Daily Archives: September 11, 2014

Homeowners steamrolled as Florida courts clear foreclosure backlog

Florida Circuit Court Judge Diana Lewis was in a hurry. She had 93 foreclosure cases before her in the next two hours and she made it clear that she wasn’t going to let anything slow them down.

“This is a 2009 case. You’ve had years to negotiate,” she told one lawyer trying to delay a foreclosure judgment because his client and the lender were working out a deal.

Later, she agreed to an extension on a foreclosure sale but admonished the defense lawyer. “I’ll give you 30 days. That’s it. Don’t come back. I don’t want to see your face back here.”

At least twice that morning at the Palm Beach County Courthouse she refused to delay foreclosure trials in cases where the banks and homeowners together requested extra time.

Lewis’ manner may be brusque, but her actions aren’t unusual among foreclosure judges in Florida, who in the last year have been working under explicit directions from the state Legislature and Supreme Court to get rid of old cases and clear the court dockets, largely by awarding tens of thousands of homes to banks.

“The state’s entire court system has been compromised,” says Matt Weidner, an outspoken foreclosure defense lawyer who practices in Tampa and St. Petersburg and blogs about the system. “They’re stripping away private property rights and transferring billions of dollars in assets from individuals to large entities.”

Read on.

Senator Warren asks why no criminal referrals for Bank of America, Citi and J.P. Morgan execs

Sen. Elizabeth Warren on Tuesday pressed regulators on why no senior officials atBank of America, Citi and J.P. Morgan Chase have been prosecuted over their role in the housing collapse.

The three banks have agreed to a combined $35 billion in penalties, the Massachusetts Democrat said. But no officials have been sentenced over the alleged misconduct.

Warren allowed that the regulators themselves can’t prosecute — that would be up to the Justice Department. But regulators can provide referrals.

Daniel Tarullo, the governor at the Federal Reserve who’s most involved in bank regulation, said the central bank provided information to the Justice Department. But, when pressed, he indicated that the Fed didn’t specifically refer anyone.

Warren noted that after the savings-and-loan crisis in the 1970s and the 1980s, the government brought over 1,000 prosecutions and got over 800 convictions.

Read on.

Michigan’s ‘Foreclosure King’ Is Trying to Win a Seat in Congress

nly four House incumbents lost primaries this year, and you’d think their vanquishers would have by now a clear path to Congress. But in Michigan’s 11th Congressional district, the upstartDavid Trott is facing a significant obstacle: his past. Trott used to own the largest “foreclosure mill” law firm in Michigan, one that churned out hundreds of thousands of evictions after the housing bust. His firm made money off virtually every aspect of the foreclosure process. And the company used what adversaries describe as unscrupulous and potentially illegal tactics to ensure evictions, even when foreclosures were preventable.

“He built the machine that was made to feed off of human misery,” said Curtis Hertel Jr., register of deeds for Ingham County, Michigan, who tangled with Trott’s law firm on a number of cases. “I’ve had kids crying in my office. I’ve seen terrible human tragedy, and frankly they didn’t care.”

Trott won the 11th District Republican primary in August. Armed with the backing of Michigan’s political establishment and over $2 million of his own money, he outspent reindeer farmer and Santa Claus impersonator Kerry Bentivolio 25-1. Bentivolio was elected in a fluke in 2012 when no other Republican qualified for the ballot. However, the seeds of Trott’s potential troubles could be found in a small ad buy in that race by an outside Tea Party group called the Freedom’s Defense Fund.

The ad dubbed Trott the “foreclosure king,” and criticized him for evicting 101-year-old Texana Hollis, throwing her out into rainy streets at night and tossing her medication in a dumpster. (A charity led by writer Mitch Albom eventually bought Hollis’ home and let her remain there; she died in January at the age of 103.) Trott still wonand sold his stake in Trott & Trott a week laterbut the ad exposed a vulnerability that a stronger general election opponent could target.

Mortgage servicing companies typically hire one or two law firms to conduct all the foreclosure business in a particular state. Trott & Trott, the law firm founded by David Trott’s father, cornered that market in Michigan, working for banks like JPMorgan Chase, Bank of America, and Wells Fargo, along with government-sponsored entities like Fannie Mae and Freddie Mac. Trottwas quoted in a 2007 interview saying that foreclosures were “all we’ve ever done.” He would grow the firm to 1,800 employees, processing two-thirds of all Michigan foreclosures and completing as many as 80,000 foreclosures a year. The name Trott was well-known throughout Michigan: In 2013, anti-foreclosure activists set up “Trottville” encampments across the state to protest evictions.

Trott & Trott profited from more than just legal work on foreclosures. The company bought up ancillary businesses needed to successfully foreclose in Michigan. Trott & Trott owned or held a significant stake in Detroit Legal News, which publishes 80 percent of Michigan’s required legal notices prior to foreclosure; NDeX, a company that processes mortgage paperwork; the Attorneys Title Agency, which does title searches for the law firm; and Coldwell Banker Weir Manuel, a real estate firm that handles many of the foreclosed properties.

Read on.

Former analyst claims Moody’s falsely inflated ratings

Former Moody’s analyst, Ilya Kolchinsky, has accused the credit rating powerhouse of overstating its ratings for countless toxic mortgage-backed securities that caused the financial meltdown in 2008, misleading investors and costing the U.S. billions in funds spent bailing out Wall Street’s too-big-to-fail banks. Kolchinsky’s 107-page False Claims Act complaint, filed in 2012, was recently unsealed after the government failed to intervene.

The complaint alleges that from 2004 to 2007, Moody’s issued inflated ratings, often “triple-A,” for the majority of risky residential mortgage-backed securities and collateralized debt obligations it reviewed, as a result of “concealed conflicts of interest and Moody’s reckless profit-maximization policies.” According to Kolchinsky, it wasn’t until October 2007 when the market started its downward turn that Moody’s began downgrading its ratings.

In a whistleblower-protection suit that Kolchinsky dropped last year, he contended that he was demoted and eventually terminated after he came forward with concerns over Moody’s rating policies for high-risk securities. Specifically, that Moody’s rating methods violated federal securities laws and had lied in registration statements to the SEC. Kolchinsky served as managing director of Moody’s derivative group, before being relegated to a diminished role with fewer responsibilities and reduced pay.

Following Kolchinsky’s termination in September 2009, he testified before the U.S. House Committee on Oversight and Government Reform regarding its probe into the role rating agencies played in the financial crisis. Moody’s denied Kolchinsky’s accusations in the media. Regardless of the outcome of the False Claims Act suit or the merits of Kolchinsky’s allegations, we have long thought that the question of whether inflated ratings were issued by credit rating agencies, and the effect on the economic collapse of 2008 seems to have been largely overlooked in the inevitable finger pointing that occurred in its aftermath.

Argentina Congress passes debt law to skirt U.S. court ruling

Argentina’s Congress on Thursday overwhelmingly passed a debt bill aimed at defying a U.S. court ruling which tipped the country into default for the second time in 12 years.

After an overnight debate, the lower house of the legislature passed the bill which authorizes the government to circumvent the U.S. court and ensure bondholders receive upcoming interest payments on an estimated $29 billion (17.86 billion pounds) in bonds, on which the country defaulted in July.

Government allies brushed aside opposition arguments that the bill would be ineffective because it failed to meet a key requirement of the original bond contracts. The bill now goes to President Cristina Fernandez for signature.

Under the law, Argentina could make payments on its foreign-held bonds locally or elsewhere beyond the reaches of the U.S. court. It also encourages investors to move their Argentine debt from the United States or other foreign jurisdictions to either Argentina or France via an exchange of debt.

Read on.

13 years ago…..

Deutsche Bank, Ex-Im Ripped Off In $38M Loan Deal, Feds Say

Law360, Los Angeles (September 10, 2014, 9:48 PM ET) — Federal prosecutors on Wednesday accused agricultural products exporter SABA Inc. of defrauding Deutsche Bank AG and the Export-Import Bank of the U.S. in a $38 million loan deal the company later defaulted on, according to a complaint filed in New York federal court.

SABA, also known as the Saudi Arabia Business Association, conspired with a Turkish nonprofit to rip off the banks for the funds, far overestimating the costs for goods for a construction project in Turkey, U.S. Attorney Preet Bharara alleged in Wednesday’s suit….

Source: Law360

The Reasons Bankers Weren’t Busted

“There Were No Convictions of Bankers for Good Reason” is theheadline of a post by Mark F. Pomerantz, a lawyer and retired partner at Paul, Weiss, Rifkind, Wharton & Garrison in the New York Times’s Room for Debate discussion:

The reason that senior bankers did not face charges, even though investigators interviewed countless witnesses and pored over truckloads of emails and other documents for many years, is that the executives running companies like Bank of America, Citigroup and JP Morgan were not engaged in criminal acts.

At least that is why according to Pomerantz. It should surprise no one that a lawyer who spent much of his career representing financial institutions and their executives wouldn’t see any prosecutable crimes. Fortunately, it is easily refutable, which is our task for today and tomorrow.

Read on.

Why isn’t the US Congress throwing a lifeline to millions of drowning homeowners?

Even as it continues to improve, the specter of negative equity—those homeowners that are underwater on their mortgage, owing more to the bank than their home is worth—will act as an anchor on the housing market for years to come. But rather than acting to help ease the problem, congressional inaction is instead keeping a lifeline away from drowning homeowners.


As of the end of the second quarter, 17% of Americans with a mortgage were underwater. That’s down from 18.8% in the first quarter and 23.8% in the second quarter of last year, which is real progress. But when almost $9 million homeowners with a mortgage nationwide still can’t or won’t realistically enter the market because they’re underwater, the pool of eligible buyers and sellers shrinks, sales volume falls and inventory gets tighter.


At best, high negative equity leads to a decrease in mobility—more people simply stay put in their homes, stuck underwater or unable to find a home they can afford. At worst, it leads to higher foreclosure activity, as desperate homeowners default on loans that are increasingly burdensome, or simply choose to walk away from homes that are too far underwater.


But, at least in recent years, there have been other options. Under the federal Home Affordable Modification Program (HAMP), homeowners worked with their lenders to reduce the amount owed on their mortgages through a reduction in principal, enabling millions to stay in their homes at more favorable terms, even if they remained underwater.

Read on.

House Advances Bill Reforming Ch. 11 For Failed Global Banks

Law360, Los Angeles (September 10, 2014, 10:47 PM ET) — The House Judiciary Committee on Wednesday unanimously approved a draft bill amending Chapter 11 of the U.S. Bankruptcy Code with the aim of encouraging recapitalizations of distressed global financial firms and avoiding future “too big to fail” bailouts.

The committee advanced H.R. 5421, Financial Institution Bankruptcy Act of 2014, by a voice vote after hearing testimony in July in which panelists testified that a reform bill was needed to remove obstacles embedded in the Bankruptcy Code to transferring a holding company’s assets to a healthy bridge…

Source: Law360