Daily Archives: August 12, 2013


A.G. Schneiderman Sues Western Sky Financial And Cashcall For Illegal Loans Over Internet

A.G. Schneiderman Sues Western Sky Financial And Cashcall For Illegal Loans Over Internet

Company Charged Usurious Rates On Short-Term Loans

Schneiderman: My Office Will Fight To Protect Consumers From Predatory Lending

NEW YORK – Attorney General Eric T. Schneiderman today announced that his office has filed a lawsuit against Western Sky Financial, LLC, CashCall, Inc., WS Funding, LLC, and their owners, Martin Webb and J. Paul Reddam, for violations of New York’s usury and licensed lender laws in connection with their issuing of personal loans over the Internet. The companies charged annual rates of interest from 89% to more than 355% to thousands of New York consumers. These interest rates far exceed the maximum rate allowed under New York law, which is limited to 16% for most lenders not licensed by the state. None of the companies sued are licensed in New York.

“Western Sky and CashCall charged exorbitant interest rates on their loans to scam New Yorkers out of millions of dollars,” said Attorney General Schneiderman. “With this case and others, my office will continue to fight to protect New Yorkers from illegal business practices and stop companies that seek to prey upon consumers facing tough economic times.”

The companies, located in South Dakota and California, targeted vulnerable New York consumers through television and internet advertising that promised “fast cash” to consumers in urgent need of money. The companies took advantage of these consumers by charging extremely high rates of interest that were above New York State’s usury caps. For example, consumers that received loans of $1,000 were charged an interest rate of more than 234%, and had to repay as much as $4,942 in interest and principal over just two years.


Report: San Diego Mayor Bob Filner Under Investigation For Allegedly Taking Women To Downtown Hotel

Report: San Diego Mayor Bob Filner Under Investigation For Allegedly Taking Women To Downtown Hotel

Federal, state and local investigators have been gathering information and building cases against San Diego Mayor Bob Filner beyond the sexual harassment accusations that have captured national attention.

The investigations have quietly moved forward amid near-daily revelations, from women making claims of lurid Filner behavior to the mayor ending his behavioral therapy early to locks being changed on the mayor’s office.

Key recent developments on the investigative front, according to sources and documents:

• Members of the mayor’s security detail provided information to investigators about Filner taking women to the downtown Westgate hotel, among other things.

• A subpoena has been issued to Lee Burdick, Filner’s chief of staff, to have her testify under oath and provide her notes about issues involving Sunroad Centrum Partners, a developer that paid $100,000 to the city at the behest of the Filner administration before approval its project was granted. The FBI has been inquiring about the transaction.

• As many as 30 City Hall employees, many who work in the mayor’s City Hall suite, have now been interviewed by investigators, mostly with the City Attorney’s Office, but also with the Sheriff’s Department and the FBI.

• Three members of the Sheriff’s Department have been assigned to handle phone calls from a hotline set up for Filner accusers to report possible criminal misconduct and conduct follow up interviews and investigations.

• In addition to agency investigations, City Council Audit Committee Chairman Kevin Faulconer is scheduled to announce Monday he will summon key city officials to testify before his committee September 9 about Filner’s June trip to Paris and the use of city-issued credit cards in connection with that trip.


German watchdog readies Deutsche Bank Libor report-source

German watchdog readies Deutsche Bank Libor report-source

* Deutsche Bank to receive Libor report from Bank watchdog -source

* BaFin to send Libor report as soon as this week -source

* Deutsche Bank says it is cooperating with authorities

FRANKFURT, Aug 12 (Reuters) – German regulator BaFin has completed its report of Deutsche Bank’s role in setting interbank lending rates and is set to submit a copy to the country’s flagship lender this week, a source familiar with the matter said on Monday.


Bank Of America Continues Deducting Fees, Even After Death

Bank Of America Continues Deducting Fees, Even After Death

erhaps showing its firm belief in the afterlife, Bank of America has continued to charge fees to the bank account of a man it knows died nearly half a year ago.


According to the L.A. Times’ David Lazarus, the account holder passed away in March. Before then, his disability checks had been direct-deposited to his BofA account on a regular basis.

The bank even acknowledged in writing that it had been notified of the customer’s death, but that didn’t stop it from charging $12 monthly fees to the account, which only had around $1,175 in it when the man passed away.

“Is it wrong morally? Yes,” one probate attorney explains to Lazarus. “Legally? No. The law says they can get away with it.”

The issue involved is that the account-holder did not have a will at the time of his death. Per California law, after 40 days a person’s heirs can attempt to lay claim to any amount below $150,000.

The late man’s son says he talked to the bank, but was given the impression that it would require so much paperwork and hundreds of dollars in legal fees, so it probably wasn’t worth going through all that hassle for the few hundred dollars that would remain.

Additionally, while California law requires banks to hand over inactive bank accounts to the state for safekeeping after a period of three years, the banks can keep charging maintenance fees during that time. In this case, that would ultimately deplete more than one-third of the amount in the late customer’s account.

However, Lazarus contends that this portion of the law is intended for situations where the bank doesn’t know the status or whereabouts of an account-holder. But the bank has already acknowledges that it knows the customer is deceased and that he has an heir.


Prosecutors and F.B.I. Examine JPMorgan Over Losses

Prosecutors and F.B.I. Examine JPMorgan Over Losses

As federal authorities prepare to charge criminally two former JPMorgan Chaseemployees suspected of misrepresenting a multibillion-dollar trading loss last year, prosecutors in Manhattan are separately exploring ways to penalize the bank over the trading blowup that has come to be known as the “London Whale.”

The investigation, according to people briefed on the matter, could yield a fine and a reprimand of the bank for allowing the suspected wrongdoing to occur. Prosecutors at the United States attorney’s office in Manhattan could also force the bank to bolster internal controls that failed to thwart the trading loss.


Prepare to be outraged. Newly obtained filings from white-collar fraud specialist Lynn Szymoniak’s lawsuit uncover horrifying scheme by big banks

Prepare to be outraged. Newly obtained filings from white-collar fraud specialist Lynn Szymoniak’s lawsuit uncover horrifying scheme by big banks

A newly unsealed lawsuit, which banks settled in 2012 for $95 million, actually offers a different reason, providing a key answer to one of the persistent riddles of the financial crisis and its aftermath. The lawsuit states that banks resorted to fake documents because they could not legally establish true ownership of the loans when trying to foreclose.

This reality, which banks did not contest but instead settled out of court, means that tens of millions of mortgages in America still lack a legitimate chain of ownership, with implications far into the future. And if Congress, supported by the Obama administration, goes back to the same housing finance system, with the same corrupt private entities who broke the nation’s private property system back in business packaging mortgages, then shame on all of us.

The 2011 lawsuit was filed in U.S. District Court in both North and South Carolina, by a white-collar fraud specialist named Lynn Szymoniak, on behalf of the federal government, 17 states and three cities. Twenty-eight banks, mortgage servicers and document processing companies are named in the lawsuit, including mega-banks like JPMorgan Chase, Wells Fargo, Citi and Bank of America.

Szymoniak, who fell into foreclosure herself in 2009, researched her own mortgage documents and found massive fraud (for example, one document claimed that Deutsche Bank, listed as the owner of her mortgage, acquired ownership in October 2008, four months after they first filed for foreclosure). She eventually examined tens of thousands of documents, enough to piece together the entire scheme.

A mortgage has two parts: the promissory note (the IOU from the borrower to the lender) and the mortgage, which creates the lien on the home in case of default. During the housing bubble, banks bought loans from originators, and then (in a process known as securitization) enacted a series of transactions that would eventually pool thousands of mortgages into bonds, sold all over the world to public pension funds, state and municipal governments and other investors. A trustee would pool the loans and sell the securities to investors, and the investors would get an annual percentage yield on their money.

In order for the securitization to work, banks purchasing the mortgages had to physically convey the promissory note and the mortgage into the trust. The note had to be endorsed (the way an individual would endorse a check), and handed over to a document custodian for the trust, with a “mortgage assignment” confirming the transfer of ownership. And this had to be done before a 90-day cutoff date, with no grace period beyond that.

The lawsuit alleges that these notes, as well as the mortgage assignments, were “never delivered to the mortgage-backed securities trusts,” and that the trustees lied to the SEC and investors about this. As a result, the trusts could not establish ownership of the loan when they went to foreclose, forcing the production of a stream of false documents, signed by “robo-signers,” employees using a bevy of corporate titles for companies that never employed them, to sign documents about which they had little or no knowledge.

Many documents were forged (the suit provides evidence of the signature of one robo-signer, Linda Green, written eight different ways), some were signed by “officers” of companies that went bankrupt years earlier, and dozens of assignments listed as the owner of the loan “Bogus Assignee for Intervening Assignments,” clearly a template that was never changed. One defendant in the case, Lender Processing Services, created masses of false documents on behalf of the banks, often using fake corporate officer titles and forged signatures. This was all done to establish standing to foreclose in courts, which the banks otherwise could not.

Szymoniak stated in her lawsuit that, “Defendants used fraudulent mortgage assignments to conceal that over 1400 MBS trusts, each with mortgages valued at over $1 billion, are missing critical documents,” meaning that at least $1.4 trillion in mortgage-backed securities are, in fact, non-mortgage-backed securities. Because of the strict laws governing of these kinds of securitizations, there’s no way to make the assignments after the fact. Activists have a name for this: “securitization FAIL.”

One smoking gun piece of evidence in the lawsuit concerns a mortgage assignment dated Feb. 9, 2009, after the foreclosure of the mortgage in question was completed. According to the suit, “A typewritten note on the right hand side of the document states:  ‘This Assignment of Mortgage was inadvertently not recorded prior to the Final Judgment of Foreclosure… but is now being recorded to clear title.’”

This admission confirms that the mortgage assignment was not made before the closing date of the trust, invalidating ownership. The suit further argued that “the act of fabricating the assignments is evidence that the MBS Trust did not own the notes and/or the mortgage liens for some assets claimed to be in the pool.”

The federal government, states and cities joined the lawsuit under 25 counts of the federal False Claims Act and state-based versions of the law. All of them bought mortgage-backed securities from banks that never conveyed the mortgages or notes to the trusts. The plaintiffs argued that, considering that trustees and servicers had to spend lots of money forging and fabricating documents to establish ownership, they were materially harmed by the subsequent impaired value of the securities. Also, these investors (which includes the Treasury Department and the Federal Reserve) paid for the transfer of mortgages to the trusts, yet they were never actually transferred.

Finally, the lawsuit argues that the federal government was harmed by “payments made on mortgage guarantees to Defendants lacking valid notes and assignments of mortgages who were not entitled to demand or receive said payments.”

Despite Szymoniak seeking a trial by jury, the government intervened in the case, and settled part of it at the beginning of 2012, extracting $95 million from the five biggest banks in the suit (Wells Fargo, Bank of America, JPMorgan Chase, Citi and GMAC/Ally Bank). Szymoniak herself was awarded $18 million. But the underlying evidence was never revealed until the case was unsealed last Thursday.

Now that it’s unsealed, Szymoniak, as the named plaintiff, can go forward and prove the case. Along with her legal team (which includes the law firm of Grant & Eisenhoffer, which has recovered more money under the False Claims Act than any firm in the country), Szymoniak can pursue discovery and go to trial against the rest of the named defendants, including HSBC, the Bank of New York Mellon, Deutsche Bank and US Bank.

The expenses of the case, previously borne by the government, now are borne by Szymoniak and her team, but the percentages of recovery funds are also higher. “I’m really glad I was part of collecting this money for the government, and I’m looking forward to going through discovery and collecting the rest of it,” Szymoniak told Salon.



Report: California, Arizona no longer foreclosure hot spots

Report: California, Arizona no longer foreclosure hot spots

Arizona and California are no longer the foreclosure laughingstocks of the nation, according to USA Today reporter Tim Mullaney.

In fact, the sand states recently staged an amazing recovery on the foreclosure front. In his USA Today update, Mullaney writes:

In states hit hardest by the housing bust — Arizona, California, Nevada and Florida — Fannie Mae used to see loans go bad from one-and-a-half to an excruciating eight times as often as the national average. That’s changing fast — except in Florida.

Only 7% of Fannie’s 2013 credit losses come from California — home to nearly 20% of its loans and 27% of its 2011 writeoffs due to defaults and foreclosures. Arizona, with 2.4% of Fannie’s outstanding balances, has seen its share of credit losses plunge to 1.8% in the first half of this year, from nearly 12% in 2011.

Source: USA Today

How One State Succeeded in Restricting Payday Loans

How One State Succeeded in Restricting Payday Loans

A version of this story was co-published with the St. Louis Post-Dispatch.

In 2009, consumer advocates in Washington State decided to try a new approach to regulating payday loans. Like reformers in other states, they’d tried to get the legislature to ban high-cost loans outright — but had hit a brick wall. So, instead, they managed to get a law passed that limited borrowers to no more than eight payday loans in one year.


Lenders would still be free to charge annual rates well into the triple digits, but the law would eliminate what critics say is the worst aspect of payday loans: borrowers caught in a cycle of debt by taking out loans over and over


Richmond mayor pushes forward with eminent domain program

Richmond mayor pushes forward with eminent domain program

Richmond, Calif. Mayor Gayle McLaughlin is not worried about moving ahead with the city’s plan to forcibly purchase mortgages from bondholders through the city’s eminent domain program, the Wall Street Journalnoted.

McLaughlin said she is not deferred from the eminent domain program despite a court challenge and the possibility of additional action by a federal regulator.

“We feel strongly that we’re on legal ground,” she said in an interview with Developments. “We’re not afraid of going into the courtroom. We believe our legal reasoning will prevail.”