Daily Archives: September 17, 2012

Idaho Supreme Court decision gives MERS court win

The Trotter v. Bank of New York Mellon case out of Idaho’s Supreme Court set a precedent in January that helped the Mortgage Electronic Registration Systems obtain the dismissal of a foreclosure case this past week.

Judge Lynn Norton of the Elmore County District Court in Idaho ruled in favor of MERS and Fannie Mae holding that MERS in fact can serve as an agent of a lender and appoint successor trustees while maintaining the power to foreclosure.

Read on.

State AGs Probing Banks of Sales of Credit Card Debt

American Banker (subsciption req.):

Echoing elements of the mortgage robo-signing controversy, investigators are looking at whether JPMorgan Chase and other banks botched the documentation and amounts owed on credit card debts they sold.


Woman sues JP Morgan Chase, Wells Fargo for predatory lending

HUNTINGTON – A woman is suing JPMorgan Chase Bank and Wells Fargo Bank after she claims they participated in predatory lending practices.

In 2003, Kathy L. Carroll and her husband, R.M. Carroll, were solicited by the now-defunct lender Aegis Funding Corporation, according to a complaint filed Aug. 22 in Cabell Circuit Court.

Wells Fargo is now the trustee for Aegis.

Kathy Carroll claims the defendants obtained an appraiser with the purpose of providing, without her or her husband’s knowledge, an inflated appraisal to justify the refinance.

The appraiser appraised the Carroll home at or above $290,000, when the actual value of the home was $180,300, according to the suit.

Kathy Carroll claims in 2007 she began to struggle with house payments because of the death of her husband and asked Chase for assistance, but was not given any.

In August, Kathy Carroll discovered for the first time that the originating appraisal was inflated, according to the suit.

Read on.

A fine for doing good. The Justice Department sues a bank for prudent lending.

Banks have been widely castigated for causing the housing bust by lending too much to borrowers who couldn’t repay, but now Eric Holder’s Department of Justice has taken its antidiscrimination campaign to new lengths by whacking a bank for having been too prudent.

In a complaint filed Wednesday and settled the same day, Justice claimed that California-based Luther Burbank Savings violated the 1968 Fair Housing Act and 1974 Equal Credit Opportunity Act by setting a policy that had a “disparate impact” on minorities. Between 2006 and mid-2011, 5.2% of Luther’s single-family residential mortgage loans went to African-Americans and Hispanics, compared to an average of 41.7% for other lenders in the area. The complaint doesn’t cite evidence of intentional discrimination because there wasn’t any.

Luther Burbank might not have been in this business were it not for government. The bank was largely focused on multi-family mortgages until its regulator, the former Office of Thrift Supervision, asked the lender to diversify its portfolio in the mid-2000s. Luther Burbank then hired a team to do “nontraditional” loans such as interest-only or option adjustable-rate mortgages that the bank would keep on its own books. Yes, this is the same stuff that eventually blew up the housing market.

Luther Burbank wasn’t a fly-by-night operator that marketed those loans to any and all. The bank insisted on a minimum $400,000 loan amount and made loans with an average 680 FICO score and 67% loan-to-value. Over the period that Justice examined, Luther Burbank foreclosed on a mere 11 borrowers out of 629 loans outstanding—a loss ratio of 1.75%. In a normal world, Luther Burbank would get a medal from regulators for its risk management, having chosen borrowers even at the height of the housing mania who could meet their monthly payments.

But Assistant Attorney General for Civil Rights Thomas Perez has a different priority: He wants banks to meet lending quotas to minorities—regardless of whether those borrowers can afford the loans. Many minority borrowers have low incomes that make them riskier lending bets. Is that a bank’s fault?

Luther Burbank admitted no guilt and said it settled to avoid costly litigation, which makes sense for a small, local lender that has to worry about its reputational risk. The bank has agreed to ratchet down its minimum loan to $20,000 and will now commit $2.2 million to a “special financing program” for “qualified borrowers,” payouts for local community groups, and “consumer education programs.” Justice has the final say on who gets that money.

Read on.

First big victim of 2nd Circuit’s MBS standing opinion: JPMorgan

Thomson Reuters News & Insight.

Earlier this month, when the 2nd Circuit Court of Appeals issued a ruling in a Goldman Sachs case thatredefined standing inclass actions involving mortgage-backed securities, I questioned how much impact the opinion would have, given that we’re four years into MBS class litigation. Sure, the 2nd Circuit opened the door to much broader MBS classes when it held that name plaintiffs can pursue claims on behalf of all the trusts backed by mortgages originated by the same lenders as those they invested in. But I wondered, as a practical matter, whether the ruling was too late to help most MBS class claimants, since most of their cases have long since crossed the threshold of standing.

Now we know that for at least one defendant — JPMorgan Chase — the newly widened definition of standing came all too soon. On Friday, U.S. Senior District Judge Edward Korman of Brooklyn issued an order drastically expanding the claims for which the name plaintiff in an MBS case against JPMorgan, the Mississippi Public Employees’ Retirement System (MissPERS), has standing to sue.

Exclusive: Virgin Money Urges UK Banks Split

Bankers’ pay should be subject to more stringent regulatory caps and there should be full separation of retail and investment banks in order to accelerate industry reforms, according to the lender that bought the taxpayer-controlled Northern Rock.

I have been leaked a summary of the submission by Sir Richard Branson’s Virgin Money to the Parliamentary Commission on Banking Standards, which is examining measures to overhaul industry practices following a string of crises in recent months.

In it, Virgin Money advocates wide-ranging changes that it claims would level the playing field for new entrants to the high street banking sector, as well as restoring the reputation of the embattled industry.

The company’s calls for reform underline the extent to which banks are attempting to demonstrate that they recognise the depths to which their industry has sunk in the wake of the payment protection insurance mis-selling and Libor manipulation scandals.

Last month, Sky News obtained Barclays’ evidence to the inquiry, which argued for tough new sanctions for bankers found guilty of malpractice.

“To restore trust in banking, we believe that two key issues are the introduction of a professional code of conduct with simple principles, and the separation of retail banking and investment banking,” Virgin Money said in its submission.

Arguing for the “full professionalization of banking”, the company said the ring-fencing of Britain’s banks, as proposed by the Independent Commission on Banking, would not go far enough.

Read on.

Probe focuses on JPMorgan’s monitoring of suspect transactions

Sept 16 (Reuters) – A U.S. regulatory probe of JPMorgan Chase & Co’s anti-money laundering systems is focusing on potential lapses in how the largest U.S. bank monitors suspect money transactions, according to people familiar with the situation.

The probe appears to be focused on the systems and personnel that JPMorgan uses to safeguard against illicit money flows, the sources said, declining to be identified because they were not authorized to speak to the media.

One specific angle of the probe is how the bank’s systems were set up to review a high volume of suspect transactions.

Banks are required to file reports of suspicious activity but that can add to costs. Regulators and banks sometimes disagree over whether those reviews produce reports that actually identify financing tied to illegal narcotics, terrorism or sanctioned countries.

JPMorgan faces being hit with a regulatory order by the U.S. Office of the Comptroller of the Currency, which regulates national banks. That order would identify lapses and require the bank to tighten the anti-money laundering systems it uses.


Read on.