Daily Archives: March 26, 2014

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Fannie, Freddie, FHA settle MBS lawsuit with BofA

Fannie, Freddie, FHA settle MBS lawsuit with BofA

Fannie Mae, Freddie Mac and the Federal Housing Finance Agency reached an agreement with Bank of America (BAC) to settle claims associated with non-agency mortgage-related securities from 2005 to 2007.

Under the agreement, Bank of America will pay Fannie $4.4 billion to satisfy all claims and buyback private label securities from Fannie with an unpaid principal balance of approximately $1.9 billion.

Meanwhile, Bank of America will pay Freddie $5.1 billion.  

According to the FHFA, the agreement provides for an aggregate payment of approximately $9.33 billion by Bank of America that includes the litigation resolution as well as a purchase of securities by Bank of America from Fannie Mae and Freddie Mac.

“FHFA has acted under its statutory mandate to recover losses incurred by the companies and American taxpayers and has concluded that this resolution represents a reasonable and prudent settlement of these cases,” said FHFA Director Mel Watt said.

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Wells Fargo To Pay $15M In Wage-and-Hour MDL

Wells Fargo To Pay $15M In Wage-and-Hour MDL

Law360, New York (March 26, 2014, 1:58 PM ET) — Wells Fargo & Co. will fork over $15 million to settle the claims of nearly 4,500 home mortgage consultants in a collective action in Texas federal court alleging that the bank and its predecessors failed to pay them overtime, according to documents filed Tuesday.

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Exclusive: Bank of America, ex-CEO Lewis settle NY lawsuit over Merrill

Exclusive: Bank of America, ex-CEO Lewis settle NY lawsuit over Merrill

Kenneth Lewis, who turned Bank of America Corp into the nation’s largest bank but also saddled it with enormous losses tied to mortgages, has settled a lawsuit accusing him of deceiving investors about one of his biggest acquisitions: Merrill Lynch & Co.

Lewis, the bank’s chief executive from 2001 to 2009, will pay $10 million to resolve claims by New York Attorney General Eric Schneiderman that he misled shareholders and the government in order to complete the merger, which closed on January 1, 2009, according to a copy of the agreement obtained by Reuters.

New York accused Lewis of concealing Merrill’s mounting losses from Bank of America shareholders prior to a December 5, 2008 vote on the merger, and manipulating the U.S. government into providing an extra $20 billion bailout by falsely claiming that he would back out of the merger without the money.

As part of the agreement, Lewis, 66, will also be barred for three years from serving as an officer or director of a public company. It is unclear whether insurance will cover his payment.

Bank of America will pay $15 million to resolve its portion of the lawsuit by Schneiderman, who inherited the case from his predecessor, Andrew Cuomo, now New York’s governor. The bank also will adopt reforms, such as creating a special committee to review large acquisitions, according to a separate settlement agreement obtained by Reuters.

Both payments would cover the costs of Schneiderman’s investigation, and neither Lewis nor Bank of America are admitting wrongdoing or paying damages.

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Fed bars shareholder payout plans from Citi, four other banks

Fed bars shareholder payout plans from Citi, four other banks

The Federal Reserve said Citigroup Inc’s ability to plan to cope with stressful scenarios is still not sufficient, and it nixed the bank’s plans to return more capital to shareholders, dealing a blow to a bank still fixing itself after the financial crisis.

The decision marks the second time in three years that the bank has failed to win the Fed’s approval for plan to return money to shareholders, known as the “capital plan.” The bank’s ability to return money to shareholders through buying back shares is critical for its meeting a key target for profitability.

Shares of Citi fell 4.5 percent to $47.90 in after-hours trading on Wednesday.

Winning regulatory approval for the bank’s capital plan is crucial for the credibility of Citigroup Chief Executive Michael Corbat, who was charged with improving the bank’s relationship with regulators when he took over as CEO in October 2012.

On Wednesday, the Fed said that Citigroup has improved its risk management practices in recent years, but the bank cannot determine well enough how its revenue and income would be hurt under stressful scenarios around the world. The bank’s internal examination process does not sufficiently consider how global crises could influence its broad number of businesses, the Fed added.

In 2012, the Fed rejected the plan of by its chief executive Vikram Pandit, a step that contributed to his ouster in October of that year. In the 2012 test, Citigroup did not prove to the Fed’s satisfaction that it could adequately measure risk in loans to some consumers in South East Asia, where credit rating standards are not as well developed as in the United States, according to a person familiar with the matter.

The Fed said on Wednesday that some of Citigroup’s deficiencies had been “previously identified by supervisors as requiring attention” and that “there was not sufficient improvement.”

Citigroup has been paying a quarterly dividend of 1 cent per share since 2011, which 

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COMPLAINT | COUNTY OF COOK V. HSBC NORTH AMERICA HOLDINGS, INC. ET AL | DEFENDANTS DISCRIMINATED AGAINST FHA PROTECTED MINORITY BORROWERS IN ORIGINATING PREDATORY MORTGAGE LOAN PRODUCTS

COMPLAINT | COUNTY OF COOK V. HSBC NORTH AMERICA HOLDINGS, INC. ET AL | DEFENDANTS DISCRIMINATED AGAINST FHA PROTECTED MINORITY BORROWERS IN ORIGINATING PREDATORY MORTGAGE LOAN PRODUCTS

uNITED STATES DISTRICT COURT NORTHERN DISTRICT OF ILLINOIS COUNTY OF COOK, Plaintiff, vs. HSBC NORTH AMERICA HOLDINGS INC., HSBC FINANCE CORPORATION, HSBC MORTGAGE CORPORATION (USA HSBC MORTGAGE SERVICES INC., HSBC USA INC., HSBC BANK USA, NATIONAL ASSOCIATION, BENEFICIAL COMPANY LLC, DECISION ONE MORTGAGE COMPANY, LLC, HFC COMPANY LLC Defendants.

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Hedge Funds Unlikely Saviors for New York-Area Homeowners

Hedge Funds Unlikely Saviors for New York-Area Homeowners

Louis Ragusa, who hasn’t paid hismortgage in two years, says he now has a chance to save his Blackwood, New Jersey, home from foreclosure after a hedge fund bought the loan.

American Homeowner Preservation, a Chicago-based investment firm, purchased the mortgage for less than half of what Ragusa owed. Chief Executive Officer Jorge Newbery called the father of three in August with an offer: Pay $5,000 and the company will drop theforeclosure case and erase the more than $100,000 of unpaid principal and penalties amassed.

“They’re a lot more flexible than a bank,” said Ragusa, 48, who ran into financial trouble after losing his job in collections for a cable company in 2007. “They can work with you because they’re a private company and they can basically set their own rules.”

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“The system of …

“The system of banking we have both equally and ever reprobated. I contemplate it as a blot left in all our constitutions, which,
if not covered, will end in their destruction, which is already hit by the gamblers in corruption, and is sweeping away in its
progress the fortunes and morals of our citizens. … And I sincerely believe, with you, that banking establishments are more
dangerous than standing armies; and that the principle of spending money to be paid by posterity, under the name of funding,
is but swindling futurity on a large scale.” — Thomas Jefferson – Letter to John Taylor, May 26, 1816

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From foreclosures to fighting for homes

From foreclosures to fighting for homes

How retired corporate attorney Thomas Cox found purpose in his second act helping low-income families fight wrongful foreclosures.

FORTUNE — Thomas Cox, 70, is not a professional homebuilder. Nonetheless, Cox found himself working in construction in Maine for about six years during the 2000s. Those were some of the more rewarding years of his career, he says.

Cox’s inspiration to build homes hit him suddenly after spending decades watching them get destroyed. A former managing partner at a prominent Maine law firm, Cox worked for 25 years helping banks engineer foreclosures. When the savings and loans crisis hit the U.S. in the late 1980s, Cox worked with the Federal Deposit Insurance Corporation collecting faulty loans from members of his small Maine community.

“It was really difficult, dark work, but it needed to be done,” says Cox. “Taking people’s homes is extremely unpleasant. Shutting down their businesses when they are fighting like crazy to keep them open is worse.”

Cox made $300,000 a year during the peak of his career, but said no amount of money could shake the significant toll the work was having on his mental health. Suffering from bipolar disorder and depression, the Pennsylvania native decided to leave the practice entirely in 1998 to pursue treatment options.

A few years later, after battling through a divorce and a slew of treatment options, a former client approached him about joining his carpentry business. The timing was perfect: Cox wanted to get back to a daily work routine, and he always enjoyed projects that produced tangible results. “As a lawyer, when you are done with a day of work all you have is a pile of papers to look at,” explains Cox. “When I built something with my own hands, it took a lot of the pressure off.”

MORE: From selling to service

Medical professionals urged Cox not to go back into the legal profession. Stress is a major trigger of depression and he didn’t need a doctor to tell him that a majority of his anxiety was work-related. Yet when the foreclosure crisis hit the country around 2008, Cox found himself wanting to get involved. Around the same time, a local nonprofit was launching an organization to provide legal help for low-income homeowners facing foreclosures: Main Attorneys Saving Homes.

Once again, Cox felt a call to action to build homes — this time in a different way.

 

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A whistleblower’s worst nightmare

A whistleblower’s worst nightmare

Justice is supposed to be blind. But what happens when it turns out to be blind, deaf and dumb?

Sadly, there is not enough space here to tell you the entire 7-year saga of whistleblower Michael Winston, but the bottom line is this: He got royally screwed by the California judicial system.

Winston, 62, is a mild-mannered Ph.D. and a veteran leadership executive who has held top jobs at elite corporations such as McDonnell Douglas, Motorola and Merrill Lynch. After taking time off to nurse his ailing parents, Winston was recruited by Countrywide Financial to help polish their corporate Image. He was quickly promoted — twice — and had a team of 200 employees.

It’s almost unheard of for a top-tier executive turning whistleblower, but that’s what Winston became after he noticed many of his staff were sickened by noxious air in their Simi Valley, California, office. When the company failed to fix the problem, Winston picked up the phone and called Cal-OSHA to investigate. Retaliation was immediate. Winston’s budget was cut and most of his staff was reassigned.

Several months later, Winston says he refused Countrywide’s request to travel to New York and, basically, lie to the credit ratings agency Moody’s about corporate structure and practices. That was the death knell for Winston’s stellar 30-year-long career.

When Countrywide was bought out by Bank of America in 2008 — following Countrywide’s widely reported lead role in the sub-prime mortgage fiasco that caused the collapse of the U.S. housing market — Winston was out of a job.

In early 2011, after a month-long trial, a jury overwhelmingly found that Winston had beenwrongfully terminated and awarded him nearly $4 million. Lawyers for Bank of America (which had assumed all Countrywide liabilities) immediately asked the judge to overturn the verdict. Judge Bert Gennon Jr. denied the request saying, “There was a great deal of evidence that was provided to the jury in making their decision, and they went about it very carefully.” Winston and his lawyer maintain they won despite repeated and egregious perjury by the opposition.

Winston never saw a dime of his award, and nearly two years later, B of A appealed. In February 2013, the Court of Appeal issued a stunning reversal of the verdict. The court declared Winston had failed to make his case.