Monthly Archives: March 2014

Memo to DOJ: Who is this “unnamed financial institution”?

You can expect that before long a significant financial institution will be charged with a felony or be made to plead guilty to a felony

Link

Adam Levitin: It’s My Fault You Can’t Get a Mortgage

Adam Levitin: It’s My Fault You Can’t Get a Mortgage

Can’t get a mortgage?  Turns out it’s my fault.  As in mine, personally.  Yup.  That’s the claim in a Housing Wire written by right-wing banking analyst R. Christopher Whalen.  Here is Whalen’s argument in a nutshell:  

Servicing regulations make banks really reluctant to deal with anyone but very good credit borrowers because it takes so long to foreclose on anyone anymore.  Servicing regulations are so onerous because of an article Tara Twomey and I wrote on mortgage servicing that said that servicers were doing bad things. The problem (in Whalen’s view) is that Tara and I had it totally wrong.

I’m flattered that Whalen credits the article with having inspired all of the subsequent foreclosure regulation, but it would be nice if Whalen would accurately characterize the article. (Has he even read it?)  It would also be nice if Whalen would acknowledge that servicers have done an awful lot of bad things over the past several years, which might just possibily have something to do with the current regulatory enviornment for servicing. But such an admission that might get in the way of Whalen grinding his political axe (two legs good, regulation ba-a-a-d).

Whalen claims that the basic thrust of our paper “is that mortgage lenders and services want to push home owners into foreclosure, gain control over the homes and thereby profit.”  

Nope.  Wrong.  First, Tara and I make no claims about lenders.  Our paper is about servicers.  Their incentives are distinct from lenders, and that’s part of the problem, we argue. Second, our argument is not about servicers wanting to push homeowners into foreclosure, nor is it about servicers wanting to gain control over the homes (via foreclosure sale purchases).  Some of that does happen, but that’s not our argument. Our article is about how servicers are compensated, and our argument is that servicers’ compensation structures mean that when a homeowner defaults, then the servicer is not incentivized to modify the loan. The servicer isn’t looking to trigger a default if the loan is performing in most cases.  And Tara and I barely mentioned the REO aftersale market in the article. So while I’m thrilled to be proclaimed the intellectual godfather of servicing regulation, I wish it would be on a more accurate basis.  (It would also be nice if Whalen could get basic details right, like how to spell either my name or Tara’s name correctly or the correct publication date of our article which is 2011, not 2010, although it was mainly written in 2009-10).  

Link

JPMorgan Chase : NY budget dedicates JPMorgan settlement funds

JPMorgan Chase : NY budget dedicates JPMorgan settlement funds

ALBANY, N.Y. (AP) — New York’s budget agreement would dedicate most of the state’s $613 million settlement from JPMorgan over mortgage-backed securities to state programs intended to prevent homeowner foreclosures.

The provision, which the Legislature is expected to approve Monday, puts nearly $440 million in the joint custody of the state comptroller and tax commissioner for funding housing counselors, foreclosure mediation, legal aid, housing remediation, other consumer protections and projects against neighborhood blight.

New York Attorney General Eric Schneiderman, who helped negotiate the national $13 billion bank settlement, and Gov. Andrew Cuomo earlier agreed to spend the first $163 million from New York’s share on mortgage relief and housing programs, half under each official’s respective control.

Spokesman Damien LaVera says Schneiderman is pleased the remaining money goes to a special purpose fund exclusively to help homeowners.

Link

JPMorgan Chase : fails to end lawsuit over London Whale losses

JPMorgan Chase : fails to end lawsuit over London Whale losses

JPMorgan Chase & Co must face a lawsuit from shareholders accusing it of securities fraud by misleading them about its ability to manage risk, which surfaced when it lost $6.2 billion in the “London Whale” scandal.

U.S. District Judge George Daniels in Manhattan said shareholders could pursue claims that JPMorgan, Chief Executive Jamie Dimon and former Chief Financial Officer Douglas Braunstein knowingly hid the increased risks that the bank’s Chief Investment Office had been taking in early 2012.

These risks allegedly manifested themselves when the bank suffered the $6.2 billion loss from trades linked to Bruno Iksil, a French national who worked in a bank office in London, causing losses for shareholders.

Daniels said shareholders could pursue claims that the bank, Dimon and Braunstein materially understated the bank’s “value at risk,” and misled them on an April 13, 2012 conference call in which Dimon labeled as a “tempest in a teapot” various news reports about a synthetic credit portfolio that Iksil managed.

FBI investigating flood insurance map fraud

The Biggert-Waters Act was passed to ensure the National Flood Insurance Program moves closer to solvency and sound underwriting. It tried to incorporate a more risk-based approach when setting premiums for insurance offered through NFIP. 

Now comes a story out of Florida serving as an example of how the current NFIP system is being abused, shifting the burden of flood insurance away from million-dollar beach homeowners and onto taxpayers.

Ironically, with the Biggert-Waters rates being suspended, whatever map shenanigans and charges arise, it was all for nothing.

FBI agents are interviewing employees at FEMA in an investigation of unusual changes in federal flood insurance maps that benefited oceanfront condo buildings with a history of flooding, according to sources familiar with the investigation.

The investigation follows a report by NBC News documenting more than 500 instances in which FEMA has remapped waterfront properties from the highest-risk flood zone, saving the owners as much as 97 percent on the premiums they pay into the financially strained National Flood Insurance Program.

Sitting in on the FBI interviews are investigators from the Office of the Inspector General at the U.S. Department of Homeland Security, according to the sources. FEMA, which has said it would review the flood map changes identified by NBC, is an agency within the DHS .

NBC News reported on Feb. 18 that FEMA has moved the lines on its flood maps to benefit hundreds of oceanfront condo buildings and million-dollar homes. According to an analysis of federal records by NBC News, the changes shift the financial burden for the next destructive hurricane, tsunami or tropical storm onto the neighbors of these wealthy beach-dwellers — and ultimately onto all American taxpayers.

Source: NBC News

N.Y. budget blocks NY A.G. from controlling JP Morgan settlement cash: NY AG loses $440M in housing funds under state budget

Bloomberg:

The budget deal reached by Governor Andrew Cuomo and lawmakers would require New York’s attorney general to cede control of cash obtained from settlements to the governor and legislature.

The move would cap a fight between Cuomo and Attorney General Eric Schneiderman, a fellow Democrat, over New York’s $613 million share of a $13 billion federal-state settlement withJPMorgan Chase & Co. (JPM) That November accord ended probes into the bank’s mortgage-bond practices and put the funds under Schneiderman’s supervision.

The provision, along with the rest of the $137.9 billion spending plan, is expected to be voted on in Albany today ahead of a deadline on April 1, the start of the fiscal year.

“Our concern has always been that the funds from Attorney General Schneiderman’s settlement with JPMorgan Chase be used for the purposes for which they were intended — to help struggling homeowners in New York,” said Damien LaVera, a spokesman for Schneiderman, in an e-mail. “We will review the budget proposal through that lens.”

During the dispute with the attorney general, Cuomo aides said the state constitution already required settlement cash to be deposited in the treasury, which the governor and legislature control.

Unfortunately, Schneiderman loses $440M in housing funds under the state budget. From NY Daily News:

Tucked away in the budget bills is a provision that strips Schneiderman of his control of the remaining $440 million the state will get in a national housing settlement with JP Morgan Chase.

Instead, the money will be put in a new fund and controlled jointly by Gov. Cuomo and legislative leaders. The bills say the money must be spent on multiple housing issues, including anti-blight projects, foreclosure assistance hotlines and counseling and mediation programs.

Link

Records from Christie review to be subpoenaed

Records from Christie review to be subpoenaed

The man leading the New Jersey Legislature’s investigation of Gov. Chris Christie and the George Washington Bridge lane-closure scandal is going to seek subpoenas for the documents, notes and recordings compiled by the lawyers who ran the controversial internal probe of the governor and his conduct, ABC News has learned.

 

Among the records being sought would be notes and any recordings of private interviews with Christie himself as well as records obtained as part of the lawyers’ reviews of the governor’s work and personal email and text message accounts. Notes and recordings of some 70 interviews were not released with the report Thursday.

“I will be asking the committee to subpoena the interview notes and recordings,” Assemblyman John Wisniewski, a Central Jersey Democrat, told ABC News Sunday morning.

Link

General Motors : Regulators Twice Failed to Open GM Probes

General Motors : Regulators Twice Failed to Open GM Probes

Congressional investigators looking into why General Motors Co. took nearly a decade to recall vehicles with faulty ignition switches said Sunday that federal regulators twice declined to open formal probes into complaints about the cars and that GM rejected a proposed fix for the problem in 2005 because it would have taken too long and cost too much.

The findings by staff for the House Energy and Commerce Committee offer new details about events leading up to GM’s recall of 2.6 million vehicles for ignition-switch defects now linked to 13 deaths.

Investigations by the House panel, a Senate committee, regulators and federal prosecutors are continuing. A memorandum produced by House investigators based on their review of evidence so far indicates that lawmakers will press both GM and the National Highway Traffic Safety Administration on why they missed several opportunities during the past decade to alert the public to the dangers posed by cars that could suddenly shut down, disabling air bags, power steering and power brakes.

GM declined to comment. The NHTSA said Sunday it “reviewed data from a number of sources in 2007, but the data we had available at the time did not warrant a formal investigation.” It added that it is “aggressively investigating” the recall and new information provided by GM.

Anita Hill documentary revisits sexual harrassment and gender inequality

Written by SP Biloxi

I had the opportunity to see Anita Hill documentary this weekend tat played in limited theaters. In 1991, Anita Hill,  a young law professor, testified that her former boss and then-Supreme Court nominee Clarence Thomas had sexually harassed her. Sexual harassment, during that time, was not opened topic to discuss. But, Ms. Hill’s testimony to the Senate committee provided a serious open dialogue to a topic and a need for change that is still an issue today 20 year later. The Senate Judiciary Committee which was an all white male committee, treated Ms. Hill as if she were on trial. One senator had referred to her a “scorned woman.” Clarence Thomas denied all charges that Ms. Hill accused Mr. Thomas of. But, what I walked away with from watching this documentary and reliving that hearing that I watched on TV is what about the other women that were not called in for testimony at the hearing that accused Mr. Thomas of inappropriate remarks and sexual harassment similar to Ms. Hill’s accusations?

The Senate never talked to Lillian McEwen who was a  former assistant U.S. attorney and Senate Judiciary Committee counsel  and who had dated Mr. Thomas for years.

From Washington Post:

She had worked on the Hill and was wary of entering the political cauldron of the hearings. She was never asked to testify, as then-Sen. Joe Biden (D-Del.), who headed the committee, limited witnesses to women who had a “professional relationship” with Thomas.

Now, she says that Thomas often said inappropriate things about women he met at work — and that she could have added her voice to the others, but didn’t.

And this:

Given that history, she said Hill’s long-ago description of Thomas’s behavior resonated with her.

“He was obsessed with porn,” she said of Thomas, who is now 63. “He would talk about what he had seen in magazines and films, if there was something worth noting.”

McEwen added that she had no problem with Thomas’s interests, although she found pornography to be “boring.”

According to McEwen, Thomas would also tell her about women he encountered at work. He was partial to women with large breasts, she said. In an instance at work, Thomas was so impressed that he asked one woman her bra size, McEwen recalled him telling her.

What about Angela Wright who worked as director of public affairs at the EEOC under Mr. Thomas? From Salon:

Upon learning of Hill’s claims, another former Thomas employee, Angela Wright, who had worked under him as director of public affairs at the EEOC, wrote a column — not meant for publication and intended only to show potential employers at a North Carolina newspaper that she could turn around a fast and topical piece — outlining the inappropriate behavior he’d exhibited toward her. Somehow, Judiciary Committee investigators learned of the column, contacted Wright, and convinced her to sit for a phone interview, during which she detailed a pattern of harassing behavior, including an instance in which Thomas asked her what her bra size was. She was subpoenaed by the committee and flew to Washington to testify in the nationally televised hearing; the basics of her claims were reported by media outlets at the time. Her testimony would have bolstered Hill’s case — a second female Thomas underling, one who had never met or worked with Hill, accusing him of the same conduct. But the committee never called Wright, and instead simply entered the transcript of her interview into its record on the eve of the final vote. The details of her interview were buried in press reports.

Or Rose Jourdain?

Rose Jourdain, who had worked with Wright under Thomas, told committee investigators that Wright had spoken to her while they worked together about their boss’ conduct. As later reported by Graves, “Though her recollections had differed slightly from Wright’s, Jourdain … had confirmed the basic elements of Wright’s account, including Wright’s anger at Thomas for what Wright had said was overtly sexist behavior. Jourdain had mentioned “comments [Wright] told me that he was making concerning her figure, her body, her breasts, her legs, how she looked in certain suits and dresses.”

Or Sukari Hardnett?

In a letter to the committee, a former aide to Thomas at the EEOC, Sukari Hardnett, wrote that many black women at the agency felt they were “an object of special interest” to their boss. “If you were young, black, female and reasonably attractive,” her letter read, “you knew full well you were being inspected and auditioned as a female.”

Lastly, statements from Mr. Thomas’ acquaintances from his college years?

In November ’94, three years after Thomas was confirmed, Wall Street Journal reporters Jill Abramson and Jane Mayer released a book, “Strange Justice,” which brought new information about the Thomas/Hill confrontation to light. As a Washington Post article described it:

“Strange Justice” uses statements from Thomas’s friends and associates to undermine Thomas’s testimony that he never talked dirty with Hill. The authors, after interviewing acquaintances as far back as his college years at Holy Cross, report that he often recounted sexually explicit films in lurid detail. Kaye Savage, a former colleague, reports that the walls of his bachelor apartment were covered with Playboy nude centerfolds. The owner of a video store near the EEOC said Thomas was a regular customer for pornographic movies.”

Unfortunately, none of the women were given an opportunity to testify. There are people who don’t believe Anita Hill’s testimony today but believe Mr. Thomas or vice versa.( On a side note: from the documentary, Ms. Hill showed file cabinets in her basement of her home full of letters throughout the years from approximately 25,000 + people who shared their support and stories. And many of the letters are from men.)  But, rest assured the goal of the Senate Committee was to target one woman for humiliation on national television as a warning to other women who wanted to speak out about employment harassment. Has anything changed in Washington? You can only answer that question. After all, remember Sandra Fluke, an attorney and women’s right activist who was refused by Republican members of  House Oversight and Government Reform Committee to allow her to testify on the importance of requiring insurance plans to cover birth control during a discussion on whether medical insurance should have a contraception mandate.  Republican members of  House Oversight and Government Reform Committee then replace Sandra Fluke with men from conservative religious organizations to testify. Anita Hill documentary certainly is perfect timing to discuss and end the gender inequality in this country and the documentary is not just about setting the record of who was telling the truth in the 1991 Senate hearing. Ms. Hill’s message simply is she is helping women find their voices. She found her voice and she is not afraid to use it.

Office Of Outgoing JPMorgan Asia CEO Raided By Hong Kong’s Commission Against Corruption

Not a good year for JP Morgan.

From Bloomberg:

 
 

The Independent Commission Against Corruption seized computer records and documents after searching the office of Fang Fang, the company’s outgoing chief executive officer for China investment banking, said the people, who asked not to be identified because the investigation is confidential.

 

“We will not comment on individual cases,” Alan Tse, an ICAC spokesman, said by phone yesterday. Marie Cheung, a Hong Kong spokeswoman for JPMorgan, declined to comment on the ICAC search.

 

The New York-based bank announced Fang’s resignation March 24. His departure comes amid an investigation into JPMorgan (JPM)’s Asian hiring practices. U.S. authorities are examining whether the bank employed people in Asia so that their relatives in government would steer business to the bank, people with knowledge of the probes have said.

 

The banker joined JPMorgan in August 2001 and became head of the firm’s China investment-banking unit in 2007 and was made vice chairman for Asia investment banking in 2009. Prior to joining the bank, Fang worked as a vice president of Beijing Enterprises Holdings Ltd., an investment company controlled by the Beijing government.

JPMorgan, the world’s biggest investment bank by fees last year, said in August that the U.S.’s Securities and Exchange Commission had sought information on its employment practices and client relationships in Hong Kong. U.S. prosecutors were given e-mails written by Fang in which the banker supported the hiring of China Everbright Group Chairman Tang Shuangning’s son, the Wall Street Journal reported March 24. Those e-mails also highlighted the potential for doing business with China’s state-backed conglomerate while Fang hasn’t been accused of any wrongdoing, the paper said.

 

The probes have posed hurdles to JPMorgan’s involvement in at least two recent investment-banking transactions. The bank decided to quit China Everbright Bank Co.’s Hong Kong share sale in November because the investigation delayed an internal approval process, according to two people with knowledge of the matter. The $3 billion deal was the largest first-time offering by any company in Hong Kong last year.