Daily Archives: May 26, 2016

CFPB fines former Wells Fargo employee for illegal mortgage fee-shifting

Banned from mortgage industry for one year

The Consumer Financial Protection Bureau took action against a former Wells Fargo employee for an illegal mortgage fee-shifting scheme that allowed him to ultimately increase his commissions.

According to the CFPB, David Eghbali referred a substantial number of loan closings to a single escrow company, which shifted its fees from some customers to others at Eghbali’s request.

From there, the CFPB said Eghbali could then manipulate loan costs and ultimately increase the number of loans he closed, increasing his commissions.

The CFPB, as a result, said it filed an administrative consent order requiring Eghbali to pay an $85,000 penalty. The bureau also banned him from working in the mortgage industry for one year.

Read on.

Complaints Over Payday Loans Triple In A Year

UK customers have the same problems as the US customers…

New figures from the Financial Ombudsman reveal that disputes over payday loans increased by 178% in the year to March despite the fact that new controls and caps have been introduced in an attempt to regulate the system.

Rules introduced in January 2015 mean that interest rates on payday loads are capped at 0.8% per day, and the Financial Conduct Authority also ordered that stricter affordability checks be carried out before loans are agreed.

The statistics, which are released on an annual basis, show that in total more than a million people have made complaints about financial services during the past year, with issues ranging from the supply of pet insurance to problems with PPI refunds.

The Ombudsman dealt with 1.6 million enquiries of all kinds during the 12-month period – amounting to around 5,000 per day – with one in five resulting in a formal investigation.

Read on.

Wall Street Crime: 7 Years, 156 Cases and Few Convictions

Proceedings against individual bank employees are rare, and authorities have had difficulty winning cases

Gary Heinz is little known on Wall Street, but he belongs to a select club.

In 2013, the former UBS Group AG employee was sent to prison on charges of rigging bids tied to the municipal-bond market. Now, he sits at a halfway house in San Antonio, awaiting his release in July.

It rarely happens that way.

The Wall Street Journal examined 156 criminal and civil cases brought by the Justice Department, Securities and Exchange Commission and Commodity Futures Trading Commission against 10 of the largest Wall Street banks since 2009. In 81% of those cases, individual employees were neither identified nor charged. A total of 47 bank employees were charged in relation to the cases. One was a boardroom-level executive, the Journal’s analysis found.

The analysis shows not only the rarity of proceedings brought against individual bank employees, but also the difficulty authorities have had winning cases they do bring.
Most of the bankers who were charged pleaded guilty to criminal counts or agreed to settle a civil case, with those facing civil charges paying a median penalty of $61,000. Of the 11 people who went to trial or a hearing and had a ruling on their case, six were found not liable or had the case dismissed. That left a total of five bank employees at any level against whom the government won a contested case. They include Mr. Heinz, the former UBS employee.

Read on.

Uncle Sam Has Only Won 5 Cases Against Bankers at Big Wall Street Firms in the Last 7 Years

Out of 47 bank employees charged, most either settled or pleaded guilty.

It’s no secret the government has trouble winning legal cases against big bankers. But a new study published Thursday shows just how hard.

In fact, during the past seven years, Uncle Sam has gone to court or a similar proceeding to contest a case against an employee at one of the 10 largest Wall Street banks just 11 times. It has managed to emerge victorious just five times.

Of course the findings, published Thursday by the Wall StreetJournal, don’t reflect the government’s full effort to pursue financial wrong doing. The Journal found that as many as 47 bank employees were charged, and the majority of those either pleaded guilty or settled their cases. Nonetheless, the findings highlight how rare it is for the government to pursue cases against individual bankers and to prevail in court against actual people (as opposed to the companies they run or that employ them). Indeed, of the 156 cases brought by the Justice Dept., SEC or CTFC and examined by the Journal, the authorities ended up singling out individuals less than a fifth of the time.

Read on.

Here is the video. Click here.

Bank of America’s Winning Excuse: We Didn’t Mean To

This story was co-published with The New Yorker. It is not subject to our Creative Commons license.

Back in the late-housing-bubble period, in 2007, Countrywide Home Loans, which was then the largest mortgage provider in the country, rolled out a new lending program. The bank called it the “high-speed swim lane,” or HSSL, or, even more to the point, “hustle.”Countrywide, like most mortgage lenders, sold its loans to Wall Street banks or Fannie Mae and Freddie Mac, two mortgage giants, which bundled them and, in turn, sold them to investors. Unlike the Wall Street banks, Fannie and Freddie insured the loans, so they demanded only the ones of the highest quality. But by that time, borrowers with high credit scores were getting scarcer, and Countrywide faced the prospect of collapsing revenue and profits. Hence, the hustle program, which “streamlined” Countrywide’s loan origination, cutting out underwriters and putting loan processors, whom the company had previously deemed not qualified to answer borrowers’ questions, in charge of reviewing loan applications. In practice, Countrywide dropped most of the conditions meant to insure that loans would be repaid.

The company didn’t tell Fannie or Freddie any of this, however. Lower-level Countrywide executives repeatedly warned top executives that the mortgages did not fulfill the requirements. Employees changed data about the mortgages to make them look better, sometimes increasing the borrower’s income on the forms until the loan looked acceptable. Then, Countrywide sold them to the mortgage giants anyway.

At one point, the head of underwriting at Countrywide wrote an alarmed e-mail, with a list of questions from employees, such as, does “the request to move loans mean we no longer care about quality?”

The executive in charge of the decision, Rebecca Mairone, replied, “So – it sounds like it may work. Is that what I am hearing?”

To federal prosecutors—and to a jury in Manhattan—the hustle sounded like fraud. And in 2013, Bank of America, which had by then taken over Countrywide, was found liable for fraud and later ordered to pay a $1.27 billion judgment to the government.

But this week, the 2nd U.S. Circuit Court of Appeals looked at that judgment and asked this question: If a entity (in this case, a bank) enters into a contract pure of heart and only deceives its partners afterward, is that fraud?

The three-judge panel’s answer was no. Bank of America is no longer required to pay the judgment.

The Bank of America case was a rare outcome in the collapse of the financial system: a firm whose actions had contributed to the crisis was held to account by a court of law. The U.S. Attorney’s Office for the Southern District of New York, which brought the case in 2012, used an ingenious strategy, charging the bank under a law dating from the savings-and-loan crisis of the late 1980s, called Financial Institutions Reform, Recovery and Enforcement Act, or FIRREA. And the government actually identified a human being, Rebecca Mairone, claiming she defrauded Fannie and Freddie. Though it was a civil action, rather than a criminal one, the case actually went to trial—unusual in this day and age—and the jury found Bank of America and Mairone liable. (The 2nd Circuit panel’s ruling reversed a finding of fraud against Mairone and tossed out a million-dollar ruling against Mairone.)

The appellate-court panel accepted the main facts as described by the government. It acknowledged that Countrywide intentionally breached its contract but ruled that it had not engaged in fraud.

The ruling, written by Richard C. Wesley, a George W. Bush appointee, was unanimous, with another Bush appointee and an Obama appointee voting in favor. “What fraud … turns on, however, is when the representations were made and the intent of the promisorat that time,” Judge Wesley wrote. If the fraud is based on “promises made in a contract, a party claiming fraud must prove fraudulent intent at the time of contract execution; evidence of a subsequent, willful breach cannot sustain the claim.”

Read on.

Corporations Could Soon Advertise in Our National Parks

The Grand Canyon, brought to you by Budweiser. Verizon signs throughout Yellowstone. The thought of advertising in our national parks is nauseating. But it could happen.

Earlier this month, the National Park Service released a proposed plan to begin aggressively seeking private sponsorship for park projects to make up for dwindling public funding. Park leaders would be encouraged to spend official time soliciting donations from individuals and corporations. Anything from sponsoring a bench to designing, building, and even operating a park building would be allowed.

The plan stirs up a fundamental debate about our public goods — what they are, who owns them, and how they should be managed.

Read on.

Baylor University Terminates Kenneth Starr As President

Remember Ken Starr, the special prosecutor that investigated Bill Clinton’s sex scandal in the ’90’s? Well, Starr was fired as President of Baylor University. Here are the details:

DALLAS — Baylor University has removed Kenneth Starr as president and will fire head football coach Art Briles because of concerns of the handling of sexual abuse scandals involving football players, the school announced on Thursday.

In the past several months, Baylor, the world’s largest Baptist college, has been criticized for not thoroughly investigating reports of rapes of female students by its male athletes.

Starr, the former independent counsel charged with investigating Bill Clinton during his presidency, will move to the role of chancellor and remain a professor at BaylorUniversity Law School. Briles is suspended with intent to terminate, the college said in a statement.

In March, a former student at Baylor brought a negligence lawsuit in federal court against the school, accusing it of acting callously and indifferently after she was raped by a Baylor football player.

In a separate scandal, Baylor football player Sam Ukwuachu was sentenced last year by a Texas judge to six months in jail for sexually assaulting a fellow student in 2013.

Read on.

Wells Fargo now offers 3% down payment mortgages

No one should be surprised that Wells Fargo is offering lower down payments to homeowners with low credit scores..

 Allows FICO scores as low as 620

Wells Fargo announced on Thursday that it now offers a down payment of as little as 3% for fixed-rate mortgages, answering calls in the industry to expand the credit box.

The new low-down payment program, yourFirst Mortgage, which went live on Monday, offers lower out-of-pocket costs, expands credit criteria and pushes homebuyer education to help more first-time homebuyers and low- to moderate-income families achieve sustainable homeownership.

“With yourFirst Mortgage, we wanted to provide access to credit and simplify the experience while maintaining responsible lending practices. We partnered with credit experts such as Fannie Mae and Self-Help, an affiliate of the Center for Responsible Lending, to develop an easy-to-understand affordable loan option that gives homebuyers the best offering in the market,” said Brad Blackwell, executive vice president with Wells Fargo Home Lending.

Read on.


Chase almost done with RMBS settlement’s consumer relief requirement

The Monitor of the Chase RMBS Settlement Joseph Smith officially credited Chase with providing $3,887,777,119 of consumer relief to 165,191 borrowers.

Through the third quarter 2015, JPMorgan Chase provided $206,242,520 in consumer relief to 3,389 borrowers.

This brings the bank extremely close to its required $4 billion in credited consumer relief by Dec. 31, 2017.

This is the eighth progress report on Chase’s consumer relief under its settlement with the federal government and five states concerning claims that Chase, Bear Stearnsand Washington Mutual packaged and sold bad residential mortgage-backed securities to investors before the financial crisis.

Read on.

Trump Has Also Hawked Bogus Vitamins

Another day, another failed and sleazy Trump venture. To the pile of shady businesses that Trump has engaged in, you can add what the Daily Beast has called a “pseudo-scientific vitamin scheme”.

Yep, that’s right. Along with crummy steaks, a litigious university, and a crashed airline, we can now add to that list The Trump Network, a telemarketing company that preyed on people’s lack of scientific understanding by selling them exorbitantly priced ($140) urine-tests, “which would then be used to personally “tailor” a pricey monthly concoction of vitamins,” the Daily Beast reported.

For the article, authors Abby Haglage and Tim Mak interviewed a former “top doctor” from The Trump Network who offered a compelling tale of how the venture came about (unsurprisingly, said doctor asked to remain anonymous).

As the good doc recalled, it all began—like so many consumer schemes—at a marketing company rally. Naturally, Trump was there as a speaker, presumably rattling off his marketing wisdom by way of vainglorious demonstration. Alongside Trump at the rally was Ideal Health, a “multi-level marketing company” selling “naturopathic” remedies — medicine that claims to heal patients through therapeutic means such as herbs and vitamins. Included among the products Ideal Health proudly boasted about at the rally was the aforementioned urine test come tailored vitamin supplement pyramid scheme regimen. Trump was sold.

Read on.

The Trump Network’s motto was “Discover the Difference between Opportunity and Success.” In this instance, the opportunity being the PrivaTest and follow up supply of vitamins at $139.95, with an additional month’s supply at $69.95 and a recommended $100 nine month follow-up test, all purportedly aimed at keeping “individual nutritional support” up to date. As for “success”? In 2012 The Trump Network sold off all its assets.

Back in April, CBS Morning news interviewed retirees that were scammed by Trump Network: