Daily Archives: December 3, 2014

Homeowners murdered while taking possession of Detroit foreclosure

A Detroit man and his daughter are dead after they tried to take possession of a home he’d purchased at a foreclosure auction.

Howard Franklin, 72, and his daughter, Catherine, 37, were shot and killed last Friday after an armed confrontation at the foreclosure the elder Franklin had recently purchased, according to a report from the Detroit Free Press.

Per the Free Press report, the Franklins arrived at the home while the family who’d previously owned the home was moving out. A relative of the family, Alonzo Long, 22, was helping the family move.

But when the Franklins arrived at the home, a heated conversation ensued.

From the Free Press report:

According to the Wayne County Prosecutor’s Office, Long and some other men were inside the house allegedly removing not only belongings from the house but also fixtures — generally considered part of a house when it is sold and thus the property of the buyer. That’s when the Franklins, both armed, confronted Long and the others.

The victims and the shooter were legally permitted to carry guns, according to police. Police would not confirm whether there was an exchange of gunfire.

The Free Press story states that Long was charged with two counts of first-degree murder and remanded to jail without bail.

Wayne County Deputy Treasurer David Szymanski told the Free Press that a shooting over an eviction is rare, and advised people who buy foreclosed properties to follow the legal process.

“This is the first incident of this nature that has occurred. Hopefully it is a complete aberration,” Szymanksi told the Free Press. “When somebody is being dispossessed from their home it is an extremely emotional situation and one has to be cautious in doing so.”

Files on WaMu Appraisal Scheme Kept Sealed

(CN) – A federal judge refused to unseal files related to Washington Mutual Bank’s alleged rigging and steering of appraisals to benefit mortgage lenders before market crashed.
The case in Washington, D.C., stems from a 2008 federal class action that Felton Spears Jr. and Sidney Scholl first brought in San Jose, Calif., against Washington Mutual Bank, Lender’s Service Inc., and the Santa Ana appraisal-management firm First American eAppraiseIT.
Spears and Scholl said that back in 2006 WaMu had eAppraiseIT and Lender’s Service provide inflated mortgage-loan appraisals, so that the bank could sell the aggregated security interests in the properties at higher prices.
At WaMu’s direction, eAppraiseIT and Lender’s Service hired former bank employees as appraisal business managers who could override the values determined by third-party appraisers, the complaint alleged.
The court in San Jose, Calif., dismissed all but a claim under the Real Estate Settlement Procedures Act against eAppraiseIT in 2009, and U.S. District Judge Ronald Whyte certified the class in April 2012.
In Washington, the plaintiffs served the Office of the Comptroller of Currency (OCC) with a subpoena for documents that the U.S. Senate Permanent Subcommittee on Investigations (PSI) cited in a 2011 report on the 2007-08 financial crisis.
Though the Office of Thrift Supervision, which has since been succeeded by the comptroller’s office, gave the Senate the documents under seal and without waiver of any privileges, the comptroller objected to the subpoena, noting that many files may be privileged.

Read on.

UK banks to pay extra $6.3 billion UK tax over next five years

Banks will pay an extra 4 billion pounds ($6.3 billion) in taxes over the next five years due to changes announced in the autumn statement, Finance Minister George Osborne said on Wednesday.

Osborne said he would change rules which enable banks to offset losses from the financial crisis of 2007 to 2009 against tax on profits for years to come, which had meant some banks wouldn’t be paying tax for 15 or 20 years.

“The banks got public support in the crisis and they should now support the public in the recovery. I am limiting the amount of profit in established banks that can be offset by losses carried forward to 50 percent and delaying relief on bad debts,” Osborne said.

Read on.

Philadelphia Fed: Could principal reduction save bankrupt homeowners?

Back in 2009, mortgage lenders shot down proposed legislation by the Obama Administration to allow strip-down of residential mortgages for homeowners in Chapter 13 bankruptcy due to the adverse effects that it would have.

Now five years later, the Federal Reserve Bank of Philadelphia is arguing that lenders were wrong.

A mortgage strip-down reduces the principal of underwater residential mortgages to the current market value of the property for homeowners in Chapter 7 or Chapter 13 bankruptcy. If a bankruptcy judge is granted mortgage modification powers, than it stands to reason an interest deduction could be implemented on top of the principal reduction.

The legislation was proposed in 2009 as a means of reducing foreclosures during the recent mortgage crisis.  And according to a new paper from the research department with the Philadelphia Fed, introducing mortgage strip-downs would not have strong adverse effects on mortgage loan terms and could be a useful new policy tool to reduce foreclosures.

The paper titled, “Using Bankruptcy to Reduce Foreclosures: Does Strip-Down of Mortgages Affect the supply of Mortgage Credit?” sought to determine whether allowing bankruptcy judges to modify mortgages would have a large adverse impact on new mortgage applicants.

Read on.

Emails about loans plague Credit Suisse


Old emails may be coming back to haunt Credit Suisse CSGN, +1.02% CS, +0.68% over real-estate deals done before the financial crisis.

The emails, which were turned over to firms suing the bank but haven’t been made public, include discussions of an appraisal method Credit Suisse used to value a dozen luxury properties such as golf communities and ski resorts during the mid-2000s.

In the emails, reviewed by The Wall Street Journal, Credit Suisse employees discuss an effort by the bank to use an uncommon appraisal method known as “total net value” that relied on future expected revenue, rather than more traditional methods based on how the market values properties.

A trial that began this week in Dallas is the latest test of whether the bank can be held liable for heavy losses incurred by investors in loans that were made based on the appraisals. The hedge-fund company Highland Capital Management, an investor in the loans, sued Credit Suisse in July 2013, alleging the bank improperly inflated the value of the properties.

The loans in question ended up going sour during the financial crisis, leaving investors like Highland with steeper losses than they would have faced had the appraisals been more conservative, Highland alleges. Credit Suisse collected its customary fee from the new deals, while holding little or no risk when the loans eventually failed.

An expanded version of this report appears on WSJ.com.

Federal district court bars foreclosure sale of first lien HUD-insured mortgages

Recently, the U.S. District Court for the District of Nevada held that a homeowners association (HOA) foreclosure sale is not valid against HUD-insured loans, but will the ruling be extended to GSE-insured mortgages?

The decision comes shortly after the Nevada Supreme Court upheld a state law that gives HOAs a super-priority lien on a Nevada property for up to nine months of unpaid HOA dues.


In its ruling, the District Court noted that federal rather than state law applies in cases involving FHA-insured mortgages to assure the protection of the federal program against loss, state law notwithstanding.

Read on.

UK Regulator Shocked That Slapping Banker Wrists Achieves Nothing

Gee, ya think???


Not a quarter passes without a bank announcing, as part of its earning statement, that – it just so happens – it has incurred a few hundreds million (or billion) in legal fees, expenses and charges for breaking the law and manipulating this market or that (recall that for banks “Crime Is Now An Ordinary Course Of Business“), but it’s ok, because it is a one-time, non-recurring thing, so please exclude it from the EPS calculation…. Until the next quarter when everything repeats once more. But the repetition of “one-time” events is not the only constant: the other one, of course, is that nobody ever goes to jail.

The latter is also the reason why, as the WSJ reports, British regulators are “getting exasperated with banks failing to clean up their act after repeated wrongdoings.”

No, really: the UK’s equivalent to the SEC truly can’t understand how banks, which have trillions in central bank reserves sloshoing around on their balance sheets as the replacement to trillions in taxpayer bailout funds, and which are delighted to use said reserves to pay for hundreds of billions in legal fees in order to avoid prison time for financial crimes, market manipulations and countless other legal transgressions which their executives were caught doing, refuse to stop breaking the law when the have a paid for by others – and quite literal – get out of jail card.

The FCA’s so-called quandary in a nutshell: “Following the £1.1 billion ($1.7 billion) of fines it doled out to five banks over misconduct related to foreign exchange rate rigging, Tracey McDermott, head of enforcement at the Financial Conduct Authority, said: “Is our action effective at all?

The answer, clearly, is no. But hey, maybe the next wristslap will fix everything and the New Normal criminal syndicate, i.e., bankers. will promptly fix their ways.

On Tuesday Ms. McDermott said she had recently looked though the slew of statements put out by punished banks dating back to 2002. They read like a  “PR paint by numbers,” she said. The press releases all state that the wrong doing is linked to a few employees, changes have been made and that it won’t happen again.

But “lessons are not being learnt,” she said.

She was speaking at a conference in London on legal enforcement.

In the meantime, if the FCA, or SEC, or DOJ, or whoever, really wants to “fix” the rampant, criminal banker problem, here is a simple solution: throw someone in jail for a long, long time, and stop showing to the world that one can avoid prison if only one pays a large enough fee (out of other shareholders’ funds).

Better yet, take a clue from Iran:

A billionaire businessman at the heart of a $2.6 billion state bank scam in Iran, the largest fraud case since the country’s 1979 Islamic Revolution, was executed Saturday, state television reported…. A total of 39 defendants were convicted in the case.Four received death sentences, two got life sentences and the rest received sentences of up to 25 years in prison.