Daily Archives: April 15, 2015

Bank of America accused of loan-sharking with steep overdraft charges

The infamous $40 latte rankles critics of bank overdraft charges, but the fees don’t always end with the initial $35 charge. Bank of America charges customers another $35 if they don’t deposit money in their accounts five days after draining their balances below zero.

A proposed class action suit accuses Bank of America of loan-sharking, saying the charges are essentially short-term loans with interest rates that can top 800 percent a year. The charges are “egregiously high, usurious and illegal,” according to the federal suit.

A spokeswoman for Bank of America, the largest bank in Florida, declined to comment. One banking expert called the case a long shot because usury laws typically apply to loans but not checking accounts.

Read on.

Trouble ahead: Tidal wave of HELOC resets about to hit

Home equity lines of credit taken during big housing bubble just before the crash may hit the millions of homeowners with home equity lines of credit with a dramatic spike in their payments.

This comes at a time when even economic bulls are seeing a systemic weakness in the economy.

According to RealtyTrac, 3,262,036 HELOCs with an estimated total balance of $158 billion that originated during the housing price bubble between 2005 and 2008 are still open and scheduled to reset between 2015 and 2018.

Of that, 56% are potentially resetting with higher, fully amortizing monthly payments from 2015 to 2018 are on properties that are seriously underwater.

Read on.

It’s over: SEC settles with Freddie Mac executives

The Securities and Exchange Commission’s high-profile case against several former Freddie Mac executives over allegedly misleading investors about the quality of subprime mortgages is now over, and it ended rather quietly.

According to multiple reports, including the Wall St. Journal, the SEC reached a settlement agreement with former Freddie Mac CEO Richard Syron and former senior executives Patricia Cook and Donald Bisenius, with the parties agreeing to penalties far less harsh than the SEC originally sought.

In the initial complaint, the SEC alleged that Syron, Cook and Bisenius violated anti-fraud provisions of U.S. securities laws by failing to accurately represent Freddie Mac’s subprime mortgage portfolio and the GSE’s overall exposure to riskier mortgages denoted as ‘subprime’ to investors, according to court records.

The Wall St. Journal report details the nature of the sanctions against the former Freddie executives. From the WSJ report:

The SEC had sought financial penalties against the executives and an order barring them from serving as officers and directors at other companies.

Instead, the executives agreed for a limited time not to sign certain reports required by chief executives or finance chiefs and to pay a total of $310,000 to a fund meant to compensate defrauded investors. Those amounts will be paid by insurance paid by Freddie Mac that covered the executives.

The case against Syron, Cook and Bisenius played out in court over the last several years, but the case is over now.

Again, from the WSJ:

The agreement said both sides disputed the degree to which Freddie Mac’s subprime disclosures were susceptible to misinterpretation on the question of how Freddie Mac quantified its exposure to subprime loans. It also says both sides agreed to the settlement “without conceding the strengths and weaknesses of their respective claims and defenses.”

The Tuesday agreement acknowledges “there was no one universally accepted definition of subprime that was used by market participants” in 2007 and 2008, the time period at issue in the lawsuit.”

Houses passes Mortgage Choice Act of 2015 by 286-140

A bill to reform mortgage industry regulations was approved by the House of Representatives late Tuesday afternoon.

House members from both parties voted 286-140 to pass H.R. 685, the Mortgage Choice Act of 2015, which was reintroduced earlier this year after dying in the last Congress despite bipartisan support.

“The American dream for so many low- and moderate-income Americans is that one day they can achieve financial independence,” said House Financial Services Committee Chairman Jeb Hensarling, R-Texas. “We are trying to ensure that low- and moderate-income Americans have convenience, that they have choice, that they have lower prices.”

The Mortgage Choice Act of 2015 by U.S. Rep. Bill Huizenga, R-Mich., — like the Mortgage Choice Act of 2014 — would amend and clarify the qualified mortgage definition in the the Dodd-Frank Wall Street Reform and Consumer Protection Act, thereby improving access to credit and qualified mortgages for low- and moderate-income borrowers while protecting consumers from bad loans.

Read on.

Court seals letter from anonymous whistleblower in Zillow lawsuit

The battle between online listings giants over trade secrets continued Tuesday with the latest round going toZillow Group (Z), as the judge in the lawsuit agreed to seal in whole and redact key parts of a letter from an anonymous whistleblower claiming former Move executive Errol Samuelson took trade secrets from Moveand the National Association of Realtors.

In an ironic twist, the judge said the anonymous source letter contained and violated Zillow’s trade secrets.

On Friday, HousingWire reported that the letter in question submitted in the case “appears to confirm” the contention by Move that Samuelson, now the chief industry development officer for Zillow, took multiple documents and entire databases from his former employer.

Move and the National Association of Realtors filed suit against Zillow on March 17, 2014, after Samuelson, Move’s chief strategy officer, resigned from Move on March 5, 2014, and joined Zillow as the company’s second-highest paid executive on the same day.

Read on.