Daily Archives: August 21, 2014

Huge tax bill for homeowners who receive BofA settlement?

Now this is the last thing that struggling homeowners want to hear: getting mortgage relief and having tax liability from the mortgage relief! Thanks Congress for not doing your job!

The Washington Post highlights the seriousness of this issue.

In 2007, Congress adopted a law that spared homeowners from being taxed on the amount of the loan that was written off. But that tax break expired in December, and now that kind of relief can be counted as income by the Internal Revenue Service.

“That’s why the Department secured a commitment from Bank of America to pay a portion of the settlement – over $490 million – to defray some of this tax liability,” U.S. Attorney General Eric Holder said. “And our settlement requires the bank to notify all consumers of the potential tax liability.”

Holder went on to warn that unless Congress acts, “the hundreds of thousands of consumers we have sought to help through our settlements with JPMorgan Chase, Citigroup, and now Bank of America, may see a significant tax bill just as they are beginning to see the light at the end of a dark financial tunnel.”

Opinion: Ferguson and money — where did all the banks go?

The Missouri city, reeling from protests, has a financial system based on payday loans and pawn shops, and that’s part of the problem.

Payday lenders in Missouri charge average annual interest rates of 455%, leading to debt traps for many customers.

Marketwatch:

J.P. Morgan Chase & Co. JPM, +1.49% Citigroup Inc. C, +2.55%  and Wells Fargo & Co. WFC, +0.87%   don’t operate branches in the St. Louis area. They offer brokerage and mortgage services, but those offices are in affluent parts of the county and in the city of St. Louis.

That said, there are ample financial services in Ferguson. ACE Cash Express operates two branches on the thoroughfare. There are at least six more payday lenders. QuickCash has a presence, as does Advance America. If a Ferguson resident needs a little more than their next paycheck can afford them, TitleMax Title Loans promises up to $10,000 in short order.

Those storefronts are bigger and bolder than any bank you’ve ever seen. There are huge “cash” and “$$$” signs.

“There are a lot of people who are unbanked,” said Todd Swanstrom, a professor of public policy at the University of Missouri, St. Louis. “They don’t have enough cash on hand to maintain a minimum deposit, and they need the cash now.”

Swanstrom said it’s not always an initial need for money that drives the poor of Ferguson to payday lenders. They go to rollover existing debt they can’t pay down, he said.

“They get caught in a cycle,” one that’s tough to break, given “the relative dearth of conventional banks.”

St. Louis, at 9.7%, ranks among the highest metro areas for unbanked residents. A total of 29% of African-Americans in the community are unbanked, compared with only 3% for white residents, according to the Federal Deposit Insurance Corp. It’s the widest racial gap in the nation.

Big Investors Push for Auditors to Sign Financial Statements

An industry group which represents some of the nation’s largest investors is urging regulators not to back away from plans to require auditors to sign the financial statements they prepare for companies.

In my August 13 “Trade” column, I wrote of a struggle between the Public Company Accounting Oversight Board, which regulates the accounting industry, and the Securities and Exchange Commission over reforms to auditor disclosure. The PCAOB, and many accounting reformers and investment groups had pushed for this change.

 

The accounting industry and the SEC have resisted. The negotiations have been going on for years.

 

Read on.

BofA To Appeal Judge Rakoff’s $1.3B Mortgage Fraud Fine

Case Information

Case Title

ABC v. DEF

 

Case Number

1:12-cv-01422

Court

New York Southern

Nature of Suit

Banks and Banking

Judge

Jed S. Rakoff

Date Filed

February 23, 2012

Law360, New York (August 21, 2014, 2:16 PM ET) — Bank of America Corp. on Thursday said it plans to appeal the $1.3 billion fine that U.S. District Judge Jed S. Rakoff slapped on the bank last month for defrauding Fannie Mae and Freddie Mac through a program designed to speed up mortgage issuing.

Judge Rakoff’s ruling on how to calculate the fine to impose on Bank of America came after a federal jury found in October that the bank’s Countrywide Financial unit and former executive Rebecca Mairone defrauded Fannie Mae and Freddie Mac through a mortgage…

Source: Law360

 

Bank of America’s $17 Billion Settlement Won’t Cost It $17 Billion

TRUST+ME

How the new BoA settlement won’t be as painful as advertised:

Whether cash payments are structured as penalties or legal settlements can determine whether targeted companies can declare them as tax-deductible business expenses. Also, consumer relief is an amorphous cost category: If Bank of America’s deal resembles the department’s previous settlements with JPMorgan (JPM) and Citigroup (C), that part could be less costly to the company than the huge figures suggest.

Some relief comes from actions that do not cost the banks anything, including making loans in depressed areas or reducing the principal of mortgages owned by outside investors.

Banks earn a multiple of each dollar spent on some types of relief. Under Citi’s deal, for example, each dollar spent on legal aid counselors is worth $2 in credits, and paper losses on some affordable housing project loans can be credited at as much as four times their actual value.

Whistleblower Seeks Billions From Moody’s

MANHATTAN (CN) – A former manager sued Moody’s in a qui tam complaint, claiming the ratings service cost the federal government billions of dollars by falsely evaluating mortgage-backed securities and collateralized debt obligations before the financial crisis.
Ilya Eric Kolchinsky sued Moody’s on Feb. 24, 2012 in a sealed complaint.
The complaint was unsealed on May 30 this year, after the United States declined to intervene.
According to the 107-page complaint: “Between 2004 and 2007, Moody’s issued credit ratings for tens of thousands of U.S. residential mortgage backed securities (‘RMBS’) and collateralized debt obligations (‘CDOs’). Motivated by Wall Street firms; willingness to pay hundreds of millions of dollars in fees to obtain investment-grade credit ratings, and Moody’s single-minded desire to increase its share of the lucrative and increasingly competitive CDO and RMBS markets, Moody’s issued its highest rating, Aaa, and similarly positive investment grade credit ratings, for the vast majority of those RMBS and CDO securities. Unbeknownst to investors, these ratings were not the product of independent, objective calculations, but rather the result of concealed conflicts of interest and Moody’s reckless profit-maximization policies. Moody’s concealed its profit-driven ratings inflation practices by its certification to the SEC to the contrary – that its rating reflected legitimate practices and policies. Moody’s certifications were a lie.”

 

Read on.

Sorry, Feds, Angelo Mozilo Can’t Be Sued: He Is Sick

LOL! And what does the tan man have, ebola? If the man is not six feet under, the feds can sue him!

From the NYT:

 
 

In 2011, the United States attorney’s office in Los Angeles decided not to file criminal charges against Mr. Mozilo. But in recent months, the office’s civil division has turned the spotlight back on Mr. Mozilo, whose company originated mortgages that went to people with little income to repay them, causing devastating losses for investors who bought the loans.

 

But a complication has emerged: Mr. Mozilo’s lawyers have cautioned the prosecutors in Los Angeles that their client has a serious illness. The prosecutors have sought Mr. Mozilo’s health records, the people said, though for now the case remains on track.

 

In a statement, Mr. Mozilo’s lawyer, David Siegel, said that he would “not comment on reported rumors concerning any investigation.” He added, however, that “there is no sound or fair basis, in law or fact, to pursue any claim against Angelo Mozilo. This story has gone on more than long enough; Mr. Mozilo stands virtually alone among banking and mortgage executives to actually have been pursued by this government and already paid a record penalty” to the S.E.C.