Daily Archives: August 7, 2014

CFPB: Alerting colleges about secret banking contracts

If you’re a student preparing to head back to campus, you may encounter offers from banks and other companies that promote debit cards, prepaid cards, bank accounts, and other products branded with your school’s name or logo. When your school makes a deal with a company to market a financial product, it’s important for you to have basic information about this agreement and to understand what this means for your options. Last year, we launched an inquiry into financial products marketed to college and university students to determine whether the market is working for students and families.

We called on financial institutions to publicly disclose agreements with institutions of higher education to market financial products to students. Information about these arrangements is already required to be disclosed when marketing credit cards and private student loans to students—these requirements were put in place after companies were found to have paid schools and school officials in order to steer students into these products.

Making these agreements available for all financial products shows schools’ and companies’ commitment to transparency, helping students and their families understand basic information about these products before you sign up.

We decided to take a look at the financial institution partners of a group of some of the largest universities in America – members of the Big Ten conference – to see if they’ve disclosed agreements on their websites. Together, these schools enroll more than a half a million students.

Of the 14 member schools (yes, there are 14 schools in the Big Ten), it appears that at least 11 have established banking partners to market financial products to students. Of those 11, we were able to easily find only four contracts on the partner websites, but three of those four contracts did not contain important information, such as how much they pay schools to gain access to students in order to market and sell them financial products and services.

University Financial partner Contract available on partner website?
University of Illinois, Urbana-Champaign TCF Bank Partially
Indiana University Unknown
University of Iowa Hills Bank & Trust Co. Yes
University of Maryland Capital One No
University of Michigan TCF Bank Partially
Michigan State University MSU Credit Union No
University of Minnesota TCF Bank Partially
University of Nebraska Wells Fargo Bank No
Northwestern University US Bank No
Ohio State University Huntington Bank No
Penn State University PNC Bank No
Purdue University Unknown
Rutgers University Unknown
University of Wisconsin UW Credit Union No


Read on.

NY Judge Griesa to hold hearing on Friday over Argentina statements

New York District judge Thomas Griesa has scheduled a hearing at 4 pm local time on Friday to address Argentina’s recent public statements over their attempts to pay creditors, a court official said.

Griesa, who has blocked Argentina from paying holders of restructured bonds unless it also pays hedge funds that rejected the terms of debt restructurings in 2005 and 2010, set the hearing after Argentina continued to press the Bank of New York to deliver US$539 million in bond payments.

Read on.

Read the ICJ’s press release.

UPDATE 1-SunTrust says cooperating with U.S. foreclosure probe

Aug 6 (Reuters) – SunTrust Banks Inc said on Wednesday it is cooperating with the office of U.S. Attorney Preet Bharara in New York on a broader industry investigation into expenses charged by law firms in connection with foreclosures.

In a regulatory filing, the Atlanta-based regional bank said the expenses relate to foreclosures of loans guaranteed or insured by government-controlled mortgage companiesFannie Mae or Freddie Mac, or by the Federal Housing Administration.

SunTrust said the investigation relates to a private whistleblower lawsuit that was filed under seal and remains in early stages. It said it has had a “dialogue” with Bharara’s office to resolve the matter, but did not reach an agreement.

Michael McCoy, a SunTrust spokesman, declined to elaborate on the filing. Betsy Feuerstein, a spokeswoman for Bharara, declined to comment.

In June, SunTrust reached a $968 million settlement with the U.S. Department of Justice to resolve claims over other questionable mortgage practices.

Read on.

Argentina sues the US in The Hague

Argentina on Thursday asked the world court in The Hague to launch proceedings against the United States over Argentine sovereign debt, the latest move in the South American country’s long-standing dispute with holdout creditors.

A statement issued by the International Court of Justice, the U.N.’s highest court for disputes between nations, said the request had been “transmitted to the U.S. Government. However, no action will be taken in the proceedings unless and until” Washington accepts the court’s jurisdiction.

Argentina said in its application to the court that the United States had “committed violations of Argentine sovereignty and immunities and other related violations as a result of judicial decisions adopted by U.S. tribunals.”

Read on.


Goldman Sachs’ Dark Pools Under Investigation

Law360, New York (August 07, 2014, 11:58 AM ET) — Goldman Sachs Group Inc. on Thursday confirmed that its U.S. alternative trading system is under investigation, following reports Tuesday that the New York attorney general’s office has extended its dark pools probe to include the bank.

The confirmation came in a quarterly filing with the U.S. Securities and Exchange Commission, but the bank did not specify which governmental, regulatory or self-regulatory body was looking into its ATS — colloquially known as a dark pool.

Source: Law360

Lender Hit With Treble Damages for Approving Ill-Fated Home Loan

A New Jersey trial judge has found a mortgage lender liable under New Jersey’s Consumer Fraud Act for providing a home refinance loan to a 70-year-old borrower it should have known would be unable to make the payments.

Freedom Mortgage Corp., was entitled to foreclose in the face of the homeowner’s predictable default but it has to pay treble damages and legal fees for the consumer fraud violation and forfeit fees and interest, Bergen County Superior Court Judge Gerald Escala said in an opinion made public Tuesday in Freedom Mortgage Corp. v. Major.

Escala further ruled that Freedom Mortgage must hold off on obtaining a foreclosure judgment for a year to allow an opportunity for borrower Mamie Major to look for someone to buy the property or to obtain refinancing elsewhere.

Major refinanced her Englewood, N.J., home with Mount Laurel, N.J.-based Freedom Mortgage in 2009.

The house, where she had lived since 1980, had a market value of $365,000 and was subject to a prior mortgage with Wells Fargo on which she owed more than $341,000, according to the opinion.

She was 70 at the time but still working and earned just over $30,000 a year, according to the opinion.

The refinance loan was intended to pay for her grandson’s college education and lower her interest rate, the opinion said.

Major provided information, including her salary, to a company representative over the phone and the loan application and other papers were signed in March 2009, at a closing that took place on her front porch, according to the opinion.

She wound up with a deal that didn’t pay her any equity but did lower her interest rate from about 5.6 percent to 5 percent, dropping the monthly payment from $1,963 to $1,900. The annual interest reduction was almost $2,135, according to the opinion.

But the transaction cost her almost $11,500 in fees, which were added on top of the existing debt.

As a result, it would take her more than five years to break even on the refinance, Escala noted. 

Major defaulted after only six payments and Freedom sought to foreclose.

Major counterclaimed, alleging it engaged in unconscionable conduct under the Consumer Fraud Act (CFA).

Read more: http://www.njlawjournal.com/id=1202666010830/Lender-Hit-With-Treble-Damages-for-Approving-IllFated-Home-Loan#ixzz39giVVpQL

New banking scandal in Britain

Le Monde.fr website (translated in English. Sub. req.):

The output of HSBC boss was a surreal side. On the occasion of the presentation of its interim results, Monday, Aug. 4, Stuart Gulliver, the CEO of the first European bank, blasted the avalanche of regulations that befell his establishment. A burden that costs him more than $ 700 million (522 million euros) per year and occupies 10% of its workforce, or 24,000 people at a time when the bank cut all spending.Above all, he insists, this overdose of rules makes employees too risk-averse to do their job well.

Still, Stuart Gulliver, like all his colleagues, will struggle to make her cry in the cottages. Chapter disputes its interim report is thick effect. It includes charges of manipulation of the currency market and indices, various actions in the United States, and finally the case of credit insurance. Now it is being transformed into larger banking scandal in British history.


In their interim results, all banks in Britain have announced a new increase in provisions to reimburse their customers for their having sold abused this type of insurance that allow an individual to neck …

Testing The CFPB’s New Financial Literacy Tools

The Consumer Financial Protection Bureau has announced the launch of its “new online toolkit called Your Money, Your Goals, a comprehensive guide to empowered financial decision-making that covers topics like budgeting daily expenses, managing debt, and avoiding financial tricks and traps.”  The toolkit addresses

  • Making spending decisions that help reach goals
  • Ordering and fixing credit reports
  • Avoiding tricks and traps in choosing financial products
  • Making decisions about repaying debts and taking on new debt
  • Keeping track of income and bills
  • Deciding whether to open a checking account and understanding what’s needed to open one

The real reason Fannie and Freddie don’t do principal modifications…pension funds

Affordable housing advocates have been pushing hard for principal mods on mortgages backed by Fannie Mae andFreddie Mac.

Ed DeMarco, the former acting head of the Federal Housing Finance Agency had refused to embrace principal mods, choosing instead to do rate / term modifications through the Home Affordable Modification Program.

As the Acting FHFA Chairman, DeMarco’s prime directive was to protect the taxpayer, and the fear was that a mass principal refi program would trigger a wave of strategic defaults, where people who had the ability to repay their mortgage would choose to stop paying in hopes of getting a principal mod.

The left thought they had finally scored a victory by replacing Ed DeMarco with Mel Watt, a politician seen as more amenable to principal mods. So far, the left has been disappointed.

Why is the government resisting principal mods?

Because there is one big investor in MBS that the government is worried about – pension funds.

Principal mods for Fannie and Freddie mortgage-backed securities could be a game changer for this paper.

Why? Because lots of MBS from the late bubble years are backed by underwater, above market-rate mortgages. The prepayment speeds for these mortgages is depressed because the borrower cannot refinance.

Read on.

JPMorgan earns legal victory over Los Angeles in discrimination suit

In May, the City of Los Angeles sued JPMorgan Chase (JPM), alleging that the bank had pushed minority borrowers into mortgages they could not afford “since at least 2004.”

The city’s suit suggested that the bank’s lending practicescreated a wave of foreclosures that impacted property values and brought urban blight to the city.

But the bank has secured a legal victory over Los Angeles, according to a report from Reuters.

In a decision made public on Wednesday, U.S. District Judge Otis Wright said the city could not hold JPMorgan responsible for questionable lending by the former Washington Mutual Inc, under a federal law governing the wind-down of failed banks.

Wright said Los Angeles may file an amended complaint focused on JPMorgan’s, but not WaMu’s, lending practices.