Daily Archives: March 31, 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


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).  


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.


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


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.


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.