Daily Archives: October 28, 2013

Link

California Bank Crafts Own Credit Ratings for Low-Income Borrowers

California Bank Crafts Own Credit Ratings for Low-Income Borrowers

Far from the Gidget-esque California of bathing suits and Santa Monica beaches – specifically a two-and-a-half-hour drive north with one hour spent driving on a two-lane road surrounded by crops – is the small city of Porterville.

There, truckers honk in a friendly way at unknown passersby, locals chance upon the town judge at the Mexican cafe, and a farm-heavy landscape demands people to drive to work. Porterville is the type of place rural Americans know well and city dwellers might find confusing.

On a recent drizzly day off of Porterville’s North Main Street, Robert (Bob) Hughes worked in a Finance and Thrift office surrounded by books on big data, an iMac, photographs of horses and family, artwork created by his daughter (more of which is showcased in the parking lot) and a glass wall for collaborative doodling. More curious items on display in the chief executive’s office include an electric dollar sign, a mug that reads, “I find your math disturbing” and Australian throwing sticks.

Here, Hughes makes decisions about how the $128 million-assets bank will serve people in his region who may have accounts at department stores, pawn shops or cash checking, necessities like indirect auto loans. At the same time, decisions he makes need to make shareholders money.

When Hughes joined the community bank in 2007, used car inventory was low, unemployment rates were high and Beyonce’s “Irreplaceable” was the top song on Billboard. F&T operated 22 branches — each location procuring and originating loans with presumably different styles.

Realizing that some branches had four times the loss rates of others, Hughes sought out a computer-run model that could quicken underwriting decisions for subprime loans that require higher capital of the bank. “If you originate a $500 loan, you can’t spend $500 making it,” Hughes points out. F&T offers deposit accounts and loans for expenses like furniture, funerals and birthday parties, but indirect auto loans account for most of its sales.

Link

Executive At Center Of Bank Of America Mortgage Fraud Case Now Working For JPMorgan Chase

Executive At Center Of Bank Of America Mortgage Fraud Case Now Working For JPMorgan Chase

The Bank of America executive at the center of the recent mortgage fraud case – for which Bank of America was found liable by a jury – is not only still working on Wall Street, she is still working in the housing market. Rebecca Mairone, the architect of the scam known as “the Hustle”, now works for JPMorgan Chase as the Managing Director of Home Lending, according to herLinkedIn profile and a report by the New York Times.

Federal lawyers claimed that Ms. Mairone, who now works at JPMorgan Chase, led a program nicknamed the “hustle,” derived from the initialism HSSL, or the “high-speed swim lane.” The program linked bonuses to how fast bankers could originate loans and as a result, the credit quality of the borrower was given short shrift, the government contended. When the loans were sold to mortgage giants like Fannie Mae and Freddie Mac, they failed, generating more than $1 billion in losses.

Marione was found liable by the jury of one count of fraud for her conduct as an executive at Bank of America’s Countrywide unit. Her penalty has yet to be determined.

Link

NY Court limits expert testimony in JP Morgan whistleblower suit for merely bolstering Plaintiff’s allegations

NY Court limits expert testimony in JP Morgan whistleblower suit for merely bolstering Plaintiff’s allegations

In a recent development in the JP Morgan whistleblower suit brought by ex-employee Jennifer Sharkey, the U.S. District Court of New York limited the expert testimony of Plaintiff’s finance and accounting expert for merely bolstering the Plaintiff’s allegations. The Defendants’ motion to preclude the expert testimony was granted in part and denied in part.

Background of the case

Jennifer Sharkey, who worked as a Vice President and Wealth Manager in JPMC’s Private Wealth Management department from 2006 until her termination in 2009, managed more than 75 “High Net Worth Client” relationships with assets that totaled over $500 million. Sharkey was the second highest producer in her department. In 2009, Sharkey was assigned to manage a long term client of JPMC by her direct supervisor Lassiter. This Client who generated quarterly returns to the tune of $150,000 for JPMC, had been JPMC’s client for more than 20 years.

A few weeks after Sharkey was assigned to manage the Client, she formed a belief that the Client was violating federal securities laws, and that JPMC should terminate the client relationship. She conveyed her concerns regarding the Client’s involvement in illegal activities, including allegations of mail fraud, bank fraud, and money laundering to Lassiter. Sharkey’s concerns were based upon concerns expressed by JPMC’s compliance and risk management team and independent research conducted by Sharkey into the Client’s activities.

Link

Exec is liable in housing crisis, but she’s no CEO: NYT

Exec is liable in housing crisis, but she’s no CEO: NYT

Fuld. Cayne. Mozilo. Mairone?

More than five years after the housing bust, the roll call of banking executives who have been blamed by the public for the crisis has grown ever longer. But when it comes to top managers who have been hit with a jury verdict for pushing dubious mortgages, the list is small indeed.

The new name added this week was Rebecca S. Mairone, a midlevel executive atBank of America’s Countrywide mortgage unit, who was held liable by a federal jury in Manhattan for having saddled the housing giants Fannie Mae and Freddie Mac with bad mortgages that resulted in over $1 billion in losses.

Link

New York Fed examines mortgage real estate investment trusts

New York Fed examines mortgage real estate investment trusts

(Reuters) – The New York Fed is examining banks’ exposure to a type of mortgage-backed security that is vulnerable to a sharp rise in interest rates, the Financial Times reported, citing unnamed people familiar with the matter.

Regulators with the Fed have been probing the proliferation of mortgage real estate investment trusts, or MReits, where long-term mortgages are financed with short-term loans from dealer banks, known as a repo.

The concern is that a rise in interest rates could prompt a selloff.

“In the spring, they came into a lot of the banks and kind of did a deep dive in that topic,” one person familiar with the discussions told the FT.

Link

Royal Bank of Scotland Group plc : U.K. May Back Off Ordering Break-up Of RBS

Royal Bank of Scotland Group plc : U.K. May Back Off Ordering Break-up Of RBS

LONDON — The British government is likely to stop short of ordering the break-up of the state-rescued Royal Bank of Scotland (RBS) before returning it to the private sector, according to media reports Sunday.

Finance minister George Osborne is due to receive a final report from Treasury officials this week recommending against the most radical option mooted for the bank, the Sunday Times reports.

Instead, RBS would be forced to commit to getting rid of tens of billions of pounds of problem loans more quickly, before the government begins selling off part of its 81 % stake starting late next year.