Daily Archives: September 24, 2013

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NCUA Sues Morgan Stanley and Eight Others over Faulty Securities

NCUA Sues Morgan Stanley and Eight Others over Faulty Securities

Sales to Southwest and Members United Caused Corporates’ Collapse

ALEXANDRIA, Va. (Sept. 23, 2013) – The National Credit Union Administration today filed nine lawsuits in Federal District Court in New York against Morgan Stanley & Co., Inc. and eight other institutions over the sale of nearly $2.4 billion in mortgage-backed securities to Southwest and Members United corporate credit unions.

“We continue to pursue accountability and recovery in the wake of billions of dollars in sales of faulty securities that led to the collapse of several corporate credit unions and handed the industry the costly bill of paying for the losses,” NCUA Board Chairman Debbie Matz said. “All the credit unions we supervise and insure are sharing those costs. The people who are responsible should be required to shoulder that burden, as well.”

Defendants Morgan Stanley & Co., Inc. and Morgan Stanley Capital I Inc., Barclays, J.P Morgan/Bear Stearns, Credit Suisse, Royal Bank of Scotland and UBS sold faulty securities to both corporate credit unions. Goldman Sachs, Wachovia and Residential Funding Securities, LLC, now Ally Securities, sold faulty securities to Southwest. The suits make claims under either federal or state securities laws.

In all, five corporate credit unions failed as a result of the purchase of faulty mortgage-backed securities.

Southwest and Members United corporate credit unions paid more than $416 million for the securities in question in the Morgan Stanley suit and more than $1.9 billion for securities sold by the other defendants.

NCUA’s suits allege the firms made misrepresentations in connection with the underwriting and subsequent sale of the mortgage-backed securities. The corporate credit unions became insolvent, were subsequently placed into NCUA conservatorship and later liquidated as a result of losses from these faulty securities. These failures subsequently caused significant losses to the credit union system.

NCUA Complaints – Filed September 23, 2013

Alley Securities

Barclays Capital

Bear, Stearns & J.P. Morgan Securities

Credit Suisse

Goldman Sachs

Morgan Stanley

RBS Securities

UBS Securities

Wachovia

 

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Senators Probe Tax Lien Sale, Foreclosure “Abuses”

Senators Probe Tax Lien Sale, Foreclosure “Abuses”

A dozen U.S. Senators have asked the Consumer Financial Protection Bureau and the U.S. Justice Department to look into residential tax lien sale and foreclosure practices that they say are unfairly––and potentially illegally––causing seniors, veterans and the disabled to lose their homes.

In a letter to the the CFPB and the Justice Department, the senators cited a Washington Post series detailing how in Washington, D.C., third-party investors sometimes purchase tax liens at auctions then try to rake in profits by charging property owners exorbitant processing, legal and other fees that can significantly increase the amount owed by a property owner, sometimes buy multiples of 30 to 40 times. For some property owners, the fees are too much to bear and they are forced to vacate.

The letter noted that some states and local governments permit the elderly and the infirm to defer property tax payments and limit the permissible fees during the tax lien process. But in states and municipalities where that is not the case, the letter claims that some third-party investors are “cynically leveraging these regulatory gaps to maximize profits by imposing often unreasonable and escalating fees” that cause property owners to be squeezed out of their homes.

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Bank Of America To Pay $2.18 Million In Racial Discrimination Case

Bank Of America To Pay $2.18 Million In Racial Discrimination Case

* Payment ordered by US Labor Department judge

* Bank of America reviewing order

* Bank settled racial, gender bias cases in last month

By Jonathan Stempel

Sept 23 (Reuters) – Bank of America Corp was ordered to pay $2.18 million to 1,147 black job applicants over racial discrimination in hiring that kept qualified candidates from getting jobs, the U.S. Department of Labor said on Monday.

The decision by Linda Chapman, an administrative law judge at the Labor Department, awards back pay and interest to former candidates for teller and entry-level administrative and clerical positions in the bank’s hometown of Charlotte, North Carolina.

Chapman concluded that Bank of America’s “unfair and inconsistent selection criteria” led to the rejection of qualified black job candidates, the Labor Department said.

About $1.22 million would go to 113 people who were rejected for jobs between 2002 and 2005, and another $964,000 to 1,034 people who were rejected in 1993.

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Bank of America goes to trial over U.S. mortgage fraud charges

Bank of America goes to trial over U.S. mortgage fraud charges

(Reuters) – Bank of America Corp heads to trial this week over allegations its Countrywide unit approved deficient home loans in a process called “Hustle,” defrauding Fannie Mae and Freddie Mac, the U.S. government enterprises that underwrite mortgages.

In what would be the government’s first financial crisis case to go to trial against a major bank over defective mortgages, jury selection is set to begin in federal court in New York on Tuesday, barring a last-minute settlement.

The trial is also a reminder of the billions of dollars in legal liabilities Bank of America has incurred as a result of its 2008 acquisition of Countrywide Financial Corp, which became a poster child of the mortgage meltdown.

The U.S. Justice Department filed the civil lawsuit in 2012, blaming the bank for more than $1 billion in losses to Fannie Mae and Freddie Mac, which bought mortgages that later defaulted. Since then, new evidence and pre-trial rulings by U.S. District Judge Jed Rakoff have pared the case back.

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Circuit to Rehear Wells Fargo Class Action Fight

Circuit to Rehear Wells Fargo Class Action Fight

SAN FRANCISCO (CN) – Wells Fargo will face a limited appeals rehearing related to claims that it denies qualified homeowners permanent loan modifications, the 9th Circuit said Monday.
     Congress created the Home Affordable Modification Program, or HAMP, in 2009 under the umbrella of the Troubled Asset Relief Program, itself a byproduct of the 2008 financial crisis.
     Lawmakers intended for HAMP to help homeowners avoid foreclosure when they were behind on their mortgage payments.
     In reviving two class actions against Wells Fargo last month, a three-judge panel of the 9th Circuit noted that the program “seems to have created more litigation than it has happy homeowners.”
     Wells Fargo had been entitled like other lenders to $1,000 from the Treasury for each permanent modification it made, so long as it followed certain guidelines and procedures.
     To apply for HAMP, distressed homeowners would supply information about their finances and their inability to pay their current mortgage to the lender. Borrowers who appeared eligible would then submit documentation of their financial status and begin making trial payments of the modified amount.
     Lenders are then supposed to notify the borrowers if they do not qualify for HAMP and consider them “for another foreclosure prevention alternative,” according to the Treasury’s directive.
     The homeowners in the two class actions claimed they made all their modified payments, but the bank never offered them permanent mortgage modifications. Instead, it allegedly foreclosed on their homes and sold them.

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SOUTH CAROLINA COURT HOLDS THAT FORECLOSURE LAW OF U.S. SUPREME COURT TRUMPS EVERYTHING: FORECLOSING PARTY MUST OWN BOTH THE NOTE AND THE MORTGAGE TO FORECLOSE

SOUTH CAROLINA COURT HOLDS THAT FORECLOSURE LAW OF U.S. SUPREME COURT TRUMPS EVERYTHING: FORECLOSING PARTY MUST OWN BOTH THE NOTE AND THE MORTGAGE TO FORECLOSE

September 20, 2013

In a stunning ruling from the Ninth Judicial Circuit Court of Common Pleas of Charleston, South Carolina, a Judge has issued a detailed, 4-page written opinion dismissing a foreclosure action filed by Deutsche Bank National Trust Company as the claimed trustee of an IndyMac securitization, holding that DB failed to show that it was the owner and holder of the original Note and Mortgage at the time the Complaint was filed. FDN South Carolina network counsel Bill Sloan, Esq. represents the homeowner and prepared and argued the homeowner’s Motion to Dismiss.

Counsel for DB made the familiar argument that it had possession of the original Note endorsed in blank, that the Note was a negotiable instrument under the UCC, that the Mortgage follows the Note, and that thus DB had established its right to foreclose. The Court disagreed, citing precedent from the United States Supreme Court’s decision in Carpenter v. Longan, 83 U.S. 271, 16 Wall. 271, 21 L.Ed. 313 (1872) which the Court found “clearly supports the notion that the Plaintiff must own the Note and the Mortgage to foreclose on the property (emphasis in the opinion).” The Court determined that “Plaintiff failed to show that it owned the Mortgage at the time the Complaint was filed”, and also noted that the Mortgage shows MERS to be the mortgagee but that “MERS is never mentioned in the Note.”

The Court stated: “It is clear that to have standing in this foreclosure case, Plaintiff must not only be the holder and owner of the original Note, but also the Mortgage as well. Plaintiff’s Complaint in this case fails to meet this criteria. Plaintiff lacks standing to initiate and prosecute the foreclosure, and dismissal pursuant to Rule 17(a) and Rule 12(b)(6) SCRCP is appropriate.”

This ruling is based on foreclosure law from the United States Supreme Court, which trumps any contrary state law which does not require the foreclosing Plaintiff to own both the Note and the Mortgage at the time that the foreclosure Complaint is filed. This ruling demonstrates the essential fallacy in the “UCC, I have the Note, mortgage follows the Note” theory espoused by every attorney for the banks and servicers. What remains to be seen is whether the judiciary handling foreclosure cases will follow the law of the U.S. Supreme Court or not.

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NCUA files suit against 13 international banks, including J.P. Morgan Chase, alleging violations of federal and state anti-trust laws by manipulation of interest rates through the London Interbank Offered Rate (LIBOR) system

NCUA files suit against 13 international banks, including J.P. Morgan Chase, alleging violations of federal and state anti-trust laws by manipulation of interest rates through the London Interbank Offered Rate (LIBOR) system

Legal Action Part of Agency’s Strategy to Hold Accountable Firms that Caused Corporate Collapse and Billions in Losses

ALEXANDRIA, Va. (Sept. 23, 2013) – The National Credit Union Administration today filed suit in Federal District Court in Kansas against 13 international banks, including J.P. Morgan Chase, alleging violations of federal and state anti-trust laws by manipulation of interest rates through the London Interbank Offered Rate (LIBOR) system.

The manipulation of LIBOR, the benchmark for setting interest rates around the globe, resulted in a loss of income from investments and other assets held by five failed corporate credit unions: U.S. Central, WesCorp, Members United, Southwest and Constitution. 

“We have a responsibility to pursue recoveries through every available avenue against those who caused billions of dollars in losses to credit unions,” NCUA Board Chairman Debbie Matz said. “Some firms were manipulating international interest rates in a way that cost the five corporates to lose millions of dollars. Just as we are doing in our other suits, we are seeking to hold responsible parties accountable for their actions.”

NCUA claims the defendants in today’s action individually and collectively gave false interest-rate information through the LIBOR rate-setting process “to benefit their investments that were tied to LIBOR, to reduce their borrowing costs, to deceive the marketplace as to the true state of their creditworthiness, and to deprive investors of the interest rate payments to which they were entitled.” The false information created the impression the defendant banks were borrowing money at a lower interest rate than they were actually paying.

More than 40 suits have been filed in relation to the LIBOR manipulation. NCUA is one of the first federal financial regulators to sue in this area.