Daily Archives: October 19, 2014

WMI Liquidating Trust, WAMU’s parent company, demands $500 Million from bankers

SEATTLE (CN) – Top officers of WMI, Washington Mutual Bank’s parent company, wasted half a billion dollars by transferring assets to the doomed bank just two weeks before it was seized by federal regulators, unsecured creditors claim in court.
WMI Liquidating Trust, representing the Official Committee of Unsecured Creditors of Washington Mutual Inc., sued 16 former WMI officers and directors for breach of fiduciary duty and corporate waste, on Tuesday in King County Court.
Washington Mutual was placed into receivership in September 2008, becoming the largest bank failure in American history.
The Trust claims that WMI officials “responded out of panic rather than reason” when they transferred, or downstreamed, $500 million to the bank on Sept. 10, 2008.
September was the height of the “financial tsunami” and there was rampant speculation that Washington Mutual would soon collapse, according to the lawsuit.
“The prudent decision would have been to preserve WMI’s assets at this critical time rather than to place them in the failing WMB [Washington Mutual Bank],” the Trust says.
Instead, the officer defendants and director defendants “responded out of panic rather than reason,” according to the complaint. “They abandoned the interests of WMI and allowed the September Downstream, despite the complete absence of any evidence of deliberation as to whether a transfer should be made at that time. Half a billion dollars of WMI’s capital, which otherwise would have been available for the benefit of WMI’s creditors and shareholders, instead was transferred outside of creditors’ reach to WMB, a distressed entity facing imminent seizure.”
Regulators seized Washington Mutual on Sept. 25, 2008. It was sold out of receivership to JP Morgan Chase Bank.
The capital infusion was “utterly irrational” and did nothing to help the bank’s liquidity, the complaint states.

Read on.

Two years later Ocwen still trying to sell company’s chairman’s Atlanta home

hahamouse

Two years ago, part of mortgage servicerOcwen Financial Corp. relocated to St. Croix and the company’s chairman, William C. Erbey, wanted to move there, too. The company bought Erbey’s Atlanta home for $6.4 million and put it on the market in September 2012. The house is still for sale and stockholders are paying the price, reports The Wall Street Journal.

By many measures, the company paid too much for the house at 4701 Northside Drive, reports WSJ Moneybeat. Erbey bought the six-bedroom, 12-bathroom, 14,387-square-foot home in 2006 for $4.385 million. He sold it to the company at a 47.7 percent increase, although the median value of top-tier homes in the area had dropped 11.2 percent, the WSJ adds.

Read on.

FHFA Said to Plan Steps to Ease Lending to Riskier Buyers

Bloomberg reports that:

A U.S. housing regulator plans new steps to encourage banks to lend to buyers with less than-perfect credit scores, according to two people with direct knowledge of the matter.

Watt will also discuss an effort that would allow borrowers to put down as little as 3 percent of the purchase price on loans backed by Fannie Mae and Freddie Mac, the people said.

Fannie Mae and Freddie Mac (FMCC), which have been under U.S. conservatorship since 2008, buy mortgages and package them into bonds on which they guarantee payments of principal and interest. Watt’s announcement is part of an effort to encourage banks to ease credit and follows a series of steps he first described in May.

Big Banks Start Charging Clients for Euro Deposits

Several global banks have begun charging large customers to deposit their money in euros, a rare move that could have costly implications for investors and companies that do business on the Continent.

The actions are driven by policies from the European Central Bank, which in June became the largest central bank to impose a negative interest rate on deposits–meaning banks are paying to park their money with the ECB. The effort is designed to encourage banks to instead use that money to lend. When the ECB dropped those rates further in September, some banks started pushing those costs–or costs related to the rate cuts–onto customers.

Now, instead of paying customers interest on their euro accounts, as they have done traditionally, some banks have started charging them. Bank of New York Mellon Corp. recently started charging 0.2% on euro deposits, the bank said Friday, and Goldman Sachs Group Inc. and J.P. Morgan Chase & Co. have also started charging clients, according to people familiar with the matter.

Meanwhile, Credit Suisse Group AG has told customers it will pass along negative interest rates on all currencies in which they apply, people familiar with the matter said, and has started charging on euro deposits.

Read on.