Daily Archives: March 20, 2015

The Nonprofit Behind Billions in Mortgage Aid Is a Mess

(Bloomberg) — Hoping to deliver relief to Americans pounded by the financial crisis, the government has poured billions of dollars into a sort of Red Cross for homeowners.

NeighborWorks America, a nonprofit chartered by Congress, distributes much of that money to counseling groups that dispense mortgage advice and sometimes financial aid.

A close look at the group reveals a house in disorder — with sweetheart contracts, document fudging and unexplained departures of top officials.

Executives at the group awarded at least two large jobs to insiders without bidding, later justifying one of the contracts with a backdated memo, according to interviews with former employees, tax filings and previously unreported company audits. In the other case, managers signed off on a multimillion-dollar technology deal to a recently formed contractor, which had board members in common with NeighborWorks and used the same law firm. The contractor overcharged by as much as 20 times, one of the audits said.

Then, with little fanfare, four top officials left NeighborWorks over a few months last year, under the watch of a board of directors that includes administrators from the Federal Reserve and the Department of Housing and Urban Development.

Read on.

One Bank Is Finally on Trial for the Financial Crisis

The trial of the century—a long-awaited determination of the damage perpetrated by Wall Street institutions in the financial crisis—began Monday in New York. But it’s only happening because one bank—unlike Goldman Sachs, JP Morgan, Citigroup, and Bank of America—refused to settle out of court. The Japanese firm Nomura stands accused of lying to mortgage giants Fannie Mae and Freddie Mac about the quality of mortgages pooled into securities during the housing bubble. The case will finally reveal hard data on just how much money Nomura, and the rest of the industry, made through fraud.

The Federal Housing Finance Agency (FHFA), conservator of Fannie Mae and Freddie Mac, sued 18 of the biggest banks in the world in 2011. As an investor, Fannie and Freddie purchased $196 billion in mortgage-backed securities from 2005 to 2007, filled with loans that did not meet specific underwriting guidelines. Sixteen of the 18 banks settled with FHFA, netting the agency $18.2 billion. One suit with the Royal Bank of Scotland remains in limbo. Only Nomura pushed FHFA into trial.1

Read on.