Fed 0.01% loans to European banks after Lehman collapse. File under “things you never knew the Fed did during the financial crisis”: an $80 billion loan scheme known as ST OMO, which was so obscure that even Barney Frank had no idea it existed when he required the Fed to turn over its lending data in his Dodd-Frank bill. In any case, Bloomberg’s Bob Ivry has the details, thanks to a FOIA which went all the way to the Supreme Court. As with most of these things, it’s impossible to work out what the Fed was so worried about — but it’s easy to see how the Fed made it as hard as possible for Ivry to get information on ST OMO. Not only did they refuse to give him the information he was asking for, but then, when they were ordered to, they dumped 29,000 pages of documents on him.
Hidden in which we find charts like these: What we’re looking at here is the pink bars, which are labeled ST OMO; the height of each bar corresponds to the billions of dollars that each bank had borrowed from the Fed that day. The Servicing Fraud Settlement: the Real Game. Warning: This is a long blog post. But if you follow mortgage servicing, I think you’ll find it worth reading. Despite lots and lots of media coverage of the servicing fraud settlement, nobody seems to understand the real story that's going on. I think that this post will explain a lot. Let's start by recapping what we know. Back in March we started hearing media reports of a proposed penalty for servicers in the $20-$30B range.
Then the American Banker published a 27-page term sheet from the AGs for servicing standards. Next, Huffington Post published a 7-page CFPB powerpoint presentation. Now there’s another round of activity and conflicting reporting. So how do we make sense out of all of this? The short answer is that the fight is not over a piddling $5B or $10B or even $20B. Now this isn't just my theory from reading between the lines. There are two important things to note in the CFPB powerpoint. I don't think anyone has really understood the significance of this number. 2.
Housing double dip could be coming: MacroMarkets. Reverse mortgages. Fannie Mae REO Homes For Sale - HomePath.com. Certified Forensic Loan Auditors, LLC - Forensic Audit / Mortgage Audit Litigation. Tracking Potential Bank Litigation Losses - Deal Journal. The Risks of the Mortgage Mess: The Banks' View. HSBC (HBC) got plenty of attention when it disclosed that it had suspended foreclosures in its annual report Monday. But its annual report -- as well as other big banks' reports -- also contained plenty of additional nuggets about the mortgage mess, especially in the risk disclosures, which are required to be written in plain English and to include "the most significant factors that may adversely affect the company's business, operations, industry, financial position or future financial performance.
" I waded through the recently filed annual reports from Bank of America (BAC), JPMorgan Chase (JPM), Citigroup (C), Wells Fargo (WFC) and HSBC to see how each institution framed the threat that the mortgage mess and the foreclosure crisis pose to their businesses. You'd expect to see plenty of similarities. After all, in general, the risks are well-known and common to all of those banks.
Here's a discussion of each bank's disclosures and what it reveals: HSBC: Document 'Deficiencies' Judge OKs Countrywide settlement but big investors opt out. Major investors opting out of a $624-million class-action settlement with Countrywide Financial Corp. said they would have recouped less than 5% of their losses on the mortgage lender's stock had they accepted the agreement. "A settlement on behalf of my clients would have to be a material multiple of that amount," said Blair Nicholas of San Diego, a lawyer for the California Public Employees' Retirement System and 15 other institutional investors.
Altogether, 33 institutional investors have opted out. The agreement was approved Friday by U.S. District Judge Mariana Pfaelzer in Los Angeles, who described the settlement as reasonable and substantial given the complexities of the case and the uncertainties of what a jury might decide. It requires Countrywide and its parent company, Bank of America Corp., to provide $600 million for former Countrywide shareholders remaining in the case. The lender's outside accounting firm, KPMG, added $24 million. Those opting out disagreed. Atty. Allstate Sues Citigroup, Deutsche Bank Over Securities. Allstate Corp., the largest publicly traded U.S. home and auto insurer, sued units of Citigroup Inc. and Deutsche Bank AG over claims they fraudulently sold hundreds of millions of dollars of mortgage-backed securities.
Allstate is seeking to recover the lost market value of the securities, as well as principal and interest payments, according to complaints filed today in New York state Supreme Court in Manhattan. The insurer said it bought more than $200 million of the securities, backed by residential mortgages, from the Citigroup defendants and about $185 million from the Deutsche Bank units after relying on misrepresentations and omissions regarding underwriting standards, owner occupancy data and loan-to-value ratios.
“Allstate was made to believe it was buying highly rated, safe securities,” the Northbrook, Illinois-based company said in its complaint against New York-based Citigroup. The cases are Allstate Insurance Co. v. 6 of the biggest mortgage lenders say N.J. high court overstepped its boundaries. Joe Raedle/Getty ImagesThe banks say a N.J. Supreme Court order violates due process and equal protection clauses. NEWARK -- State Supreme Court Chief Justice Stuart Rabner made a splash in December when he ordered six of the nation's biggest mortgage lenders into court to show why their foreclosure operations shouldn't be suspended over reports of widespread irregularities.
State attorneys general around the country have increased pressure on lenders over the past year, but New Jersey is believed to be the first state whose Supreme Court has stepped into the fray so boldly. Too boldly, according to the banks' court filings. With the court hearing looming next month, the banks say they'd already begun remedial action months before New Jersey's court order and that suspending their operations would damage already shaky housing markets and lead to further deterioration of hard-hit neighborhoods.
They also accuse the state of overstepping its boundaries on several levels. Connecticut Law Tribune: Forensic Accounting And Valuation Litigation: Finding Out Who Really Holds The Note. OCC - Office of the Comptroller of the Currency, Administrator of National Banks. SEC Is Said to Subpoena Wall Street Banks in Mortgage-Bond Investigation. U.S. regulators subpoenaed JPMorgan Chase & Co., Citigroup Inc., Bank of America Corp., Goldman Sachs Group Inc. and Wells Fargo & Co., seeking information on the banks’ role in bundling mortgages for sale to investors, a person familiar with the matter said. The Securities and Exchange Commission subpoenas asked the banks for details on how mortgages were selected and bundled into securities, said the person, who declined to be identified because the probe isn’t public.
Reuters reported the SEC probe earlier today, saying the subpoenas were sent last week. The SEC, which is investigating business practices that might have contributed to the collapse of the U.S. subprime mortgage market, has sued companies and executives responsible for selling loan bundles that soured when the housing bubble burst. Goldman Sachs reached a $550 million settlement over SEC claims that it misled investors. To contact the reporter on this story: Joshua Gallu in Washington at jgallu@bloomberg.net. SEC Urges Banks to Disclose Potential Losses From Foreclosures. The U.S. Securities and Exchange Commission urged banks to disclose their expected losses from flawed foreclosure documents, as mortgage-bond investors demand refunds on billions of dollars of securities. Lenders must disclose circumstances that they “reasonably expect” to have an “unfavorable impact” on financial results, the SEC said in a letter posted on the agency’s website today. The letter was sent because of “concerns about potential risks and costs associated with mortgage and foreclosure-related activities,” the SEC said.
Federal regulators and attorneys general from all 50 states are investigating whether loan-servicing companies used improper procedures during foreclosure proceedings, including so-called robo-signers who didn’t check documentation. Investors such as Pacific Investment Management Co. have demanded that banks buy back faulty loans that were bundled into bonds. To contact the reporter on this story: Jesse Westbrook in Washington at jwestbrook1@bloomberg.net.
Bondholders Pick a Fight With Banks. U.S. Holding Banks Accountable on Foreclosures, Caldwell Says. The Treasury Department official leading Obama administration efforts to stem foreclosures said the government is working to ensure borrowers are being treated fairly while avoiding delays that could lower housing prices. Federal regulators have “stepped up compliance efforts” in response to claims that banks may have used faulty documents to seize homes, said Phyllis Caldwell, chief of Treasury’s Homeownership Preservation Office, in testimony today for a congressional oversight panel. The U.S. is aiming to make sure lenders are proceeding properly on foreclosures while avoiding delays that could harm real-estate markets, she said. “Longer foreclosure timelines will likely lead to lower sales prices of houses that are already in the foreclosure process,” Caldwell said. “This would hurt homeowners and home- buyers alike at a time when foreclosed homes make up 25 percent of home sales.”
“We are watching this every day,” she said. Mortgage Buybacks Pacific Investment Management Co. Holman Jenkins, Jr.: The Foreclosure Crisis and the Future of American Communities. Foreclosure as a Last Resort. The Financial Crisis - A visual Guide to How the Economy Went Into Recession. The roots of foreclosure-gate: incentives and lawyers « Truth on the Market. Careless or even fraudulent documentation in foreclosure actions has stalled foreclosures, stymied recovery of the housing market, threatened the earnings and even financial stability of banks, and may lead to massive securities fraud actions. How did this happen? Per CR: [A] combination of getting swamped with foreclosures, lack of experienced staff, the poor economic environment for servicers, and outsourcing to the lowest bidder, all contributed to the servicers using “robo-signers”. From WaPo: To keep up with the crush of foreclosures, document processors and mortgage service firms rushed to hire anyone they could – hair stylists, Wal-Mart clerks, assembly-line workers who made blinds – and gave them key roles in their foreclosure departments without formal training, according to court papers.
More on incentives (WaPo again): (So here we have Fannie Mae in the middle of yet another financial crisis.) More on the lawyers (NYT, via CR): [F]ormer employee recently testified that Mr. Credit Suisse lists mortgage servicers with highest Ginnie Mae delinquencies. Judges to Weigh Mortgage Document Destruction. Federal bankruptcy judges in Delaware are due to hold separate hearings Monday on requests by two defunct subprime mortgage lenders to destroy thousands of boxes or original loan documents. The requests, by trustees liquidating Mortgage Lenders Network USA and American Home Mortgage, come despite intense concerns that paperwork critical to foreclosures and securitized investments may be lost. A series of recent court rulings have increased the importance of original loan documents, holding that they are essential for investors to prove ownership of mortgages and to have the right to foreclose.
In the Mortgage Lenders case, the U.S. Attorney in Delaware has formally objected to the requested destruction because loss of the records "threatens to impair federal law enforcement efforts. " The former subprime lender shut down in February 2007. In a Jan. 6, 2010, motion, Neil Luria, the liquidating trustee, asked Bankruptcy Judge Peter J.
. © 2014 Thomson/Reuters. Flawed Mortgage Papers May Pose Economic Risk, Panel Says. Inside Job director on Geithner, Goldman, and criminal bankers - Fortune Finance. Charles Ferguson elaborates on his famous Oscar speech. by Adam Lashinsky, senior editor-at-large Inside Job, which recently won the Academy Aware for best documentary film of 2010, continues to be a conversation starter. Paul Krugman titled his latest column in The New York Times, "Another Inside Job. " Time Magazine's Joe Klein evokes director Charles Ferguson's now-famous acceptance speech at the Oscars in which the filmmaker lamented that so far no one has gone to jail for crimes to committed during the financial crisis of 2008. Despite lots of overheated rhetoric, it never has been completely clear to me exactly which crimes people think were committed.
If Klein, a political writer, has any ideas of specific crimes, he isn't letting on. He writes about "the shyster army peddling tricky mortgages, usurious credit-card rates and unscrupulous payday-check-cashing shops. " I put this question to Ferguson himself recently in a public interview in San Francisco. [audience applause] L: Good. Moral for CEOs Is Choose Your Fraud Carefully: Jonathan Weil. Of all the stories to come out of the 2008 collapses of Fannie Mae and Freddie Mac, this one may be the most incredible: To this day, neither company has admitted that any of the numbers on its financial statements that year were wrong.
It seems the Securities and Exchange Commission won’t be doing anything to challenge that pretense, either, and that this may be by design. The SEC for years has been bending over backward to avoid accusing major financial institutions of cooking their books, even when it’s obvious they did. So much for upholding financial integrity. Last week the regulator notified former Fannie Mae Chief Executive Officer Daniel Mudd that it may file civil claims against him. The allegations wouldn’t be about Fannie Mae’s accounting, though. They would focus on whether the government- chartered housing financier accurately disclosed to investors how much of its loans were subprime. There’s a pattern here. Accounting Violation IndyMac Collapse Paper Losses Shielding Auditors. Consumer Watchdog to Crack Down on 'Abusive' Home Lending. Michael Houghton for The New York TimesRichard Cordray of the Consumer Financial Protection Bureau. The Consumer Financial Protection Bureau has put mortgage companies and other lenders on notice: be on your best behavior.
Richard Cordray, the top cop at the new federal consumer watchdog, unveiled his enforcement agenda on Tuesday during a speech in Washington. At the top of the list: cracking down on “unfair, deceptive or abusive acts” by lenders. “Rooting out these bad actors will be good not only for consumers, but also for community banks and other financial companies that are committed to honest dealing and quality customer service,” he told the National Association of Attorneys General at the group’s spring meeting. It was a familiar crowd for Mr. Cordray, a former attorney general of Ohio. His speech to the attorneys general came at a critical time for the mortgage industry and the regulators that oversee it. Mr. “We will work directly with you,” Mr.
Warren tells the controversial truth Al Lewis. By Al Lewis NEW YORK (MarketWatch) — Certain members of Congress keep trying to kill the Consumer Financial Protection Bureau before it is born, but so far they’re losing to a former Sunday school teacher. “I am not going down on this agency without a fight,” Elizabeth Warren said earlier this month at a Society of American Business Writers and Editors meeting in Dallas. “It is a fight worth having.” Warren, who draws inspiration from Methodist Church co-founder John Wesley, has been preparing the way for the new agency to open July 21.
From the beginning, she’s fended off calls that she go away and battled legislation designed to kill, defund or otherwise neuter her baby. Reminds me of when our fearless leaders gutted the Securities and Exchange Commission and so many other regulatory agencies and then asked why there were so many Ponzi schemes. “The plan is, stick with our failed financial system,” Warren said of her congressional opponents and the banking industry that backs them.
Reuters. Wolters Kluwer Financial Services - Risk Headquarters | National Credit Union Association Threatens Lawsuit Against 4 Firms. Fed Stress Test 2011 Is A Farce. William K. Black: Foreclose on the Foreclosure Fraudsters, Part 1: Put Bank of America in Receivership. Ker-BOOM! Transformational Change in. Mortgage Settlement Term Sheet: Bailout as Reward for Institutionalized Fraud. 27_page_settlement2. How to Foreclose on Your Bank. Banks Saved $25 Billion By Under-Serving Delinquent Mortgages - Halah Touryalai - Working Capital. Foreclosure class-action lawsuits picking up nationwide. Banks Get Edge in Talks on Foreclosure Penalties as Feds Settle. U.S. May Pursue More Lenders After Suing Deutsche Bank on Loans. Ambac, Bankrupt Bond Insurer, Settles Subprime Assets Suit. Four States Weigh Bills to Make Appraisers Disregard Foreclosures - US Banker.
FDIC’s Bair: Millions of Foreclosures Could Be ‘Infected’ - Developments.