found on those vacant properties.
“Foreclosures not only affect the families who lose their homes, but also the safety, health and welfare of the entire community,” the lawsuit said.
Harris also called on Fannie Mae and Freddie Mac to disclose whether they have complied with civil rights laws protecting minorities and members of the Armed Forces against unlawful convictions and foreclosures.
Read on.
E-mail clues discovered by Feds in tracking MF Global client funds
Federal authorities investigating the collapse of MF Global have uncovered e-mails that detail the transfers of money in the firm’s last days, including transfers that contained customer money, according to people close to the investigation.
One e-mail chain refers to the transfer of roughly $200 million that MF Global owed JPMorgan Chase on Oct. 28 — the firm’s last business day before it filed for bankruptcy. In that chain, a senior official in the firm’s Chicago office was told to make the transfer, said the people close to the investigation who requested anonymity because the inquiry was still open.
That official, Edith O’Brien, a treasurer at MF Global, is considered a “person of interest” in the investigation, said two of the people, who added that authorities expected to interview her in the coming days. It was not clear who had directed Ms. O’Brien, whose job was to oversee the customer money, to make the Oct. 28 transfer. The roughly $200 million that JPMorgan Chase received is said to be entirely customer money.
Ms. O’Brien has hired a prominent criminal defense lawyer, Reid H. Weingarten of Steptoe & Johnson, according to one of the people. Ms. O’Brien has not been accused of any wrongdoing. And there is no indication that she had reason to suspect that the money being transferred included customer money.
MF Global’s sloppy recordkeeping and a flurry of transactions in its final days may have obscured the fact that the firm was dipping into the cash of farmers, traders and hedge funds to cover its own needs.
Still, the interest in Ms. O’Brien and the e-mails suggest that, nearly two months after some $1 billion in customer money went missing, investigators have identified employees who may have played an important and perhaps unwitting role in the improper use of customer money.
One e-mail chain refers to the transfer of roughly $200 million that MF Global owed JPMorgan Chase on Oct. 28 — the firm’s last business day before it filed for bankruptcy. In that chain, a senior official in the firm’s Chicago office was told to make the transfer, said the people close to the investigation who requested anonymity because the inquiry was still open.
That official, Edith O’Brien, a treasurer at MF Global, is considered a “person of interest” in the investigation, said two of the people, who added that authorities expected to interview her in the coming days. It was not clear who had directed Ms. O’Brien, whose job was to oversee the customer money, to make the Oct. 28 transfer. The roughly $200 million that JPMorgan Chase received is said to be entirely customer money.
Ms. O’Brien has hired a prominent criminal defense lawyer, Reid H. Weingarten of Steptoe & Johnson, according to one of the people. Ms. O’Brien has not been accused of any wrongdoing. And there is no indication that she had reason to suspect that the money being transferred included customer money.
MF Global’s sloppy recordkeeping and a flurry of transactions in its final days may have obscured the fact that the firm was dipping into the cash of farmers, traders and hedge funds to cover its own needs.
Still, the interest in Ms. O’Brien and the e-mails suggest that, nearly two months after some $1 billion in customer money went missing, investigators have identified employees who may have played an important and perhaps unwitting role in the improper use of customer money.
Lender Processing Services shares drops on NV Attorney General fraud charges
The shares of Lender Processing Services (LPS +2.70%) came under fire Friday, dropping nearly 20% on unusually high volume after Nevada Attorney General Catherine Cortez Masto filed fraud charges against the company.
Although LPS, a billion dollar company by market capitalization, has several business lines, the fraud charges relate to its largest (by revenue) default services division. Given the nature of the charges and the mound of evidence AG Masto cites in the complaint, Friday’s fall in share price is likely only the beginning.
In recent years, LPS’s default servicing division has come under fire for two practices central to the attorney general’s charges: document fraud and illegal fee-splitting. Both types of claims go right to the heart of LPS’s business model.
As the complaint details, the standard business practices of the LPS facilities in Minnesota and Georgia involved the routine signing of documents and notarization of documents in ways that were contrary to the documents’ own claims and state law. For example, people were trained to forge other individuals' names and then notarize their forgeries in their own names.
On the fee splitting issue, the Nevada AG’s suit details how LPS provides its services to mortgage servicers for free, and gets paid by charging the network of attorneys it manages a variety of fees. The AG called such fees "kickbacks" and pointed out that the management of the attorneys appears to be at least tantamount to the illegal practice of law. In fact, LPS has faced two lawsuits charging that its practice of charging these fees to attorneys is illegal fee-splitting, but LPS was able to defeat both suits on procedural grounds.
Read on.
Although LPS, a billion dollar company by market capitalization, has several business lines, the fraud charges relate to its largest (by revenue) default services division. Given the nature of the charges and the mound of evidence AG Masto cites in the complaint, Friday’s fall in share price is likely only the beginning.
In recent years, LPS’s default servicing division has come under fire for two practices central to the attorney general’s charges: document fraud and illegal fee-splitting. Both types of claims go right to the heart of LPS’s business model.
As the complaint details, the standard business practices of the LPS facilities in Minnesota and Georgia involved the routine signing of documents and notarization of documents in ways that were contrary to the documents’ own claims and state law. For example, people were trained to forge other individuals' names and then notarize their forgeries in their own names.
On the fee splitting issue, the Nevada AG’s suit details how LPS provides its services to mortgage servicers for free, and gets paid by charging the network of attorneys it manages a variety of fees. The AG called such fees "kickbacks" and pointed out that the management of the attorneys appears to be at least tantamount to the illegal practice of law. In fact, LPS has faced two lawsuits charging that its practice of charging these fees to attorneys is illegal fee-splitting, but LPS was able to defeat both suits on procedural grounds.
Read on.
Tuesday, December 20, 2011
JPM Facing Massive Private-Label (PLS) Buyback Claims
JPMorgan Chase & Co.'s chief executive, Jamie Dimon, told investors at the beginning of 2011 that potential repurchases of private-label mortgage securities are "not that material" for his bank — an assertion that increasingly appears to be in doubt.
Dimon might not be quite so confident these days. Gibbs & Bruns LLP, the law firm that negotiated an $8.5 billion mortgage repurchase settlement with Bank of America Corp. on behalf of a group of large investors, has announced that it is seeking put-backs on $95 billion in private-label mortgage-backed securities issued by JPMorgan Chase, Washington Mutual Inc. and Bear Stearns. Private-label securities are mortgage-backed securities or other bonds that are created and sold by companies other than government-sponsored entities like Fannie Mae and Freddie Mac.
"Our clients continue to seek a comprehensive solution to the problems of ineligible mortgages in RMBS [residential mortgage-backed securities] pools and deficient servicing of those loans. Today's action is another step toward achieving that goal," said Gibbs & Bruns attorney Kathy Patrick in a press release Friday.
The law firm's clients, which claim to own the requisite 25% of the deals necessary to mount a challenge, have instructed trustees of 243 securitizations to begin seeking loan put-backs. In practice, this would entail stepping aside and allowing the law firm to file suits.
JPMorgan Chase did not respond immediately to a request for comment by American Banker.
Fed to adopt Bank of Canada governor Mark Carney's tougher banking rules, JP Morgan Chase CEO railed against tighter loan restrictions
Wall Street's biggest financial firms appear to have lost their battle to avoid the more stringent regulations being promoted by the likes of Bank of Canada governor Mark Carney.
Despite a concerted campaign by some top U.S. bank executives who branded the rules "anti-American," the U.S. Federal Reserve is poised to adopt the measures, which apply to global firms that are essentially "too big to fail," according to a report in the Wall Street Journal.
Citing unnamed sources, the newspaper said the Fed was embracing the latest elements of the "Basel III" framework, so-called because it represents the third round of standards put forward by the Basel Committee on Banking Supervision, an international group of bank regulators.
Under the Basel III accord, all banks would basically have to maintain a ratio of common equity to risk-weighted assets (like loans) of at least seven per cent, up from the Basel II standard of maintaining so-called Tier 1 capital at four per cent.
The latest set of rules would also require the world's biggest and most interconnected banks — the ones that pose the greatest risk to the global financial system — to maintain extra capital, called a surcharge, of between one and 2.5 per cent of their risk-weighted assets.
Bureau Of Labor Statistics Caught Red Handed Leaking Confidential Employment Data
RALEIGH — Since as early as January 2011, and perhaps before then, Gov. Bev Perdue’s press office has received access to confidential employment data from the U.S. Bureau of Labor Statistics hours if not days before its scheduled release, quite likely in violation of federal law. The governor’s staff used its early access to massage the monthly employment press release that reported jobs data to the public.
Documents and correspondence obtained by Carolina Journal show that the Division of Employment Security, formerly known as the Employment Security Commission, sent a draft of the press release each month to Perdue’s press office. The governor’s spokesmen typically rewrote the text and added a positive spin, even if the data did not support Perdue’s talking points.
The glowing quotes were attributed to Lynn Holmes, director of the employment agency, but the documents show the quotes were approved and probably written by a Perdue press aide, either Chrissy Pearson or Mark Johnson.
In several instances, DES spokesman Larry Parker cautioned Pearson or Johnson against using extraneous or unverifiable information in a release to boost Perdue’s image. At times, the Perdue communications team would push back, and the release would undergo several revisions before final publication.
While the operation may sound like a harmless effort to add political spin to the release of jobs data, sharing confidential BLS estimates while they are protected by an embargo violates a federal law barring the early release of employment data. This is no small matter: A conviction for breaching the Confidential Information Protection and Statistical Efficiency Act of 2002 carries a fine of up to $250,000, up to five years in prison, or both.
The data, including monthly estimates for current job totals, the labor force, and the unemployment rate, are produced by BLS with some minor assistance from the Labor Market Information Division of DES.
Read on.
Documents and correspondence obtained by Carolina Journal show that the Division of Employment Security, formerly known as the Employment Security Commission, sent a draft of the press release each month to Perdue’s press office. The governor’s spokesmen typically rewrote the text and added a positive spin, even if the data did not support Perdue’s talking points.
The glowing quotes were attributed to Lynn Holmes, director of the employment agency, but the documents show the quotes were approved and probably written by a Perdue press aide, either Chrissy Pearson or Mark Johnson.
In several instances, DES spokesman Larry Parker cautioned Pearson or Johnson against using extraneous or unverifiable information in a release to boost Perdue’s image. At times, the Perdue communications team would push back, and the release would undergo several revisions before final publication.
While the operation may sound like a harmless effort to add political spin to the release of jobs data, sharing confidential BLS estimates while they are protected by an embargo violates a federal law barring the early release of employment data. This is no small matter: A conviction for breaching the Confidential Information Protection and Statistical Efficiency Act of 2002 carries a fine of up to $250,000, up to five years in prison, or both.
The data, including monthly estimates for current job totals, the labor force, and the unemployment rate, are produced by BLS with some minor assistance from the Labor Market Information Division of DES.
LPS Responds to Allegations from Nevada Attorney General
JACKSONVILLE, Fla., Dec. 16, 2011 /PRNewswire/ -- Lender Processing Services, Inc. (NYSE: LPS) strongly disputes the allegations made in the complaint filed by the Nevada Attorney General yesterday evening. LPS has cooperated with the Attorney General's office for more than 14 months to resolve its inquiry in a manner which would benefit the citizens of Nevada.
Unfortunately, the company's efforts to engage in meaningful discussions with the Nevada Attorney General's office have been frustrated by the Nevada Attorney General's decision to outsource its investigation to Cohen Milstein Sellers & Toll PLLC, a plaintiff's law firm located in Washington, D.C., in apparent violation of Nevada law. The complaint highlights misconceptions about LPS and seeks to sensationalize a variety of false allegations in a misleading manner.
As the company has previously disclosed, it has discovered, during its own internal reviews, potential issues related to some of its past document execution practices. However, the company is not aware of any person who was wrongfully foreclosed upon as a result of a potential error in the processes used by our employees.
Unfortunately, the company's efforts to engage in meaningful discussions with the Nevada Attorney General's office have been frustrated by the Nevada Attorney General's decision to outsource its investigation to Cohen Milstein Sellers & Toll PLLC, a plaintiff's law firm located in Washington, D.C., in apparent violation of Nevada law. The complaint highlights misconceptions about LPS and seeks to sensationalize a variety of false allegations in a misleading manner.
As the company has previously disclosed, it has discovered, during its own internal reviews, potential issues related to some of its past document execution practices. However, the company is not aware of any person who was wrongfully foreclosed upon as a result of a potential error in the processes used by our employees.
Monday, December 19, 2011
NY AG Schneiderman and FHFA Inspector General Linick Share Resources & Evidence on Mortgage Fraud Probe
The collaboration between New York’s top prosecutor and the federal auditor overseeing half of the US home loan Findings from the New York market raises the spectre of criminal probes and increased scrutiny of Wall Street’s once-lucrative role in packaging mortgages into securities.
Eric Schneiderman, New York attorney-general, has the power to file criminal charges as part of his investigation into banks’ role in packaging mortgages into securities for sale to investors, who have suffered hundreds of billions of dollars worth of losses.
The partnership is bolstered by Mr Schneiderman’s ability to use the Martin Act, a 1921 state law that allows him to bring misdemeanour and felony criminal charges against alleged wrongdoers doing business in New York. The prosecutor can operate across state lines, essentially acting on behalf of investors across the US.
In court filings, Mr Schneiderman has alleged that Bank of America fabricated documents when foreclosing on mortgages of delinquent borrowers. He has also argued that some mortgage-backed securities were not properly constructed, and thus may not be securities at all – an explosive allegation that experts say could result in big losses for financial institutions that pooled the loans into securities and
The joint effort also creates an easier path for Mr Schneiderman to obtain documents from national banks and depose their current and former employees without running into objections from federal bank regulators. Federal regulators can stifle state probes against national banks by arguing that state officials lack authority, a legal principle known as pre-emption.
Continue reading here with free registration.
Eric Schneiderman, New York attorney-general, has the power to file criminal charges as part of his investigation into banks’ role in packaging mortgages into securities for sale to investors, who have suffered hundreds of billions of dollars worth of losses.
The partnership is bolstered by Mr Schneiderman’s ability to use the Martin Act, a 1921 state law that allows him to bring misdemeanour and felony criminal charges against alleged wrongdoers doing business in New York. The prosecutor can operate across state lines, essentially acting on behalf of investors across the US.
In court filings, Mr Schneiderman has alleged that Bank of America fabricated documents when foreclosing on mortgages of delinquent borrowers. He has also argued that some mortgage-backed securities were not properly constructed, and thus may not be securities at all – an explosive allegation that experts say could result in big losses for financial institutions that pooled the loans into securities and
The joint effort also creates an easier path for Mr Schneiderman to obtain documents from national banks and depose their current and former employees without running into objections from federal bank regulators. Federal regulators can stifle state probes against national banks by arguing that state officials lack authority, a legal principle known as pre-emption.
Continue reading here with free registration.
LPS using TARP funds to cover-up Assignment of Mortgage
Here is a copy of an email in September 14, 2009 from Adrian Lofton to Bradley Johnson, lead Attorney at Taylor, Day, Currie, Boyd and Johnson apprizing him of their TARP fund violations (see below). And who is Adrian Lofton? Lofton is a former Lender Processing Service (LPS) employee who gave a sworn statement to a New Jersey court investigating mortgage fraud. Read more on what Lofton exposed to the New Jersey court on LPS' fraudulent practices and mismanaging of accounts such as:
"...109. ...most of the [LPS] Associate Team members had gained unauthorized access to the logins and passwords of their team associates and supervisors for all of the bank servicers' computers.
110. With this unauthorized access to the Bank's computers, the [LPS] associates could go into the banks computer files and manipulate the data....
112. I was particularly concerned that during "crunch" times ...Team Associates were cutting corners....
116. When an employee cut corners, the employee left out one or more steps that should have been performed and had to make something up.
117. The problem caused by cutting corners might not come to light until six months down the road when an attorney asks questions about the billing record."
Adrian Lofton Cert
LPS Using TARP Funds to Cover-Up Assignment of Mortgage
"...109. ...most of the [LPS] Associate Team members had gained unauthorized access to the logins and passwords of their team associates and supervisors for all of the bank servicers' computers.
110. With this unauthorized access to the Bank's computers, the [LPS] associates could go into the banks computer files and manipulate the data....
112. I was particularly concerned that during "crunch" times ...Team Associates were cutting corners....
116. When an employee cut corners, the employee left out one or more steps that should have been performed and had to make something up.
117. The problem caused by cutting corners might not come to light until six months down the road when an attorney asks questions about the billing record."
Adrian Lofton Cert
LPS Using TARP Funds to Cover-Up Assignment of Mortgage
NV AG strikes again, likely slaying Lender Processing Services
Document fraud infects many if not most foreclosures across the country, and Lender Processing Services (LPS) is a major reason why. As a result, many are celebrating Nevada Attorney General Catherine Cortez Masto’s civil fraud suit against the company. Her suit details, based on numerous witnesses’ testimony, documents, and other evidence, how LPS’s business model was deceptive and fraudulent.
LPS organized its workforce to churn out documents that were replete with lies, improperly directed foreclosure and bankruptcy attorneys, misrepresented its fees, and made numerous misleading statements to investors. Frankly, it’s hard to see how LPS survives this suit and the shareholder and other cases that are sure to follow.
The suit’s tremendous clarity and detail raise several questions beyond “when will LPS declare bankruptcy?”
Biloxi Buzz for Monday
Last U.S. troops leave Iraq, ending war — (Reuters) - The last convoy of U.S. soldiers pulled out of Iraq on Sunday, ending nearly nine years of war that cost almost 4,500 American and tens of thousands of Iraqi lives and left a country still grappling with political uncertainty.
Swiss Bank Tax Evasion: U.S. Offers 11 Banks Deal To Avoid Prosecution: Report
ZURICH (Reuters) - U.S. officials are offering 11 Swiss banks, among them Credit Suisse , a deal that allows them to avoid criminal prosecution in exchange for revealing full details of their U.S. offshore business to Washington, a paper reported on Sunday.
Famed for the care with which it protects account holders' anonymity, the Alpine state has been forced to act by a series of U.S. probes into alleged tax evasion by Americans concealing their assets in Swiss banks.
In 2009, the Swiss parliament approved a deal to allow UBSto reveal details of around 4,450 U.S. clients and pay a $780 million fine to end lengthy tax proceedings that had threatened the future of the country's biggest bank.
The Swiss government has been in talks with U.S. authorities for months to try to get an investigation into 11 banks dropped, in return for expected hefty fines on the banks and the handing over of the names.
Credit Suisse, Julius Baer and Basler Kantonalbank are among the banks under investigation.
Citing an unnamed source, the newspaper SonntagsZeitung reported that 11 banks would each be offered a deal like the one to which UBS agreed.
Famed for the care with which it protects account holders' anonymity, the Alpine state has been forced to act by a series of U.S. probes into alleged tax evasion by Americans concealing their assets in Swiss banks.
In 2009, the Swiss parliament approved a deal to allow UBS
The Swiss government has been in talks with U.S. authorities for months to try to get an investigation into 11 banks dropped, in return for expected hefty fines on the banks and the handing over of the names.
Credit Suisse
Citing an unnamed source, the newspaper SonntagsZeitung reported that 11 banks would each be offered a deal like the one to which UBS agreed.
Sunday, December 18, 2011
Local Ohio Family Never Missed A Payment Engages BofA In Legal Fight For Home
CANAL WINCHESTER, Ohio --
A Canal Winchester family is taking on Bank of America in a legal fight to save their home. The outcome of their case could potentially impact hundreds of other Ohio families.
Joe and Jennifer Woodruff own a home in Canal Winchester. The couple says despite never having missed a payment, last spring Bank of America instituted foreclosure proceedings.
"Oh definitely shock ... How are you going to foreclose on us when we've been making payments for a year under your permanent modification," Jennifer Woodruff asked
In a lawsuit filed Friday in the Franklin County Court of Common Pleas, Woodruff has counter-claimed against BOA, saying the company "unlawfully diverted" her mortgage money.
The couple says after an unexpected job loss four years ago, it called the bank and asked for help. They received a temporary loan modification, which eventually became permanent. However, last spring the couple received foreclosure papers.
The Woodruffs say they desperately tried to work with BOA, spending hours on the phone trying to figure out the problem, but mostly getting the run around.
The Woodruffs are represented by Mark Jump and John Sherrod of Jump Legal in Columbus, who say the couple always made their payments on time, in some cases early.
Sherrod and Jump say potentially hundreds to thousands of other Ohio families may also be going through something similar.
In response to where the money could have been diverted, Sherrod said, "Other than complete and utter incompetence on the part of Bank of America, I don't know yet," adding that he hopes to find answers in the litigation and discovery proecss.
Sovereign Citizen Pleads Guity, Agrees To Rat Out Others
One of the men linked to a real estate scheme exposed by a Channel 2 Action News investigation, pleaded guilty to racketeering Tuesday.
Kenith Beniaih Rey admitted trying to steal a $2 million home in Sandy Springs. It was still under construction when he filed a quit claim deed in his name, turned on the power and alarm system, and moved in an armchair and suitcases.
“He was also involved with a co-defendant who was deeply engrained in the organization, a man by the name of Richard Terrance Jenkins,” prosecutor John Melvin told the judge.
Jenkins sat watching in the courtroom. He and Rey were indicted in March along with 10 others. Jenkins is accused of trying to steal six houses. Rey said he was just interested in acquiring foreclosed houses and that Jenkins roped him into the scheme.
“They began to show me some of the properties that they had. I decided to acquire his services,” Rey said.
But the homeowner was able to escape foreclosure, found Rey’s belongings and called Sandy Springs Police.
“It was one home that was an abandoned foreclosure that I was trying to acquire. He was like ‘let me show you how to acquire it,’ and we went down to the courthouse and filed documents which he had provided,” Rey said.
Read more here
Kenith Beniaih Rey admitted trying to steal a $2 million home in Sandy Springs. It was still under construction when he filed a quit claim deed in his name, turned on the power and alarm system, and moved in an armchair and suitcases.
“He was also involved with a co-defendant who was deeply engrained in the organization, a man by the name of Richard Terrance Jenkins,” prosecutor John Melvin told the judge.
Jenkins sat watching in the courtroom. He and Rey were indicted in March along with 10 others. Jenkins is accused of trying to steal six houses. Rey said he was just interested in acquiring foreclosed houses and that Jenkins roped him into the scheme.
“They began to show me some of the properties that they had. I decided to acquire his services,” Rey said.
But the homeowner was able to escape foreclosure, found Rey’s belongings and called Sandy Springs Police.
“It was one home that was an abandoned foreclosure that I was trying to acquire. He was like ‘let me show you how to acquire it,’ and we went down to the courthouse and filed documents which he had provided,” Rey said.
Read more here
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