Daily Archives: October 13, 2013


“You’re not gonna gonna to be able to change what Wall Street did with those securitizations of all these things. So we’re dealing with the situation on the ground how we’re trying to sell your house. And if you start requiring the original note that has been gone through I don’t know how many hands — but the collection is being done by a servicing company that we know — if you require that original note, none of you will ever be able to sell your property. You just won’t.”-Stu Halsan

Here is the video from Senate Financial Institutions, Housing, and Insurance Committee: 


Here is the transcript: 


SunTrust Pays a Billion for cheating GSE on Mortgage Loans

Teri Buhl:

This week we learned SunTrust had to pay around a billion dollars to settle with the government over the mortgage fraud they committed against the GSE’s. News of this investigation detailing how they committed the fraud was first reported by me at finance trade publication Growth Capitalist in November 2012. This means SunTrust knew for over a year they would have to pay a large fine for these actions but instead they kept telling shareholders their legacy mortgage problems with Fannie Mae and Freddie Mac were behind them.

Original news report Nov 2012 for Growth Capitalist:

November 5, 2012 by Teri Buhl

SunTrust under SEC Investigation

Atlanta-based SunTrust Banks (STI) is under investigation by regulators for alleged mortgage fraud against Fannie Mae. Whistleblowers who worked in SunTrust’s residential mortgage underwriting group filed a whistleblower suit with the Securities and Exchange Commission this spring. After the Washington, D.C. office of the SEC received the complaint a director of the SEC’s Atlanta office and a forensic accountant were assigned to begin an immediate investigation in the bank. Three people involved in the case told Growth Capital Investor interviews with SunTrust employees who worked in the bank’s mortgage unit started in May, along with an inspection of the methods SunTrust used to qualify prime loans sold to Fannie Mae.

SunTrust saw its stock price fall off a cliff in the financial crisis, and subsequently participated in the federal TARP program aimed at shoring up distressed banks. Investors who held the stock valued at $73 a share in October 2007 watched their investment wiped out when it fell to $7 by February 2009. Distressed investors who bought the stock in the high-teens at the end of 2011 have now witnessed a near 50% rise in the stock as the bank paid off its TARP funds and increased mortgage lending. Analysts started to boast buy ratings on the stock this year and Jefferies currently has a $32 price target on SunTrust.

But as bank executives have worked to clean up the troubled balance sheet created during its go-go lending years, 2005 to early 2008, the prior actions of its mortgage team could still place a dent in future profitability.

SunTrust financials show since 2005 they sold $233 billion of loans, with the bulk being bought by the GSEs (Fannie Mae and Freddie Mac). SunTrust built a special relationship with Fannie Mae who allowed them to have a custom underwriting system that connected to Fannie’s automated mortgage buying program. The Desktop Underwriter program, or DU, was designed to buy prime residential loans from banks like SunTrust who were heavy volume mortgage originators. The Federal Housing Finance Agency Office of Inspector General reported in an audit of Fannie’s lending standards that more 1,500 banks originated loans through the DU program in 2010, comprising 71% of all loans bought by the GSE. All SunTrust had to do was meet the right mix of income and personal asset qualifiers, enter them into Fannie’s DU system, and the loan was swiftly bought off the bank’s books, freeing up reserves for new loans. Fannie would then book these loans as ‘lender selected’ prime loans, even though there was little human inspection of the documents that qualified the borrower.

The SunTrust whistleblower complaint says bank executives then taught underwriters how to ‘trip the DU system’ to make it accept loans that were actually less than prime quality. All SunTrust had to do was make sure they were scored right and their custom DU Fannie Mae program even allowed them to re-enter borrower data multiple times until they got the right score. Internal documents from SunTrust management show how to avoid red flags or “beat the Fannie Mae DU system.” One whistleblower explains how they re-entered a borrower’s income ten times until they got the right acceptance score. Snapshots of these repeated DU data runs were turned over to the SEC in the whistleblower complaint along with internal memos that encourage underwriters to “get loans” into the DU systems.

Read more from Teri Buhl. Click here.

Regulators Investigating Firms Sub-Account Use in Shorting Stocks

Teri Buhl:

Government regulators are investigating investment firms that set up sub-accounts with their broker dealers to mask illegal short selling schemes. I reported for Growth Capitalist this week that FINRA and the SEC are currently doing a sweep of hedge funds and their brokers dealers for the use of sub-account under the hedge funds master account to essentially naked short a stock.

The regulatory investigation is on top of the short selling fines the SEC imposed on 22 firms last month. The government is focused on how firms short a stock within a five day rule before a new issue for the stock – which is basically naked shorting.

The use of sub-accounts, sometimes set up in names of people who are not actually the investor in the funds, is similar to the ‘rathole’ game Jordan Belfort used in the mid-90′s at his illustrious Long Island firm Stratton Oakmont. You might remember Belfort from his tell-all novel ‘The Wolf of Wall Street’ – which is now going to be a lucid and greedy portrayal of what can happen behind the scenes with stock trading in a major motion picture this year.


UK court to hear evidence ahead of landmark Libor ruling

UK court to hear evidence ahead of landmark Libor ruling

(Reuters) – A British court will this week consider whether attempted manipulation of the benchmark interest rate Libor can invalidate loans and other deals or show that banks mis-sold products that were based upon the rate.

The Court of Appeal will on Tuesday begin a 3-day hearing examining two separate cases brought by clients against Barclays and Deutsche Bank. It is expected to hand down a landmark ruling later in the year, according to sources familiar with the cases.

If the decision goes against the banks, it could open the door to many more cases being brought against the industry by companies citing Libor manipulation, opening banks up to compensation claims worth billions of pounds.


WSJ’s Kissel Says Zero Homeowners Were Wrongfully Foreclosed

WSJ’s Kissel Says Zero Homeowners Were Wrongfully Foreclosed

Obviously she drank the koolaid and was abducted by aliens.By the way Mary Kissel is an ex-Golman Sachs employee.

Wall Street Journal editorial board member Mary Kissel falsely claimed that no American homeowners have been wrongfully foreclosed on since the financial crisis of 2008 and 2009. In fact, federal investigations found more than a million homeowners have faced potentially wrongful foreclosures.

On the October 11 edition of Fox Business’ Varney & Co., guest host Charles Payne was joined by Fox contributor Monica Crowley and Kissel to discuss the latest quarterly earnings report from JPMorgan Chase. The firm, which has been beset by legal battles, reported robust profits despite extensive legal expenses in the last fiscal quarter.

The discussion turned to an alleged government “shake down” of the bank and demonization of Wall Street when Kissel interjected that, in fact, the financial industry had done nothing whatsoever to deserve extra scrutiny:

KISSEL: There hasn’t been a single homeowner who has been identified who was foreclosed on that shouldn’t have been foreclosed on. Somebody who was paying his bills.



Bank of America Ordered to Pay Black Job Applicants $2.2 Million

Bank of America Ordered to Pay Black Job Applicants $2.2 Million

A United States Department of Labor Administrative Law Judge has ordered Bank of America to pay $2.2 million in back wages to more than 1,100 African Americans who were rejected for jobs. The ruling ends a nearly two-decades old legal dispute.

Judge Linda S. Chapman ordered the Charlotte-based megabank to pay $964,033 to 1,034 applicants who were rejected for jobs in 1993. Bank officials also were ordered to pay approximately $1.3 million to individuals who were rejected for jobs between 2002 and 2008.

Judge Chapman issued her ruling after determining that bank officials applied unfair and inconsistent selection criteria resulting in the rejection of African Americans for jobs as tellers, entry-level clerical and administrative positions.

Bank officials also repeatedly challenged the authority of the Office of Federal Contract Compliance Programs (OFCCP). The Office of the Comptroller of the Currency regulates of BofA, a national bank based in Charlotte, N.C.

Read the rest at The NorthStar News


US banks no longer ‘too big to fail’, says Tucker

US banks no longer ‘too big to fail’, says Tucker

The deputy governor of the Bank of England has declared an end to the era of taxpayer bail-outs for the world’s giant lenders.

Almost five years to the day since the collapse of Lehman Brothers triggered the worst financial crisis since the 1930s, Paul Tucker claimed that America’s biggest banks are now in a position to go bust without state intervention.


Barclays’ appeal aims to dismiss Libor-link case

Barclays’ appeal aims to dismiss Libor-link case

Barclays will this week attempt to dismiss a £70m legal claim over complex interest rate hedging products it sold to a care home operator in what is seen as the first major court case linked to Libor-rigging.

The bank will tomorrow appeal against a High Court judgment that it must defend at trial allegations that its attempts to manipulate interest rates constitute sufficient grounds to cancel several interest rate swaps sold to Guardian Care Homes.


DOJ Said to Open Criminal Probe of FX Market Rigging

DOJ Said to Open Criminal Probe of FX Market Rigging

The U.S. Justice Department has opened a criminal investigation of possible manipulation of the $5.3 trillion-a-day foreign exchange market, a person familiar with the matter said.

The Federal Bureau of Investigation, which is also looking into alleged rigging of interest ratesassociated with the London interbank offered rate, or Libor, is in the early stages of its currency market probe, said the person, who asked not to be identified because the inquiry is confidential.