Daily Archives: November 9, 2012

Exec Who Allegedly Enabled Countrywide-BofA Fraud Runs Chase’s Effort to Compensate Foreclosure Victims

An executive who the Justice Department says facilitated a scheme to defraud Fannie Mae and Freddie Mac is now spearheading JPMorgan Chase’s role in the government’s program to compensate victims of the big banks’ abusive foreclosure practices.

The executive, Rebecca Mairone, worked at Countrywide and Bank of America from 2006 until earlier this year, when she left for JPMorgan Chase, according to her LinkedIn profile.

In a lawsuit filed last month in federal court in New York, Justice Department attorneys allege that Countrywide, which was bought by Bank of America in 2008, perpetrated a two-year scam to foist shoddy home loans on Fannie and Freddie. Neither Mairone nor any other individuals are named as defendants in the civil suit, and no criminal charges have been filed against her or anyone else in connection with the alleged misconduct. But Mairone is one of two bank officials cited in the suit as having repeatedly ignored warnings about the “Hustle,” as the alleged scheme was called inside the company, and she prohibited employees from circulating some of those warnings outside their division.

Read on.

Bigger than Libor: Major Banks at Risk for Energy Manipulation


Major banks have another fight on their hands.

This set-to is not with inveterate antagonists like the SEC or the Department of Justice but with the Federal Energy Regulatory Commission (FERC), which oversees the oil, natural gas, and electricity industries. The tough part is figuring out how to size up and respond to this relatively unfamiliar inquisitor.

FERC has thus far gone after JPMorgan ChaseDeutsche Bank, and Barclaysfor alleged manipulation of energy prices – and the stakes are potentially as high, at least in terms of the penalty amounts sought, as any numbers splashed across the front-page stories of recent years. The action againstBarclays is especially conspicuous. Here the agency is seeking $470 million, which is not just the largest fine in FERC history but $20 million more than what Barclays got hit for in June, 2012 over the Libor bid-rigging scandal.

Federal judge gave preliminary approval to a settlement for homeowners who said that Citibank reduced their credit by using an automated valuation program

SAN FRANCISCO (CN) – A federal judge gave preliminary approval to a settlement for home owners who said that Citibank reduced their credit by using an automated valuation program.
Citibank faced a slew of claims over its automated valuation models in 2009. In one complaint, lead plaintiff David Levin claimed that his home value did not actually decrease enough for Citibank to reduce his credit limit. He alleged violations of the Truth-in-Lending Act and breach of contract.
Levin is one of six plaintiffs named as a class representative in the Tuesday order granting preliminary settlement approval.

Read on.

HSBC Offshore Account Holders Investigated

HM Revenue and Customs (HMRC) has said it is studying a list of British HSBC customers in Jersey after a whistleblower handed over a list of names, addresses and account balances.

The department will now investigate the customers’ details to establish whether any of them used the offshore accounts to evade tax.

Together, the 4,388 UK-based customers have a total of £699m in the bank accounts – which were often undisclosed to tax authorities, the Daily Telegraph claimed.

It said a number of criminals, former bankers, doctors, mining and oil workers, celebrities and other well-known figures are on the list.

“We can confirm we have received the data and we are studying it,” HMRC said in a statement.

Read on.


More from BBG:

U.K. prosecutors are poised to arrest former traders and rate setters at UBS AG (UBSN), Royal Bank of Scotland Group Plc (RBS) and Barclays Plc within a month for questioning over their role in the Libor scandal, a person with knowledge of the probe said.


The arrests will be made by police under the direction of prosecutors at the Serious Fraud Office within the next month, said the person, who declined to be identified because the matter isn’t public. Arrests in the U.K. are made at an early stage of the investigation, allowing police and prosecutors to question people under caution and may not lead to charges.


The SFO has 40 people working on the probe into manipulation of the London interbank bank offered rate, a benchmark for financial products valued at $360 trillion worldwide, and has involved the City of London Police, said David Green, the agency’s director.


“Significant developments” in the case are coming “in the near future,” Green said yesterday in an interview at his office in London without giving further details and declining to comment on any possible arrests.

Election Results May Force Some Banks to Sell

WASHINGTON – Community bankers hoping that a Republican landslide at the election box this week would ease their regulatory burden are now reassessing their profit prospects – and independence.

“A lot of people had hopes that [Mitt] Romney would unleash some of the animal spirits in the economy,” said John Corbett, president and chief executive of $2.4 billion-asset CenterState Bank of Florida in Winter Haven. “Now, there’s more certainty of the status quo which is slow growth, low interest rates and big government.”

Although it’s still unclear what the election will mean for bankers, most observers expect regulators to move faster to implement the Dodd-Frank Act.

“The reelection of President Obama does suggest that it will be full speed ahead for the Dodd-Frank rulemaking process,” said Eugene Ludwig, chief executive officer of Promontory Financial Group.

That is bad news for many small banks, who fear the financial reform law will gut profits and add to their compliance burden.

“We’re going to get more regulations and a tightening down on consumer rules,” said Rusty Cloutier, president and chief executive of $1.4 billion-asset MidSouth Bancorp (MSL) in Lafayette, La. “The President, the Senate and the House leadership will all turn to the regulators and say, ‘don’t you dare let another banking crisis come on this watch.’”

Read on.

NY Judge keeps FHFA case against BofA-Merrill Lynch alive

Another major bank facing litigation over misrepresentations tied to mortgage bonds sold to Fannie Mae and Freddie Mac lost its chance to have the case completely dismissed by a judge.

The FHFA sued Bank of America-Merrill Lynch ($9.28 -0.115%) and 16 other major financial firms this past year, claiming various allegations of fraud on the grounds that the firms sold residential-mortgage backed securities to the GSEs and misrepresented the quality of the loans.

U.S. District Judge Denise Cote out of New York granted Bank of America-Merrill Lynch’s push to dismiss claims of fraud tied to representations made about the borrowers owner-occupancy status and LTV ratios, but kept the main parts of the case alive.

Her ruling mirrors a similar decision this week in which Judge Cote kept the FHFA’s case against JPMorgan Chase ($41.03 0.625%) alive.

The judge’s opinion allows the case to go forward with other fraud claims permitted to survive.

Judge Cote wrote: “As in Chase, the facts alleged in the amended complaint are sufficient to plead fraud with respect to the offering materials’ representations regarding mortgage-underwriting standards.”

Source: Housingwire

Where the SEC Puts the JP Morgan-Bear Stearns Settlement Matters

JP Morgan disclosed they reached an agreement with the SEC today for the double-dipping scheme run by Bear Stearns mortgage traders. This was where the traders under Tom Marano kept billions of dollars that were supposed to go back to RMBS investors when resi-loans defaulted in the first 90 days. The SEC hasn’t officially accepted the deal yet and a court still has to approve it so we have ZERO info on how much Jamie Dimon’s bank has to pay and if there are any punitive damages.

Unfortunately with SEC settlements the bank doesn’t admit any wrong doing. So what’s important to watch here is where the SEC slots the funds. Will they place millions in their general fund or will the money go into something called a ‘fair fund’. Sarbanes-Oxley actually gave the SEC a mechanism to create a fund for aggrieved investors so they can get some restitution dollars back. In all fairness any money the SEC gets out of JP Morgan should be put back into the RMBS trust and paid out according to the waterfall for each security. It would be a little complicated to do but hey it’s the SEC and I’m sure they can hire a forensic accountant to sort it out. If that happens then the state and federal judges ruling on $140 billion of rmbs civil suits against the bank (it went up $20 billion in Q3 according to their 10-Q filing) could see it as an admission of guilt, which would really bolster the civil suits with fraud claims who are subject to triple damages.

Read more from Teri Buhl.

Bank of America Scrambling for the Mortgage Servicing Exits

NEW YORK (TheStreet) —Bank of America (BAC) may speed up its sale of its mortgage servicing portfolio, according to a report published Thursday by Sterne Agee analyst Henry Coffey on mortgage servicer Nationstar Mortgage Holdings. (NSM).

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U.S. Objects to Ocwen Buy of ResCap Loan

The U.S. is worried Ocwen Financial Corp. (OCN) won’t abide by a home-lending industry overhaul that was “designed to protect homeowners from future occurrences of mortgage-related abuse and fraud” when it takes over Residential Capital LLC’s servicing platform as part of a $3 billion deal.

Papers filed in advance of a Nov. 19 bankruptcy court hearing at which Ocwen will seek a judge’s permission to seal the deal say talks are under way, but for now the government plans to object to Ocwen’s acquisition unless Ocwen agrees to honor reforms agreed by ResCap.

Ally Financial Inc. also filed papers saying it is concerned about Ocwen’s willingness to honor the industry settlement, as well as a 2011 consent order with banking regulators.

Read on.