Daily Archives: May 21, 2014


BNP PARIBAS : U.S. may seek more than $5 billion in BNP settlement: Bloomberg

BNP PARIBAS : U.S. may seek more than $5 billion in BNP settlement: Bloomberg

(Reuters) – U.S. authorities are seeking more than $5 billion from BNP Paribas SA to settle federal and state investigations into the French lender’s dealings with sanctioned countries, Bloomberg reported, citing a person familiar with the matter.

The news dragged the company’s shares down as much as 3 percent on Wednesday, making them the top loser on the French blue-chip CAC 40 index and on the European banking index during trading hours. The stock closed down 1.3 percent at 51 euros.

Discussions about the penalty amount are continuing and the final amount could change, the report said. (http://r.reuters.com/tac59v)


Montana Couple Has A Key Figure in Lawsuit To Take on Bank of America

Montana Couple Has A Key Figure in Lawsuit To Take on Bank of America

Abraham and Betty Morrow have never met Sunil Kumar, of Hyderabad, India, but he is a key figure in their fraud lawsuit against Bank of America.

The lawsuit, alleging that the bank deliberately led them into foreclosure on their retirement home outside White Sulphur Springs, Montana had previously been dismissed by a district court judge. The Montana Supreme Court voted 4-2 on May 7 to overturn that decision, saying the Morrows’ lawsuit should proceed to trial.

John Heenan of Billings, one of the attorneys for the Morrows, said the case could have repercussions for hundreds of Montanans in similar circumstances, and potentially thousands of people all over the country.

“It’s a big deal, and that decision’s a big deal,” he said of the high court ruling.

Heenan said a key factor in the case is that Abraham Morrow is a retired accountant and small-business owner who kept meticulous notes of every conversation he had with Bank of America representatives.

One early conversation took place on Dec. 8, 2009. It was with a Bank of America representative who identified himself as “Brian.” Morrow said “Brian” told him that he and his wife were locked in for a loan modification program. If they successfully made reduced trial payments for three to four months, Morrow said he was told, their loan modification would be made permanent.

After the whole thing unraveled and the Morrows filed suit, one of the defenses made by Bank of America was that, according to its records, Morrow had not spoken with anyone by the name of Brian on the date in question. On Dec. 8, 2009, the bank said, Morrow spoke with a customer service representative in India by the name of Sunil Kumar.

Heenan later deposed Kumar by telephone. Heenan said Kumar told him, “We all use American names” when speaking with customers.

And what American name did Kumar use? “Brian,” he told Heenan.

If Morrow’s custom of taking good notes proved vital, Heenan said, it also illustrated how devious loan-servicing fraud can be.

“If people like that can be tricked, imagine everyone else,” he said.


Buyout Giants Team Up For Sub-Prime Lender

Buyout Giants Team Up For Sub-Prime Lender

Two of the world’s biggest private equity groups have joined forces to mount a takeover bid for Kensington, one of the UK’s biggest specialist mortgage lenders.

Sky News understands that Blackstone and TPG will table a combined offer for the business ahead of a deadline towards the end of the month.

The buyout giants are understood to be competing against at least three other bidders for Kensington, one of which is said to be Lonestar, a specialist US property investor.

Kensington is owned by Investec, the Anglo-South African banking group which sponsors the England cricket team.

The mortgage operation was bought by Investec for £283m in 2007, just before the start of the banking crisis.

Analysts say the bank should recoup the vast majority of that initial outlay, with Kensington’s performance aided by the strength of the UK housing market.


J.P. Morgan CEO Jamie Dimon says $100 million Detroit investment was not for publicity

J.P. Morgan CEO Jamie Dimon says $100 million Detroit investment was not for publicity

Jamie Dimon says his bank isn’t giving arguably the most financially troubled city in the U.S. $100 million for the publicity.

“The cynic would be wrong,” said the CEO of J.P Morgan Chase & Co. JPM +0.75% to Today show host Matt Lauer in an interview broadcast Wednesday.

Lauer asked if the investment in the Motor City was in response to the intense scrutiny on the bank from regulators and massive billion dollar fines it had to pay out.

Dimon, stepping into mainstream territory by appearing on the morning show, insisted the bank has a history of investing in and developing communities around the world.

“We’re doing this to grow investments, to grow the city, and create a healthy and vibrant city,” Dimon told Lauer.

Senator Elizabeth Warren, then a professor of law, questioned Sallie Mae’s dual role as both lender and collector

In 60 Minutes segment with Leslie Stahl on May 5, 2006, Senator Elizabeth Warren, then a professor of law, questioned Sallie Mae’s dual role as both lender and collector:

On top of that, Sallie Mae also owns some of the biggest collection agencies in the country. Once a student borrower goes into default, the government pays Sallie Mae all the principle and compounded interest that have accrued. 

The loan then passes into the collection phase. If Sallie Mae is the collector, it gets to keep up to 25 percent of whatever is recovered. In 2005, nearly a fifth of its revenue came from its collection business. 

“Sallie Mae makes money if you pay back on time. And Sallie Mae makes money if you don’t pay back on time,” says Elizabeth Warren, a professor of bankruptcy law at Harvard Law School. 

Warren says it’s a mistake to allow Sallie Mae to be both a lender and a collector.

“It shouldn’t be the case that Sallie Mae gets to play every hand at the poker table while the government is the one that keeps anteing up the money,” Warren tells Stahl. “But let’s be clear. That by itself isn’t enough. We have to decide collectively as a country: do we want to encourage the young people who are trying to get college diplomas? And if the answer to that is yes, the way to encourage them is not to double and triple the amount that they owe when they get into financial troubles.”


Since 2002, the company and its employees have doled out more than $2.7 million to congressmen and their political action committees, including more than $200,000 to House Majority Leader John Boehner and his PAC. Over the years, Congress has written laws that give the student loan industry special advantages.

“If you don’t pay Sallie Mae, then Sallie Mae gets to come after you in ways that virtually no other creditors in America can do,” says Elizabeth Warren.

Asked if he ever considered going into bankruptcy, Alan Collinge says he thought about it. “But in the case of student loans, it doesn’t matter because bankruptcy is not an option for the vast majority of borrowers for student loans.”

“The bankruptcy laws were written, once again, to give this extraordinary protection to the student loan agencies, to Sallie Mae. The idea behind …” Warren explains.

“A special law just for them on this?” Stahl asks.

“A special law just for those who make student loans,” Warren continues. “Credit card companies don’t get that kind of protection despite all tier lobbying. Home mortgage lenders don’t get that kind of protection.” 

And Congress passed more laws that squeeze the student borrowers. 

“Suppose you get hurt and you have to live on disability insurance from your Social Security,” Warren says.

The government can attach that. Stahl asks if there are any other cases where Social Security funds are garnished.

“Only child support,” Warren replies.

But all these special protections have produced results. The default rate, over 20 percent in the late 1980s is now down below 5 percent.

Here is the 60 minutes segment with Leslie Stahl. Click here.


The Buck Stops With Obama on Tepid Financial Reform

The Buck Stops With Obama on Tepid Financial Reform

What are we talking about when we talk about Timothy F. Geithner’s new book? President Obama.

The former Treasury secretary’s new book, “Stress Test,” has stirred up the old debates and anger: How the bailout was overly generous to the banks and bankers; how the failures on housing were inexcusable; how the financial regulatory reform was inadequate.

These were Mr. Geithner’s failures, but they were more deeply Mr. Obama’s. The flaws we thought we were seeing during Mr. Geithner’s tenure turn out to have replicated themselves in other Obama departments. And they have persisted after Mr. Geithner left. Why, it’s almost as if the Treasury secretary wasn’t the one making decisions and setting the tone after all.

President Obama’s appointees, Eric H. Holder Jr. at the Department of Justice and Mary L. Schapiro at the Securities and Exchange Commission, oversaw the inadequate enforcement response to the crisis. Mr. Obama reappointed Ben S. Bernanke, who focused on monetary policy and didn’t push for more aggressive regulatory and financial reform. Mr. Geithner didn’t run those shops.

And Geithner-like characters keep popping up, while appointees who are unlike the president get ousted. At the Federal Deposit Insurance Corporation, the outspoken Sheila Bair was replaced with the low-profile Martin J. Gruenberg. Gary S. Gensler, the tough chairman of the Commodity Futures Trading Commission, didn’t get nominated to a second term. In his place, we got a Treasury official whose cipher of a record was almost treated as a virtue by the Obama administration. The new head of the S.E.C., Mary Jo White, has been disappointing on regulatory questions.

Favored Obama appointees seem to share certain qualities: They work within the system, they don’t like to ruffle feathers or pick fights, and they keep their profiles low. They are technocrats.

There’s an “Invasion of the Body Snatchers” quality to these Obamaites. Mr. Geithner had a saying: “No jerks, no peacocks, no whiners.” That echoes the president’s ethos, encapsulated by “No drama Obama.” The result is a congenital suspicion of vision, ambition, sweeping reform and change.


Sallie Mae Torments Faithful Student Borrowers After Co-Signers Die

Sallie Mae Torments Faithful Student Borrowers After Co-Signers Die

Note: The Student Loan Marketing Association (Sallie Mae) was originally created in 1972 as a government-sponsored enterprise (GSE) and began privatizing its operations in 1997, a process it completed at the end of 2004 when Congress terminated its federal charter, ending its ties to the government. The company remains the country’s largest originator of federally insured student loans. Unfortunately, this is a private company and no longer tied to the government.

Seven borrowers who had been paying their Sallie Mae student loans on time for years were unexpectedly threatened with asset seizures after a Sallie Mae contractor demanded they immediately repay tens of thousands of dollars simply because a family member had died.

Regina Kibler, a retiree who lives off payments from her late husband’s life insurance policy, spent days agonizing over how to help her son, Christopher, pay back nearly $22,000 neither had. Samantha Flora hired a lawyer to fight attempts to recoup some $20,000 from her dead grandmother’s estate that have turned members of her family against one another.




Let’s start with the issue of non-bank mortgage servicers. Specifically, the parallel growth of non-bank servicers – as well as their affiliates, which provide ancillary services. First, some context on how a loan and the servicing of that loan become separate assets. This background will be familiar to many of you, but it’s not well known among the wider public. In a typical scenario, mortgage loans are originated or purchased by a bank or other large financial institution, which then pools them together into a security. A pooling and servicing agreement (PSA) governs the rights and obligations of the parties, including the rights of certain investors to collect mortgage payments, and the compensation to be paid to a servicer to collect borrower payments and transmit them to investors.



Citi Gets Approval For $8.5M Settlement In Subprime Suit

Citi Gets Approval For $8.5M Settlement In Subprime Suit

Law360, New York (May 21, 2014, 1:32 PM ET) — A New York federal judge has signed off on $8.5 million settlement between Citigroup Inc. and employee shareholders in a putative class action alleging the company hid its exposure to subprime mortgages before its stock tanked, according to an order filed Tuesday.

U.S. District Judge Sidney H. Stein approved the settlement, closing the door on ongoing litigation brought by six former employees who purchased stock in Citigroup while working for the financial giant. The settlement includes a class of more than 7,000 Citigroup employees who acquired…


CFPB To Open Advisory Council Meetings To The Public

CFPB To Open Advisory Council Meetings To The Public

Law360, New York (May 21, 2014, 12:51 PM ET) — In response to complaints from industry groups and Republican lawmakers, the Consumer Financial Protection Bureau on Tuesday announced that all of its outside advisory board and council meetings would be made open to the public.

The CFPB said in a blog post that beginning with its June 18 Community Advisory Board meeting in Reno, Nevada, members of the public will be able to attend all of the bureau’s meetings with outside advisers and that the entirety of those meetings would be streamed live on the Internet….