Daily Archives: July 22, 2013


Victims Of Mortgage Abuse Refuse To Cash Tiny Settlement Checks

Victims Of Mortgage Abuse Refuse To Cash Tiny Settlement Checks

A billion dollars in checks sent to foreclosed homeowners as part of a national settlement with big banks is going uncashed, another sign that the government’s much-criticized effort to redress mortgage abuses is coming up far short of its promised impact.

While the agency in charge of dispersing the funds has not specified how many individual checks make up that $1 billion total, the fact that recipients are not bothering to deposit the funds reinforces criticisms of the program. It distributed 4.2 million checks, which expire after 90 days. The vast majority of those checks were for just $300 each. Yet a review by the Independent Foreclosure Review (IFR) suggested that almost a quarter million Americans lost homes under false or illegal pretenses and that about 1.2 million borrowers had had to defend against wrongful foreclosure efforts. The IFR, part of the much-derided 2012 National Mortgage Settlement, has long been faulted for protecting the mortgage industry and for distributing checks for hundreds of dollars to homeowners who owed hundreds of thousands to abusive lenders. The uncashed checks account for a bit less than a third of the money allocated for the IFR program under the 2012 deal with financial firms.


Guy Walks Into Citigroup Branch, Loses $40,000

Guy Walks Into Citigroup Branch, Loses $40,000

If the senators are going to persuade Congress to bring back Glass-Steagall, they should show examples of real, sympathetic people. This brings me to the story of Philip L. Ramatlhware, an immigrant from Botswana who went to a Citigroup Inc. (C) branch in downtown Philadelphia one day five years ago to open a regular bank account.

He was 48 years old at the time and disabled, after being hurt in an accident as a passenger on a Greyhound bus. His English wasn’t good, he had no college education and his last job had been at a fast-food kiosk at the Philadelphia airport. In April 2008, he received $225,000 in a settlement for his injuries, part of which went to pay legal fees. He was holding the settlement check when he walked into the branch.

Arbitration Claim

Immediately he was referred to a broker for a “financial consultation,” according to an arbitration claim he filed against Citigroup. The broker assured him the money would be invested in “guaranteed” funds and that he could have access to them whenever the need arose, the complaint said. Ramatlhware gave him $150,000 to invest. The broker put $5,000 into a bank certificate of deposit, bought a $133,000 variable annuity and invested the rest in a series of mutual funds.

Less than six months later, Ramatlhware had lost $40,000, according to the complaint. Citigroup settled the case in 2010 for $22,500, without admitting liability, according to a report on the case by the Financial Industry Regulatory Authority.

There are countless tales like this of banks cross-selling unsuitable investments to unsophisticated customers. For whatever reason, lots of people trust the advice they get from someone working in the lobby of their local retail bank branch, even if they normally would never set foot in a brokerage firm.

Here’s another example from Finra’s files, involving a Michigan couple, Alberto Ferrero and Qingwen Li, who filed a claim in 2010 against CCO Investment Services, a unit of Royal Bank of Scotland Group Plc. (RBS) They sought $60,000, plus attorneys’ fees and other damages. They were awarded almost $72,000.

Their story began one day in April 2007 when they walked into their local bank, Charter One, also owned by RBS. Here’s how the arbitrator explained the November 2012 ruling in their favor:

“Claimants are recent immigrants to the United States, and they had very limited investment experience,” wrote James Graven, an attorney from Toledo, Ohio, who was the arbitration panel’s chairman. “Claimants went to their bank to roll over their CD. The bank directed them to a registered representative. Claimants’ primary objective was capital preservation.

“The broker recommended a solicited trade placing one third of claimants’ net worth in one speculative fund. The broker made material misrepresentations and omissions concerning risk. Claimants lost approximately 50% of their investment in 18 months. The broker invested claimants’ whole account into one high risk junk municipal bond fund.”

The banking industry has a long history of preying on unsuspecting depositors by selling them garbage securities without regard to suitability. This was a big reason Glass-Steagall was originally enacted during the Great Depression. It has been a recurring problem ever since key portions of the act were repealed during President Bill Clinton’s administration.

UBS to Settle Fannie, Freddie RMBS Lawsuit

Swiss bank UBS says it has reached an agreement in principle to settle a lawsuit over residential mortgage-backed securities it offered to Fannie Mae and Freddie Mac from 2004 to 2007, according to the Associated Press.

The lawsuit was one of 17 that the Federal Housing Finance Agency filed in September 2011 in its role as conservator of the government-sponsored enterprises. The lawsuit against UBS concerns some 23 MBS deals worth approximately $6.4 billion that Fannie and Freddie purchased from the bank. Others, including Citigroup, have reached similar settlements.

The full cost of the settlement, which still needs final approvals, would be covered by previous provisions and those taken in the second quarter, Bloomberg notes. The settlement announcement comes as UBS said its second-quarter profit beat forecasts, posting net profit of 690 million francs ($734.4 million), Reuters adds.


Protesters Gather Outside Home Of Wells Fargo CEO

Protesters Gather Outside Home Of Wells Fargo CEO

A group of around 50 people gathered outside the San Francisco home of Wells Fargo CEO John Stumpf Saturday calling for changes in the way the bank handles foreclosures.

The protestors, organized by Alliance of Californians for Community Empowerment, or ACCE, set up what they called a “Stumpfville” outside a home at Chestnut and Larkin streets.

The group, which says it has repeatedly asked Stumpf to meet with members, is calling for the bank to implement a principal reduction program to prevent foreclosures and to publicly disclose foreclosure and relief data by race, income and zip code.

“Wells Fargo is the leader in targeting African American and Latino communities with predatory loans,” organizer Grace Martinez said.

Martinez, whose mother and sister have both had their homes foreclosed on, said Wells Fargo currently has more than 11,000 homes “in the foreclosure pipeline” and has resisted offering principal reductions in loan modifications even when other banks have done so.

Manuela Alvarez said she is to stay in her home following foreclosure proceedings, and would be back in court on Monday to fight an eviction order.

“I’ve been holding out for almost four years, but its getting harder and harder,” Alvarez said.

“When I came to ACCE, I came for myself, but I found out everybody else needs help too, so it’s not just about me,” Alvarez added.

In response to the protest, a Wells Fargo spokesman said that Wells Fargo has helped more than 860,000 customers with loan modifications, and extended more than $6 billion in principal forgiveness since January 2009.


Another way big banks are screwing you: Inflated aluminum pricing, one way Wall Street is capitalizing on federal regulations to sway a variety of commodities markets

Another way big banks are screwing you: Inflated aluminum pricing, one way Wall Street is capitalizing on federal regulations to sway a variety of commodities markets

MOUNT CLEMENS, Mich. — Hundreds of millions of times a day, thirsty Americans open a can of soda, beer or juice. And every time they do it, they pay a fraction of a penny more because of a shrewd maneuver by Goldman Sachs and other financial players that ultimately costs consumers billions of dollars.

The story of how this works begins in 27 industrial warehouses in the Detroit area where a Goldman subsidiary stores customers’ aluminum. Each day, a fleet of trucks shuffles 1,500-pound bars of the metal among the warehouses. Two or three times a day, sometimes more, the drivers make the same circuits. They load in one warehouse. They unload in another. And then they do it again.

This industrial dance has been choreographed by Goldman to exploit pricing regulations set up by an overseas commodities exchange, an investigation by The New York Times has found. The back-and-forth lengthens the storage time. And that adds many millions a year to the coffers of Goldman, which owns the warehouses and charges rent to store the metal. It also increases prices paid by manufacturers and consumers across the country.

Tyler Clay, a forklift driver who worked at the Goldman warehouses until early this year, called the process “a merry-go-round of metal.”

Only a tenth of a cent or so of an aluminum can’s purchase price can be traced back to the strategy. But multiply that amount by the 90 billion aluminum cans consumed in the United States each year — and add the tons of aluminum used in things like cars, electronics and house siding — and the efforts by Goldman and other financial players has cost American consumers more than $5 billion over the last three years, say former industry executives, analysts and consultants.

The inflated aluminum pricing is just one way that Wall Street is flexing its financial muscle and capitalizing on loosened federal regulations to sway a variety of commodities markets, according to financial records, regulatory documents and interviews with people involved in the activities.


Wells Fargo, Citigroup Slash Mortgage Jobs as Refis Tank

Wells Fargo, Citigroup Slash Mortgage Jobs as Refis Tank

Wells Fargo and Citigroup are laying off hundreds of employees in their mortgage units as rising interest rates cause home loan refinances to plummet. More layoffs by banks with heavy exposure to mortgages are expected this year.