Daily Archives: July 7, 2014

Federal Reserve Defends Its Approach to Punishing Banks for Improper Foreclosures

WASHINGTON—The Federal Reserve defended its approach to punishing banks for misconduct in home foreclosures and said in a report issued Monday that about 83% of borrowers have cashed checks reimbursing them for financial injury.

The Fed said the settlement program, in which 13 banks agreed to compensate homeowners whose properties may have been improperly sent into foreclosure, had transferred about $3.1 billion to borrowers as of April. That agreement “provided for payments to borrowers faster” and resulted in banks paying more than they would have under an independent review that was scrapped at the end of 2012, the Fed said in the report.

Lawmakers and public advocacy groups have questioned regulators’ decision to halt an independent review in favor of a settlement, saying it may have allowed some banks with high error rates in their foreclosure reviews to escape without providing homeowners proper compensation. The Wall Street Journal reported last year that some banks were on track to find a high rate of mistakes when the settlement was announced.

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Wells Fargo Avoids Escrow Mismanagement Class Action

Law360, New York (July 07, 2014, 1:43 PM ET) — A California federal judge dismissed a class action accusing Wells Fargo Bank NA of intentionally setting up escrow accounts so that consumers would incur large negative escrow balances, finding the claims are preempted by the Home Owners’ Loan Act.

U.S. District Judge M. James Lorenz on Thursday granted Wells Fargo’s motion to dismiss Michelle Hayes’ complaint alleging it violated California’s Unfair Competition Law and the Consumer Legal Remedies Act by failing to maintain plaintiffs’ escrow accounts and representing that the accounts have benefits they do not…

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Prudential Sues BofA, Merrill Over $119M In ‘Garbage’ MBS

Law360, New York (July 07, 2014, 5:53 PM ET) — Prudential Investment Portfolios 2 accused Bank of America NA, Merrill Lynch & Co. Inc. and others of knowingly selling $119 million worth of “garbage” mortgage-backed securities in a suit removed to New Jersey federal court on Monday.

The 229-page complaint says the Bank of America entities, Merrill Lynch entities and First Franklin Financial Corp. made false statements about the quality of the securities they were hawking.

“The offering materials falsely represented that a stated set of underwriting guidelines would be followed,” the plaintiffs said. “An enormous…

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Crony Capitalism Comes To China – Ex Central Bank Chief’s Son-In-Law In Insider-Trading Scandal

As EJ Insight reports,


The son-in-law of former Tianjin mayor Dai Xianglong spent millions of Hong Kong dollars buying shares in the special administrative region one year before Beijing announced in August, 2007 plans to pilot its “through train” scheme to let mainland residents buy Hong Kong stocks directly.


According to an investigation by Ming Pao Daily and the International Consortium of Investigative Journalists, Che Fung bought nearly HK$100 million worth of Hi Sun Technology (00818.HK) shares at HK$1.46 apiece in March 2006 through his wholly owned BVI vehicle Ever Union. A month later, Hi Sun announced a one-to-four share subdivision.


Che sold some of the shares in December 2006, creaming off HK$240 million after costs, the report said. Che still has 90 million shares in the company.


The announcement of the “through train” plan helped drive the Hang Seng index to a record in October 2007, with Hi Sun’s shares climbing to HK$3.50, the report said. Then-premier Wen Jiabao said in November that year that the government needed to study the risks before going ahead with the plan. Beijing official scrapped it in January, 2010.


Hong Kong exchange data showed that Ever Union has HK$1.4 billion combined shares in Hi Sun, MI Energy Corp. (01555.HK) and Digital Domain (00547.HK).


Ever Union’s office in Hong Kong’s International Finance Centre did not respond to a written inquiry from Ming Pao.

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More U.S. companies doing deals to avoid U.S. taxes: Congress study

Seventy-six U.S. corporations have shifted their tax domiciles out of the United States to other countries since 1983 to avoid U.S. taxes, with a sharp increase recently in such deals, a policy research arm of Congress said on Monday.

Known as inversions, these transactions are still rare but are becoming more common and causing concern in Washington. Responding to a request from lawmakers for background, the Congressional Research Service said it had found 47 such deals had been done in the past decade and more are in the works.

“Barely a week seems to pass without news that another corporation plans to move its address overseas simply to avoid paying its fair share of U.S. taxes,” said Democratic Representative Sander Levin in a statement.

Medical technology group Medtronic Inc said last month that it plans to buy Covidien Plc, a rival based in low-tax Ireland. Analysts said the deal was driven, at least in part, by tax considerations.

The research service said other inversions have been done in the past decade by Mallinckrodt Pharmaceuticals, Perrigo Co Plc, Actavis Plc and other companies, many of them rebasing for tax purposes to Ireland.

In a related matter, international law firm Cadwalader, Wickersham & Taft said in a statement that one of its top partners met on June 27 in Dublin with Irish Prime Minister Enda Kenny and discussed U.S.-to-Ireland inversions.

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The Federal Reserve Board on Monday published a report regarding the Independent Foreclosure Review (IFR) and the Payment Agreement that replaced the IFR. The Payment Agreement required large mortgage servicers to provide approximately $10 billion in cash payments to eligible borrowers and other foreclosure prevention assistance. After the Payment Agreement has been fully implemented, the Federal Reserve expects to publish data on the final status of the cash payments and the foreclosure prevention assistance.

Here are the reports: herehere and here.

Florida attorney general probes North Palm Beach law firm

The Florida attorney general’s office confirmed last week it is investigating a North Palm Beach-based law firm that is the subject of dozens of complaints by clients and at least two former employees who say homeowners were roped into expensive litigation against their banks with little to show for it.

The Hoffman Law Group, which advertises its services nationwide as a mass litigation law firm that sues banks for wrongful mortgage and foreclosure practices, also had its Better Business Bureau rating dropped last week to an F from a C-minus.

Whitney Ray, press secretary for Florida Attorney General Pam Bondi, said the firm is being investigated for potential violations of Florida’s Deceptive and Unfair Trade Practices Act and “related laws.”

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