Daily Archives: October 5, 2014

Interesting Simpsons episode on Twitter feed

photo (11)

And interesting enough is today’s topic of discussion as well as crisis in this country.

Northern California Real Estate Investor Agrees to Plead Guilty to Bid Rigging and Fraud at Public Foreclosure Auctions

Investigations Have Yielded 47 Plea Agreements to Date

U.S. Department of JusticeOctober 03, 2014
  • Office of Public Affairs(202) 514-2007/TDD (202) 514-1888

WASHINGTON—A Northern California real estate investor has agreed to plead guilty for his role in conspiracies to rig bids and commit mail fraud at public real estate foreclosure auctions in Northern California, the Department of Justice announced.

Felony charges were filed today in the U.S. District Court for the Northern District of California in Oakland against Gernot Sebastian Zepernick of Concord, Calif. To date, 47 individuals have agreed to plead or have pleaded guilty, as a result of the department’s ongoing antitrust investigations into bid rigging and fraud at public real estate foreclosure auctions in Northern California.

According to court documents, beginning as early as November 2008 until about January 2011, Zepernick conspired with others not to bid against one another, and instead to designate a winning bidder to obtain selected properties at public real estate foreclosure auctions in Contra Costa County. Zepernick was also charged with conspiring to use the mail to carry out a scheme to fraudulently acquire title to selected Contra Costa County properties sold at public auctions, to make and receive payoffs, and to divert money to co-conspirators that would have otherwise gone to mortgage holders and other beneficiaries by holding second, private auctions open only to members of the conspiracy. The department said that the selected properties were then awarded to the conspirators who submitted the highest bids in the second, private auctions. The private auctions often took place at or near the courthouse steps where the public auctions were held.

“Collusion at the foreclosure auctions created an unfair playing field where the conspirators pocketed illegal payoffs at the expense of lenders and distressed homeowners,” said Brent Snyder, Deputy Assistant Attorney for the Antitrust Division’s criminal enforcement program. “The division will continue to investigate and prosecute local cartels that corrupt the competitive process.”

Read on.

Housing Rights Group Says HUD Program Helps Wall Street, Hurts Homeowners

After learning that his home was in foreclosure in July 2013, James Cheeseman received an even more unpleasant surprise when he showed up in court the following January. He was told that his mortgage loan had been sold by JP Morgan Chase and purchased by a company he had never heard of before – LVS Financial.

Cheeseman had already applied for a loan modification from Chase and says he was still awaiting a response when the loan sale occurred – a move that he and his attorney argue violates New York State foreclosure laws. Cheeseman says that the new servicer, BSI Financial, then required him to fill out a whole new loan modification application. In mid-September, he learned that he had been denied.

Though he is asking the court for another shot at a modification, this curveball has caused considerable distress for Cheeseman, 47, and his mother Constance, 75, who have resided in the New York home that they co-own for five years.

“I was shocked; I thought that [the resale of bundles of bad loans] was over,” he says. “That’s what got the country into trouble in the 2008 [mortgage crisis]. But lo and behold, it’s still going on.”

In fact, the Cheesemans and their attorney believe that the sale of their loan was part of a recently expanded federal program ostensibly intended to provide relief to homeowners on the brink of foreclosure. Though foreclosure rates have been falling nationwide, 2 million homeowners are still behind on their mortgages and headed for foreclosure and another 10 million are underwater on their mortgages and at risk of the same in the future. About half a million of those seriously delinquent loans are insured by the Federal Housing Administration (FHA), representing a drain on the agency’s taxpayer-backed insurance fund.

In 2012, the FHA expanded a program to auction off pools of “nonperforming loans” – those on which homeowners are at least six months delinquent on their mortgage payments – to both for-profit and nonprofit bidders. To date, nearly 100,000 loans have been sold through the Distressed Asset Stabilization Program (DASP), bringing $8.8 billion into the FHA’s coffers. The agency asserts that the program can also help reduce foreclosures, as private loan-buyers not hemmed in by the same restrictions as the government agency should be able to pursue a wider range of avenues to keep residents in their homes.

But citing stories like Cheeseman’s, some housing-rights organizations are telling a different story about DASP. They contest that the program has deepened the pain of homeowners and tenants by handing their fates over to hedge funds and investment groups that often have no interest in pursuing loan modifications or other options that would allow residents to remain in their homes. On September 9, community groups in more than 10 cities nationwide protested at local offices of the US Department of Housing and Urban Development (HUD), which oversees the FHA and DASP. Noting that, by HUD’s own numbers, private investors – including private equity firms, hedge funds, specialty servicers and single-family rental companies – have won bids on close to 98 percent of all loans auctioned through DASP, many housing advocates are calling for a halt to the program until it can be overhauled.

Read on.

Financial watchdog sounds alarm on bank security breach

New York’s top financial watchdog is ringing the alarm for Wall Street after bank giant JPMorgan Chase revealed one of the largest security breaches in history.

Benjamin Lawsky, the superintendent of the NY Department of Financial Services, warned the next financial crisis could be sparked by a massive cyberattack and called on big banks to fortify their online defenses.

“The cause of the next financial crisis could be from something triggered by some kind of cyber event,” Lawsky told The Post on Friday. “We should be thinking about cybersecurity preparedness in the same vein we think about capital levels.

“These are matters that go to the safety of the institutions,” he added.

The Federal Deposit Insurance Corp. insures bank accounts up to $250,000 from bankruptcy, but won’t extend that same protection in the event of fraud, an FDIC spokeswoman told The Post.

JPMorgan, run by CEO Jamie Dimon, is likely to have some kind of private insurance to cover any cyber threat, experts said.

Read on.

S&P Warns: Athens Nearing Default, Again

Remember Yunanistan (Greece, Hellas, Ellada…): the country that in 2010 launched Europe’s sovereign solvency crisis and the ECB’s own helpless attempts at intervention, which later was “saved”, only to default shortly thereafter (but without triggering CDS as that would end the Eurozone’s amusing monetary experiment and collapse the Deutsche Bank $100 trillion house of derivative cards), which later was again “saved” when every single global central bank made sure Greek bonds became the only yield-generating securities in the world?

Well, the country which at last count was doing ok, is about to not be ok. Because according to none other than S&P, at some point over the next 15 months, Greek debt is about to be in default when the country is no longer able to cover its financing needs. In other words, back to square one.

As Bloomberg reports, citing Real News, S&P analyst Marie-France Raynaud said Athens can’t cover its own financing needs.

How is that possible? Isn’t Europe so fixed, it no longer has anything to worry about except deflation, pardon, inflation?

Guess not. According to Bloomberg, S&P estimates Greek financing needs for the next 15 months to be at EU43 billion.

This is a problem because even if Greece sells bonds this year and next, sales won’t be enough to cover net financing needs. So maybe Athens will sell more bonds? Well, the problem with that is that the second the LIFO paradigm of bond investing no longer works, and the last guy in may be stuck holding the bag, nobody will want to buy 1 penny in debt issued by Greece.

Read on.

Introducing a Welfare Queen: Wealthy North Carolina Republican Politician Nailed For Medicaid And Food Stamp Fraud

Documents have surfaced showing that he and his former wife applied for Medicaid and food stamp benefits while he was pulling in a six-figure salary.

ABC 11 website:

North Carolina Republicans are calling on state Senator Wesley Meredith to refute welfare fraud allegations, or repay the funds.

In a statement issued Wednesday afternoon, party chair Linda Devore said the Cumberland County GOP looks forward to Senator Meredith refuting the allegations made Tuesday by his opponent, Fayetteville attorney Billy Richardson.

“These are serious matters, and we expect that Senator Meredith will be considerate of the impact of the issues raised by these allegations on the women, children, and families in our community, by addressing them completely and without delay,” Devore said in the statement.

On Tuesday, Richardson released a load of Meredith’s public and private financial and public assistance documents. They indicate Meredith and his ex-wife, Elizabeth Meredith, received welfare in the late 1990s. At the time, the couple earned annual incomes in the six-figure range.

You can read more here: http://abc11.com/331343

On a side note, in order to qualify for food stamps in North Carolina, here is the household income to qualify for food stamps:

Household Size* Maximum Income Level (Per Year)
1 $23,340
2 $31,460
3 $39,580
4 $47,700
5 $55,820
6 $63,940
7 $72,060
8 $80,180

Ok what is the penalty for welfare fraud in North Carolina? From NC DSS website:

A person found guilty of public assistance fraud can be

  1. fined,
  2. placed in jail, or
  3. fined and placed in jail.

People guilty of Food and Nutrition Services fraud may get an even stiffer penalty. That penalty could include all of the above, and you may not be allowed to get Food and Nutrition Services for:

  • 1st offense – 1 year.
  • 2nd offense – 2 years.
  • 3rd offense – permanently.
  • 1st time court finding of purchasing illegal drugs with Food and Nutrition Services – 2 years.
  • Misrepresenting identity or residence to get Food and Nutrition Services in more than one place – 10 years.

 And there is more:

As for the allegations? They may actually carry some serious weight in the upcoming election, and state authorities are concerned enough that they have called for an investigation. Richardson’s camp also delivered the documents to the Cumberland County District Attorney’s Office, Department of Social Services, and the Attorney General.

According to ABC-11, DSS investigate all reports of fraud related to Medicaid and food stamps and has 180 days to complete a food stamp investigation.  DHHS guidelines show there is no state of limitations for Medicaid fraud, and indicate fraudulent assistance would be recovered by voluntary repayment, wage garnishment, estate recovery or liens.

A Regulator Finally Gets It Right: CFPB Hits a Bad Bank Where It Hurts

  • Agency cracks down on Flagstar Bank for severe violations.
  • This case could force mortgage-servicing industry to clean up.
  • By contrast, DOJ’s sanctions typically follow a much different path.


CFPB has in the past sanctioned mortgage servicers for similar violations, with limited success. This time, in addition to fining the bank $37.5 million (the bulk of which will go to victims of Flagstar’s bad servicing, who also must be offered new loan modifications), CFPB banned the company from acquiring new mortgage servicing rights, particularly for defaulted loans, until it can demonstrate its ability to comply with the law.

This is enormous. There’s a healthy trade in the right to service loans in default, because new capital rules make them less attractive to large banks, and because CFPB’s regulations are costly to follow. Because servicers don’t originate a massive amount of loans themselves, and because consumers constantly refinance, pay off, or lose a loan to foreclosure, servicers must constantly purchase new servicing rights to refresh their supply and stay in business.

But CFPB ordered Flagstar to not purchase any more default loan servicing until it figures out how to do it properly. This “benching remedy,” as Georgetown law professor Adam Levitin calls it, can change the calculations for financial institutions over whether to commit a fraud, where the potential penalty is usually less than the profit they can make. In this case, Levitin writes, “compliance can be costly, and being taken out of the market can really squeeze the firm’s market position and potentially even its cashflow.”

– See more at: http://www.thefiscaltimes.com/Columns/2014/10/03/Regulator-Finally-Gets-It-Right-CFPB-Hits-Bad-Bank-Where-It-Hurts#sthash.7YUofY3p.dpuf