Monthly Archives: October 2014

Banks Set Aside $2.7 Billion on FX as Settlements Near

Banks began setting aside money for currency-rate rigging probes this week with as much as $2.7 billion provisioned, indicating settlements are drawing near.

Royal Bank of Scotland Group Plc today set aside 400 million pounds ($639 million) for the foreign-exchange probes. HSBC Holdings Plc (HSBA) will set aside about the same amount when it releases third-quarter earnings on Nov. 3, a person with knowledge of the matter said, asking not to be identified as it hasn’t been announced.

Yesterday Citigroup Inc. (C) took a $600 million legal charge as it said it is involved in “rapidly evolving regulatory inquiries and investigations.” Barclays Plc (BARC) set aside 500 million pounds for resolving the foreign-exchange investigations.

Read on.

Ally Financial (Formerly GMAC) Admits DoJ Subpoenas On Mortgage-Related Activities

Zerohedge:

Via Ally’s 10-Q

Ally and its subsidiaries, including Ally Bank, are or may become involved from time to time in reviews, investigations, and proceedings (both formal and informal), and information-gathering requests, by government and self-regulatory agencies, including the FRB, FDIC, Utah Department of Financial Institutions (UDFI), Consumer Financial Protection Bureau (CFPB), U.S. Department of Justice (DOJ), SEC, and the Federal Trade Commission regarding their respective operations.

Such requests currently include subpoenas from each of the SEC and the DOJ. The subpoenas and document requests from the SEC include information covering a wide range of mortgage-related matters, and the subpoenas received from the DOJ include a broad request for documentation and other information in connection with its investigations of potential fraud and other potential legal violations related to mortgage-backed securities, as well as the origination and/or underwriting of mortgage loans.

In addition, we recently received a document request from the SEC in connection with itsinvestigation related to subprime automotive finance and related securitization activities.

Further, in December 2013, Ally Financial Inc. and Ally Bank entered into Consent Orders issued by the CFPB and the DOJ pertaining to the allegation of disparate impact in the automotive finance business, which resulted in a $98 million charge in the fourth quarter of 2013. The Consent Orders require Ally to create a compliance plan addressing, at a minimum, the communication of Ally’s expectations of Equal Credit Opportunity Act compliance to dealers, maintenance of Ally’s existing limits on dealer finance income for contracts acquired by Ally, and monitoring for potential discrimination both at the dealer level and within our portfolio of contracts acquired across all dealers. Ally formed a compliance committee consisting of certain Ally and Ally Bank directors to oversee Ally’s execution of the Consent Orders’ terms. Failure to achieve certain remediation targets could result in the payment of additional amounts in the future.

Investigations, proceedings, regulatory actions, or information-gathering requests that Ally is, or may become, involved in may result in material adverse consequences including without limitation, adverse judgments, settlements, fines, penalties, injunctions, or other actions.

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And this comes on the heels of GM Financial’s admission of Subprime Auto Loan Probes (via Bloomberg)

Investigations of the subprime auto finance business are spreading as General Motors Co. (GM) said its lending arm received additional subpoenas seeking details of its underwriting practices.

GM Financial, which specializes in loans to people with spotty credit, said in a regulatory filing yesterday that attorneys general of states it didn’t identify and other government offices are demanding documents related to its business of making car loans and pooling them into bonds that are sold to investors. The Detroit-based lender, along with Santander Consumer USA Holdings Inc., disclosed a similar probe by the U.S. Department of Justice in August.

The scrutiny is intensifying at the same time more borrowers are falling behind on their payments and sales of securities backed by the loans increase. Auto-finance firms that lend to people with bad credit lowered their standards amid increased competition as new entrants flooded the business to capitalize on cheap funding, according to Moody’s Investors Service.

“Subpoenas travel in packs,” Erik Gordon, a professor at the Ross School of Business at the University of Michigan, said by telephone. “There’s never one company in an industry subpoenaed because they’re mostly all doing the same thing.”

In Depth: How Big Business Buys State Courts

Truthout:

More than 90 percent of judicial business in the United States is decided in state courts, and with business interests tangled up in much of the litigation, it’s easy to understand why corporations spend big on state judicial campaigns.

“Special interest groups continue to dump money into state supreme court races in an attempt to stack the deck in their favor,” Bannon said. “Voters should feel like our courts are fair and impartial, not political playgrounds where business interests and lawyers can tilt the scales of justice with their pocketbooks.”

Since January, political parties, outside groups and candidates spent more than $12.1 million on TV ads for state judicial races across the country. In the past week, outside groups spent a total of nearly $1 million on ads in Michigan, Montana, Ohio, North Carolina and Illinois in a last-minute surge before the election.

The 2012 election cycle was the first full cycle since the Supreme Court’s 2010 Citizens United ruling that struck down caps on outside corporate campaign spending, and special interest groups spent a record $15.4 million on TV ads for state high court races, nearly half the total spent on those races that year, according to a2013 report by the Brennan Center and other watchdogs.

“Special interest groups have realized that it doesn’t take much money to reshape an entire state court compared to high-cost elections for statewide political offices,” Bannon said.

Last year, the American Constitution Society released analysis of judicial campaign finance data from 2000-2009 showing that the more campaign cash a state justice receives from business interests, the more likely they are to rule in favor of business litigants who show up in their courts.

Ocwen Financial Announces Operating Results for Third Quarter 2014

  • Completed legacy ResCap system migration
  • Recorded $100 million charge for potential settlement with New York regulator
  • Surpassed 500,000 loan modifications milestone

ATLANTA, Oct. 30, 2014 (GLOBE NEWSWIRE) — Ocwen Financial Corporation, (NYSE:OCN), a leading financial services holding company, today reported a Net loss of $(75.3) million, or $(0.58) per share, for the third quarter of 2014 compared to Net income of $60.6 million, or $0.39 per share, for the third quarter of 2013. Ocwen generated revenue of $513.7 million, down 3% compared to the third quarter of 2013. Income from operations was $58.7 million for the third quarter of 2014.

Net income for the nine months ended September 30, 2014 was $52.2 million, or $0.36 per share, as compared to $175.1 million, or $1.17 per share, for the same period in 2013. Revenue for the first nine months of 2014 increased 9% from the first nine months of 2013 to a total of $1.6 billion.

Pre-tax loss on a GAAP basis for the third quarter of 2014 was $(72.3) million, a 194% decrease as compared to the second quarter of 2014. During the third quarter of 2014, Ocwen incurred a total of $137 million in normalized expenses. Ocwen’s normalized pre-tax earnings were $64.8 million, a 41% decrease from the second quarter of 2014. Normalized pretax earnings were impacted by $120.0 million of reserves for various regulatory and legal matters, including a $100.0 million accrual for a potential settlement with the New York Department of Financial Services, $9.0 million for Fair Value changes and $8.1 million of integration, technology-related and severance costs. We have not reached any agreement with the New York Department of Financial Services and cannot predict whether or when we may reach such a resolution. Any future resolution of these regulatory and legal matters may be materially different from what has been accrued.

“I want to emphasize that Ocwen takes great efforts to keep borrowers in their homes and to avoid foreclosures,” commented Bill Erbey, Ocwen’s Executive Chairman. “Ocwen recently reached a significant milestone by making its 500,000th loan modification, including 290,000 HAMP modifications. Ocwen is the leader in foreclosure prevention with 44% more HAMP modifications than any other servicer. We work very hard to keep borrowers in their homes and that is why we take the concerns raised by the New York Department of Financial Services so seriously. We have numerous compensating controls in place which we believe should have prevented borrower harm. Nonetheless, Ocwen is proactively creating a process whereby any borrower, who believes they received a misdated letter, and were harmed as a result, will have the opportunity to receive a complete file review to resolve any issues caused by the misdating.”

Read on.

OCC Clarifies How Banks Learn Of, Fix Compliance Problems

Law360, New York (October 31, 2014, 2:31 PM ET) — The Office of the Comptroller of the Currency on Thursday updated its process for notifying banks of potential problems uncovered by its examiners and gave bank boards a clearer picture of their responsibility for making sure those issues are addressed.

The OCC’s revisions to its policy of handling so-called “Matters Requiring Attention” are intended to make sure that examiners clearly inform banks of all size under the agency’s supervision of problems lurking within their operations in a uniform manner and that those banks address them more…

Source: Law360

House Republicans Can’t Find Anyone to Sue the President

Congress roaches-2013

Remember the lawsuit to sue the President? Here is the latest:

It’s not so easy, it turns out, for Congress to sue the president.

Speaker John Boehner is finding that out the hard way after a second law firm withdrew from representing the House in the Republican-led lawsuit against President Obama over his use—or overuse—of executive authority. William Burck of the Washington-based firm Quinn Emanuel pulled out of the case last month, not long after he signed a contract with the House to replace David Rifkin of BakerHostetler.

The law firms succumbed to political pressure from Democratic clients who threatened to pull their business.

The yet-to-be-filed suit has become an embarrassment for the speaker after he led the House in a party-line vote to authorize legal action against Obama back in August. The lawsuit would accuse the president of exceeding his authority by delaying implementation of the Affordable Care Act’s employer mandate without permission from Congress.

Read on.

$1.5 million sent in error to money manager (both are missing)

In the board game Monopoly, when the bank makes an error in your favor, the player gets to keep the money. A hedge fund manager is acting as if he has drawn that lucky card for real, a lawsuit against him contends.

Credit Suisse says it wired a total of $1.5 million in three transactions to the hedge fund’s bank account on one day in January. Two weeks later, according to its lawsuit, the bank realized it had made a mistake: At the time of the wire transfers, the hedge fund, Galbraith Capital Investment Management, was winding down operations and it had no cash left in its account with Credit Suisse.

The bank asked for its money back.

It is still waiting.

The bank sued Galbraith Capital and its manager, Joseph B. Galbraith, seeking to recover the money. Credit Suisse filed a motion in a New York State court in August seeking a default judgment against Mr. Galbraith and the hedge fund. At a hearing this month, a New York State judge orally granted a judgment against the hedge fund but not against Mr. Galbraith, a person briefed on the matter said. Mr. Galbraith has yet to file a legal response in the case or be personally served with court papers.

So now Credit Suisse is left to play a different game: Where in the world is Joseph B. Galbraith?

People who know Mr. Galbraith, 42, who renounced his United States citizenship in 2011, say they think he is living with his second wife in Europe, possibly in Monaco.

Read on.