Daily Archives: March 27, 2014


Judge says U.S. fraud case vs. Bank of America should be tossed

Judge says U.S. fraud case vs. Bank of America should be tossed

(Reuters) – A federal judge has recommended dismissal of a U.S. government lawsuit accusing Bank of America Corp of defrauding investors into buying about $855 million of mortgage securities that soured during the financial crisis.

If it stands, Thursday’s ruling by U.S. Magistrate Judge David Cayer in Charlotte, North Carolina could mark a serious setback for the U.S. Department of Justice in its effort to fight fraud in the sale of mortgage securities.

The case is one of several in which the government has relied on a law adopted after the 1980s savings and loan scandals, the Financial Institutions Reform, Recovery, and Enforcement Act, to pursue cases against banks. That law has a 10-year statute of limitations, double the usual length in securities fraud cases, which the government took advantage of in its lawsuit against Bank of America.

In the North Carolina case, Cayer reviewed whether the bank misled the former Wachovia Corp, now part of Wells Fargo & Co, and the Federal Home Loan Bank of San Francisco in early 2008 about the risks of 1,191 seemingly high-quality “jumbo” adjustable-rate mortgages. Wachovia and the FHLB-San Francisco bought about 98 percent of the securities.


Just 83,000 Homeowners Get First-Lien Principal Reductions from National Mortgage Settlement, 90 Percent Less Than Promised

Just 83,000 Homeowners Get First-Lien Principal Reductions from National Mortgage Settlement, 90 Percent Less Than Promised

Posted on March 19, 2014 by 

Yesterday, the National Mortgage Settlement monitor, Joseph Smith, released his final crediting reports, confirming that all five banks (Wells Fargo, Bank of America, Citi, JPMorgan Chase and Ally, now known after bankruptcy as Residential Capital, or ResCap) have now satisfied the consumer relief portion of the foreclosure fraud settlement. The banks were required to spend $20 billion in “credited” relief (some actions received less than a dollar-for-dollar credit). Smith exults that the gross relief provided totaled over $50 billion, and that “more than 600,000 families received some form of relief.”

What the mainstream media reports on this don’t tell you is that the $50 billion number is wildly inflated: for example, it includes $12 billion worth of deficiency waivers in non-recourse states, which the IRS confirmed have no value whatsoever. But I didn’t know just how inflated these numbers were, and how empty the promises, until I went through them all.

HUD Secretary Shaun Donovan did make a prediction about how many homeowners would get relief under the settlement, so we have a benchmark. He used it over and over in the PR push to get it inked. The number? 1 million.

About one million American homeowners would get writedowns in the size of their mortgages under a proposed deal with banks over shady foreclosure practices, Housing and Urban Development Secretary Shaun Donovan said on Wednesday […]

“We’re very close to a settlement that would both fix the servicing problems, but also help over a million families around the country stay in their homes and get help,” Donovan said at a U.S. Conference of Mayors meeting in Washington.

Even at the time this seemed ludicrous; a study from the Brookings Institution showed that only 500,000 would be eligible for principal reductions, given the constraints of the settlement (no Fannie/Freddie loans, for example). But it played out even worse than these fears.

The total borrowers helped with “some form of relief,” Joseph Smith reported, was 600,000, a little over half of Donovan’s promise. But Donovan specifically said that 1 million would receiveprincipal reductions. The 600,000 includes borrower transitional funds (as in, “you have to leave your home, here’s $1,000″), short sales, deed-in-lieu foreclosures, deficiency waivers, forbearance measures, anti-blight actions, and refinancing). Moreover, it includes second-lien principal reductions, which in a large majority of cases, almost all of them, are worthless and unsalvageable. So you have to separate the wheat from the chaff to figure out just how many homeowners got first-lien principal reductions that helped them “stay in their homes.”

Frustratingly and probably by design, the crediting reports do not break down those numbers; you have to go into the individual court reports for each bank. The numbers are further cut up in fairly odd ways – there are different types of first-lien mortgage modifications listed, including “Principal Forgiveness,” “Forbearance Forgiveness” (well which is it, forbearance or forgiveness?), “Federal Program Forgiveness,” “Conditional Forgiveness” and “180 Days Past Due with Forgiveness.” I’m going to be nice and keep in everything but the “conditional” forgiveness, which is after all conditional, and the 180 DPD, which is forgiveness on a loan that appears unrecoverable. So with that in mind, here are the numbers for first-lien principal forgiveness for each bank (I’ve linked to the court report so you can check this yourself):

Bank of America: 30,609
JPMorgan Chase: 18,114
Citi: 10,296
Wells Fargo: 23,248
Ally/ResCap: This one is harder to figure, because the court report does not break down the numbers at all. The summary shows that ResCap devoted about $130 million to principal reduction. Assuming an average $100,000 principal reduction each, which was roughly the standard, you get about 1,300 borrowers.

Total all of those up, and you’re left with a grand total of 83,567 first-lien principal reductions from the settlement. That means that Donovan over-promised by about 90% when he said that 1 million borrowers would get principal reductions.



UK regulator issues warning notice to seventh Libor trader

UK regulator issues warning notice to seventh Libor trader

(Reuters) – Britain’s financial regulator has issued a warning notice to another two traders for “significant failings” over a period of around two years, as part of an investigation into manipulation of benchmark interest rates.

The Financial Conduct Authority (FCA), which has already sent warning notices to five other traders, did not name the latest two. But it said one was a manager and trader at a bank, who was personally aware of and condoned other traders making requests to manipulate benchmark rate submissions.

The individual facilitated others’ attempts to manipulate benchmark submissions and was aware of the inadequacy of the bank’s systems, controls or policies governing the procedure for making interest rate benchmark submissions, but took no steps to address this, the FCA said in a statement on Thursday.

NJ Gov. Chris Christie’s own internal bridge scandal report: Key excerpts

TRENTON — The law firm hired by Gov. Chris Christie’s office to conduct an internal investigation into the George Washington Bridge and Hoboken Hurricane Sandy scandalsreleased its findings today.

Here are excerpts from the 360-page report:



“Our investigation found that David Wildstein (then of the Port Authority) and Bridget Kelly (then one of the Deputy Chiefs of Staff in the Governor’s Office) knowingly participated in this plan to realign toll lanes leading onto the George Washington Bridge at Fort Lee, at least in part, for some ulterior motive to target Mayor Sokolich. Our investigation also found that Bill Stepien (then the Governor’s campaign manager) and Bill Baroni (then the Deputy Executive Director of the Port Authority) knew of this idea in advance, but we found no evidence that they knew of the ulterior motive here, besides the claimed purpose of conducting a traffic study.”


“As the controversy grew, Wildstein and Kelly attempted to cover it up. Others in the Governor’s Office were being told by Wildstein and Baroni that this was a legitimate traffic study and an operational issue best left to the Port Authority to handle. With Assembly Committee hearings looming in late November 2013, Wildstein helped prepare Baroni for his testimony. Baroni told the Committee this was a legitimate traffic study long under consideration and long overdue because Fort Lee had received favored treatment in the past. He even described the study’s limited but inconclusive results, showing there was improvement in I-95 traffic flow as a result of this toll lane realignment. Baroni also publicly identified Wildstein as the Port Authority employee responsible for orchestrating the lane realignment.”


“What motivated this act is not yet clear.”

Read on.


JPMorgan Brass Beats Derivative Suit Over Libor Fixing

JPMorgan Brass Beats Derivative Suit Over Libor Fixing

Law360, New York (March 27, 2014, 2:20 PM ET) — A New York judge on Thursday dismissed a shareholder derivative lawsuit brought against the top brass at JPMorgan Chase & Co. over the bank’s alleged role in manipulation of the London interbank offered rate, finding JPMorgan’s board properly rejected the plaintiff’s request to take action.


Is NY regulator Benjamin Lawsky only going to get more aggressive?

Is NY regulator Benjamin Lawsky only going to get more aggressive?

In a note to clients, Ballard Spahr warns that the head of the New York State Department of Financial Services is only going to get more aggressive in his crusade against perceived wrong-doers.

“(Benjamin) Lawsky decried the ‘accountability gap’ on Wall Street,” the Mortgage Banking Update from Keith Fisher reads. “That gap fuels public outrage, he said, even as a proliferation of post-crisis scandals—money laundering, LIBOR, tax evasion, and currency manipulation—suggest that lessons from the crisis have not adequately been learned.“

Lawsky told guests at the Exchequer Club in Washington last week that a “culture on Wall Street” and only penalizing the institutions themselves plays into an “everyone was doing it” defense for individuals who engage in misconduct.

Lawsky says that real deterrence cannot be accomplished solely by corporate accountability, regardless of the size of the fines and penalties, and can only succeed if regulators and prosecutors change that focus to individual accountability.


Bank of America files foreclosure….over two cents! (Two pennies!)

Bank of America files foreclosure….over two cents! (Two pennies!)

When you think you heard it all, you obviously haven’t when it comes to foreclosure by the banksters..

It’s no secret that there have been a lot of abuses in the huge number of foreclosures filed in recent years, but can you imagine a foreclosure over two cents? Hard to believe, but Carmel Cafiero is on just such a case.

WSVN — This Lighthouse Point condo has been home to Gloria Jacques for eight years, but for the last two of those years, the 80-year-old has been in fear of losing her home to foreclosure despite never having missed a mortgage payment.

Her attorney says Bank of America filed for foreclosure over two payments that were each one penny short, payments that the bank deducted from her account.

Tom Murphy: “Well, Bank of America shortchanged the payment that they were making to themselves for her mortgage.”

Carmel Cafiero: “So it was a bill pay type thing?”

Tom Murphy: “It was a bill pay and it was a penny short.”

The case was set to be heard by Judge Cynthia Imperato, but an attorney representing the bank asked for a delay.

Attorney: “We were trying to basically work something, trying to get someone in authority to work something out. So that’s what the holdup was.”

Something was worked out after meetings outside the courtroom.

Attorney: “At this time we actually have come to a settlement agreement.”

Judge Cynthia Imperato: “OK.”

Attorney: “And we will be dismissing the case.”