Daily Archives: October 3, 2012

In JPMorgan case, a potentially potent alliance for state, federal prosecutors


One of five officials co-chairing the working group, Schneiderman was a natural choice to launch the first attack. New York prosecutors have been working on their investigation since spring 2011. And Schneiderman has a powerful weapon to punish Wall Street — the state’s Martin Act.

The law gives “gives an immense amount of power to the New York attorney general,” said David Reiss, a Brooklyn Law School professor who has written about mortgage markets, predatory lending and housing policy. Under the Martin Act, the state has a lower burden of proof than proceeding with a similar suit in federal district court, Reiss said. “It makes New York courts an attractive vehicle to push certain issues,” he said. (Schneiderman drew laughter Tuesday when he said “we have an extraordinary judiciary in the state of New York” — a nod to the home court advantage the law gives him.)

The JPMorgan case has a “well-worn path” in the New York state courts, said Robert Kurucza, a partner in Goodwin Procter in Washington and former director of the Securities and Corporate Practices Division of the Office of the Comptroller of the Currency.

Successive state attorneys general have used the breadth of the Martin Act to pursue civil claims that might otherwise fall within the jurisdiction of federal financial regulators, and the JP Morgan suit is “carrying on the tradition,” Kurucza said.

“Given the subject matter and magnitude of it, we can anticipate actions by the New York attorney general are likely to continue,” Kurucza said. “Clearly, the banking industry is trying mightily to put these cases behind them.”

Schneiderman on Tuesday said additional suits would be forthcoming. He didn’t elaborate on timing, and he didn’t say whether subsequent cases would end up in federal district court.


“The California Monitor Program received 224 complaints about dual tracking since the Settlement was announced. The bad news is this clearly understates the degree of the problem. Most families do not file a complaint, and even among the 1,482 total complaints received, some may focus on confusing communication from their banks, meaning my staff doesn’t realize dual tracking is occuring into well into its work to help the family. The good news is the trend line is sharply downward in September. As the chart shows, dual tracking complaints were half as frequent last month.” ~ Katherine Porter


Tomorrow, October 3, the National Mortgage Settlement takes full effect. The nation’s five largest mortgage companies must implement new, stronger rules for working with homeowners who are facing a hardship. These reforms require banks to make fundamental changes to their businesses. It should be a bright day for all who care about principles of fairness and the California housing market.

This report, the first from the California Monitor, focuses on dual tracking. Dual tracking is the name given to a race between foreclosure and loan modification. This practice allows mortgage companies to manufacturethe foreclosures of homes and the displacement of families—even as those families fight to stay in their homes by requesting loan modifications. In my view, the Settlement’s restrictions on dual tracking are at the heart of changes that will give families who have fallen on hard times a fair chance to keep their homes.

The Settlement did not change the loan modification landscape overnight, nor did it promise to do so. Under the agreement, mortgage companies had six months to change practices that were harmful to homeowners.

In California, dual tracking was widespread during this time. The report reflects the fear and frustration of California families while the mortgage companies retooled their practices. In August, 25% of complaintsreceived by the California Monitor stated a dual tracking problem. However, this number began to trend downward in September. With the end of the implementation period, I will continue to monitor the mortgage companies’ actions and listen to homeowners. When a home is on the line, rhetoric is no substitute for real, measureable change.

The announcement of the $25 billion National Mortgage Settlement brought hope to thousands of families struggling to avoid foreclosure. Attorney General Kamala D. Harris appointed me as California Monitor to make sure those hopes were not dashed by delay or deception on the part of mortgage companies.

But consumers should not need a law professor as their ally to ensure fair process. While the California Monitor Program has worked successfully with mortgage companies to stop foreclosure sales in several dozens of dual tracking situations, the Settlement’s protections place accountability on mortgage companies to treat their customers fairly or face real consequences if they continue to dual track.

It is my honor to serve Californians. My staff and I are working hard each day to ensure that every family struggling to avoid foreclosure has a square shot at keeping its home. I look forward to making future monthly reports and informing Californians of our progress at http://www.californiamonitor.org.

Very truly yours,

Katherine Porter

Copy of the full report here…

JPMorgan Rivals Face Billions in Damages After MBS Case

JPMorgan Chase & Co. (JPM)’s rivals may face government lawsuits claiming tens of billions of dollars in damages tied to investor losses on mortgage bonds after New York’s attorney general filed a fraud lawsuit against the nation’s biggest bank by assets.

A state-federal task force set up this year to investigate misconduct in the bundling of mortgage loans into securities will bring other cases, according to New York Attorney General Eric Schneiderman. Investor losses in the JPMorgan case alone will be “substantially more” than the $22.5 billion cited in his complaint, he said.

“We do expect this to be a matter of very significant liability, and there are others to come that will also reflect the same quantum of damages,” Schneiderman said in an interview yesterday with Bloomberg Television’s Erik Schatzker. “We’re looking at tens of billions of dollars, not just by one institution, but by quite a few.”

Read on.

BofA foreclosure fiasco has Portland woman furious

PORTLAND — Four months after Bank of America admitted making mistakes in threatening to foreclose on a Portland woman’s home, the bank is back at it again.

“It’s a slap in the face,” that homeowner, Polly Brown, told Unit 8. “It looks like to me they’re just a bureaucratic mess and the left hand doesn’t know what the right hand is doing, it’s just a mess.”

In April, Unit 8 helped Brown get an apology and correction to her credit scores from Bank of America. She thought her mortgage mess had ended, until she got a recent letter from the bank.

That’s when she contacted Unit 8 for help again.

When Brown first reached out earlier this year, her frustration and fear left her in tears during an interview.

Read on.

Countrywide: It’s baaack

FORTUNE –The Federal Reserve’s recent decision to buy mortgage bonds until the economy recovers has made home lending more attractive than it has been in years. The spread between what it costs to fund a mortgage loan and what borrowers actually pay is nearly three times as large as usual. So it’s perhaps no surprise that one of the first firms to rush into this profit-filled fun house is headed by the former executives of the most notorious subprime lender of the era that led to the financial crisis.

Last month, PennyMac (PMT), a finance company run almost entirely by alumni of Countrywide Financial, opened its first retail branch. The company expects to hire as many as 100 employees for the office, which is in Pasadena, California, including loan officers and underwriters.

To head the office, PennyMac has tapped Stephen Brandt, who, according to a Congressional report released in July, ran Countrywide’s “Friends of Angelo” program. The report found that Brandt’s former unit handed out hundreds of sweetheart loans to members of Congress, their staffs and other government employees. One of the main thrusts of the division, according to the report, which was nicknamed after Countrywide’s former CEO, Angelo Mozilo, was to soften anti-predatory lending laws.


Read on.


Oct. 2 (Bloomberg) — New York State Attorney General Eric Schneiderman, speaks about the lawsuit filed against JPMorgan Chase & Co. for alleged mortgage fraud. Schneiderman accused the bank’s Bear Stearns unit, which JPMorgan bought in 2008, of using “depceptive” practices in selling hundreds of billions of dollars in mortgage bonds. U.S. Attorney for the District of Colorado John Walsh, U.S. Department of Housing and Urban Development Secretary Shaun Donovan, Assistant Attorney General Lanny Breuer and Acting Assistant Attorney General Tony West also speak at the news conference in Washington. (Source: Bloomberg)

Here is the video.