Citi continues moving away from mortgages as originations plummet

By Ben Lane at Housingwire

Citigroup continues moving away from mortgages as originations plummet

Nearly finished with exit from mortgage servicing

Citigroup first-quarter earnings show that the bank is continuing to move further and further away from mortgages and into other lines of business (The bigger question is why is Citi moving away from originating and servicing consumer mortgages).

According to information released Thursday by the bank, Citi’s residential first mortgage originations plummeted in the first quarter, dropping from $5.6 billion in the fourth quarter of 2016 to $3.8 billion in the first quarter of 2017.

That’s a drop of 32% in one quarter, and a drop of 31% from the same time period last year, when Citi originated $5.5 billion in first mortgages.

Citi’s mortgage servicing rights portfolio is also dwindling, as the bank continues to shed mortgage servicing rights (Citi is vulnerable to litigation for foreclosing on homes it didn’t own, revoking loan modifications and other servicing improprieties).

Earlier this year, CitiMortgage announced that it agreed to a massive mortgage servicing rights deal with New Residential Investment and Nationstar Mortgage that will transfer the servicing rights for approximately 780,000 mortgages away from CitiMortgage.

That deal is part of a larger play for Citi to get out of the servicing business altogether.

In addition to selling the mortgage servicing rights on approximately $97 billion in unpaid principal balance to New Residential, Citi also earlier this year that it entered into a separate subservicing agreement with Cenlar that will effectively end Citi’s mortgage servicing business.

And Citi’s latest earnings show just how close Citi already is to exiting the servicing business.

According to Citi’s report, the bank claims $567 million in mortgage servicing rights as assets in the first quarter. That’s down a whopping 64% from the fourth quarter of 2016, when the bank claimed $1.564 billion in MSR assets.

So in just one quarter, Citi sold off nearly $1 billion in mortgage servicing rights.

While the bank’s mortgage portfolio is clearly down, the bank’s overall earnings didn’t take a hit.

The bank said Thursday that its net income for the first quarter of 2017 was $4.1 billion, or $1.35 per diluted share, on revenues of $18.1 billion. That’s up from the same time period last year, when the bank reported net income of $3.5 billion or $1.10 per diluted share, on revenues of $17.6 billion.

The bank said that its revenues increased 3% from the prior year period, “driven by growth in both the Institutional Clients Group and Global Consumer Banking, partially offset by lower revenues in Corporate/Other primarily due to the continued wind down of legacy assets.”

The bank also said that its net income of $4.1 billion increased 17%, “driven by the higher revenues and lower cost of credit.”

The lower revenue in the “Corporate/Other” segment of Citi’s business is partially mortgage related.

Here’s how Citi breaks it down (emphasis added by HousingWire):

Corporate/Other revenues of $1.2 billion decreased 40% from the prior year period, driven by legacy asset runoff and divestiture activity, as well as lower revenue from treasury-related hedging activity. The current quarter revenue included approximately $750 million of gains on asset sales which more than offset a roughly $300 million charge related to the previously announced exit of Citigroup’s U.S. mortgage servicing operations. As of the end of the first quarter 2017, Corporate/Other assets were $96 billion, 23% below the prior year period and 7% below the prior quarter, primarily reflecting the continued wind down of legacy assets.

Corporate/Other net income was $92 million, compared to $450 million in the prior year period, reflecting the lower revenue, partially offset by lower operating expenses and lower cost of credit. Corporate/Other operating expenses declined 11% to $1.1 billion, primarily driven by the wind-down of legacy assets, partially offset by approximately $100 million of episodic expenses related to the exit of Citigroup’s U.S. mortgage servicing operations.

Corporate/Other cost of credit was $52 million compared to $170 million in the prior year period. Net credit losses declined 43% to $81 million, reflecting the impact of ongoing divestiture activity as well as continued improvement in the North America mortgage portfolio, and the provision for benefits and claims declined by $59 million to $1 million reflecting lower insurance-related assets. The net loan loss reserve release was largely unchanged.

While the mortgage revenue is down, Citi’s revenue in other areas is up.

Here’s how Citi breaks that down (emphasis again added by HousingWire):

North America Global Consumer Banking revenues of $4.9 billion increased 2%, with higher revenues in Citi-branded cards partially offset by declines in retail services and retail banking. Citi-branded cards revenues of $2.1 billion increased 13%, reflecting the addition of the Costco portfolio and modest organic growth, offset by the impact of day count. Citi retail services revenues of $1.6 billion were down 5% driven by the absence of gains on the sales of two portfolios sold in first quarter 2016. Retail banking revenues declined 3% mainly due to lower mortgage revenues partially offset by growth in average loans, deposits and assets under management.

“The momentum we saw across many of our businesses towards the end of last year carried into the first quarter, resulting in significantly better overall performance than a year ago,” Citi CEO Michael Corbat said.

“Revenues increased in both our consumer and institutional lines of business, most notably in areas where we have been investing such as Equities, U.S. Cards and Mexico,” Corbat continued.

“We grew loans and deposits and achieved an efficiency ratio of just under 58%, an ROA of 91bps and a ROTCE ex-DTA of over 10%, showing good progress towards achieving our near-term financial targets,” Corbat added.

“Through our earnings and the utilization of $800 million in Deferred Tax Assets, we generated $5.5 billion of total regulatory capital before returning $2.2 billion to our shareholders,” Corbat concluded. “Our CET 1 Capital ratio rose to 12.8% and we could not be more committed to continuing to increase the capital we return to our shareholders.”

Citi’s attempts to act ethically are a smoke-screen to hide Fraud

by the Lending Lies Team

CitiGroup’s attempts to act Ethically are a Smoke-Screen for its Fraud Spree.

In last Saturday’s edition of the Wall Street Journal an article entitled, “The Banker-Turned-Seminarian Trying to Save Citigroup’s Soul”.  I didn’t projectile vomit but my gag reflex was activated.

Citigroup’s latest attempt to schmooze regulators and the general public by addressing past and ongoing legal and ethical violations is by hiring theologian and Princeton University professor Dr. David Miller to ‘white wash’ its crime spree.  Hiring an ethicist at Citigroup is akin to the Vatican consulting on evil prevention with mass-murderer Charles Manson.

Dr. David Miller has been retained as Citi’s “on call ethicist.”  Dr.  Miller heads Princeton’s Faith & Work Initiative and has worked with Citi over the last three years. He says, “You need banking, just like you need pharmaceuticals.”  Interesting analogy considering that both banking and big pharma are more interested in profits than improving your financial, physical or mental health.

Miller will provide “advice and input to senior management.” Is it even possible to instill a sense of ethics in Citi CEO Michael Corbat who endorses Citi’s fraudulent foreclosures by way of fabrication, forgery and deception?   Mr. Corbat parroted Miller when he said when faced with an uncertain situation, “ask the four M’s: What would your mother, your mentor, the media and—if you’re inclined—your maker think?” While Corbat was saying all the right things to appease shareholders, his mind was saying, “ask the four M’s: What is your profit motive, your mode of deception, media manipulation and how much money can be made?”

Corbat claims he isn’t worried about the bad employees, but is concerned when good employees justify bad decisions when they face gray-zone questions.  When an employee is financially rewarded for denying or revoking a loan modification and for quickly foreclosing on a homeowner- there are going to be a lot of employees caught in that “gray zone”.  Has Citi changed the incentives that drive the behavior?  Not hardly.

Citi operates in an area of gray-zones and black-zones.  Citigroup has had numerous issues and has earned a reputation for ethical problems before and after the financial crisis. Mr. Corbat actually feigned shock when the company’s employee surveys showed some workers weren’t comfortable escalating concerns about possible wrongdoing.  What could be ethically wrong with sabotaging modifications and work outs or fabricating notes and assignments in order to foreclose?  Past Whistleblowers like ex-Citi employee Richard Bowen know all about the consequences of exposing wrong doing at Citi- it is a career ender.

Corbat claims he was shocked by the banking industry’s image problem overall. “If you look today at what the poll numbers say, what the general population says, there is distrust of banks,” Mr. Corbat said in an interview.  Is Corbat living under a rock?

The Wall Street Journal reports, “Citigroup is embracing Dr. Miller’s idea (influenced by Plato and Aristotle) of three lenses to apply in ethical decision-making, an approach: Is it right, good and fitting?” In other words, in Citispeak-is it right to gain an advantage, profitable and easy to implement?

Citigroup executives also pose these questions:  Is it in our clients’ interest, does it create economic value, and is it systemically responsible?”  Who is the client?  Fannie Mae or Freddie Mac?  It isn’t the homeowner or consumer.  These questions actually promote unethical behavior instead of prevent it when posed by upper management who are rewarded for improving Citi’s bottom line.

At Lendinglies we have a client who has been in litigation since 2003 with CitiMortgage.  To date, Citi has revoked a completed modification, prevented a sale of the home, stripped all of the equity and most recently in mid-appeal altered an Appellee brief by slipping an endorsement onto a note, altering an affidavit, and thus committed fraud and fraud on the court.  Citi won the appeal by resorting to fraud and then directed its attorneys to break into the client’s occupied home.  The case is ongoing.   Citi is probably the most corrupt servicer in America and yet they hide behind the pathetic and obvious ruse of hiring an “ethicist”.

Citi claims they are sharing these ideas with employees worldwide, working these concepts into its ethics and training manuals and mission statement, and posting on the wall of its Manhattan headquarters lobby.  This strategy is akin to inviting PETA for a strategy lunch at the Chicago cattle feedlots while trading cattle futures.

Every Citi operation has been cited for fraud and ethical transgressions while fined billions of dollars.  Forex issues, currency rigging, bribery, forgery, fraud, racketeering and employee violations are among the violations Citi has faced and yet nothing changes until the next controversy emerges.  Just because the devil slips on a halo for the night doesn’t cancel out the horns below.  Citi’s culture is ingrained in predatory and fraudulent practices that create an unfair competitive advantage.  Discussions about transparency, trust and developing an ethical culture is a smoke screen.  Citi is rotten from top to bottom.

Citi has recently started unloading its servicing rights after a decade of fabricating documents, forging signatures, breaking into homes, revoking completed modifications, ignoring bankruptcy automatic stays and grossly destroying the lives of those homeowners who were unfortunate enough to have their servicing rights sold to Citi.  Mortgage servicing is a highly profitable activity- especially when you never paid a dime for a loan.  Likely the only reason Citi is offloading servicing rights is to create some distance from its fraudulent practices.

Citi is built on a foundation of unfair competition, operating above the law, and by the theft of other’s resources.  It is what Citi knows and it is entrenched in Citi’s DNA.  The American Bank is free to racketeer, laundry money, rig currencies and break federal law with impunity.  If anyone, especially Dr. David Miller thinks an ethics class and a few posters are going to change the Citi corporate culture- your Ph.D. isn’t worth jack.

Evidence shows Citi will not change its culture and has never followed an ethics plan despite implementing others in the past. Citi may have killed many trees to publish its 60-page ethics policy; but only harsh financial penalties coupled with prison time is going to change Citi’s organized crime operation.

Dr. Miller naively believes banks can change and likely knows very little about how a bank like Citi operates. “To make the assumption that an organization cannot be more ethical than it was is to give up before you start… It is not naive. It is a realistic and necessary goal.”    Okay Dr. Miller, let’s see how your Ivy League theories play out in the real world.  Most of us on this blog know that your ethical ideologies will never gain traction in an organization built on greed, deception and profits at any cost.

CitiGroup Whistleblower Richard Bowen: The Immaculate Corruption

bowen

http://campaign.r20.constantcontact.com/render?m=1118575381433&ca=a2e5c0b7-db56-42f8-9a03-3310d938cb61

Watch the video here: http://fullmeasure.news/news/cover-story/immaculate-corruption

Full Measure with Sharyl Attkisson: The Immaculate Corruption featuring Richard Bowen. Photo: Sharyl Attkisson

Full Measure News is broadcast to 43 million households in 79 markets on 162 Sinclair Broadcast Group stations, including ABC, CBS, NBC, FOX, CW, MyTV, Univision and Telemundo affiliates and streams live Sunday mornings at 9:30 a.m. ET.

In some markets they are seen more than the cable news competition in that time slot, and by more viewers than CNN, MSNBC, and CBNC combined and equal or surpass the audience size of CBS’ “Face the Nation,” NBC’s “Meet the Press,” and ABC’s “This Week.” They explore “untouchable topics in a fearless way,” from immigration, terrorism, government waste, national security and whistleblower reports on government and corporate abuse and misdeeds. It is hosted by Sharyl Attkisson, a five-time Emmy Award winner and recipient of the Edward R. Murrow award for investigative reporting.

This past Sunday, I was honored to be featured on my “experience” at Citigroup, which many have called “The Immaculate Corruption.” [watch it here].

Sharyl Attkisson and Richard Bowen

The interview started with, “This is the story of how systems intended to hold people accountable failed and Bowen claims even helped cover for them… Richard Bowen knew where the figurative bodies were buried at banking giant Citigroup, once the largest company in the world. As a senior vice president, Bowen blew the whistle on Citigroup’s practices leading up to the banking crisis – practices like buying and selling risky mortgages and misrepresenting them to the public and investors.”

Sharyl noted, ”Not much has happened in terms of from what I can see to the actual people at Citigroup who were allegedly responsible for this behavior.” “That would be very accurate,” I responded.

Sharyl continued,

In 2009, Congress created the Financial Crisis Inquiry Commission. Six members were appointed by Democrats, four by Republicans.

Bowen was asked to testify. And he was eager to do it. It was a setting where he says he could publicly tell what he knew, exempt from his Citigroup confidentiality agreement. He wrote up his testimony, naming names and laying blame. However, shortly before he testified Bowen was told to “take out much of the damning evidence that they had originally told me to put in.”

He says the commission wanted major edits; “what they also conveyed is that the edits were not optional. If I did not make the edits I would probably be taken off the witness list.” Bowen says he had to cut out eight pages, almost a third of his planned testimony. And almost nobody knew that when he testified on April 7, 2010.

Last March, the financial commission’s records were quietly unsealed for the first time. And we were able to obtain copies of Bowen’s original testimony, including parts that were cut.

Sharyl: “Did they have you take out names of people responsible”?

Richard Bowen: “Yes. They had originally wanted me to put in the names and the specific instance of cover-ups that I had witnessed. All of that had to be taken out, at least the names”.

Sharyl continued…

Financial commission staff members who dealt with Bowen say the reason his testimony was shortened is simply because it was too long. They deny suggesting any edits, say there was no attempt to censor or silence Bowen, and say that all acted with the best of intentions and followed the highest ethics…

And there’s something of a bombshell in the formerly hidden documents: In 2011, when the Financial Commission concluded work, it secretly determined some of the world’s largest financial institutions had possibly violated securities law.

The Financial Commission privately referred 11 charges against nine executives, including Robert Rubin and two other Citigroup officials, to Justice Department Attorney General Eric Holder for possible prosecution. 

Now that the documents have finally been released after 5 years, Senator Elizabeth Warren has written the FBI and Justice Department Inspector General asking why nothing came of those criminal charge referrals.

“The [Department of Justice] has not filed any criminal prosecutions against any of the nine individuals,” writes Warren. “Not one of the nine has gone to prison or been convicted of a criminal offense. Not a single one has even been indicted or brought to trial.”

On the program I expressed my concern, ”If we do not hold people accountable, then we’re going to see the same behavior. In the 1980s and the banking and S&L crisis, we sent over 800 senior bankers to jail. This crisis which is 70 times worse, I’d say, maybe even greater than that, we have sent no one to jail. And, and I think we basically are saying, there’s no downside to doing this.”

I fervently believe that by allowing the big banks to get away with fraud we are condoning their behavior and it will happen again. The large banks have a stranglehold on the financial services industry. If we are going to institute real change, then we must first break up the large banks, then repeal parts of the Dodd-Frank act to open up the banking industry to real competition.

Although Dodd-Frank was originally passed to reign in the large banks, it has turned into a gift to the larger banks because they have the wherewithal to lobby and gut those provisions that directly affect them. This leaves a disproportionate share of compliance costs on the smaller banks; which then has them selling to the larger banks as they can’t afford to compete.

And Sharyl concluded the interview, “As for Citigroup, it continues to rack up the fines. Last week, it paid $28 million more to settle claims that it gave homeowners the “runaround” when refinancing their home mortgages.”

http://www.richardmbowen.com/first-time-televised-smoking-gun-evidence/

Do you know where your loan payments are going? Bet you Don’t!

For further information please call 954-495-9867 or 520-405-1688

============================

Submitted from a person who is an anonymous source but who works deep inside an organization where the raw data is available and just to be clear —- I told you so:

Bonding experience

Subject: Bonding experience

Sorry for the title line, low hanging fruit……Anyway, I thought you both will find this of interest.) From the Citibank Trustee website you both have access to per my prior e-mail (or anyone, it is public….) you will find below the listing of the original principal balance of the loans in the various traunches for the WAMU-HE-2 Trust. The balances below are from the PSA on page 8; they track almost identically to the balances as of the funds 1st reporting date on the Citibank website (I have attached below from May 2007); Directly above the May 2007 balances is the current January 2015 balances. Notice anything strange? All principal balances are lower or gone, and reduced by half in the largest traunch (1-A). How can this be you ask?  Did that many loans default and have the homes liquidated and proceeds applied to the loans? OR,  did insurance payments, credit default swaps, TARP money, or buy backs on the loans by Chase (as likely forced by the investors who have that right for non-conforming loans) pay off the loan balances that are now gone? The answer is likely a bit of all the above.

Not to bore you with the details, but if you look at the January 2015 certificate holder statement on Page 5 you will see detail on who lost what, other pages break out reasons for reductions (yes, some of this is due to repurchase, Chase? maybe, unknown). The M-Series traunches appear to have been wiped out completely, which tracks to PSA which shows 1-A-II A’s get distributions 4th (AFTER credit default swaps and derivative holders mind you, who may be from entirely different funds! Like that, your loan payment is not even going to the fund that claims to hold it 1st, 2nd, or 3rd time around), losses last, Hence if you are M-series you are screwed.

So why does this matter in a typical homeowner foreclosure? As XXX and I pointed out to judges too lazy to want to dive into this, if your loan is in Traunch 1-IIA, which report no principal loss (any losses?) the fund has a hard time claiming standing if the certificate holders of your loan suffered no loss. Due to commingling of funds, and cross defaults, when peoples loan payments are distributed to the Servicer (Chase), it puts your payment in the loan pool, and it is likely used to pay someone else’s loan payment (ditto with foreclosure proceeds, if your loan was in M Traunch, a 100% loss was realized years ago, your proceeds go to make someone else’s loan payment). This was never disclosed to the homeowner at loan signing, your payment goes to another, your home is cross collateralized, your home may be covered by a pool level insurance policy, credit default swaps, your payment does not go to whom you bargained it would (TILA, RESPA, REG Z violations anyone?). If your loan was repurchased, the fund is not even the correct foreclosing party anymore, and if servicer advances and credit default swaps cover your loan payments (from swap holders in other funds!!) you are not even in default nor has the fund suffered a claimed loss. You can see what a mess this is, and why Chase and other “Servicers” don’t want to open the books on what happens to the Trust funds money to anyone. Investors in current lawsuits have to sue their own Trustee’s (like Citigroup) to try to get to the “real” books, sound crazy, it’s happening….  since Chase and the fund never legally held my loan due to multiple forgeries and botched assignments, they in essence committed theft through conversion of my loan payments when I made them, because they never held the legal right to accept payments from me.Like I said, this happens thousands of times daily to thousands of homeowners, and no one, not the government, regulators, judiciary, and especially the banks, want to discuss this mess. LOL, if this all gives you a headache, it should! Same process is now happening on credit cards and auto loans, anything they can securitize…..

see http://www.bloomberg.com/news/articles/2015-02-24/justice-department-probing-auto-loan-securitization-yates-says
 

REMIC 3
As provided  herein, the Trustee shall  make an election  to treat the segregated  pool of assets consisting of the REMIC 2 Regular Interests as a REMIC for federal income tax purposes, and such segregated pool of assets shall be designated as “REMIC 3.”  The Class R-3 Interest represents  the  sole  class  of  “residual  interests”  in  REMIC  3  for  purposes   of  the  REMIC Provisions.The following  table sets forth (or describes)  the Class  designation,  Pass-Through  Rate and Original Class Certificate Principal Balance for each Class of Certificates that represents one or more of the “regular interests” in REMIC 3 and each class of uncertificated  “regular  interests” inREMIC 3:

Class designation Original Class Certificate Principal Balance Pass-Through

Rate

Assumed Final

Maturity Date1

1-A $             491,550,000.00 Variable May25, 2047
II-AI $              357,425,000.00 Variable2 May25, 2047
II-A2 $              125,322,000.00 Variable2 May25, 2047
II-A3 $              199,414,000.00 Variable2 May25, 2047
II-A4 $              117,955,000.00 Variable2 May 25,2047
M-1 $                50,997,000.00 Variable2 May25, 2047
M-2 $                44,623,000.00 Variable2 May25,  2047
M-3 $                27,092,000.00 Variable2 May25, 2047
M-4

M-5

M-6

$                23,905,000.00

$                23, I 08,000.00

$                21,514,000.00

Variable2

Variable2

Variable2

May25, 2047

May25, 2047

May25,  2047

M-7 $                20,718,000.00 Variable2 May25,  2047
M-8 $                12,749,000.00 Variable2 May25, 2047
M-9 $                17,531,000.00 Variable2 May25,  2047
Swap 10 N/A Variables May25, 2047
FM Reserve 10

Class C lnterese

N/A

$                59,762,058.04

Variables

Variable2

May25, 2047

May25, 2047

Class P Interest $                            100.00 N/A4 May25,  2047

Szymoniak: Honesty Pays $46.5 Million in Whistleblower Suit

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Editor’s Comment and Analysis:  

It was and remains a big lie — the securitization the loans, the origination of the loans, the assignments, alleges and endorsements. $46.5 million sounds like a lot and these whistleblowers will get a “windfall” as a result of it. But it is a drop in the bucket and we need to fill the bucket. And our bucket list should include taking down the big banks, removing money from politics, and getting back to government by the people and for the people.

Schiller, the scholar who has been leading the way in economic analysis of the housing market, has offered an audacious plan that is the last possible way for government intervention to save the economy, which is heavily dependent upon consumer spending, particularly in the housing market. Eminent domain has long been sustain as the right of government to take private property and convert it to public use. Whether it is a highway, downtown redevelopment or other reasons, eminent domain has been played by the banks and developers as a way to get land they need, at a price that could not be achieved using the power of the government behind them. 

While seemingly unusual and audacious, Schiller’s proposition has many precedents in history and should be considered as the last great hope after the 50 attorney generals agreed in the 50 state settlement that now prevents them from further investigation and prosecution against the banks. Schiller’s, the originator of the case-Schiller index showing that median income and income disparity is harmful to the economy and deadly to the housing market, proposes that we use the power of eminent domain to seize the remaining mortgages, and perhaps the property that has already been foreclosed, and remake the deals so that they make sense. Translating that means that the homeowners will get the deal that they should have received when they bought o refinanced their house. And it capitalizes on the inconvenient truth that it was the banks who created risks that neither the investors nor the homeowners signed up for.

By paying the value of the remaining mortgages — more than 30% are reported still under water and when carefully analyzed the figure is closer to 60%, the banks get no more and no less than they should, the investors still get their money — 100 cents on the dollar if they insist on payback from the banks in addition to the money from the new mortgages on the old property, and the homeowner is back in charge of his own home paying principal, interest, costs, fees and insurance and taxes that are fair market value indicators. It is better than the proceeds of foreclosures, so the banks now must argue that they have a right to take less money in order to get the foreclosure.

The banks want the foreclosure because they lied. And with the foreclosure it adds to the illusion that they funded or paid for loans in which they do not have a nickel invested. The fact that the balance sheets of the mega banks are going to take a giant hit is only an admission that the assets they are reporting are either not worth anything or are worth far less than the value shown on their public financial statements. They are still lying about that to investors, the SEC and other regulatory agencies.

So whistleblowers must pave the way and show the lies, show the inequality, show the inflated appraisals that could not stand the test of time and force government to act as it should. The chief law enforcement of the country and the chief law enforcement of each state owes his/her citizens at least that much and more. They must find ways to clear up the corruption of title records that are irretrievably lost. 

And the lawyers who keep turning down these cases because they are too complex or too weak should take a close look at these whistleblower  cases. The settlement, as always, comes before the trial because the fact remains that the banks are o the hook for  their bets on the mortgages and not the mortgages themselves. Lawyers need to show a little guts and seek some glory and wealth from these cases, while at the same time doing their country a service.

We are turning the corner and the banks are starting to lose. Keep up the fight and your effort will probably go well-rewarded.

Whistleblowers win $46.5 million in foreclosure settlement

By James O’Toole

NEW YORK (CNNMoney) — Getting served with foreclosure papers made Lynn Szymoniak rich.

While she couldn’t have known it at the time, that day in 2008 led to her uncovering widespread fraud on the part of some of the country’s biggest banks, and ultimately taking home $18 million as a result of her lawsuits against them. Szymoniak is one of six Americans who won big in the national foreclosure settlement, finalized earlier this year, as a result of whistleblower suits. In total, they collected $46.5 million, according to the Justice Department.

In the settlement, the nation’s five largest mortgage lenders –Bank of America (BAC, Fortune 500), Wells Fargo (WFC, Fortune 500), J.P. Morgan Chase (JPM, Fortune 500), Citigroup (C, Fortune 500) and Ally Financial — agreed to pay $5 billion in fines and committed to roughly $20 billion more in refinancing and mortgage modifications for borrowers.

A judge signed off on the agreement in April, and in May — Szymoniak received her cut.

“I recognize that mine’s a very, very happy ending,” she said. “I know there are plenty of people who have tried as hard as I have and won’t see these kinds of results.”

Related: 30% of borrowers underwater

Whistleblower suits stem from the False Claims Act, which allows private citizens to file lawsuits on behalf of the U.S. when they have knowledge that the government is being defrauded. These citizens are then entitled to collect a portion of any penalties assessed in their case.

The act was originally passed in 1863, during a time when government officials were concerned that suppliers to the Union Army during the Civil War could be defrauding them.

In 1986, Congress modified the law to make it easier for whistleblowers to bring cases and giving them a larger share of any penalties collected. Whistleblowers can now take home between 15% and 30% of the sums collected in their cases. In the cases addressed in the foreclosure settlement, the whistleblowers revealed that banks were gaming federal housing programs by failing to comply with their terms or submitting fraudulent documents.

In Szymoniak’s case alone, the government collected $95 million based on her allegations that the banks had been using false documents to prove ownership of defaulted mortgages for which they were submitting insurance claims to the Federal Housing Administration.

The FHA is a self-funded government agency that offers insurance on qualifying mortgages to encourage home ownership. In the event of a default on an FHA-insured mortgage, the FHA pays out a claim to the lender.

Szymoniak’s case was only partially resolved by the foreclosure settlement, and she could be in line for an even larger payout when all is said and done.

As an attorney specializing in white-collar crime, the 63-year-old Floridian was well-placed to spot an apparent forgery on one of the documents in her foreclosure case, one she saw repeated in dozens of others she examined later.

“At this point, the banks are incredibly powerful in this country, but you just have to get up every morning and do what you can,” she said.

The other five whistleblowers in the settlement came from the industry side, putting their careers at risk by flagging the banks’ questionable practices.

Kyle Lagow, who won $14.6 million in the settlement, worked as a home appraiser in Texas for LandSafe, a subsidiary of Countrywide Financial. He accused the company in a lawsuit of deliberately inflating home appraisals in order to collect higher claims from the FHA, and said he was fired after making complaints internally.

Gregory Mackler, who won $1 million, worked for a company subcontracted by Bank of America to assist homeowners pursuing modifications through the government’s Home Affordable Modification Program, or HAMP. Under HAMP, the government offers banks incentive payments to support modifications.

Mackler said Bank of America violated its agreement with the government by deliberately preventing qualified borrowers from securing HAMP modifications, steering them toward foreclosure or more costly modifications from which it could make more money. He, too, claims to have been fired after complaining internally.

There’s also Victor Bibby and Brian Donnelly, executives from a Georgia mortgage services firm who accused the banks of overcharging veterans whose mortgages were guaranteed by the Department of Veterans Affairs, thereby increasing their default risk. Bibby and Donnelly won $11.7 million in the settlement; their attorneys did not respond to requests for comment.

Shayne Stevenson, an attorney who represented both Lagow and Mackler, said the two weren’t aware of possible rewards when they first brought their evidence to his firm.

“The reality of it is that most of the time, whistleblowers don’t even know about the False Claims Act — they don’t know they can make money,” Stevenson said. Both his clients, Stevenson added, “just wanted the government to know about this fraud, so they deserve every penny that they got.”

A Bank of America spokesman declined to comment on individual cases, but said the national settlement was “part of our ongoing strategy to put these issues, particularly these legacy issues with Countrywide, behind us.” BofA acquired mortgage lender Countrywide in 2008, thereby incurring the firm’s legal liabilities.

The other banks involved either declined to comment or did not respond to requests for comment.

Related: Foreclosures spike 9%

While the whistleblowers in the settlement scored big paydays in the end, the road wasn’t easy. Stevenson said his clients “were pushed to the brink” after raising their concerns, struggling to find work and beset by financial problems.

“They were facing evictions, foreclosure, running away from bills, trying to deal with creditors that were coming after them,” Stevenson said. “This went on and on and on, and this is part and parcel of what happens to whistleblowers.”

For Robert Harris, a former assistant vice president in JPMorgan’s Chase Prime division, the experience was similar.

Harris accused the bank of failing to assist borrowers seeking HAMP modifications and knowingly submitting false claims for government insurance based on wrongful foreclosures. He was stymied when he tried to complain internally, and says he was fired for speaking out.

While Harris ended up with a $1.2 million payout in the settlement, the father of five says he’s been blacklisted within the industry and exhausted by the ordeal.

“It completely turned my life upside down,” he said. “I’m trying to raise my kids, recover from a divorce, recover from the loss of my career — it just comes to down to surviving and putting this to an end.”

“I guarantee the other whistleblowers, too, have sacrificed a lot,” he added. “But to be able to sit back and sleep at night is worth it.”


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BAILOUT TO STATE BUDGETS: AZ Uses Housing Settlement Money for Prisons

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Editor’s Comment:

The general consensus is that the homeowner borrowers are simply at the bottom of the food chain, not worthy of dignity, respect or any assistance to recover from the harm caused by Wall Street. Now small as it is, the banks have partially settled the matter by an agreement that bars the states from pursuing certain types of claims conditioned on several terms, one of which was the payment of money from the banks that presumably would be used to fund programs for the beleaguered homeowners without whose purchasing power, the economy is simply not going to revive. Not only are many states taking the money and simply putting it into general funds, but Arizona, over the objection of its own Attorney General is taking the money and applying to pay for prison expenses.

Here is the sad punch line for Arizona. The prison system in that state and others is largely “privatized” which is to say that the state “hired” new private companies created for the sole purpose of earning a profit off the imprisonment of the state’s citizens. Rumors abound that the current governor has a financial interest in the largest private prison company.

The prison lobby has been hard at work ever since privatizing prisons became the new way to get rich using taxpayers dollars. Not only are we paying more to house more prisoners because the laws a restructured to make more behavior crimes, but now our part of the housing settlement is also going to the prisons. Another bailout that was never needed or wanted. Meanwhile the budget of  Arizona continues to rise from incarcerating its citizens and the profiteers (not entrepreneurs by any stretch of the imagination) are getting a gift of more money from the state out of the multistate settlement.

Needy States Use Housing Aid Cash to Plug Budgets

By SHAILA DEWAN

Only 27 states have devoted all their funds from the banks to housing programs, according to a report by Enterprise Community Partners, a national affordable housing group. So far about 15 states have said they will use all or most of the money for other purposes.

In Texas, $125 million went straight to the general fund. Missouri will use its $40 million to soften cuts to higher education. Indiana is spending more than half its allotment to pay energy bills for low-income families, while Virginia will use most of its $67 million to help revenue-starved local governments.

Like California, some other states with outsize problems from the housing bust are spending the money for something other than homeowner relief. Georgia, where home prices are still falling, will use its $99 million to lure companies to the state.

“The governor has decided to use the discretionary money for economic development,” said a spokesman for Nathan Deal, Georgia’s governor, a Republican. “He believes that the best way to prevent foreclosures amongst honest homeowners who have experienced hard times is to create jobs here in our state.”

Andy Schneggenburger, the executive director of the Atlanta Housing Association of Neighborhood-Based Developers, said the decision showed “a real lack of comprehension of the depths of the foreclosure problem.”

The $2.5 billion was intended to be under the control of the state attorneys general, who negotiated the settlement with the five banks — Bank of America, Wells Fargo, JPMorgan Chase, Citigroup and Ally. But there is enough wiggle room in the agreement, as well as in separate terms agreed to by each state, to give legislatures and governors wide latitude. The money can, for example, be counted as a “civil penalty” won by the state, and some leaders have argued that states are entitled to the money because the housing crash decimated tax collections.

Shaun Donovan, the federal housing secretary, has been privately urging state officials to spend the money as intended. “Other uses fail to capitalize on the opportunities presented by the settlement to bring real, concerted relief to homeowners and the communities in which they live,” he said Tuesday.

Some attorneys general have complied quietly with requests to repurpose the money, while others have protested. Lisa Madigan, the Democratic attorney general of Illinois, said she would oppose any effort to divert the funds. Tom Horne, the Republican attorney general of Arizona, said he disagreed with the state’s move to take about half its $97 million, which officials initially said was needed for prisons.

But Mr. Horne said he would not oppose the shift because the governor and the Legislature had authority over budgetary matters. The Arizona Center for Law in the Public Interest has said it will sue to stop Mr. Horne from transferring the money.


Everything Built on Myth Eventually Fails

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Editor’s Comment:

The good news is that the myth of Jamie Dimon’s infallaibility is at least called into question. Perhaps better news is that, as pointed out by Simon Johnson’s article below, the mega banks are not only Too Big to Fail, they are Too Big to Manage, which leads to the question, of why it has taken this long for Congress and the Obama administration to conclude that these Banks are Too Big to Regulate. So the answer, now introduced by Senator Brown, is to make the banks smaller and  put caps on them as to what they can and cannot do with their risk management.

But the real question that will come to fore is whether lawmakers in Dimon’s pocket will start feeling a bit squeamish about doing whatever Dimon asks. He is now becoming a political and financial liability. The $2.3 billion loss (and still counting) that has been reported seems to be traced to the improper trading in credit default swaps, an old enemy of ours from the mortgage battle that continues to rage throughout the land.  The problem is that the JPM people came to believe in their own myth which is sometimes referred to as sucking on your own exhaust. They obviously felt that their “risk management” was impregnable because in the end Jamie would save the day.

This time, Jamie can’t turn to investors to dump the loss on, thus drying up liquidity all over the world. This time he can’t go to government for a bailout, and this time the traction to bring the mega banks under control is getting larger. The last vote received only 33 votes from the Senate floor, indicating that Dimon and the wall Street lobby had control of 2/3 of the senate. So let ius bask in the possibility that this is the the beginning of the end for the mega banks, whose balance sheets, business practices and public announcements have all been based upon lies and half truths.

This time the regulators are being forced by public opinion to actually peak under the hood and see what is going on there. And what they will find is that the assets booked on the balance sheet of Dimon’s monolith are largely fictitious. This time the regulators must look at what assets were presented to the Federal Reserve window in exchange for interest free loans. The narrative is shifting from the “free house” myth to the reality of free money. And that will lead to the question of who is the creditor in each of the transactions in which a mortgage loan is said to exist.

Those mortgage loans are thought to exist because of a number of incorrect presumptions. One of them is that the obligation remains unpaid and is secured. Neither is true. Some loans might still have a balance due but even they have had their balances reduced by the receipt of insurance proceeds and the payoff from credit default swaps and other credit enhancements, not to speak of the taxpayer bailout.

This money was diverted from investor lenders who were entitled to that money because their contracts and the representations inducing them to purchase bogus mortgage bonds, stated that the investment was investment grade (Triple A) and because they thought they were insured several times over. It is true that the insurance was several layers thick and it is equally true that the insurance payoff covered most if not all the balances of all the mortgages that were funded between 1996 and the present. The investor lenders should have received at least enough of that money to make them whole — i.e., all principal and interest as promissed.

Instead the Banks did the unthinkable and that is what is about to come to light. They kept the money for themselves and then claimed the loss of investors on the toxic loans and tranches that were created in pools of money and mortgages — pools that in fact never came into existence, leaving the investors with a loose partnership with other investors, no manager, and no accounting. Every creditor is entitled to payment in full — ONCE, not multiple times unless they have separate contracts (bets) with parties other than the borrower. In this case, with the money received by the investment banks diverted from the investors, the creditors thought they had a loss when in fact they had a claim against deep pocket mega banks to receive their share of the proceeds of insurance, CDS payoffs and taxpayer bailouts.

What the banks were banking on was the stupidity of government regulators and the stupidity of the American public. But it wasn’t stupidity. it was ignorance of the intentional flipping of mortgage lending onto its head, resulting in loan portfolios whose main characteristic was that they would fail. And fail they did because the investment banks “declared” through the Master servicer that they had failed regardless of whether people were making payments on their mortgage loans or not. But the only parties with an actual receivable wherein they were expecting to be paid in real money were the investor lenders.

Had the investor lenders received the money that was taken by their agents, they would have been required to reduce the balances due from borrowers. Any other position would negate their claim to status as a REMIC. But the banks and servicers take the position that there exists an entitlement to get paid in full on the loan AND to take the house because the payment didn’t come from the borrower.

This reduction in the balance owed from borrowers would in and of itself have resulted in the equivalent of “principal reduction” which in many cases was to zero and quite possibly resulting in a claim against the participants in the securitization chain for all of the ill-gotten gains. remember that the Truth In Lending Law states unequivocally that the undisclosed profits and compensation of ANYONE involved in the origination of the loan must be paid, with interest to the borrower. Crazy you say? Is it any crazier than the banks getting $15 million for a $300,000 loan. Somebody needs to win here and I see no reason why it should be the megabanks who created, incited, encouraged and covered up outright fraud on investor lenders and homeowner borrowers.

Making Banks Small Enough And Simple Enough To Fail

By Simon Johnson

Almost exactly two years ago, at the height of the Senate debate on financial reform, a serious attempt was made to impose a binding size constraint on our largest banks. That effort – sometimes referred to as the Brown-Kaufman amendment – received the support of 33 senators and failed on the floor of the Senate. (Here is some of my Economix coverage from the time.)

On Wednesday, Senator Sherrod Brown, Democrat of Ohio, introduced the Safe, Accountable, Fair and Efficient Banking Act, or SAFE, which would force the largest four banks in the country to shrink. (Details of this proposal, similar in name to the original Brown-Kaufman plan, are in this briefing memo for a Senate banking subcommittee hearing on Wednesday, available through Politico; see also these press release materials).

His proposal, while not likely to immediately become law, is garnering support from across the political spectrum – and more support than essentially the same ideas received two years ago.  This week’s debacle at JP Morgan only strengthens the case for this kind of legislative action in the near future.

The proposition is simple: Too-big-to-fail banks should be made smaller, and preferably small enough to fail without causing global panic. This idea had been gathering momentum since the fall of 2008 and, while the Brown-Kaufman amendment originated on the Democratic side, support was beginning to appear across the aisle. But big banks and the Treasury Department both opposed it, parliamentary maneuvers ensured there was little real debate. (For a compelling account of how the financial lobby works, both in general and in this instance, look for an upcoming book by Jeff Connaughton, former chief of staff to former Senator Ted Kaufman of Delaware.)

The issue has not gone away. And while the financial sector has pushed back with some success against various components of the Dodd-Frank reform legislation, the idea of breaking up very large banks has gained momentum.

In particular, informed sentiment has shifted against continuing to allow very large banks to operate in their current highly leveraged form, with a great deal of debt and very little equity.  There is increasing recognition of the massive and unfair costs that these structures impose on the rest of the economy.  The implicit subsidies provided to “too big to fail” companies allow them to boost compensation over the cycle by hundreds of millions of dollars.  But the costs imposed on the rest of us are in the trillions of dollars.  This is a monstrously unfair and inefficient system – and sensible public figures are increasingly pointing this out (including Jamie Dimon, however inadvertently).

American Banker, a leading trade publication, recently posted a slide show, “Who Wants to Break Up the Big Banks?” Its gallery included people from across the political spectrum, with a great deal of financial sector and public policy experience, along with quotations that appear to support either Senator Brown’s approach or a similar shift in philosophy with regard to big banks in the United States. (The slide show is available only to subscribers.)

According to American Banker, we now have in the “break up the banks” corner (in order of appearance in that feature): Richard Fisher, president of the Federal Reserve Bank of Dallas; Sheila Bair, former chairman of the Federal Deposit Insurance Corporation; Tom Hoenig, a board member of the Federal Deposit Insurance Corporation and former president of the Federal Reserve Bank of Kansas City; Jon Huntsman, former Republican presidential candidate and former governor of Utah; Senator Brown; Mervyn King, governor of the Bank of England; Senator Bernie Sanders of Vermont; and Camden Fine, president of the Independent Community Bankers of America. (I am also on the American Banker list).

Anat Admati of Stanford and her colleagues have led the push for much higher capital requirements – emphasizing the particular dangers around allowing our largest banks to operate in their current highly leveraged fashion. This position has also been gaining support in the policy and media mainstream, most recently in the form of a powerful Bloomberg View editorial.

(You can follow her work and related discussion on this Web site; on twitter she is @anatadmati.)

Senator Brown’s legislation reflects also the idea that banks should fund themselves more with equity and less with debt. Professor Admati and I submitted a letter of support, together with 11 colleagues whose expertise spans almost all dimensions of how the financial sector really operates.

We particularly stress the appeal of having a binding “leverage ratio” for the largest banks. This would require them to have at least 10 percent equity relative to their total assets, using a simple measure of assets not adjusted for any of the complicated “risk weights” that banks can game.

We also agree with the SAFE Banking Act that to limit the risk and potential cost to taxpayers, caps on the size of an individual bank’s liabilities relative to the economy can also serve a useful role (and the same kind of rule should apply to non-bank financial institutions).

Under the proposed law, no bank-holding company could have more than $1.3 trillion in total liabilities (i.e., that would be the maximum size). This would affect our largest banks, which are $2 trillion or more in total size, but in no way undermine their global competitiveness. This is a moderate and entirely reasonable proposal.

No one is suggesting that making JPMorgan Chase, Bank of America, Citigroup and Wells Fargo smaller would be sufficient to ensure financial stability.

But this idea continues to gain traction, as a measure complementary to further strengthening and simplifying capital requirements and generally in support of other efforts to make it easier to handle the failure of financial institutions.

Watch for the SAFE Banking Act to gain further support over time.

The Reporter Who Saw it Coming

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Editor’s Comment:

By Dean Starkman

Mike Hudson thought he was merely exposing injustice, but he also was unearthing the roots of a global financial meltdown.

Mike Hudson began reporting on the subprime mortgage business in the early 1990s when it was still a marginal, if ethically challenged, business. His work on the “poverty industry” (pawnshops, rent-to-own operators, check-cashing operations) led him to what were then known as “second-lien” mortgages. From his street-level perspective, he could see the abuses and asymmetries of the market in a way that the conventional business press could not. But because it ran mostly in small publications, his reporting was largely ignored. Hudson pursued the story nationally, via a muckraking book, Merchants of Misery (Common Courage Press, 1996); in a 10,000-word expose on Citigroup-as-subprime-factory, which won a Polk award in 2004 for the small alternative magazine Southern Exposure; and in a series on the subprime leader, Ameriquest, co-written as a freelancer, for the Los Angeles Times in 2005. He continued to pursue the subject as it metastasized into the trillion-dollar center of the Financial Crisis of 2008—briefly at The Wall Street Journal and now at the Center for Public Integrity. Hudson, 52, is the son of an ex-Marine and legendary local basketball coach. He started out on rural weeklies, covering championship tomatoes and large fish and such, even produced a cooking column. But as a reporter for The Roanoke Times he turned to muckraking and never looked back. CJR’s Dean Starkman interviewed Hudson in the spring of 2011.

Follow the ex-employees

The great thing about The Roanoke Times was that there was an emphasis on investigation but there was also an emphasis on storytelling and writing. And they would bring in lots of people like Roy Peter Clark and William Zinsser, the On Writing Well guy. The Providence Journal book, the How I Wrote the Story, was a bit of a Bible for me.

As I was doing a series on poverty in Roanoke, one of the local legal aid attorneys was like, “It’s not just the lack of money—it’s also what happens when they try to get out of poverty.” He said basically there are three ways out: they bought a house, so they got some equity; they bought a car so they could get some mobility; or they went back to school to get a better job. And in every case, he had example after example of folks, who because they were doing just that, had actually gotten deeper in poverty, trapped in unbelievable debt.

His clients often dealt with for-profit trade schools, truck driving schools that would close down; medical assistant’s schools that no one hired from; and again and again they’d be three, four, five, eight thousand dollars in debt, and unable to repay it, and then of course prevented from ever again going back to school because they couldn’t get another a student loan. So that got me thinking about what I came to know as the poverty industry.

I applied for an Alicia Patterson Fellowship and proposed doing stories on check-cashing outlets, pawn shops, second-mortgage lenders (they didn’t call themselves subprime in those days). This was ’91. We didn’t have access to the Internet, but I came across a wire story about something called the Boston “second-mortgage scandal,” and got somebody to send me a thick stack of clips. It was really impressive. The Boston Globe and other news organizations were taking on the lenders and the mortgage brokers, and the closing attorneys, and on and on.

I was trying to make the story not just local but national. I had some local cases involving Associates [First Capital Corp., then a unit of Ford Motor Corp.]. Basically, it turned out that Ford Motor Company, the old-line carmaker, was the biggest subprime lender in the country. The evidence was pretty clear that they were doing many of the same kinds of bait-and-switch salesmanship and, in some cases, pure fraud, that we later saw take over the mortgage market. I felt like this was a big story; this is the one! Later, investigations and Congressional hearings corroborated what I was finding in ’94, ’95, and ’96. And it seems so self-evident now, but I learned that finding ex-employees often gives you a window into what’s really going on with a company. The problem has always been finding them and getting them to talk.

I spent the better part of the ‘90s writing about the poverty industry and about predatory lending. As a reporter you don’t want to be defined by one subject. So I was actually working on a book about the history of racial integration in sports, interviewing old Negro-league baseball players. I was really trying to change a little bit of how I was moving forward career-wise. But it’s like the old mafia-movie line: every time I think I’m out, they pull me back in.

Subprime goes mainstream

In the fall of 2002, the Federal Trade Commission announced a big settlement with Citigroup, which had bought Associates, and at first I saw it as a positive development, like they had nailed the big bad actor. I’m doing a 1,000-word freelance thing, but of course as I started to report I started hearing from people who were saying that this settlement is basically giving them absolution, and allowed them to move forward with what was, by Citi standards, a pretty modest settlement. And the other thing that struck me was the media was treating this as though Citigroup was cleaning up this legacy problem, when Citi itself had its own problems. There had been a big magazine story about [Citigroup Chief Sanford I.] “Sandy” Weill. It was like “Sandy’s Comeback.” I saw this and said, ‘Whoa, this is an example of the mainstreaming of subprime.’

I pitched a story about how these settlements weren’t what they seemed, and got turned down a lot of places. Eventually I went to Southern Exposure and called the editor there, Gary Ashwill, and he said, “That’s a great story, we’ll put it on the cover.” And I said, “Well how much space can we have?” and he said, “How much do we need?” That was not something you heard in journalism in those days.

I interviewed 150 people, mostly borrowers, attorneys, experts, industry people, but the stuff that really moves the story are the former employees. Many of them had just gotten fired for complaining internally. They were upset about what had gone on—to some degree about how the company treated them, but usually very upset about how the company had pressured them and their co-workers to mistreat their customers.

As a result of the Citigroup stuff, I got a call from a filmmaker [James Scurlock] who was working on what eventually became Maxed Out, about credit cards and student loans and all that kind of stuff. And he asked if I could go visit, and in some cases revisit, some of the people I had interviewed and he would follow me with a camera. So I did sessions in rural Mississippi, Brooklyn and Queens, and Pittsburg. Again and again you would hear people talk about these bad loans they got. But also about stress. I remember a guy in Brooklyn, not too far from where I live now, who paused and said something along the lines of: ‘You know I’m not proud of this, but I have to say I really considered killing myself.’ Again and again people talked about how bad they felt about having gotten into these situations. It was powerful and eye-opening. They didn’t understand, in many cases, that they’d been taken in by very skillful salesmen who manipulated them into taking out loans that were bad for them.

If one person tells you that story, you say okay, well maybe it’s true, but you don’t know. But you’ve got a woman in San Francisco saying, “I was lied to and here’s how they lied to me,” and then you’ve got a loan officer for the same company in suburban Kansas saying, “This is what we did to people.” And then you have another loan officer in Florida and another borrower in another state. You start to see the pattern.

People always want some great statistic [proving systemic fraud], but it’s really, really hard to do that. And statistics data doesn’t always tell us what happened. If you looked at some of the big numbers during the mortgage boom, it would look like everything was fine because of the fact that they refinanced people over and over again. So essentially a lot of what was happening was very Ponzi-like—pushing down the road the problems and hiding what was going on. But I was not talking to analysts. I was not talking to high-level corporate executives. I was not talking to experts. I was talking to the lowest level people in the industry— loan officers, branch managers. I was talking to borrowers. And I was doing it across the country and doing it in large numbers. And when you actually did the shoe-leather reporting, you came up with a very different picture than the PR spin you were getting at the high level.

One day Rich Lord [who had just published the muckraking book, American Nightmare: Predatory Lending and the Foreclosure of the American Dream, Common Courage Press, 2004) and I went to his house. We were sitting in his study. Rich had spent a lot of time writing about Household [International, parent of Household Finance], and I had spent a lot of time writing about Citigroup. Household had been number one in subprime, and then CitiFinancial/Citigroup was number one. This was in the fall of 2004. We asked, well, who’s next? Rich suggested Ameriquest.

I went back home to Roanoke and got on the PACER—computerized court records—system and started looking up Ameriquest cases, and found lots of borrower suits and ex-employee suits. There was one in particular, which basically said that the guy had been fired because he had complained that Ameriquest business ethics were terrible. I just found the guy in the Kansas City phone book and called him up, and he told me a really compelling story. One of the things that really stuck out is, he said to me, “Have you ever seen the movie Boiler Room [2000, about an unethical pump-and-dump brokerage firm]?”

By the time I had roughly ten former employees, most of them willing to be on the record, I thought: this is a really good story, this is important. In a sense I feel like I helped them become whistleblowers because they had no idea how to blow the whistle or what to do. And Ameriquest at that point was on its way to being the largest subprime lender. So, I started trying to pitch the story. While I had a full-time gig at the Roanoke Times, for me the most important thing was finding the right place to place it.

The Los Angeles Times liked the story and teamed me with Scott Reckard, and we worked through much of the fall of 2004 and early 2005. We had thirty or so former employees, almost all of them basically saying that they had seen improper, illegal, fraudulent practices, some of whom acknowledged that they’d done it themselves: bait-and-switch salesmanship, inflating people’s incomes on their loan applications, and inflating appraisals. Or they were cutting and pasting W2s or faking a tax return. It was called the “art department”—blatant forgery, doctoring the documents. You know, it was pretty eye-opening stuff. One of the best details was that many people said they showed Boiler Room—as a training tape! And the other important thing about the story was that Ameriquest was being held up by politicians, and even by the media, as the gold standard—the company cleaning up the industry, reversing age-old bad practices in this market. To me, theirs was partly a story of the triumph of public relations.

Leaving Roanoke

I’d been in Roanoke almost 20 years as a reporter, and so, what’s the next step? I resigned from the Roanoke Times and for most of 2005 I was freelancing fulltime. I made virtually no money that year, but by working on the Ameriquest story, it helped me move to the next thing. I interviewed with The Wall Street Journal [and was hired to cover the bond market]. Of course I came in pitching mortgage-backed securities as a great story. I could have said it with more urgency in the proposal, but I didn’t want to come off as like an advocate, or half-cocked.

Daily bond market coverage is their bread-and-butter, and it’s something that needs to be done. And I tried to do the best I could on it. But I definitely felt a little bit like a point guard playing small forward. I was doing what I could for the team but I was not playing in a position where my talents and my skills were being used to the highest.

I wanted to do a documentary. I wanted to do a book [which would become The Monster: How a Gang of Predatory Lenders and Wall Street Bankers Fleeced America—and Spawned a Global Crisis, Times Books, 2010]. I felt like I had a lot of information, a lot of stuff that needed to be told, and an understanding that many other reporters didn’t have. And I could see a lot of the writing focused on deadbeat borrowers lying about their income, rather than how things were really happening.

Through my reporting I knew two things: I knew that there were a lot of predatory and fraudulent practices throughout the subprime industry. It wasn’t isolated pockets, it wasn’t rogue lenders, it wasn’t rogue employees. It was really endemic. And I also knew that Wall Street played a big role in this, and that Wall Street was driving or condoning and/or profiting from a lot of these practices. I understood that, basically, the subprime lenders, like Ameriquest and even like Countrywide, were really just creatures of Wall Street. Wall Street loaned these companies money; they then made loans; they off-loaded the loans to Wall Street; Wall Street then sold them [as securities to investors]. And it was just this magic circle of cash flowing. The one thing I didn’t understand was all the fancy financial alchemy—the derivatives, the swaps, that were added on to put them on steroids.

It’s clear that people inside a company, one or two or three people, could commit fraud and get away with it, on occasion, despite the best efforts of a company. But I don’t think it can happen in a widespread way when a company has basic compliance systems in place. The best way to connect the dots from the sleazy practices on the ground to people at high levels was to say, okay, they did have these compliance people in place; they had fraud investigators, loan underwriters, and compliance officers. Did they do their jobs? And if they did, what happened to them?

In late 2010, at the Center for Public Integrity, I got a tip about a whistleblower case involving someone who worked at a high level at Countrywide. This is Eileen Foster, who had been an executive vice president, the top fraud investigator at Countrywide. She was claiming before OSHA that she was fired for reporting widespread fraud, but also for trying to protect other whistleblowers within the company who were also reporting fraud at the branch level and at the regional level, all over the country. The interesting thing is that no one in the government had ever contacted her! [This became “Countrywide Protected Fraudsters by Silencing Whistleblowers, say Former Employees,” September 22 and 23, 2011, one of CPI’s best-read stories of the year; 60 Minutes followed with its own interview of Foster, in a segment called, “Prosecuting Wall Street,” December 14, 2011.] It was very exciting. We worked really hard to do follow-up stories. I did about eight stories afterward, many about General Electric, a big player in the subprime world. We found eight former mortgage unit employees who had tried to warn about abuses and whom management had shunted aside.

I just feel like there needs to be more investigative reporting in the mix, and especially more investigative reporting—of problems that are going on now, rather than post-mortems or tick-tocks about financial disasters or crashes or bankruptcies that have already happened.

And that’s hard to do. It takes a real commitment from a news organization, and it can be a high-wire thing because you’re working on these stories for a long time, and market players you’re writing about yell and scream and do some real pushback. But there needs to be more of the sort of early warning journalism. It’s part of the big tent, what a newspaper is.

SEC ISSUES WELLS NOTICES TO MAJOR BANKS

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Sifting Through 25 Million Pages of Documents

EDITOR’S COMMENT: Attorneys for homeowners should watch these investor suits carefully. Contained within them are allegations and discovery relating to the enforceability of the mortgage liens as well as the failure to properly underwrite the loans.

The fact that the SEC is going after the banks on these issues is a good thing, but not unless it is referred for criminal prosecution. If our securities markets are subject to outright criminal fraud and we don’t do anything about the criminal aspect, we are sending the wrong signal out to the rest of the world which already views our mortgage debacle as a virtual attack on the sovereignty of dozens of countries.

If we want to see our credit markets revive and our economy, we will need to make investors feel certain that the regulatory environment and law enforcement are working together to bring criminal masterminds to justice. Anything short of that will result in a slow but rising attrition to anywhere but the U.S. credit markets.

Feb 8 (Reuters) – U.S. securities regulators plan to warn several major banks that they may sue them over the sale of bonds linked to sub-prime mortgages that ignited the financial crisis in 2008, the Wall Street Journal said, citing people familiar with the matter.

The U.S. Securities and Exchange Commission (SEC) is looking at whether the banks misrepresented the poor quality of loan pools they bundled and sold to investors, the people told the Journal.

It was not clear which firms will receive the formal SEC enforcement warnings, known as “Wells notices”, the paper said.

Banks whose activities are being examined in the civil investigation include Ally Financial Inc, Bank of America Corp , Citigroup, Deutsche Bank and Goldman Sachs, the Journal said.

Ally Financial spokeswoman Gina Proia told Reuters that she could comment on the Journal report.

Representatives of the banks and SEC declined to comment, the Journal said.

None of the other parties could immediately be reached for comment by Reuters outside regular U.S. business hours.

Speaking at a news conference in January, SEC enforcement director Robert Khuzami said his agency already reviewed 25 million pages of documents on mortgage-related investigations.

The Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac, sued 17 large banks last September over losses on about $200 billion of subprime bonds and said the underlying mortgages did not meet investors’ criteria.

Reuters: Top Justice Officials Linked With Pretender Lenders and MERS

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Covington Issued Legal Opinions that Started MERS

Editor’s Note: 4 years ago I interviewed lawyers that had detailed knowledge of the start of MERS and the entire mortgage mess. They told me, on promise of anonymity, and for use as background only, that some of the lawyers balked at the assignment to the tasks at Covington and other law firms that were drafting the initial documentation for what became known as “Securitization” of mortgage debt. At least two resigned, according to these sources, stating that what they were being asked to do was be complicit in criminal acts.
In a world dominated by financial services, it is hard to think of a scenario where the public officials and lawyers involved would not be associated in some way with the mega Banks, so the mere association with those firms might not indicate direct complicity on the part of Holder and Breurer — especially in large firms like Covington.
But the appearance of impropriety is present when the justice department refrains from prosecution despite wide scale published reports of forgery, fabrication and fraud reported by the officials who are charged with responsibility for maintaining an orderly system of records and a registry of title in each county.
Even if Holder and Breurer were not directly involved in the representation of MERS and the mega Banks, it certainly appears as though they are protecting their old employers from the consequences of committing the largest economic crimes in human history.
And taking President Obama at his word, he has been told that what the Banks did was legal. I have no doubt that is exactly what he has been told. The problem is that he believed what what he was told.
As far as the overall plan for securitization and even the use of MERS, there may well have been no law prohibiting the plan, although we can all agree there should have been such laws in place. The problem is that the plan was not followed — instead violations of the plan were used as a vehicle to commit theft and fraud upon investors and borrowers alike using the same tactics that departed from all legal requirements.
  • It was the departure from the plan that got the Banks into trouble and they should be in deep trouble.
  • The blue print for securitization required that the money and documents follow a certain path.
  • Instead the money followed whatever path those Banks wanted, despite clear requirements to the contrary in the securitization documents.
  • And the transfer documents for each loan, without which there would be no securitization, were not present, drafted or executed, much less delivered.
  • And this was because the Banks, even though they were merely intermediaries, asserted ownership over the loans in a grey are they created between the execution of the loan by the borrower and the supposed delivery of the loans into the pools that the investors had created with their money.
  • By asserting ownership, directly or indirectly, the banks were able to create fictitious “trades” which they used to create transaction profits, only some of which were reported, the rest being “off balance sheet” and channeled out of the country.
  • Those “profits” were merely the improper use of proceeds from borrowers’ money and property and investors’ money and that was advanced for the purchase of mortgage bonds, intended for funding mortgage loans.
There are crimes upon crimes in this story with plenty of low hanging fruit that would entice any prosecutor. That the prosecutions have not proceeded and that the investigations have been self-limiting, combined with the desire to settle with the Banks before the investigation is complete (or even started) leaves only questions of the worst kind. At this point though the administration’s press for settlement with the Banks and servicers can only be seen as disingenuous — since we know that forgery, fraud, and fabrication of documents that never existed can only be illegal.

Insight: Top Justice officials connected to mortgage banks

By Scot J. Paltrow
Fri Jan 20, 2012 9:31am EST

(Reuters) – U.S. Attorney General Eric Holder and Lanny Breuer, head of the Justice Department’s criminal division, were partners for years at a Washington law firm that represented a Who’s Who of big banks and other companies at the center of alleged foreclosure fraud, a Reuters inquiry shows.

The firm, Covington & Burling, is one of Washington’s biggest white shoe law firms. Law professors and other federal ethics experts said that federal conflict of interest rules required Holder and Breuer to recuse themselves from any Justice Department decisions relating to law firm clients they personally had done work for.

Both the Justice Department and Covington declined to say if either official had personally worked on matters for the big mortgage industry clients. Justice Department spokeswoman Tracy Schmaler said Holder and Breuer had complied fully with conflict of interest regulations, but she declined to say if they had recused themselves from any matters related to the former clients.

Reuters reported in December that under Holder and Breuer, the Justice Department hasn’t brought any criminal cases against big banks or other companies involved in mortgage servicing, even though copious evidence has surfaced of apparent criminal violations in foreclosure cases.

The evidence, including records from federal and state courts and local clerks’ offices around the country, shows widespread forgery, perjury, obstruction of justice, and illegal foreclosures on the homes of thousands of active-duty military personnel.

In recent weeks the Justice Department has come under renewed pressure from members of Congress, state and local officials and homeowners’ lawyers to open a wide-ranging criminal investigation of mortgage servicers, the biggest of which have been Covington clients. So far Justice officials haven’t responded publicly to any of the requests.

While Holder and Breuer were partners at Covington, the firm’s clients included the four largest U.S. banks – Bank of America, Citigroup, JP Morgan Chase and Wells Fargo & Co – as well as at least one other bank that is among the 10 largest mortgage servicers.

DEFENDER OF FREDDIE

Servicers perform routine mortgage maintenance tasks, including filing foreclosures, on behalf of mortgage owners, usually groups of investors who bought mortgage-backed securities.

Covington represented Freddie Mac, one of the nation’s biggest issuers of mortgage backed securities, in enforcement investigations by federal financial regulators.

A particular concern by those pressing for an investigation is Covington’s involvement with Virginia-based MERS Corp, which runs a vast computerized registry of mortgages. Little known before the mortgage crisis hit, MERS, which stands for Mortgage Electronic Registration Systems, has been at the center of complaints about false or erroneous mortgage documents.

Court records show that Covington, in the late 1990s, provided legal opinion letters needed to create MERS on behalf of Fannie Mae, Freddie Mac, Bank of America, JP Morgan Chase and several other large banks. It was meant to speed up registration and transfers of mortgages. By 2010, MERS claimed to own about half of all mortgages in the U.S. — roughly 60 million loans.

But evidence in numerous state and federal court cases around the country has shown that MERS authorized thousands of bank employees to sign their names as MERS officials. The banks allegedly drew up fake mortgage assignments, making it appear falsely that they had standing to file foreclosures, and then had their own employees sign the documents as MERS “vice presidents” or “assistant secretaries.”

Covington in 2004 also wrote a crucial opinion letter commissioned by MERS, providing legal justification for its electronic registry. MERS spokeswoman Karmela Lejarde declined to comment on Covington legal work done for MERS.

It isn’t known to what extent if any Covington has continued to represent the banks and other mortgage firms since Holder and Breuer left. Covington declined to respond to questions from Reuters. A Covington spokeswoman said the firm had no comment.

Several lawyers for homeowners have said that even if Holder and Breuer haven’t violated any ethics rules, their ties to Covington create an impression of bias toward the firms’ clients, especially in the absence of any prosecutions by the Justice Department.

O. Max Gardner III, a lawyer who trains other attorneys to represent homeowners in bankruptcy court foreclosure actions, said he attributes the Justice Department’s reluctance to prosecute the banks or their executives to the Obama White House’s view that it might harm the economy.

But he said that the background of Holder and Breuer at Covington — and their failure to act on foreclosure fraud or publicly recuse themselves — “doesn’t pass the smell test.”

Federal ethics regulations generally require new government officials to recuse themselves for one year from involvement in matters involving clients they personally had represented at their former law firms.

President Obama imposed additional restrictions on appointees that essentially extended the ban to two years. For Holder, that ban would have expired in February 2011, and in April for Breuer. Rules also require officials to avoid creating the appearance of a conflict.

Schmaler, the Justice Department spokeswoman, said in an e-mail that “The Attorney General and Assistant Attorney General Breuer have conformed with all financial, legal and ethical obligations under law as well as additional ethical standards set by the Obama Administration.”

She said they “routinely consult” the department’s ethics officials for guidance. Without offering specifics, Schmaler said they “have recused themselves from matters as required by the law.”

Senior government officials often move to big Washington law firms, and lawyers from those firms often move into government posts. But records show that in recent years the traffic between the Justice Department and Covington & Burling has been particularly heavy. In 2010, Holder’s deputy chief of staff, John Garland, returned to Covington, as did Steven Fagell, who was Breuer’s deputy chief of staff in the criminal division.

The firm has on its web site a page listing its attorneys who are former federal government officials. Covington lists 22 from the Justice Department, and 12 from U.S. Attorneys offices, the Justice Department’s local federal prosecutors’ offices around the country.

As Reuters reported in 2011, public records show large numbers of mortgage promissory notes with apparently forged endorsements that were submitted as evidence to courts.

There also is evidence of almost routine manufacturing of false mortgage assignments, documents that transfer ownership of mortgages between banks or to groups of investors. In foreclosure actions in courts mortgage assignments are required to show that a bank has the legal right to foreclose.

In an interview in late 2011, Raymond Brescia, a visiting professor at Yale Law School who has written about foreclosure practices said, “I think it’s difficult to find a fraud of this size on the U.S. court system in U.S. history.”

Holder has resisted calls for a criminal investigation since October 2010, when evidence of widespread “robo-signing” first surfaced. That involved mortgage servicer employees falsely signing and swearing to massive numbers of affidavits and other foreclosure documents that they had never read or checked for accuracy.

Recent calls for a wide-ranging criminal investigation of the mortgage servicing industry have come from members of Congress, including Senator Maria Cantwell, D-Wash., state officials, and county clerks. In recent months clerks from around the country have examined mortgage and foreclosure records filed with them and reported finding high percentages of apparently fraudulent documents.

On Wednesday, John O’Brien Jr., register of deeds in Salem, Mass., announced that he had sent 31,897 allegedly fraudulent foreclosure-related documents to Holder. O’Brien said he asked for a criminal investigation of servicers and their law firms that had filed the documents because they “show a pattern of fraud,” forgery and false notarizations.

(Reporting By Scot J. Paltrow, editing by Blake Morrison)

 

EFFECTIVE USE OF WHAT THE MORTGAGE GIANTS SAY ABOUT EACH OTHER

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The Federal Housing Finance Agency (FHFA) filed suit against 17 lead defendants. Lawyers and pro se litigants and anyone with a mortgage subject to a possible claim that the loan was securitized should be interested and follow the allegations AND the wrangling over discovery. There are forms in there that can and should be used by litigants. When counsel for pretender lenders proffers facts not in evidence then your objection should be coupled with “that’s not what they said when they were litigating with FHFA.” And then quote what they DID say in writing versus the oral proffers of counsel who can later say he was “mistaken.”
Complaints have been filed against the following lead defendants:

  1. Ally Financial Inc. f/k/a GMAC, LLC
  2. Bank of America Corporation
  3. Barclays Bank PLC
  4. Citigroup, Inc.
  5. Countrywide Financial Corporation
  6. Credit Suisse Holdings (USA), Inc.
  7. Deutsche Bank AG
  8. First Horizon National Corporation
  9. General Electric Company
  10. Goldman Sachs & Co.
  11. HSBC North America Holdings, Inc.
  12. JPMorgan Chase & Co.
  13. Merrill Lynch & Co. / First Franklin Financial Corp.
  14. Morgan Stanley
  15. Nomura Holding America Inc.
  16. The Royal Bank of Scotland Group PLC
  17. Société Générale

The following Reports to the Congress from the Federal Housing Finance Agency (FHFA) present the findings of the agency’s annual examinations of Fannie Mae and Freddie Mac (Enterprises), the 12 Federal Home Loan Banks (FHLBanks), and the Office of Finance. This report meets the statutory requirements of the Federal Housing Enterprises Financial Safety and Soundness Act of 1992, as amended by the Housing and Economic Recovery Act of 2008 (HERA).  The views in this report are those of FHFA and do not necessarily represent those of the President.

To request hard copies of FHFA Reports to Congress, contact: FHFA’s Office of Congressional Affairs and Communications
Phone: (202) 414-6922 or send e-mail to:   FHFAinfo@FHFA.gov

 

OCC AND FEDERAL RESERVE DEMAND BANKS START REVIEW PROCESS ON OVER 4 MILLION LOANS

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“This is the ultimate discovery mechanism that the Banks have been avoiding for 6 years. If it is used properly, at the end of the day everyone will know everything they need to know — where the money came from and where it went, where the documents came from and where they went, who signed them and with what authority, with what knowledge etc. You can ask for proof of the formation and current existence of the trust, its status and an accounting from the Trust for money in and out. If the Banks are forced to actually give up this information both the investors and the borrowers are going to see exactly how they have been screwed.” Neil Garfield, livinglies.me

THE MORE INFORMATION YOU ALREADY HAVE (FROM THE COMBO TITLE AND SECURITIZATION REPORT, LOAN LEVEL ACCOUNTING, FORENSIC ANALYSIS ETC), THE MORE POINTED YOUR QUESTIONS. DO YOUR HOMEWORK!

SEE IMPORTANT WHITE PAPER: National Consumer Law Firm Servicers Why They Foreclose

YOU MUST WRITE DEMAND FOR REVIEW

EDITOR’S NOTE: In an important step (maybe), the Federal regulators are now showing their ire at the Banks who entered into consent decrees in which they were ordered to conduct thorough audits of the accounts they claim they service or own. The Banks have not done it for the same reason they have fought so hard to resist discovery attempts in court — the results will be devastating to the position of the Banks in their court filings, their SEC filings and their reports to regulators. There are several elements listed but the complete list of items are in the actual orders that are posted on this Blog and at OCC website.

A key component I think in this process is that you demand that they explain discrepancies that you have already found and that you ask them about other things that you believe apply to your loan. It is very much like a QWR. You can use the QWR form free on this blog as a form and adapt it. Get a lawyer to draft it and I would suggest that it go out under a lawyer’s letterhead. Make sure the lawyer is licensed in the jurisdiction in which the property is located.

The Banks are already behind schedule on this and they are continuing to stone wall — because in the past it has always worked with the agency accepting far less than what was ordered. You can make the difference by demanding answers and when you don’t get them reporting it to the OCC and Federal Reserve. But better yet, these documents and the method that was used to audit the accounts, must be made available to you. You can demand them from the servicer, the purported owner of the loan, the Federal reserve and the OCC (or OTS if that applies).

I would recommend that in your discovery you ask them to produce their responses to this requirement in the OCC orders, that you question them in interrogatories as to who is in charge of the audit process at the Bank, what their plan is (and provide a copy), who is involved in the audit process at the Bank, what independent consultants they have used — note that they all announced they would use independent consultants), requests for admission based upon their failure to comply with the OCC, OTS and Federal Reserve Consent Decrees, and notices for deposition of the people who are identified as being in charge of the audit process for the Bank. It isn’t enough that they say they outsourced it. Who at the Bank signed the outsource contract? What did the contract say and who has it? To whom does the outsource contractor report? You get the idea, I hope.

Whatever opposition the Bank raises to these questions and demands for discovery should be reported to the regulators as direct proof that the Banks are refusing to comply with the intent of the Order — which is to allow borrowers to know the facts about their mortgage loan — or to be more precise the facts about the origination and chain of events before, during and after the transaction in which their obligation arose.

Here are some questions I would like to see answered on each closing:

  1. Using UCC as guideline, who was the creditor at the time of the closing?
  2. Where did the money for the closing come from?
  3. Where did the money go (the money that was paid by borrower, by third parties, etc.)
  4. How much money was received from each category of insurance and credit enhancement? By whom was it received?
  5. What reports were issued to investors? What accounting?
  6. Relative to the initial money borrowed from investors, what is the current balance due to those investors? How was this figure determined? By whom?
  7. Is the Bank or Servicer claiming to be an agent of the investors?
  8. What entity is authorized to sign a satisfaction of mortgage (or release and reconveyance) by virtue of the fact that the amount due to that entity has been paid?
  9. What are the duties of the trustee with respect to foreclosure on your property?
  10. What fees and profits were paid to the servicer, trustees, and other third parties in connection with processing your loan origination, processing payments from all sources, and processing foreclosure?
  11. Have any documents been filed in court or in the title registry that contained signatures of people who were unauthroized to sign on behalf of the entity receiving the benefit of the document filed?
  12. Have any documents been filed in court or the title registry that contained the signatures of people who had no knowledge of the contents of the document or any data or information supporting the contents of the document?
  13. Have any documents been filed in court or the title registry that contained information that was untrue? OK, how about information that the servicer or Bank doesn’t know if it was true or not?
  14. What is the procedure by which information was obtained to initiate foreclosure? Who was in charge of that?
  15. What is the procedure by which information was obtained to draft affidavits filed in court? who was in charge of that?
  16. What is the procedure by which modifications are considered? Who is in charge of that?
  17. What evidence exists that the investors were told of the existence of a modification offer?
  18. What method was used to evaluate the relative merits of foreclosure versus modification? By whom?
  19. What are the financial reasons for turning down a modification or short-sale? How is that determined? By whom?
  20. What are the legal reasons for turning down a modification or short-sale? How is that determined? By whom?

Regulators Begin Offering Foreclosure Reviews to Borrowers

By Lorraine Woellert

(Updates with industry and regulator comments starting in the sixth paragraph.)

Nov. 1 (Bloomberg) — U.S. mortgage servicers have begun offering case reviews to borrowers who may have suffered financial injury from errors and misrepresentations during foreclosure proceedings in 2009 and 2010, according to the Office of the Comptroller of the Currency.

The reviews, announced by the OCC in a statement today, are required under a settlement regulators reached with 14 of the biggest mortgage-servicing firms to resolve complaints over mishandled home seizures. The OCC was joined by the Federal Reserve and the Office of Thrift Supervision in the reaching the April accord with companies including JPMorgan Chase & Co., Citigroup Inc. and Wells Fargo & Co.

The companies have hired independent consultants to review foreclosure actions to determine whether borrowers were harmed and recommend appropriate remediation where necessary, the OCC said today. Letters explaining the review process are being sent to an estimated 4.5 million eligible borrowers, who may request reviews through April 30, 2012, the agency said.

“The challenge is substantial, but the steps we have required the servicers to take are vitally important to resolving these issues in a way that respects the rights of those who have been harmed and helps to restore confidence in the system,” John Walsh, acting Comptroller of the Currency, said in the OCC’s statement.

A record 2.87 million homeowners received foreclosure filings in 2010, surpassing the 2.82 million total for 2009, according to Irvine, California-based RealtyTrac Inc.

The first letters went out today, according to Joe Evers, the OCC’s deputy comptroller for large banks. Borrowers also can request a review at www.independentforeclosurereview.com.

Mortgage servicers will run an advertising campaign later this year and work with housing counselors to get word out to eligible borrowers, said Paul Leonard, a Financial Services Roundtable lobbyist who is serving as a spokesman for the firms.

It’s impossible to predict how many borrowers might be awarded compensation or when they might receive it, Leonard said today on a conference call. Regulators will make the final decision on whether borrowers have suffered harm and the amount of any remediation, he said.

The Fed and the OCC, which absorbed the OTS in July, haven’t offered said what might constitute harm to borrowers. Consultants will review company records and homeowner information to make decisions about compensation, according to Evers.

“Between the two sets of information, they should be able to determine if there’s injury or harm,” he told reporters on a conference call.

Robo-signing

Companies are being required to conduct the reviews under terms of the consent agreement they reached with regulators to resolve claims that they botched foreclosure paperwork amid the wave of foreclosures stemming from the subprime mortgage crisis. Reports of document robo-signing prompted several lenders to temporarily suspend foreclosures last year.

Servicers signing the accords included JPMorgan, Wells Fargo, Bank of America Corp., Citigroup, Ally Financial Inc.’s GMAC unit, Aurora Bank FSB, EverBank Financial Corp., HSBC Holdings Plc, OneWest, MetLife Inc., PNC Financial Services Group Inc., Sovereign Bank, SunTrust Banks Inc. and US Bancorp.

In addition to compensating harmed borrowers, the banks agreed to improve their foreclosure, loan modification and refinancing procedures by hiring staff, upgrading tracking systems, assigning each borrower a single point of contact, and policing lawyers and vendors.

State attorneys general and the U.S. Justice Department are continuing their own talks with servicers to seek additional relief for homeowners.

–Editor: Gregory Mott

To contact the reporter on this story: Lorraine Woellert in Washington at lwoellert@bloomberg.net

To contact the editor responsible for this story: Lawrence Roberts at lroberts13@bloomberg.net

MEGA DEATH WATCH: MOODY’S DOWNGRADES CREDIT RATING FOR BOA, CITI AND WELLS

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EDITOR’S NOTE: It’s only the first of a series of moves that will reduce the megabanks to rubble. They are reporting a substantial amount of “assets” that don’t exist and now it is apparent that neither the politicians nor the taxpayers have any stomach for bailing them out again. The ruse backfired. These banks siphoned off trillions and parked it off shore and are not reporting the real cash they have because they would need to explain how they got it.

The banks got the money in two major ways: First they skimmed the money that investors advanced for loans to the tune about 20-25% which is around $3 trillion dollars. Second, they took money that should have been given to investors to pay off the obligations and left the investors holding the bag. That amounted to trillions of dollars as well — estimated by some to be as much as $9 trillion.

By leaving the investors in an apparent “loss” position they were able to say the mortgage bonds (received by investors) were in default and so the payoff was pennies on the dollar for most investors who held those bonds. Now the investors are suing these investment banks for 100 cents on the dollar and more because of the very reason that the banks reported the bonds in default — that the mortgages went bad. But the math doesn’t add up. Not all mortgages are in default but virtually all investors are getting stiffed by these banks.

It was a logical and necessary position for the banks to say that the mortgages had gone bad. But they had a problem. The obligations of the borrowers were ultimately payable to the investors. The borrowers account was not credited with the bailouts, insurance and proceeds of credit default swaps because (a) the banks were keeping the money for themselves instead of giving it to the investors (b) the banks saw an opportunity to step in as intermediaries (pretender lenders) and claim a default even while they knew the account had been paid off.

The “Trustees” of the asset backed pools that were virtually empty failed to provide any accounting to the investors so there was no credit against the obligation owed to the investor and thus no credit against the amount owed by the borrower. At ground level where the foreclosures were taking place the only accounting is from the servicer who reports what the borrower paid but not what other money was received by or on behalf of the investor on the obligation of the borrower.

This gave the banks another opportunity to make even more money. They subverted the modification and settlement process and forced millions into foreclosure even though the amount claimed in default was either paid off entirely or nearly paid off. They then manipulated the foreclosure process so that the fees they charged the investor accounts were so large that they ate up any equity the investor might have recovered. In short, they are keeping the houses for themselves.

To recap, somebody in these banks is holding onto trillions of unreported liquid assets parked somewhere offshore, while the banks are left to float away unattended, leaving the bank shareholders to lose the rest of the money. The management of the these banks has pulled off the largest scam in human history and its complexity is thwarting even the highest government officials from seeing the truth.

Management of the megabanks, since they have nothing to lose and everything to gain, maintained the banks by reporting the mortgage bonds as assets — bonds which they did not and never did own as assets, while knowing that the bonds were worthless because they were either in really in default or paid off with the investor pool dissolved. Using the cover of foreclosure where there was an apparent attempt to recapture “losses”, the banks are becoming the largest landlowners in the country.

While many on Wall Street understand this it was assumed that the government would again bail out the megabanks when they had to won up to the fact that a very large portion of their reported assets did not exist and then were forced to write them down, thus requiring divestiture of of many lines of business to bring them in line with the reserve requirements for a lending institution. Now people realize the government won’t bail the banks out again which means that there is a day of reckoning coming. The banks will be forced to write down these assets to true value (zero) and they will be forced into liquidation, which is as it should be. Then the government and the 7,000 other banks that are not in this bind will resolve the issue by dividing up the business and assets of what remains of what once was the megabanks.

It is only at that point that the truth about the mortgage balances will be known. Right now the banks are doing everything they can to thwart discovery of the money trail and the actual obligations that are owed to the real creditors (investors) because they will need to account to those investors for payments received on behalf of the investors that the banks kept for themselves. At that point we will discover that millions of foreclosures were based upon false reports of default because the borrower and the court was not notified of the real balance that was owed to the creditor which had been mitigated or obliterated by the receipt of enough money to pay for the actual “defaults” on ground level several times over.

It is only then that people can be restored to the former homes and perhaps recapture a piece of the equity that was stolen from them,just like it was stolen from investors. It is only then that the housing market will recover. And it is only then that the economy will recover.

Moody’s Downgrades Credit Ratings of Three Large Banks

By

Moody’s cut its credit ratings Wednesday on three large banks — Bank of America, Citigroup and Wells Fargo — underscoring the challenges the sector still faces three years after the onset of the financial crisis.

The downgrades were driven by Moody’s conclusion that the federal government was less likely to step in and provide support for a faltering big bank the way it did after the 2008 collapse of Lehman Brothers, when Washington executed a series of actions including capital infusions and credit guarantees to halt the spreading panic.

Moody’s had put the banks on notice for a possible downgrade on June 2.

While Moody’s said it “believes that the government is likely to continue to provide some level of support to systemically important financial institutions,” the agency added that the government “is also more likely now than during the financial crisis to allow a large bank to fail should it become financially troubled.”

Under the Dodd-Frank financial regulatory reform passed by Congress in 2010, financial institutions must file a so-called living will that lays out steps for an orderly liquidation in the event of a financial collapse. The goal is to avoid future government bailouts, as well as the kind of turmoil unleashed by Lehman’s unexpected bankruptcy.

“Now, having moved beyond the depths of the crisis, Moody’s believes there is an increased possibility that the government might allow a large financial institution to fail, taking the view that the contagion could be limited,” the firm said in a statement. Even so, Moody’s said it doubted whether a global financial institution could be liquidated “without a disruption of the marketplace and the broader economy.”

The ratings agency cut Bank of America’s long-term senior debt to Baa1, three levels above junk. For Citigroup, Moody’s cut its ratings on short-term debt to Prime 2 from Prime 1, while affirming its A3 long-term rating. Moody’s lowered its rating on Wells Fargo’s senior debt to A2 from A1. Its Prime-1 short-term rating was affirmed. Of the three institutions, Bank of America has the lowest credit rating.

Shares of all three big banks fell sharply after the downgrade, but Bank of America dropped the most, falling 7.5 percent to $6.38 a share.

Although big banks enjoyed higher credit ratings before the financial crisis, Wednesday’s move was not unexpected, and analysts played down its significance. Although it could slightly raise borrowing costs over the long term, banks are not expected to have to pay significantly more to finance their operations in the near term.

“It’s not a good headline, but it shouldn’t have much impact,” said Jason Goldberg, an analyst with Barclays Capital, adding that even the federal government’s loss of its AAA rating this summer had not raised its borrowing costs.

In addition to seeing the government as less likely to support Bank of America, if needed, Moody’s said that the company “remains exposed to potentially significant risks related to both the residential mortgage and home equity loans on its balance sheet, as well as to mortgages previously sold to investors.”

Investors are seeking to force Bank of America to pay billions of dollars for its alleged misdeeds during the height of the housing boom, especially the bubble-related excesses at Countrywide Financial, the subprime giant Bank of America acquired in 2008. Bank of America has reached settlements with some investors, but other holders of mortgage-backed securities assembled by Bank of America, Countrywide and Merrill Lynch, another subsidiary, are suing to recover multibillion-dollar losses.

Moody’s was careful to note that its action did not reflect a weakening of Bank of America’s “intrinsic credit quality.”

Minnesota AG Backs NY AG: No Amnesty For Banks

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POLITICIANS SMELL BLOOD: RUN AGAINST THE BANKS

“Every single American has paid a very heavy price for the behavior of the financial industry. Ordinary people have lost homes, jobs, income, and financial security because of the actions of this industry,” Swanson said in a statement emailed to The Huffington Post by a spokesman. “I welcome and embrace all efforts to investigate the banks and their executives and to hold them accountable for unlawful activity.”

Minnesota Attorney General Backs New York’s Eric Schneiderman In National Foreclosure Settlement Talks

Minnesota Lori Swanson

First Posted: 9/13/11 12:24 PM ET Updated: 9/13/11 01:40 PM

NEW YORK — As government officials work to settle claims that the nation’s biggest banks illegally foreclosed on American homeowners, Minnesota Attorney General Lori Swanson has joined a group of law enforcers pushing for a narrow deal that would leave banks exposed to potential legal action in the future.

In a letter obtained by The Huffington Post, Swanson said any settlement with the group of banks over mortgage practices should exclude a release from claims over the creation of mortgage-linked securities. Swanson’s support for a narrow settlement unites her with New York Attorney General Eric Schneiderman and attorneys general from three other states, who have said the banks’ alleged wrongdoing hasn’t been investigated thoroughly enough to merit a broader release from legal liability.

“[T]he banks should not be released from liability for conduct that has not been investigated and is not appropriately remedied in any settlement,” she said in a Friday letter addressed to Schneiderman, Iowa Attorney General Tom Miller and Associate United States Attorney General Thomas Perrelli. “For example, a settlement that focuses on mortgage servicing standards should not release the banks or their officers from liability for securities claims or conduct arising out of the securitization of mortgages.”

“[A]ny settlement between government regulators and the mortgage industry should have ‘teeth’ — holding the banks accountable for their wrongful conduct, enjoining future unlawful activity, and helping injured homeowners,” she continued.

The federal government, along with attorneys general from all 50 states, launched an investigation into big banks’ mortgage and foreclosure practices after it emerged last fall that mortgage companies employed so-called “robo-signers,” who signed thousands of foreclosure documents without reading them. Banks temporarily halted foreclosures last October, saying they would review documents for errors.

Settlement talks, which began in the spring, seemed to be moving toward a conclusion during the summer months, even though government officials had initiated only a limited investigation into the banks’ alleged wrongdoing, The Huffington Post reported in July. Elizabeth Warren, a staunch consumer advocate and recently a senior Obama Administration adviser, told a congressional panel that claims of illegal foreclosures may not have been fully investigated.

The banks, which include Bank of America, JPMorgan Chase, Citigroup, Wells Fargo and Ally Financial, have pushed for a speedy resolution, as uncertainty over a legal penalty that could reach $20 billion has contributed to persistent slumps in their stock. “When we get that call we’ll be on an airplane, we’ll be down there, we’ll be signing up,” JPMorgan chief executive Jamie Dimon said during a conference call in July.

Schneiderman, who has firmly supported a narrow deal, was last month kicked off the committee leading the 50-state talks at the behest of Iowa’s Miller, who is leading the state group, The Huffington Post reported. That news broke a day after the New York Times editorial board voiced support for New York’s attorney general, saying Schneiderman “should stand his ground in not supporting the deal.”

The skirmish among government officials highlights divisions that have emerged, as federal officials and some state attorneys general advocate for a quick resolution, while others are urging the parties not to settle unless there has been a more thorough investigation. Some attorneys general, including Schneiderman, are also pursuing their own investigations.

Law enforcers recently proposed a deal that would effectively release banks from legal liability for securitization practices, the Financial Times reported earlier this month. The banks, which want the broadest possible immunity, called the latest proposal a “non-starter,” according to the FT.

In addition to Swanson and Schneiderman, the attorneys general from Delaware, Massachusetts and Nevada have also raised concerns about a broad release of legal liability for the banks.

“We have received Attorney General Swanson’s letter and agree that any agreement must not prevent attorneys general investigating the mortgage crisis from following the facts wherever they lead,” Danny Kanner, spokesman for the New York attorney general, said in an emailed statement.

“Every single American has paid a very heavy price for the behavior of the financial industry. Ordinary people have lost homes, jobs, income, and financial security because of the actions of this industry,” Swanson said in a statement emailed to The Huffington Post by a spokesman. “I welcome and embrace all efforts to investigate the banks and their executives and to hold them accountable for unlawful activity.”

MERS: A FAILED ATTEMPT AT BYPASSING STATE AND FEDERAL AUTHORITY

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Fannie-Freddie’s Hypocritical Suit Against Banks Making Loans that GSEs Helped Create

Fannie-Freddie’s Hypocritical Suit Against Banks Making Loans that GSEs Helped Create

EDITOR’S NOTE:  Practically everything that the government is doing with respect to the economy and the housing market in particular is hypocritical. If we look to the result to determine the intent of the government you can see why nothing is being done to improve DOMESTIC market conditions. By removing the American consumer from the marketplace (through elimination of available funds in equity, savings or credit) the economic prospects for virtually every marketplace in the world is correspondingly diminished. The downward pressure on economic performance worldwide creates a panic regarding debt and currency. By default (and partially because of the military strength of the United States) people are ironically finding the dollar to be the safest haven during a bad storm.

 The result is that the federal government is able to borrow funds at interest rates that are so low that the investor is guaranteed to lose money after adjusting for inflation. The climate that has been created is one in which investors are far more concerned with preservation of capital than return on capital. In a nutshell, this is why the credit markets are virtually frozen with respect to the average potential consumer, the average small business owner, and the average entrepreneur or innovator who would otherwise start a new business and fuel rising employment.

 While it is true that the lawsuits by Fannie and Freddie are appropriate regardless of their past hypocritical behavior, they are really only rearranging the deck chairs on the Titanic. Ultimately there must be a resolution to our current economic problems that is based in reality rather than the power to manipulate events. The scenario we all seek  would cleanup the rising title crisis, end the foreclosure crisis, and restore a true marketplace in the purchase and sale of real estate. We have all known for decades that the housing market drives the economy.

 There is obviously very little confidence that the government and market makers in the United States are going to seek any resolution based in reality. Therefore while investors are parking their money in dollars they are also driving up the price of gold and finding other innovative ways to preserve their wealth. As these innovations evolve it is almost certain that an alternative to the United States dollar will emerge. The driving force behind this innovation is the stagnation of the credit markets and the world marketplace. My opinion is that the United States is pursuing a policy that virtually guarantees the creation of a new world reserve currency.

 The creation of MERS was a private attempt to substitute private business plans for public laws. It didn’t work. The lawsuits by the government-sponsored entities together with lawsuits from investors who were duped into being lenders and homeowners who were duped into being borrowers in a rigged market are only going to result in money judgments and money settlements. With a nominal value of credit derivatives at over $600 trillion and the actual money supply at under $50 trillion there is literally not enough money in the world to fix this problem. The problem can only be fixed by recognizing and applying existing law to existing transactions.

 This means that MERS, already discredited, must be treated as a nonexistent entity in the world of real estate transactions. Nobody wants to do that because the failure to disclose an actual creditor on the face of a purported lean or encumbrance on land is a fatal defect in perfecting the lien. This is true throughout the country and it is obvious to anyone who has studied real property transactions and mortgages. If you don’t have the name and address of the creditor from whom you can obtain a satisfaction of mortgage, then you don’t have a mortgage that attaches to the land as a lien. It is this realization that is forming a number of lawsuits from the investors who advanced money for mortgage bonds. Those advances were the funds that were used to finance pornographic Wall Street profits with the balance used to fund absurd mortgage products.

 This is basic property law and public policy. There can be no confidence or consistency in the marketplace without a buyer or a lender knowing that they can rely upon the information contained in a government title Registry at the county recording office. Any other method requires them to take the word of someone without the authority of the government. This is a fact and it is the law. But the banks are successfully using politics to sidestep the basic essential elements of law. Under their theory the fact that the mortgage lien was never perfected would be ignored so that bank and non-bank institutions could become the largest landholders in the country without ever having spent a dime on loaning any money or purchasing the receivables. Politics is trumping law.

 The narrative and the debate are being absolutely controlled by Wall Street interests. We say we don’t like what the banks did and many say they don’t like banks at all. But it is also true that the same people who say they don’t like banks are willing to let the banks keep their windfall and make even more money at the expense of the taxpayer, the consumer and the homeowner. There are trillions of dollars available for investment in business expansion, government projects, and good old American innovation to drive a healthy economy. It won’t happen until we begin to drive the debate ourselves and force government and banking to conform to rules and laws that have been in existence for centuries.

from STOP FORECLOSURE FRAUD…………….

Lets NOT forget both Fannie and Freddie, like most of the named banks they are suing, each are shareholders of MERS.

Again, who gave the green light to eliminate the need for assignments and to realize the greatest savings, lenders should close loans using standard security instruments containing “MOM” language back in April 26, 1999?

This was approved by Fannie Mae and Freddie Mac which named MERS as Original Mortgagee (MOM)!

Open Market-

“U.S. is set to sue dozen big banks over mortgages,” reads the front-page headline in today’s New York Times. The “deck” below the headline explains that that the Federal Housing Finance Agency, which oversees the government-sponsored enterprises Fannie Mae and Freddie Mac, is “seen as arguing that lenders lacked due diligence” in the loans they made.

A more apt description would probably be that Fannie and Freddie are suing the banks for selling them the very loans the GSEs helped designed and that government mandates encourage — and are still encouraging them to make. These conflicted actions are just one more of the government’s contributions to the uncertainty that is helping to keep unemployment at 9 percent.

Strangely the author of the Times piece, Nelson Schwartz, ignores the findings of a recent blockbuster

[OPEN MARKET]

BANKS DEFRAUDING TAXPAYERS FACE FATE OF AL CAPONE

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EDITOR’S NOTE:  Somehow this particular article escaped me when it was published by Huffington Post. Like all the other allegations against the participants in the mortgage securitization hoax, the underlying theme is that the major banks simply lied about the ownership, value and nature of the mortgage assets. In this case the government paid them based upon their naked representation that the mortgage liens had been perfected and properly transferred.

 So far the banks have been successful, for the most part, in convincing the public and the courts that the mortgage liens have been perfected and properly transferred in all cases where claims of “ownership” were based upon securitization of debt. But in every case where professionals have been employed and have taken the time to carefully examine both the money trail and the document trail they have reached the conclusion that the documents and the handling of the money has been at best fatally defective and at worst fraudulent, forged,  and fabricated.

 The victims of this hoax include every taxpayer, consumer, homeowner and business in the entire country. As the lawsuits multiply and as the attorney general of each state comes to realize the political risk of siding with the banks, it will become obvious that we are all affected regardless of whether we are directly involved in the foreclosure process or merely suffering the results of collateral damage.

 The debates regarding the debt ceiling, spending and the tax code are mere distractions from the enforcement of existing tax liability of the participants in the massive securitization hoax. As taxpayers we have given the banks considerable resources to kick the can down the road. But the ultimate result cannot be disputed. Trillions of dollars are owed to the federal government, state governments and local governments on transactions that were either not reported at all or were reported with the intent to deceive those governments and deprive them of revenue.

The missing revenue together with the fraudulent receipt of payments from taxpayers for nonexistent or fraudulently represented mortgages and mortgage assets constitute all of the “deficit” that has been reported for all the governmental  entities that supposedly are in distress, bankrupt were subject to downgrade in their credit ratings.

 Simply stated, the deficit money is sitting on Wall Street or offshore under the control of those who control the Wall Street entities that perpetrated the grand securitization hoax. The same is true for individual consumers and homeowners. The scope of the securitization hoax included but was not limited to home loans, credit cards, student loans, auto loans and virtually every other kind of debt imaginable. Lately we have been receiving reports that the securitization hoax is expanding its scope to include life insurance. By inducing those who would otherwise not purchased life insurance (perhaps because they could not afford it) or who would purchase a contract from a life insurance carrier that was not involved in securitization, Wall Street is creating a vehicle which for the first time institutionalizes the motivation to deprive people of their lives.

 There are many permutations of the securitization hoax. The bottom line is that the vendor of the financial products sold to the consumer is not taking any risk, but is being paid, like an actor. In this way Wall Street is essentially the primary actor in the sale of financial products, like all mortgages or insurance, without being regulated or licensed by the appropriate federal or state agency.

The actors (pretender lenders) are either lending their licenses contrary to law or pretending to be licensed and getting away with it because of the apparent complexity of securitization. There is no need for complex analysis. Either they are a lender or they are not. Either they are a mortgage broker or they are not. Either they are an insurance broker or they are not. And if they acted as a lender when in fact their function was as a mortgage broker they have violated the law. And if they acted as a mortgage originator when in fact their function was a mortgage broker, they have violated the law. The administrative agencies regulating the various professions involved in real estate transactions have lots of work to do, lots of discipline to mete out, lots of fines to collect and lots of restitution to order.

 There are hundreds of millions of transactions in which worthless paper was involved which contained claims to obligations, notes and mortgages (which are interest in real property). The fact that these were fraudulent transactions does not take away from the fact that a profit was made, that documents should have been recorded, and that taxes and fees were due. The only question left is whether there are enough people left in government who are willing to use the tools available to them to correct the mess created by the securitization hoax.

Al Capone, the famed mobster, got away with almost everything including murder — until  he was taken down for tax fraud. It doesn’t matter how his reign of terror was ended. What matters is that it did end. And if government had followed through there would not have been anything to replace him. That is the challenge facing today’s government. And more importantly, it is the challenge to our Republic, where inch by inch, personal liberties have been taken away that are still guaranteed by our most basic law — the American Constitution.

___________________________________________________________________

The audits conclude that the banks effectively cheated taxpayers by presenting the Federal Housing Administration with false claims: They filed for federal reimbursement on foreclosed homes that sold for less than the outstanding loan balance using defective and faulty documents.”

Those violations are likely only a small fraction of the number committed by home loan companies, experts say, citing the small sample examined by regulators.”

Shahien Nasiripour

Shahien Nasiripour shahien@huffingtonpost.com

Confidential Federal Audits Accuse Five Biggest Mortgage Firms Of Defrauding Taxpayers [EXCLUSIVE]

Foreclosure Fraud

WASHINGTON — A set of confidential federal audits accuse the nation’s five largest mortgage companies of defrauding taxpayers in their handling of foreclosures on homes purchased with government-backed loans, four officials briefed on the findings told The Huffington Post.

The five separate investigations were conducted by the Department of Housing and Urban Development’s inspector general and examined Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial, the sources said.

The audits accuse the five major lenders of violating the False Claims Act, a Civil War-era law crafted as a weapon against firms that swindle the government. The audits were completed between February and March, the sources said. The internal watchdog office at HUD referred its findings to the Department of Justice, which must now decide whether to file charges.

The federal audits mark the latest fallout from the national foreclosure crisis that followed the end of a long-running housing bubble. Amid reports last year that many large lenders improperly accelerated foreclosure proceedings by failing to amass required paperwork, the federal agencies launched their own probes.

The resulting reports read like veritable indictments of major lenders, the sources said. State officials are now wielding the documents as leverage in their ongoing talks with mortgage companies aimed at forcing the firms to agree to pay fines to resolve allegations of routine violations in their handling of foreclosures.

The audits conclude that the banks effectively cheated taxpayers by presenting the Federal Housing Administration with false claims: They filed for federal reimbursement on foreclosed homes that sold for less than the outstanding loan balance using defective and faulty documents.

Two of the firms, including Bank of America, refused to cooperate with the investigations, according to the sources. The audit on Bank of America finds that the company — the nation’s largest handler of home loans — failed to correct faulty foreclosure practices even after imposing a moratorium that lifted last October. Back then, the bank said it was resuming foreclosures, having satisfied itself that prior problems had been solved.

According to the sources, the Wells Fargo investigation concludes that senior managers at the firm, the fourth-largest American bank by assets, broke civil laws. HUD’s inspector general interviewed a pair of South Carolina public notaries who improperly signed off on foreclosure filings for Wells, the sources said.

The investigations dovetail with separate probes by state and federal agencies, who also have examined foreclosure filings and flawed mortgage practices amid widespread reports that major mortgage firms improperly initiated foreclosure proceedings on an unknown number of American homeowners.

The FHA, whose defaulted loans the inspector general probed, last May began scrutinizing whether mortgage firms properly treated troubled borrowers who fell behind on payments or whose homes were seized on loans insured by the agency.

A unit of the Justice Department is examining faulty court filings in bankruptcy proceedings. Several states, including Illinois, are combing through foreclosure filings to gauge the extent of so-called “robo-signing” and other defective practices, including illegal home repossessions.

Representatives of HUD and its inspector general declined to comment.

The internal audits have armed state officials with a powerful new weapon as they seek to extract what they describe as punitive fines from lawbreaking mortgage companies.

A coalition of attorneys general from all 50 states and state bank supervisors have joined HUD, the Treasury Department, the Justice Department and the Federal Trade Commission in talks with the five largest mortgage servicers to settle allegations of illegal foreclosures and other shoddy practices.

Such processes “have potentially infected millions of foreclosures,” Federal Deposit Insurance Corporation Chairman Sheila Bair told a Senate panel on Thursday.

The five giant mortgage servicers, which collectively handle about three of every five home loans, offered during a contentious round of negotiations last Tuesday to pay $5 billion to set up a fund to help distressed borrowers and settle the allegations.

That offer — also floated by the Office of the Comptroller of the Currency in February — was deemed much too low by state and federal officials. Associate U.S. Attorney General Tom Perrelli, who has been leading the talks, last week threatened to show the banks the confidential audits so the firms knew the government side was not “playing around,” one official involved in the negotiations said. He ultimately did not follow through, persuaded that the reports ought to remain confidential, sources said. Through a spokeswoman, Perrelli declined to comment.

Most of the targeted banks have not seen the audits, a federal official said, though they are generally aware of the findings.

Some agencies involved in the talks are calling for the five banks to shell out as much as $30 billion, with even more costs to be incurred for improving their internal operations and modifying troubled borrowers’ home loans.

But even that number would fall short of legitimate compensation for the bank’s harmful practices, reckons the nascent federal Bureau of Consumer Financial Protection. By taking shortcuts in processing troubled borrowers’ home loans, the nation’s five largest mortgage firms have directly saved themselves more than $20 billion since the housing crisis began in 2007, according to a confidential presentation prepared for state attorneys general by the agency and obtained by The Huffington Post in March. Those pushing for a larger package of fines argue that the foreclosure crisis has spawned broader — and more costly — social ills, from the dislocation of American families to the continued plunge in home prices, effectively wiping out household savings.

The Justice Department is now contemplating whether to use the HUD audits as a basis for civil and criminal enforcement actions, the sources said. The False Claims Act allows the government to recover damages worth three times the actual harm plus additional penalties.

Justice officials will soon meet with the largest servicers and walk them through the allegations and potential liability each of them face, the sources said.

Earlier this month, Justice cited findings from HUD investigations in a lawsuit it filed against Deutsche Bank AG, one of the world’s 10 biggest banks by assets, for at least $1 billion for defrauding taxpayers by “repeatedly” lying to FHA in securing taxpayer-backed insurance for thousands of shoddy mortgages.

In March, HUD’s inspector general found that more than 49 percent of loans underwritten by FHA-approved lenders in a sample did not conform to the agency’s requirements.

Last October, HUD Secretary Shaun Donovan said his investigators found that numerous mortgage firms broke the agency’s rules when dealing with delinquent borrowers. He declined to be specific.

The agency’s review later expanded to flawed foreclosure practices. FHA, a unit of HUD, could still take administrative action against those firms for breaking FHA rules based on its own probe.

The confidential findings appear to bolster state and federal officials in their talks with the targeted banks. The knowledge that they may face False Claims Act suits, in addition to state actions based on a multitude of claims like fraud on local courts and consumer violations, will likely compel the banks to offer the government more money to resolve everything.

But even that may not be enough.

Attorneys general in numerous states, armed with what they portray as incontrovertible evidence of mass robo-signings from preliminary investigations, are probing mortgage practices more closely.

The state of Illinois has begun examining potentially-fraudulent court filings, looking at the role played by a unit of Lender Processing Services. Nevada and Arizona already launched lawsuits against Bank of America. California is keen on launching its own suits, people familiar with the matter say. Delaware sent Mortgage Electronic Registration Systems Inc., which runs an electronic registry of mortgages, a subpoena demanding answers to 75 questions. And New York’s top law enforcer, Eric Schneiderman, wants to conduct a complete investigation into all facets of mortgage banking, from fraudulent lending to defective securitization practices to faulty foreclosure documents and illegal home seizures.

A review of about 2,800 loans that experienced foreclosure last year serviced by the nation’s 14 largest mortgage firms found that at least two of them illegally foreclosed on the homes of “almost 50” active-duty military service members, a violation of federal law, according to a report this month from the Government Accountability Office.

Those violations are likely only a small fraction of the number committed by home loan companies, experts say, citing the small sample examined by regulators.

In an April report on flawed mortgage servicing practices, federal bank supervisors said they “could not provide a reliable estimate of the number of foreclosures that should not have proceeded.”

The review of just 2,800 home loans in foreclosure compares with nearly 2.9 million homes that received a foreclosure filing last year, according to RealtyTrac, a California-based data provider.

“The extent of the loss cannot be determined until there is a comprehensive review of the loan files and documentation of the process dealing with problem loans,” Bair said last week, warning of damages that could take “years to materialize.”

Home prices have fallen over the past year, reversing gains made early in the economic recovery, according to data providers Zillow.com and CoreLogic. Sales of new homes remain depressed, according to the Commerce Department. More than a quarter of homeowners with a mortgage owe more on that debt than their home is worth, according to Zillow.com. And more than 2 million homes are in foreclosure, according to Lender Processing Services.

Rather than punishing banks for misdeeds, the administration is now focused on helping troubled borrowers in the hope that it will stanch the flood of foreclosures and increase consumer confidence, officials involved in the negotiations said.

Levying penalties can’t accomplish that goal, an official involved in the foreclosure probe talks argued last week.

For their part, however, state officials want to levy fines, according to a confidential term sheet reviewed last week by HuffPost. Each state would then use the money as it desires, be it for facilitating short sales, reducing mortgage principal, or using the funds to help defaulted borrowers move from their homes into rentals.

In a report last week, analysts at Moody’s Investors Service predicted that while the losses incurred by the banks will be “sizable,” the credit rating agency does “not expect them to meaningfully impact capital.”

*************************Shahien Nasiripour is a senior business reporter for The Huffington Post. You can send him an e-mail; bookmark his page; subscribe to his RSS feed; follow him on Twitter; friend him on Facebook; become a fan; and/or get e-mail alerts when he reports the latest news. He can be reached at 917-267-2335.

GLOVES OFF? Massive Wave Of Lawsuits To Be Filed By The US Against America’s Biggest Banks

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ANOTHER BANK BAILOUT???

Massive Wave Of Lawsuits To Be Filed By The US Against America’s Biggest Banks As Soon As Tomorrow

Tyler Durden's picture

Submitted by Tyler Durden on 09/01/2011 22:30 -0400

FROM www.zerohedge.com

In a move that could either send BAC stock limit down overnight or send it soaring (we are still trying to figure out just what is going on here), the NYT has broken major news that the US is preparing to go nuclear on more than a dozen big banks among which Bank of America, JPMorgan Chase, Goldman Sachs and Deutsche Bank, in an attempt for Fannie and Freddie to recoup $30 billion if not much more. The lawsuit is expected to hit the docket in the next few days: “The suits stem from subpoenas the finance agency issued to banks a year ago. If the case is not filed Friday, they said, it will come Tuesday, shortly before a deadline expires for the housing agency to file claims.” Now, taken at face value, this would mean that Bank of America can kiss its ass goodbye as unlike the Walnut Place litigation, this will take place in Federal Court where Article 77 is not applicable. Yet there is something that gives us pause: namely logic, captured by the following words: “While I believe that F.H.F.A. is acting responsibly in its role as conservator, I am afraid that we risk pushing these guys off of a cliff and we’re going to have to bail out the banks again,” said Tim Rood, who worked at Fannie Mae until 2006 and is now a partner at the Collingwood Group, which advises banks and servicers on housing-related issues.” In other words: if the banks are sued, and if justice prevails, the end of the world is nigh and cue TARP 2 – XXX. Now where have we heard that argument over, and over, and over before.

From the NYT:

The suits will argue the banks, which assembled the mortgages and marketed them as securities to investors, failed to perform the due diligence required under securities law and missed evidence that borrowers’ incomes were inflated or falsified. When many borrowers were unable to pay their mortgages, the securities backed by the mortgages quickly lost value.

Fannie and Freddie lost more than $30 billion, in part as a result of the deals, losses that were borne mostly by taxpayers.

In July, the agency filed suit against UBS, another major mortgage securitizer, seeking to recover at least $900 million, and the individuals with knowledge of the case said the new litigation would be similar in scope.

Private holders of mortgage securities are already trying to force the big banks to buy back tens of billions in soured mortgage-backed bonds, but this federal effort is a new chapter in a huge legal fight that has alarmed investors in bank shares. In this case, rather than demanding that the banks buy back the original loans, the finance agency is seeking reimbursement for losses on the securities held by Fannie and Freddie.

The prestory is by now known by everyone:

Besides the angry investors, 50 state attorneys general are in the final stages of negotiating a settlement to address abuses by the largest mortgage servicers, including Bank of America, JPMorgan and Citigroup. The attorneys general, as well as federal officials, are pressing the banks to pay at least $20 billion in that case, with much of the money earmarked to reduce mortgages of homeowners facing foreclosure.

And last month, the insurance giant American International Group filed a $10 billion suit against Bank of America, accusing the bank and its Countrywide Financial and Merrill Lynch units of misrepresenting the quality of mortgages that backed the securities A.I.G. bought.

Bank of America, Goldman Sachs and JPMorgan all declined to comment. Frank Kelly, a spokesman for Deutsche Bank, said, “We can’t comment on a suit that we haven’t seen and hasn’t been filed yet.”

The response? Why Paulson-esque Mutual Assured Destruction:

But privately, financial service industry executives argue that the losses on the mortgage-backed securities were caused by a broader downturn in the economy and the housing market, not by how the mortgages were originated or packaged into securities. In addition, they contend that investors like A.I.G. as well as Fannie and Freddie were sophisticated and knew the securities were not without risk.

Investors fear that if banks are forced to pay out billions of dollars for mortgages that later defaulted, it could sap earnings for years and contribute to further losses across the financial services industry, which has only recently regained its footing.

The total litigation amount will not be in the trillions… but will certainly be in the tens if not hundreds of billions.

While the banks put together tens of billions of dollars in mortgage securities backed by risky loans, the Federal Housing Finance Agency is not seeking the total amount in compensation because some of the mortgages are still good and the investments still carry some value. In the UBS suit, the agency said it owned $4.5 billion worth of mortgages, with losses totaling $900 million. Negotiations between the agency and UBS have yielded little progress.

Bottom line: the gloves are coming off, and while we want to believe that this is the final nail in BAC’s coffin (Quinn Emanuel is counsel for the FHFA), we do have a nagging feeling that the US will not purposefully do everything in its power to destroy its banking sector.

Window Dressing: File a Lawsuit — Maybe It will Improve the View

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EDITOR’S COMMENT: YAWN! The government keeps filing lawsuits that COULD be big and COULD cause make corrections in the marketplace to reflect reality. But then they go nowhere, with discovery stymied by the Banks and then a settlement on the table that sells out everyone except the half dozen big banks that we allow to control the market, courtesy of our taxpayer money and our refusal to apply the same rules to them we do to the 7,000 other community banks and credit unions who could do the same or better job at handling the country’s finance sector.

Don’t get fooled. When someone comes out and says that securitization was an illusion, a ruse to defraud as many people in world population as possible, TEN we will have addressed the problem. When that special someone is willing to consider the idea that the banks never actually lost money and never needed a bailout, but that the top management diverted pornographic profits to off-shore havens then we will be on track to recapture the nation’s wealth, which currently is held hostage by Wall Street banks and the great majority of those in government who depend upon the mega banks for their political campaign expenses.

In the meanwhile, the lawsuits should be watched because deep inside each suit are some additional allegations, indicating the results of administrative investigations that you can use. When we get serious, the lawsuits will come fast and furious and aggressively pursued. Until then, all thee actions amount to little more than window dressing.

U.S. Is Set to Sue a Dozen Big Banks Over Mortgages

By

The federal agency that oversees the mortgage giants Fannie Mae and Freddie Mac is set to file suits against more than a dozen big banks, accusing them of misrepresenting the quality of mortgage securities they assembled and sold at the height of the housing bubble, and seeking billions of dollars in compensation.

The Federal Housing Finance Agency suits, which are expected to be filed in the coming days in federal court, are aimed at Bank of America, JPMorgan Chase, Goldman Sachs and Deutsche Bank, among others, according to three individuals briefed on the matter.

The suits stem from subpoenas the finance agency issued to banks a year ago. If the case is not filed Friday, they said, it will come Tuesday, shortly before a deadline expires for the housing agency to file claims.

The suits will argue the banks, which assembled the mortgages and marketed them as securities to investors, failed to perform the due diligence required under securities law and missed evidence that borrowers’ incomes were inflated or falsified. When many borrowers were unable to pay their mortgages, the securities backed by the mortgages quickly lost value.

Fannie and Freddie lost more than $30 billion, in part as a result of the deals, losses that were borne mostly by taxpayers.

In July, the agency filed suit against UBS, another major mortgage securitizer, seeking to recover at least $900 million, and the individuals with knowledge of the case said the new litigation would be similar in scope.

Private holders of mortgage securities are already trying to force the big banks to buy back tens of billions in soured mortgage-backed bonds, but this federal effort is a new chapter in a huge legal fight that has alarmed investors in bank shares. In this case, rather than demanding that the banks buy back the original loans, the finance agency is seeking reimbursement for losses on the securities held by Fannie and Freddie.

The impending litigation underscores how almost exactly three years after the collapse of Lehman Brothers and the beginning of a financial crisis caused in large part by subprime lending, the legal fallout is mounting.

Besides the angry investors, 50 state attorneys general are in the final stages of negotiating a settlement to address abuses by the largest mortgage servicers, including Bank of America, JPMorgan and Citigroup. The attorneys general, as well as federal officials, are pressing the banks to pay at least $20 billion in that case, with much of the money earmarked to reduce mortgages of homeowners facing foreclosure.

And last month, the insurance giant American International Group filed a $10 billion suit against Bank of America, accusing the bank and its Countrywide Financial and Merrill Lynch units of misrepresenting the quality of mortgages that backed the securities A.I.G. bought.

Bank of America, Goldman Sachs and JPMorgan all declined to comment. Frank Kelly, a spokesman for Deutsche Bank, said, “We can’t comment on a suit that we haven’t seen and hasn’t been filed yet.”

But privately, financial service industry executives argue that the losses on the mortgage-backed securities were caused by a broader downturn in the economy and the housing market, not by how the mortgages were originated or packaged into securities. In addition, they contend that investors like A.I.G. as well as Fannie and Freddie were sophisticated and knew the securities were not without risk.

Investors fear that if banks are forced to pay out billions of dollars for mortgages that later defaulted, it could sap earnings for years and contribute to further losses across the financial services industry, which has only recently regained its footing.

Bank officials also counter that further legal attacks on them will only delay the recovery in the housing market, which remains moribund, hurting the broader economy. Other experts warned that a series of adverse settlements costing the banks billions raises other risks, even if suits have legal merit.

The housing finance agency was created in 2008 and assigned to oversee the hemorrhaging government-backed mortgage companies, a process known as conservatorship.

“While I believe that F.H.F.A. is acting responsibly in its role as conservator, I am afraid that we risk pushing these guys off of a cliff and we’re going to have to bail out the banks again,” said Tim Rood, who worked at Fannie Mae until 2006 and is now a partner at the Collingwood Group, which advises banks and servicers on housing-related issues.

The suits are being filed now because regulators are concerned that it will be much harder to make claims after a three-year statute of limitations expires on Wednesday, the third anniversary of the federal takeover of Fannie Mae and Freddie Mac.

While the banks put together tens of billions of dollars in mortgage securities backed by risky loans, the Federal Housing Finance Agency is not seeking the total amount in compensation because some of the mortgages are still good and the investments still carry some value. In the UBS suit, the agency said it owned $4.5 billion worth of mortgages, with losses totaling $900 million. Negotiations between the agency and UBS have yielded little progress.

The two mortgage giants acquired the securities in the years before the housing market collapsed as they expanded rapidly and looked for new investments that were seemingly safe. At issue in this case are so-called private-label securities that were backed by subprime and other risky loans but were rated as safe AAA investments by the ratings agencies.

In the years before 2007, “the market was so frothy then it was hard to find good quality loans to securitize and hold in your portfolio,” said David Felt, a lawyer who served as deputy general counsel of the finance agency until January 2010. “Fannie and Freddie thought they were taking AAA tranches, and like so many investors, they were surprised when they didn’t turn out to be such quality investments.”

Fannie and Freddie had other reasons to buy the securities, Mr. Rood added. For starters, they carried higher yields at a time when the two mortgage giants could buy them using money borrowed at rock-bottom rates, thanks to the implicit federal guarantee they enjoyed.

In addition, by law Fannie and Freddie were required to back loans to low-to-moderate income and minority borrowers, and the private-label securities were counted toward those goals.

“Competitive pressures and onerous housing goals compelled them to operate more like hedge funds than government-sponsored guarantors, ” Mr. Rood said.

In fact, Freddie was warned by regulators in 2006 that its purchases of subprime securities had outpaced its risk management abilities, but the company continued to load up on debt that ultimately soured.

As of June 30, Freddie Mac holds more than $80 billion in mortgage securities backed by more shaky home loans like subprime mortgages, Option ARM and Alt-A loans. Freddie estimates its total gross losses stand at roughly $19 billion. Fannie Mae holds $38 billion of securities backed by Alt-A and subprime loans, with losses standing at nearly $14 billion.

GOVERNMENT OFFICIALS NEGOTIATING (SELL-OUT!) WITH BANKS AND TAKING POLITICAL CONTRIBUTIONS SIMULTANEOUSLY

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SELL-OUT!

EDITOR’S COMMENT: WHAT ARE THEY NEGOTIATING ABOUT AND WITH WHOM ARE THEY NEGOTIATING? This is theater in the most absurd. Our government is negotiating with the very people who have demonstrated that they must fabricate and forge documents in order to establish their authority to do anything. Even in hostage negotiations we don’t give as much as we are giving to the servicers. They have no authority.

By definition they don’t own the obligation which means the obligation of the borrower is not owed to them. They are not the authorized agent of the real owner of the obligation until the real owner is identified and says they give authority to the agent to negotiate on their behalf.

Those documents don’t exist because those facts don’t exist. The investors are not going to give the servicers anything. If they were going to do that it would have happened en masse and avoided lots of paperwork problems for the banks. If it were not for political contributions, thousands of people would be headed for jail cells.

Instead we are negotiating away the future of America — for what? All homeowners are affected by these negotiations because when the so called honest Joe Homeowner goes to sell his home he is going to be hopping mad that not only can’t he deliver marketable title, he now has nobody to sue because the government sold him out. AND he still can’t sell his house because there is no way to clear up title.

These negotiations are a farce because down the road, they will be meaningless except that they will have added time to the already corrupted title registries across the country.

Mortgage servicers spend millions on political contributions

Banks under scrutiny as housing crisis festers

Posted Aug 8, 2011, 2:55 pm

Michael Hudson & Aaron Mehta Center for Public Integrity

As the financial markets roil, one of the critical factors weighing down the U.S. economy is the flood of home foreclosures. Thursday’s crash underscores how difficult it will be for the economy to make significant strides while the housing market is still in tatters.

The pace of the housing market recovery may depend in part on the outcome of intense negotiations underway among state and federal authorities and the nation’s five largest mortgage servicers.

Government officials are negotiating with the firms — Bank of America, JP Morgan Chase & Co., Citigroup, Wells Fargo & Co. and Ally Financial Inc. — over allegations of widespread abuses in the foreclosure process. State attorneys general around the country have been investigating evidence that the big banks used falsified documentation to process foreclosures.

Four of the five companies under scrutiny—Bank of America, JP Morgan, Wells Fargo and Citigroup — are major donors for state and federal political campaigns. Between them, they have donated at least $8 million since the start of 2009 to candidates, party committees and other political action committees, according to an iWatch News analysis of campaign finance data.

(Ally Financial hasn’t given money during that period to campaigns under its current name or is previous name, General Motors Acceptance Corp., or GMAC).

The fate of foreclosure negotiations could go a long way toward determining where the housing market will go in the next few years.

Normally, the housing market plays a leading role in any economic recovery. But that hasn’t been the case in the aftermath of the U.S. financial crisis of 2008.

“It’s has been a negative factor in this recovery — or lack of recovery,” housing economist and consultant Michael Carliner said.

Generally, when interest rates go down, that spurs the mortgage and housing markets and helps move the economy in the right direction. But that hasn’t happened this time around, said Carliner, a former economist for the National Association of Home Builders. “We have lowest mortgage rates since the early 1950s and it’s not doing anything,” he said.

Interest rates on 30-year fixed rate mortgages averaged 4.39 percent for the week ending Aug. 4, according to a survey by mortgage giant Freddie Mac.

What’s holding back the housing market, Carliner said, is a glut of available homes for sale, due in part to overbuilding during the housing boom and to continuing foreclosure woes. An “excess inventory” of perhaps 2 million homes is making it hard for the housing market to get going again, he said.

The inventory of foreclosures continues to grow. In June, one out of every 583 housing units in the United States received a foreclosure notice, according to data provider Realty Trac. The numbers are even worse in the hardest hit markets, where housing prices climbed the fastest during the housing boom and fell the most when the housing crash came. In Nevada, one out of every 114 housing units was the subject of a foreclosure filing in June.

Investigations and negotiations over allegations of fraudulent foreclosure practices by big banks have helped slow down the foreclosure process, making it harder for the market to work through defaults and readjust, Carliner said.

He would like to see a deal between government officials and mortgage servicers that would pave the way to swifter foreclosures that would help put the foreclosure problem in the past. “If people haven’t paid their mortgages in two years, they shouldn’t be able to keep their house,” Carliner said.

Not everyone agrees.

Ira Rheingold, executive director of the National Association of Consumer Advocates, a consumer attorneys group, argues that any national settlement should be about keeping people in their homes. He wants a settlement that would require banks to reduce the amount of mortgage debt held by distressed homeowners.

Reducing their payments and overall debts would help keep them in their homes and reduce the number of foreclosures, he said. It would also provide a measure of justice, he said, for homeowners who were defrauded via bait-and-switch salesmanship, falsified documentation and other predatory tactics that were common during the mortgage frenzy of the past decade.

Rheingold acknowledges, though, that extracting large concessions from big banks will be a “tough slog.”

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The banks have high-powered legal talent and lobbyists on their side, and four of the top five mortgage services have given generously to state and federal political campaigns, according to an iWatch News analysis of election data provided by the subscription-only CQMoneyLine. 

  • Since the start of 2009, Bank of America has donated at least $3.2 million to candidates, party committees and other PACs. Among the top recipients was Rep. Jeb Hensarling (at least $17,500), a Texas Republican who is vice chairman of the House Financial Services Committee. Another Texan Republican, Randy Neugebauer , received at least $16,000 from the financial giant. Neugebauer also serves on the Financial Services Committee, and chairs the Subcommittee on Oversight and Investigations.
  • JPMorgan Chase has donated over $ 2.8 million to candidates, party committees and other PACs since the start of 2009. The firm has made donations to the Republican Governors Association (at least $50,000), the National Republican Senatorial Committee (at least $45,000) and the National Republican Congressional Committee (at least $45,000), the Democratic Governors Association (at least $25,000) and the Democratic Senatorial Campaign Committee (at least $15,000). The firm also donated at least $15,000 to the Blue Dog PAC, the fundraising arm of the Blue Dog Democrats who were vital to financial corporations when the Democrats controlled the House.
  • and ranking member on the financial services committee’s Subcommittee on Financial Institutions and Consumer Credit.
  • Wells Fargo gave over $1 million to candidates, party committees and other PACs since the start of 2009. Wells Fargo has given at least $45,000 each to the NRCC and NRSC and at least $30,000 each to the DSCC and DCCC. It also donated at least $17,000 to Rep. Ed Royce , a California Republican who serves on the Financial Services committee. Another top recipient was Democrat Carolyn Maloney of New York, the vice chair of the Joint Economic Committee
  • Citigroup has given $850,000 to candidates, party committees and other PACs since the start of 2009. Among its top individual recipients is Democrat Gregory Meeks of New York. Meeks, who sits on the House Committee on Financial Services, has received at least $10,000 from Citi. Another is Ohio Republican Rep. Pat Tiberi (at least $15,000), a member of the powerful Ways and Means committee. Tiberi is currently the Chairman of the Subcommittee on Select Revenue, which has jurisdiction over federal tax policy.

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