Daily Archives: October 5, 2012

Did JP Morgan Chase have the right to foreclose on Wamu loans while the JPM-Wamu sale was pending?

Good question. A blast from the past. Reported by Puget Sound Business Journal last year:

Note: FDIC spokesperson Andrew Gray said to me this morning that JPMorgan Chase & Co. acquired WaMu’s assets when it signed the purchase and assumption agreement (Sept. 25, 2008), not the day the sale was finalized (Sept. 1, 2010). According to him, Chase did have a legal right to foreclose on WaMu mortgage holders in default, despite the fact the sale was still pending up until late last year.

Did JPMorgan Chase & Co. have the legal right to foreclose on homeowners with Washington Mutual mortgages?

That’s one of the questions to arise from the continuing uncertainty about when the sale of WaMu to JPMorgan actually closed.

According to the latest statements from the Federal Deposit Insurance Corp., the sale closed on Sept 1, 2010, nearly two years after the sale was agreed to on Sept. 25, 2008.

And though now I have received extension documents (PDF) from the FDIC from a Freedom of Information Act request, there is still lots of uncertainty surrounding the $1.9 billion sale.

The federal regulator confirmed to the Puget Sound Business Journal last Augustthe sale was still pending because it was a large transaction and the kinks were still being worked out. Then the FDIC said again in September the sale had been pushed back, from a scheduled closing date of Aug. 30, 2010 to Sept. 30, 2010. In October, the FDIC said for a third time the sale had been extended.

Last month, FDIC spokesman Andrew Gray said a statement in October the sale was held up was incorrect. The transaction officially closed on Sept. 1, 2010, and the terms of thepurchase and assumption agreement remained the same.


This raises the questions such as: Who owned the assets of failed WaMu in the interim? Was JPMorgan Chase able to foreclose on homeowners with Washington Mutual mortgages before the sale of the assets was complete? 

Canadian bank goes after American homes to collect credit card debts

In a significant escalation by debt collectors who pursue consumers for payment, a major Canadian bank has threatened to foreclose on the homes of hundreds of Californians unless they pay back old credit card debts.

California law generally makes foreclosure available only to lenders using residential properties as security, and collectors of unsecured debts, like credit card loans, normally are limited to attaching wages or bank accounts.

But Credigy Receivables – a unit of the National Bank of Canada, which has more than $150 billion in assets – has taken advantage of California’s relatively lax debt collection laws. The bank has repeatedly bypassed a legal hurdle that normally prevents credit card companies from threatening to take away the homes of debtors who refuse or are unable to pay.

Little-noticed except by debtors and consumer attorneys, Credigy’s unusual collection efforts begin with the purchase of judgment liens issued in California lawsuits filed by credit card lenders and other unsecured creditors. Credigy then names debtors who own residential properties as defendants in foreclosure lawsuits.

A California Watch review of court records identified foreclosure lawsuits filed by Credigy since December 2009 in superior courts in Alameda, Fresno, Kern, Los Angeles, Marin, Orange, Sacramento, San Bernardino, San Francisco, San Mateo and Solano counties.

Read on.

Citibank Dual Tracks MN Homeowner Into Foreclosure

“I’m really devastated here, I don’t understand how this can happen,” explained Golden Valley Minnesota homeowner Rose McGee.

She’s referring to her California Mission style home on a quiet corner of Duluth Street in the Minneapolis suburb of Golden Valley. Citibank, Rose’s lender foreclosed after months of telling her they were working with her on a plan to save the home. The process is called “dual tracking”. That’s when the lender says they’re working with the borrower to modify their loan, but is pursuing foreclosure.

Rose McGee’s troubles didn’t start with a foreclosure on her house. Her husband passed away in 2000, leaving Rose with only one income to pay all the bills. Then came major repairs due to a series of storms that hit the metro area a few years after that. Then, she lost her job. She was able to negotiate with Citibank to refinance her home and was able to keep up with the payments until 2011 when she lost her job, again.

“I’m thinking, ‘mortgage, how am I going to keep up with my mortgage.’ It’s awful when mortgage is the first thing that comes into your mind,” said Rose.

She immediately called Citibank and explained the situation. A representative said initially there was nothing they could do for her. After some pressing, another said that there were options of paying a percentage of what she owed. Rose agreed and worked with Citibank representatives. She called and called and called. Each time getting a different person on the line. Each time the person at Citibank said they were reviewing her case and they would get back to her. One representative said she should know something soon and call back the following week. Rose heard nothing. Finally, on June 4th, she reached the person who had the answer-just not the one she was expecting.

“They said, ‘Well ma’am are you aware that your house has been sold?’” recalls Rose.

She was stunned.

Read on.

On a side note: In Minnesota, lenders may foreclose on deeds of trusts or mortgages in default using either a judicial or non-judicial foreclosure process.

NCUA Sues Credit Suisse Over MBS Sold to Credit Unions

Federal regulators are targeting another financial firm in connection with its mortgage activities before the housing crisis.

The National Credit Union Administration sued Credit Suisse Group (CS) on Thursday, charging the Zurich-based company with misleading three corporate credit unions about the riskiness of mortgages that backed securities Credit Suisse bundled and sold to them. The three credit unions, which failed in 2010, sustained heavy losses from the transactions, the lawsuit says.

Separately, the U.S. Justice Department and the New York attorney general are probing the company’s handling of mortgage-backed securities, Reuters reported Thursday.

Read on.


New York Attorney General Eric Schneiderman is looking into the mortgage securities practices of at least a dozen financial institutions that have agreed to suspend a deadline for him to bring fraud claims,according to a person familiar with the matter.

Schneiderman, who sued JPMorgan Chase & Co. (JPM) this week for defrauding mortgage bond investors, has so-called tolling agreements with 12 institutions that preserve claims that could expire during a state investigation, according to the person, who declined to be named because the matter isn’t public.

Schneiderman is the co-chairman of a state-federal taskforce that is investigating misconduct in the bundling of mortgage loans into securities in the run-up to the financial crisis. The group includes the U.S. Securities and Exchange Commission and the Justice Department, and the JPMorgan case was its first legal action.

The tolling agreements, reached this year, stop the clock on the six-year statute of limitations and ensure Schneiderman can bring civil fraud claims against banks for conduct going as far back as 2006, said theperson. The agreements don’t necessarily mean that suits will be filed, the person said.

Rest here…

Calif. hands trial lawyers ‘nuclear weapon’ to use against mortgage industry: legal expert

The Homeowner Bill of Rights launched in California not only changed hundreds of years of real estate law, it may have turned the West Coast state into a judicial foreclosure state with financial firms on high alert, legal experts claim.

“In California, they just gave trial lawyers a nuclear weapon to use against the industry,” said Bob Jackson, president and attorney at Irvine, Calif.-based Jackson & Associates. Jackson spoke at HousingWire’s REperform Summit, a mortgage servicing conference under way in Dallas.

“The Homeowner Bill of Rights is the most massive change in the last 100 years of real estate law,” he said. “It used to be servicers were in the business of enforcing simple contract law. What the loan servicer did is they enforced the contract, but that is no longer how the game is played.”

The bill of rights, which was legislation designed by California Attorney General Kamala Harris, gave borrowers standing to legally address violations of the new foreclosure legislation.

Read on.

Deutsche Bank fires traders aiding tax dodgers

Germany’s biggest bank has dismissed several traders who systematically helped clients evade VAT, a German newspaper reported. The move is apparently part of a new clean-up drive at Deutsche Bank.

At least five of the company’s employees have been asked to clear their desks, the Süddeutsche Zeitung reported on Thursday.

The bank would not comment on the specific report, but pointed to “culture change” recently announced by the new joint CEOs Jürgen Fitschen and Anshu Jain, who declared that “not everything that was legal was legitimate.”

The co-chairmen promised that the bank would no longer engage in business that damages its reputation. “We mean it seriously,” Jain said recently.

The dismissed workers reportedly cooperated with an international group that deprived the German state of several hundred million euros by trading CO2 emissions credits. A number of firms were awarded illegitimate tax rebates by capitalizing on so-called VAT “carousel frauds,” the paper said.

Read on.

Bank of America must defend contract claim over the botched sale of a $15.5 million loan interest.

DALLAS (CN) – The 5th Circuit reinstated Highland Capital Management’s contract claim against Bank of America over the botched sale of a $15.5 million loan interest.
A three-judge panel ruled that “when viewed in the light most favorable to Highland, and taking the above allegations as true, Highland has made a viable claim for breach of an oral contract.” The Dallas-based alternative investment firm claims that in December 2009, the parties’ employees agreed to the sale over the phone of a $15.5 million interest from the bank to Highland at 93.5 percent of par.
“Pursuant to industry practice, the agreement also incorporated standard terms and conditions published by the Loan Syndications and Trading Association Inc. providing that an oral debt-trade agreement is binding on the parties, so long as the agreement includes all material terms,” the 15-page opinion states. “According to Highland, [Bank of America representative Andrew] Maidman did not reserve any non-LSTA, non-industry terms or conditions during the December 3 phone call.”
Highland says that later that day, its employee sent an email to Maidman that confirmed the debt-trade agreement was complete. It says Maidman responded shortly thereafter, confirming the agreement and adding that it was “subject to appropriate consents and documentation.” Highland says the “subject to” language does not allow either party to demand the inclusion of non-industry or non-LSTA standard terms in the agreement.
The bank later refused to settle the trade unless Highland agreed to additional terms that departed from the standard terms in the oral agreement, including indemnification, legal fees, and waiver of legal claims, according to the complaint. Highland responded by suing the bank in July 2010 for breach of contract and promissory estoppel.

Read on.

Federal judge rules that WAMU investors can sue JP Morgan for allegedly damaging WaMu’s credit rating in order to buy it at a fire sale price

WASHINGTON (CN) – A federal judge ruled bondholders of the now defunct Washington Mutual Bank can sue JP Morgan Chase for allegedly damaging WaMu’s credit rating in order to buy it at a fire sale price.
But in doing so, U.S. District Judge Rosemary Collyer also dismissed the bondholders’ claims of breach of confidentiality agreement and unjust enrichment.
The bondholders sued JP Morgan in 2009, claiming that the bank spread misinformation about WaMu that caused credit raters and federal regulators to doubt the bank’s ability to survive the financial crisis of 2008.
“As a result of these alleged nefarious activities, JPMC was able to acquire WaMu at a fire-sale price and the bonds were rendered worthless,” states Collyer in her ruling.
According to the ruling, JP Morgan signed off on a confidentiality agreement with WaMu in 2008 regarding the possible acquisition of the bank, but then allegedly revealed some of the information to federal regulators to make WaMu appear as though it was in financial shambles. The bondholders say JP Morgan also gave the information to the credit rating agencies, but overestimated WaMu’s loan losses and underestimated its liquidity and financial health.
According to the bondholders, JP Morgan’s scheme was successful. The bank received the government’s blessing and bought WaMu with no liability to the investors holding bonds in the bank.
The lawsuit was original filed in Texas, but was ultimately removed to the District Court for the District of Columbia, where the bondholders lost, but successfully appealed after a judge found that they couldn’t seek a remedy administratively.

Read on.

RBS Said to Suspend Trader Over Interest Rate Rigging Singapore Dollar Swap Offer Rate

Royal Bank of Scotland Group Plc (RBS) suspended a trader for trying to rig the Singaporedollar swap offer rate, indicating employees may have sought to manipulate more than just Libor, two people briefed on the matter said.

Senior trader Chong Wen Kuang was put on leave earlier this year for trying to rig the interest rate to benefit his trading position, said the people who asked not to be identified because the bank is probing his actions. He is the first RBS employee to be suspended or fired for attempting to rig a benchmark other than the London interbank offered rate, one of the people said.

Read on.