For years the public has vented about half-baked government settlements in which corporations and white-collar defendants “neither admit nor deny” the allegations against them. The Justice Department wasn’t about to go down that path when it unveiled its big, not-really-$13 billion deal this week with JPMorgan Chase & Co.
So the government made a few sly tweaks. The result is a mutant offspring of the no-admit genre that may be even less satisfying than the parent. JPMorgan didn’t have to admit to any violations of the law. And here’s the rub: The Justice Department didn’t allege any, either.
According to the settlement agreement, the bank will pay a civil penalty “pursuant to” a statute called the Financial Institutions Reform, Recovery and Enforcement Act. However, the Justice Department didn’t lodge any claims against JPMorgan for breaking that law or any other. This was an out-of-court settlement. The Justice Department didn’t file a complaint. No judge’s approval was needed.
Today we’re announcing an enforcement action against payday lender Cash America International, Inc., one of the largest short-term, small-dollar lenders in the country. The company has agreed to reimburse up to $14 million to approximately 14,000 people for robo-signing practices related to debt collection lawsuits. The company will also pay a $5 million penalty for the violations and other misconduct.
Who is eligible for a refund? You may be eligible for a full refund if you paid money because of a collections lawsuit from January 1, 2008 through October 1, 2012 to any of the following companies:
Ohio Neighborhood Finance, Inc., d/b/a Cashland
Cash America Pawn, Inc. of Ohio
Cashland Financial Services, Inc.
Cash America Net of Ohio, LLC
Ohio Neighborhood Credit Solutions, Inc.
CNU of Ohio, LLC.
If you have not already received your refund, or think you received the wrong amount of refund, please contact the company administering the refund no later than May 19, 2014. You can call them at (877) 524-8480 or find more information on their website: www.voluntaryloanrefundprogram.com
Problem with a payday loan? You can submit a complaint online or by calling (855) 411-2372.
You can also get clear, unbiased answers to questions about payday loans on Ask CFPB.
So when did the recruiting begin? Going from $155K to possibly $2.5 Million is a giant leap!
NYTIMES-
Neil H. MacBride, the former United States attorney in Alexandria, Va., will join Davis Polk & Wardwell as a partner, the firm will announce on Thursday.
In the latest example of a government prosecutor jumping to a high-paying law firm, Mr. MacBride will start in Davis Polk’s white-collar criminal defense practice early next year after four years in one of the country’s most prominent federal prosecutor’s offices. During his tenure, Mr. MacBride oversaw many newsworthy cases, including the criminal charges against Edward J. Snowden, who leaked classified documents from the National Security Agency, and the high-seas piracy convictions of 26 Somali pirates.
Between 2005 and 2007, affiliates of each of JPMorgan Chase & Co.(“JPMorgan”)1, The Bear Stearns Companies, Inc. (“Bear Stearns”), and Washington MutualBank (“WaMu”) securitized large amounts of subprime and Alt-A mortgage loans and sold theresulting residential mortgage-backed securities (“RMBS”) to investors, including federally insured financial institutions. Each of JPMorgan, Bear Stearns, and WaMu developed andmaintained mortgage origination and securitization processes and controls, including processes for conducting credit, compliance, and property valuation due diligence on loans prior toacquisition and/or securitization as well as processes for the monitoring of loan originators and sellers based, in part, on the subsequent performance of loans acquired from those parties.
JPMorgan, Bear Stearns, and WaMu described these processes to investors in marketingmaterials, and represented to investors in offering documents that loans generally complied with underwriting guidelines. As discussed below, employees of JPMorgan, Bear Stearns, and WaMureceived information that, in certain instances, loans that did not comply with underwriting guidelines were included in the RMBS sold and marketed to investors; however, JPMorgan, BearStearns, and WaMu did not disclose this to securitization investors.
JPMorgan
Between 2005 and 2007, JPMorgan purchased loans for the purpose of packaging and selling residential mortgage-backed securities. Before purchasing loans from third parties, employees at JPMorgan conducted “due diligence” to (1) confirm that the mortgage loans were originated consistent with specific origination guidelines provided by the seller, (2) confirm the mortgage loans were originated in compliance with Federal, State, and local laws, rules, and regulations, and (3) confirm that the property collateral had the value represented in the appraisal at the time of origination. Through that due diligence process, JPMorgan employees were informed by due diligence vendors that a number of the loans included in at least some of the loan pools that it purchased and subsequently securitized2 did not comply with the originators’ underwriting guidelines, and, in the vendors’ judgment, did not have sufficient compensating factors, and that a number of the properties securing the loans had appraised values that were higher than the values derived in due diligence testing from automated valuation models, broker price opinions or other valuation due diligence methods. In addition, JPMorgan represented to investors in various offering documents that loans in the securitized pools were originated “generally” in conformity with the loan originator’s underwriting guidelines; and that exceptions were made based on “compensating factors,” determined after “careful consideration” on a “case-by-case basis.” The offering documents further represented, with respect to representations and warranties made to JPMorgan by sellers and originators of the loans, that JPMorgan would not include any loan in a pool being securitized “if anything has come to [JPMorgan’s] attention that would cause it to believe that the representations and warranties of a seller or originator will not be accurate and complete in all material respects in respect of the loan as of the date of initial issuance of the related series of securities.” Notwithstanding these representations, in certain instances, at the time these representations were made to investors, the loan pools being securitized contained loans that did not comply with the originators’ underwriting guidelines.
JPMorgan began the process of creating RMBS by purchasing pools of loans from lending institutions, such as Countrywide Home Loans, Inc., or WMC Mortgage Corporation, that originated residential mortgages by making mortgage loans to individual borrowers. After entering into a contract to purchase loans, but prior to purchase, JPMorgan performed “due diligence” on samples of loans from the pool being acquired to ensure that the loans were originated in compliance with the originator’s underwriting guidelines.
JPMorgan salespeople marketed its due diligence process to investors through oral communications that were often scripted by internal sales memoranda, through presentations given at industry conferences, and to certain individual investors. In marketing materials, JPMorgan represented that the originators had a “solid underwriting platform,” and that JPMorgan was familiar with and approved the originators’ underwriting guidelines; that before purchasing a pool, a “thorough due diligence is undertaken to ensure compliance with [underwriting] guidelines”; and that such due diligence was “performed by industry leading 3rd parties (Clayton and Bohan).”
JPMorgan contracted with industry leading third party due diligence vendors to re-underwrite the loans it was purchasing from loan originators. The vendors assigned one of three grades to each of the loans they reviewed. An Event 1 grade meant that the loan complied with underwriting guidelines. An Event 2 meant that the loans did not comply with underwriting guidelines, but had sufficient compensating factors to justify the extension of credit. An Event 3 meant that the vendor concluded that the loan did not comply with underwriting guidelines and was without sufficient compensating factors to justify the loan, including in certain instances because material documents were missing from the loan file being reviewed. JPMorgan reviewed loans scored Event 3 by the vendors and made the final determination regarding each loan’s score. Event 3 loans that could not be cured were at times referred to by due diligence personnel at JPMorgan as “rejects.” JPMorgan personnel then made the final purchase decisions.
From January 2006 through September 2007, in the course of JPMorgan’s acquisition of certain pools of mortgage loans for subsequent securitization, JPMorgan’s due diligence vendors graded numerous loans in the samples as Event 3’s, meaning that, in the vendors’ judgment, they neither complied with the originators’ underwriting guidelines nor had sufficient compensating factors, including in many instances because of missing documentation such as appraisals, or proof of income, employment or assets. The exceptions identified by the third-party diligence vendors included, among other things, loans with high loan-to-value ratios (some over 100 percent); high debt-to-income ratios; inadequate or missing documentation of income, assets, and rental/mortgage history; stated incomes that the vendors concluded were unreasonable; and missing appraisals or appraisals that varied from the estimates obtained in the diligence process by an amount greater than JPMorgan’s fifteen percent established tolerance. The vendors communicated this information to certain JPMorgan employees.
JPMorgan directed that a number of the uncured Event 3 loans be “waived” into the pools facilitating the purchase of loan pools, which then went into JPMorgan inventory for securitization. In addition to waiving in some of the Event 3 loans on a case-by-case basis, some JPMorgan due diligence managers also ordered “bulk” waivers by directing vendors to override certain exceptions the JPMorgan due diligence managers deemed acceptable across all Event 3 loans with the same exceptions in a pool, without analyzing these loans on a case-by-case basis. JPMorgan due diligence managers sometimes directed these bulk waivers shortly before closing the purchase of a pool. Further, even though the Event 3 rate in the random samples indicated that the un-sampled portion of a pool likely contained additional loans with exceptions, JPMorgan purchased and securitized the loan pools without reviewing and eliminating those loans from the un-sampled portions of the pools.
According to a “trending report” prepared for client marketing purposes by one of JPMorgan’s due diligence vendors (later described by the vendor to be a “beta” or test report), from the first quarter of 2006 through the second quarter of 2007, of the 23,668 loans the vendor reviewed for JPMorgan, 6,238 of them, or 27 percent, were initially graded Event 3 loans and, according to the report, JPMorgan ultimately accepted or waived 3,238 of these Event 3 loans – 50 percent – to Event 2.
During the course of its due diligence process, JPMorgan also performed a valuation review. JPMorgan hired third-party valuation firms to test the appraisal’s estimate of the value of the mortgaged properties through a variety of data points, including (1) automated valuation models, (2) desk reviews of the appraisals by licensed appraisers, and (3) broker price opinions. After reviewing the relevant data, the valuation firm would provide a “final recommendation of value.” JPMorgan had a “tolerance” of 15 percent in the valuation review, meaning that JPMorgan would routinely accept loans for securitization, including those with loan-to-value ratios as high as 100 percent, when the valuation firm’s “final recommendation of value” was up to 15 percent under the appraised value. In the same marketing communications described above, JPMorgan salespeople disclosed that its property valuation review involved an “Automated review of appraisals, with secondary reviews undertaken for any loans outside of tolerance.” JPMorgan did not disclose that its “tolerance” was 15 percent.
In one instance, JPMorgan’s due diligence revealed that several pools from a single third-party originator contained numerous stated income loans (i.e., loans originated without written proof of the borrower’s income) where the vendor had concluded that borrowers had overstated their incomes. Initially, due diligence employees and at least two JPMorgan managers decided that these pools should be reviewed in their entirety, and all unreasonable stated income loans eliminated before the pools were purchased. After the originator of the loan pools objected, JPMorgan Managing Directors in due diligence, trading, and sales met with representatives of the originator to discuss the loans, then agreed to purchase two loan pools without reviewing those loan pools in their entirety as JPMorgan due diligence employees and managers had previously decided; waived a number of the stated income loans into the pools; purchased the pools; and subsequently securitized hundreds of millions of dollars of loans from those pools into one security. In addition, JPMorgan obtained an agreement from the originator to extend contractual repurchase rights for early payment defaults for an additional three months.
Prior to JPMorgan purchasing the loans, a JPMorgan employee who was involved in this particular loan pool acquisition told an Executive Director in charge of due diligence and a Managing Director in trading that due to their poor quality, the loans should not be purchased and should not be securitized. After the purchase of the loan pools, she submitted a letter memorializing her concerns to another Managing Director, which was distributed to other Managing Directors. JPMorgan nonetheless securitized many of the loans. None of this was disclosed to investors.
On some occasions, prospective investors in mortgage-backed securities marketed by JPMorgan requested specific data on the underlying loan pools, including information on due diligence results and loan characteristics, such as combined-loan-to-value ratios. JPMorgan employees sometimes declined to provide information to such investors concerning such loan data, including combined loan-to-value ratio data. In some instances, JPMorgan employees also provided data on the percentage of defective loans identified in its own due diligence process as a percentage of the pool that was acquired rather than as a percentage of the diligence sample, without disclosing the basis of their calculation.
Bear Stearns
Throughout the relevant time periods described below, Bear Stearns made various statements concerning the processes by which Bear Stearns monitored third party loan sellers and aspects of the performance of the loans Bear Stearns purchased from those sellers. Between 2006 and 2007, Bear Stearns purchased, securitized and sold to investors billions of dollars of Alt-A mortgage loans. Some of these loans were acquired by Bear Stearns through what was known as its “flow-conduit.” Flow-conduit loans were acquired by EMC Mortgage – a wholly owned Bear Stearns subsidiary – from a wide variety of sellers and mortgage originators (“Flow-Conduit Sellers”). After acquiring these loans, Bear Stearns would generally bundle them, securitize that bundled pool of loans, and sell the securities (“Flow- Conduit Securities”) to investors. Investors included federally-insured financial institutions and other institutional investors nationwide.
Between 2006 and 2007, Bear Stearns implemented a program for monitoring Flow- Conduit Sellers. Among other things, Bear Stearns monitored the financial well-being of the Flow-Conduit Sellers, tracked aspects of the performance of loans being originated by individual Flow-Conduit Sellers, and reviewed a sample of the loans post-acquisition to determine whether they complied with certain underwriting and/or origination standards.
Beginning in approximately June 2006 and continuing through 2007, as part of its monitoring program, Bear Stearns assigned “grades” to individual sellers. Bear Stearns employed different grading systems over different time periods. But, at relevant times, the Bear Stearns grading system included a grade of “F” for sellers whose financial condition or credit profile, loan performance, and claims history warranted significant scrutiny and potentially a discontinuation of the business relationship, and also allowed for sellers to be “suspended” or “terminated.”
Flow-Conduit Securities typically included loans from many, and in some cases, as many as hundreds, of Flow-Conduit Sellers. Prospectus supplements for Flow-Conduit Securities were required by regulation to identify the Flow-Conduit Sellers only if those sellers exceeded a specified concentration of loans in the security pool. In only one security during the relevant period, a Flow-Conduit Seller exceeded that concentration; in that instance, the prospectus supplement identified the relevant Flow-Conduit Seller. Consistent with the applicable regulatory disclosure requirements, Bear Stearns did not otherwise identify the Flow- Conduit Sellers in any given security.
Bear Stearns discussed its seller monitoring process with certain investors. In some communications with investors, Bear Stearns described its seller approval and seller monitoring processes as a way to filter out poor-performing sellers. Bear Stearns informed certain investors in Flow-Conduit Securities that, as a result of Bear Stearns’ seller monitoring, certain Flow-Conduit Sellers had been terminated or suspended. Bear Stearns further communicated that it would not continue to purchase loans originated by terminated or suspended sellers. Certain of this same information was also communicated to rating agencies in January 2007. Between 2006 and 2007, certain Flow-Conduit Securities included a number of loans originated by sellers that, at the time of securitization, had received “F” grades, or had been designated as “suspended” or “terminated.” Purchasers of Flow-Conduit Securities were not informed as to the presence of loans from those sellers in Flow-Conduit Securities.
In certain instances, Bear Stearns employed a quality control process to review the loans after they had been purchased, which meant in certain circumstances that the loans were already included in Flow-Conduit Securities (among other securities) when the review took place. In certain investor presentations and communications, Bear Stearns stated that its loan acquisition processes included post-purchase quality control reviews, but, by the end of the relevant time period, once Bear Stearns made a decision to suspend or terminate and discontinue loan purchases from sellers, it did not undertake this post-purchase review for loans that had been originated by those Flow-Conduit Sellers. The absence of a quality control process for such loans meant that Bear Stearns did not take certain steps that might have been undertaken to cure potential exceptions in the underlying loans, or to determine if Bear Stearns had to repurchase them out of the trusts holding them for investors.
Bear Stearns personnel, including certain managers, were aware that Flow- Conduit Securities included a number of loans from poorly graded Flow-Conduit Sellers, and were likewise aware that the loans originated by these poorly graded sellers sometimes experienced high rates of default. At least one Bear Stearns employee questioned the continued inclusion of loans from those sellers in Flow-Conduit Securities.
Certain of the Flow-Conduit Securities also included loans acquired through bulk purchases of pools of loans from larger originators (“bulk purchases”) rather than from Flow- Conduit Sellers. For bulk purchases of Alt-A, as well as subprime, loans, Bear Stearns often conducted credit-related due diligence on the loan pool (or, in the case of Alt-A loans, on a sample of the loan pool) to be acquired. Bear Stearns typically hired a third-party due diligence vendor to review the loans selected for diligence and to provide a score reflecting the vendor’s judgment as to whether the loan was originated in accordance with applicable underwriting guidelines or had adequate compensating factors.
Bear Stearns’ due diligence managers reviewed the vendor’s determinations and made the final decision as to whether Bear Stearns would purchase the loan or not. In certain circumstances, Bear Stearns due diligence managers or other employees determined after their review of the loans that, notwithstanding a vendor’s identification of exceptions to specified underwriting guidelines, Bear Stearns would purchase loans where there was a variance from the guidelines that the managers or other employees deemed acceptable. In addition, Bear Stearns completed bulk purchases of Alt-A loan pools even though the rate of loans with exceptions in the due diligence samples indicated that the un-sampled portion of a pool likely contained additional loans with exceptions.
The last securitization by Bear Stearns was in 2007. The conduct described above with respect to Bear Stearns all occurred prior to JPMorgan’s acquisition of Bear Stearns in March 2008.
WaMu
Prior to WaMu’s failure and closure by the Office of Thrift Supervision (“OTS”) in 2008, internal WaMu reviews indicated specific instances of weaknesses in WaMu’s loan origination and underwriting practices, including, at times, non-compliance with underwriting standards; the reviews also revealed instances of borrower fraud and misrepresentations by others involved in the loan origination process with respect to the information provided for loan qualification purposes. WaMu did not disclose to securitization investors in written offering materials the information from its internal reviews concerning instances of borrower fraud and misrepresentations regarding borrower credit, compliance, and property valuation, in the origination of loans, including as to loans that were sold into securitizations. WaMu also did not disclose to investors information regarding instances of fraudulent and/or poor underwriting by certain non-WaMu loan originators who sold loans to WaMu, the fact that certain internal processes and controls were determined by internal reviews to have been ineffective in certain circumstances in preventing weak loan origination practices, or that the systems and data issues led to certain instances of delinquent loans being included in pools that were securitized in RMBS offerings. The last securitization by Washington Mutual was in 2007.
On September 25, 2008, the OTS seized Washington Mutual Bank and placed it into receivership with the Federal Deposit Insurance Corporation (“FDIC”). After the bank’s failure, JPMorgan acquired WaMu’s assets and certain specified liabilities from the FDIC. The actions and omissions described above with respect to WaMu occurred prior to OTS’s closure of WaMu and JPMorgan’s acquisition of the identified WaMu assets and liabilities.
update: I over analyzed the confusing wording in the exhibit below. Still working on peeling away at the layers to uncover the truth. Especially the real 118 page agreement that was not made public.
The explosion of non-bank mortgage servicers is hurting American homeowners.
In These times-
…And that’s because the nation’s largest non-bank mortgage servicer has supplied its legions of outsourced customer reps in India with a software program that gauges the stress level of callers. Aided in its design by a team of 16 social psychologists, this new wrinkle on mortgage servicing was first reported in a December 2011 article in the Wall Street Journal. By analyzing speech patterns of past calls, the program coaches reps on how to respond to incoming questions posed by often dazed, confused and angry homeowners regarding such matters as incomprehensible penalties and fees on their monthly statements, or why they’ve been peppered with foreclosure notices after having, they thought, negotiated a loan modification. If the history of consumer complaints regarding Ocwen Financial Corporation is any indication, the software program may be keyed to stress-level categories ranging from mildly pissed to hot under the collar to positively postal.
Back in October, a man who goes by the name of Reverend Billy, AKA Bill Talen, appeared at JP Morgan to protest the bank’s financing of “mountaintop removal, dirty coal, fracking, and other types of fossil fuel extraction.”* He did so by entering the building, along with members of his Stop Shopping choir who were dressed as frogs, heading up to the third floor (where wealth management offices are located), and belting out a tune on the subject. The Reverend delivered a sermon about JP Morgan’s role in climate change (via its investments), and his flock passed out informational pamphlets to clients and employees. They exited stage left and shortly thereafter, Billy and his choir director were arrested while waiting for the F train.
UPDATE #2: JPMORGAN CFO SAYS $7 BILLION OF COMPENSATORY PAYMENTS WILL BE TAX DEDUCTIBLE –
$2B Civil Penalty Isn’t Tax Deductible
Department of Justice
Office of Public Affairs
FOR IMMEDIATE RELEASE
Tuesday, November 19, 2013
.
Justice Department, Federal and State Partners Secure Record $13 Billion Global Settlement with JPMorgan for Misleading Investors About Securities Containing Toxic Mortgages
.
The Justice Department, along with federal and state partners, today announced a $13 billion settlement with JPMorgan – the largest settlement with a single entity in American history – to resolve federal and state civil claims arising out of the packaging, marketing, sale and issuance of residential mortgage-backed securities (RMBS) by JPMorgan, Bear Stearns and Washington Mutual prior to Jan. 1, 2009. As part of the settlement, JPMorgan acknowledged it made serious misrepresentations to the public – including the investing public – about numerous RMBS transactions. The resolution also requires JPMorgan to provide much needed relief to underwater homeowners and potential homebuyers, including those in distressed areas of the country. The settlement does not absolve JPMorgan or its employees from facing any possible criminal charges.
This settlement is part of the ongoing efforts of President Obama’s Financial Fraud Enforcement Task Force’s RMBS Working Group.
“Without a doubt, the conduct uncovered in this investigation helped sow the seeds of the mortgage meltdown,” said Attorney General Eric Holder. “JPMorgan was not the only financial institution during this period to knowingly bundle toxic loans and sell them to unsuspecting investors, but that is no excuse for the firm’s behavior. The size and scope of this resolution should send a clear signal that the Justice Department’s financial fraud investigations are far from over. No firm, no matter how profitable, is above the law, and the passage of time is no shield from accountability. I want to personally thank the RMBS Working Group for its tireless work not only in this case, but also in the investigations that remain ongoing.”
The settlement includes a statement of facts, in which JPMorgan acknowledges that it regularly represented to RMBS investors that the mortgage loans in various securities complied with underwriting guidelines. Contrary to those representations, as the statement of facts explains, on a number of different occasions, JPMorgan employees knew that the loans in question did not comply with those guidelines and were not otherwise appropriate for securitization, but they allowed the loans to be securitized – and those securities to be sold – without disclosing this information to investors. This conduct, along with similar conduct by other banks that bundled toxic loans into securities and misled investors who purchased those securities, contributed to the financial crisis.
“Through this $13 billion resolution, we are demanding accountability and requiring remediation from those who helped create a financial storm that devastated millions of Americans,” said Associate Attorney General Tony West. “The conduct JPMorgan has acknowledged – packaging risky home loans into securities, then selling them without disclosing their low quality to investors – contributed to the wreckage of the financial crisis. By requiring JPMorgan both to pay the largest FIRREA penalty in history and provide needed consumer relief to areas hardest hit by the financial crisis, we rectify some of that harm today.”
Of the record-breaking $13 billion resolution, $9 billion will be paid to settle federal and state civil claims by various entities related to RMBS. Of that $9 billion, JPMorgan will pay $2 billion as a civil penalty to settle the Justice Department claims under the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA), $1.4 billion to settle federal and state securities claims by the National Credit Union Administration (NCUA), $515.4 million to settle federal and state securities claims by the Federal Deposit Insurance Corporation (FDIC), $4 billion to settle federal and state claims by the Federal Housing Finance Agency (FHFA), $298.9 million to settle claims by the State of California, $19.7 million to settle claims by the State of Delaware, $100 million to settle claims by the State of Illinois, $34.4 million to settle claims by the Commonwealth of Massachusetts, and $613.8 million to settle claims by the State of New York.
JPMorgan will pay out the remaining $4 billion in the form of relief to aid consumers harmed by the unlawful conduct of JPMorgan, Bear Stearns and Washington Mutual. That relief will take various forms, including principal forgiveness, loan modification, targeted originations and efforts to reduce blight. An independent monitor will be appointed to determine whether JPMorgan is satisfying its obligations. If JPMorgan fails to live up to its agreement by Dec. 31, 2017, it must pay liquidated damages in the amount of the shortfall to NeighborWorks America, a non-profit organization and leader in providing affordable housing and facilitating community development.
The U.S. Attorney’s Offices for the Eastern District of California and Eastern District of Pennsylvania and the Justice Department’s Civil Division, along with the U.S. Attorney’s Office for the Northern District of Texas, conducted investigations into JPMorgan’s, Washington Mutual’s and Bear Stearns’ practices related to the sale and issuance of RMBS between 2005 and 2008.
“Today’s global settlement underscores the power of FIRREA and other civil enforcement tools for combatting financial fraud,” said Assistant Attorney General for the Civil Division Stuart F. Delery, co-chair of the RMBS Working Group. “The Civil Division, working with the U.S. Attorney’s Offices and our state and agency partners, will continue to use every available resource to aggressively pursue those responsible for the financial crisis.”
“Abuses in the mortgage-backed securities industry helped turn a crisis in the housing market into an international financial crisis,” said U.S. Attorney for the Eastern District of California Benjamin Wagner. “The impacts were staggering. JPMorgan sold securities knowing that many of the loans backing those certificates were toxic. Credit unions, banks and other investor victims across the country, including many in the Eastern District of California, continue to struggle with losses they suffered as a result. In the Eastern District of California, we have worked hard to prosecute fraud in the mortgage industry. We are equally committed to holding accountable those in the securities industry who profited through the sale of defective mortgages.”
“Today’s settlement represents another significant step towards holding accountable those banks which exploited the residential mortgage-backed securities market and harmed numerous individuals and entities in the process,” said U.S. Attorney for the Eastern District of Pennsylvania Zane David Memeger. “These banks packaged and sold toxic mortgage-backed securities, which violated the law and contributed to the financial crisis. It is particularly important that JPMorgan, after assuming the significant assets of Washington Mutual Bank, is now also held responsible for the unscrupulous and deceptive conduct of Washington Mutual, one of the biggest players in the mortgage-backed securities market.”
This settlement resolves only civil claims arising out of the RMBS packaged, marketed, sold and issued by JPMorgan, Bear Stearns and Washington Mutual. The agreement does not release individuals from civil charges, nor does it release JPMorgan or any individuals from potential criminal prosecution. In addition, as part of the settlement, JPMorgan has pledged to fully cooperate in investigations related to the conduct covered by the agreement.
To keep JPMorgan from seeking reimbursement from the federal government for any money it pays pursuant to this resolution, the Justice Department required language in the settlement agreement which prohibits JPMorgan from demanding indemnification from the FDIC, both in its capacity as a corporate entity and as the receiver for Washington Mutual.
“The settlement announced today will provide a significant recovery for six FDIC receiverships. It also fully protects the FDIC from indemnification claims out of this settlement,” said FDIC Chairman Martin J. Gruenberg. “The FDIC will continue to pursue litigation where necessary in order to recover as much as possible for FDIC receiverships, money that is ultimately returned to the Deposit Insurance Fund, uninsured depositors and creditors of failed banks.”
“NCUA’s Board extends our thanks and appreciation to our attorneys and to the Department of Justice, who have worked closely together for more than three years to bring this matter to a successful resolution,” said NCUA Board Chairman Debbie Matz. “The faulty mortgage-backed securities created and packaged by JPMorgan and other institutions created a crisis in the credit union industry, and we’re pleased a measure of accountability has been reached.”
“JPMorgan and the banks it bought securitized billions of dollars of defective mortgages,” said Acting FHFA Inspector General Michael P. Stephens. “Investors, including Fannie Mae and Freddie Mac, suffered enormous losses by purchasing RMBS from JPMorgan, Washington Mutual and Bear Stearns not knowing about those defects. Today’s settlement is a significant, but by no means final step by FHFA-OIG and its law enforcement partners to hold accountable those who committed acts of fraud and deceit. We are proud to have worked with the Department of Justice, the U.S. attorneys in Sacramento and Philadelphia and the New York and California state attorneys general; they have been great partners and we look forward to our continued work together.”
The attorneys general of New York, California, Delaware, Illinois and Massachusetts also conducted related investigations that were critical to bringing about this settlement.
“Since my first day in office, I have insisted that there must be accountability for the misconduct that led to the crash of the housing market and the collapse of the American economy,” said New York Attorney General Eric Schneiderman, Co-Chair of the RMBS Working Group. “This historic deal, which will bring long overdue relief to homeowners around the country and across New York, is exactly what our working group was created to do. We refused to allow systemic frauds that harmed so many New York homeowners and investors to simply be forgotten, and as a result we’ve won a major victory today in the fight to hold those who caused the financial crisis accountable.”
“JP Morgan Chase profited by giving California’s pension funds incomplete information about mortgage investments,” California Attorney General Kamala D. Harris said. “This settlement returns the money to California’s pension funds that JP Morgan wrongfully took from them.”
“Our financial system only works when everyone plays by the rules,” said Delaware Attorney General Beau Biden. “Today, as a result of our coordinated investigations, we are holding accountable one of the financial institutions that, by breaking those rules, helped cause the economic crisis that brought our nation to its knees. Even as the American people recover from this crisis, we will continue to seek accountability on their behalf.”
“We are still cleaning up the mess that Wall Street made with its reckless investment schemes and fraudulent conduct,” said Illinois Attorney General Lisa Madigan. “Today’s settlement with JPMorgan will assist Illinois in recovering its losses from the dangerous and deceptive securities that put our economy on the path to destruction.”
“This is a historic settlement that will help us to hold accountable those investment banks that played a role in creating and exacerbating the housing crisis,” said Massachusetts Attorney General Martha Coakley. “We appreciate the work of the Department of Justice and the other enforcement agencies in bringing about this resolution and look forward to continuing to work together in other securitization cases.”
The RMBS Working Group is a federal and state law enforcement effort focused on investigating fraud and abuse in the RMBS market that helped lead to the 2008 financial crisis. The RMBS Working Group brings together more than 200 attorneys, investigators, analysts and staff from dozens of state and federal agencies including the Department of Justice, 10 U.S. attorney’s offices, the FBI, the Securities and Exchange Commission (SEC), the Department of Housing and Urban Development (HUD), HUD’s Office of Inspector General, the FHFA-OIG, the Office of the Special Inspector General for the Troubled Asset Relief Program, the Federal Reserve Board’s Office of Inspector General, the Recovery Accountability and Transparency Board, the Financial Crimes Enforcement Network, and more than 10 state attorneys general offices around the country.
The RMBS Working Group is led by five co-chairs: Assistant Attorney General for the Civil Division Stuart Delery, Acting Assistant Attorney General for the Criminal Division Mythili Raman, Co-Director of the SEC’s Division of Enforcement George Canellos, U.S. Attorney for the District of Colorado John Walsh and New York Attorney General Eric Schneiderman.
Learn more about the RMBS Working Group and the Financial Fraud Enforcement Task Force at: www.stopfraud.gov.
HSBC BANK USA, NA, AS TRUSTEE ON CASE NO. 08-80371 (CA 27) BEHALF OF THE JP MORGAN ALTERNATIVE LOAN TRUST 2006-A7, MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2006-A7, Plaintiff,
v.
IVOR H ROSE, RITA STARR; et al., Defendants/Counter-Plaintiffs,
v.
METROPOLITAN MORTGAGE COMPANY OF MIAMI, STEWART TITLE GUARANTY COMPANY, et al., Counter-Defendants. _____________________________________________________/ U.S. BANK NATIONAL ASSOCIATION, AS CASE NO. 09-47829 (CA 27) TRUSTEE OF JP MORGAN ALTERNATIVE LOAN TRUST 2006-A6, Plaintiff,
v.
IVOR H ROSE, RITA STARR; et al., Defendants/Counter-Plaintiffs,
v.
METROPOLITAN MORTGAGE COMPANY OF MIAMI, STEWART TITLE GUARANTY COMPANY, et al., Counter-Defendants. _____________________________________________________/ U.S. BANK NATIONAL ASSOCIATION, AS CASE NO. 09-47944 (CA 27) TRUSTEE FOR THE HOLDERS OF GSAA HOME EQUITY TRUST 2006-20 ASSETBACKED CERTIFICATES SERIES 2006-20, Plaintiff,
v.
IVOR H ROSE, RITA STARR; et al., Defendants/Counter-Plaintiffs,
v.
METROPOLITAN MORTGAGE COMPANY OF MIAMI, STEWART TITLE GUARANTY COMPANY, et al., Counter-Defendants. _____________________________________________________/ CITIBANK, N.A., AS TRUSTEE FOR THE CASE NO. 09-56135 (CA 27) HOLDERS OF BEAR STEARNS ALT-A TRUST 2006-7, MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2006-7, Plaintiff,
v.
IVOR H ROSE, RITA STARR; et al., Defendants/Counter-Plaintiffs,
v.
METROPOLITAN MORTGAGE COMPANY OF MIAMI, STEWART TITLE GUARANTY COMPANY, et al., Counter-Defendants. _____________________________________________________/
AFFIDAVIT OF DANIEL K. SCHERRER
BEFORE ME, the undersigned authority, Daniel J. Scherrer personally appeared who after being first duly sworn, deposes, and says as follows:
1. This Affidavit is made based upon my own personal knowledge.
2. My name is Daniel J. Scherrer and I currently reside at XXXXXXXXXX
3. In 2006, I was the Branch Manager for Countrywide Home loans Inc.’s office located at 1691 Michigan Ave Ste 230, Miami Beach, FL 33139
4. Attached are Uniform Residential Loan Applications (“URLA”) for four (4) properties as shown in Section II of the URLAs:
a. Exhibit A – 1827 Michigan Ave., Miami Beach, FL 33139-2418 b. Exhibit B -1801 Michigan Ave., Miami Beach, FL 33139-2418 c. Exhibit C -1800 Michigan Ave., Miami Beach, FL 33139-2395 d. Exhibit D -1810 Michigan Ave., Miami Beach, FL 33139-2419
5. The subject Uniform Residential Loan Applications were prepared and processed by my office at 1691 Michigan Ave Ste 230.
6. My purported signature appears in the signature block as the “Interviewer” on page 3 of each Exhibit.
a. I did not sign any of the four (4) URLAs. b. I did not authorize any other person to sign my name to any of the four ( 4) URLA’s. c. I never met Rita Starr or lvor Rose. d. I never took a “Telephone” application or “Face-to-face” application from Rita Starr and/ or lvor Rose as represented by the Exhibits
7. This affidavit is made and given by Affiant with full knowledge of applicable Florida laws regarding sworn affidavits and the penalties and liabilities resulting from false statements and misrepresentations therein.
————————————————————— 1 I met and spoke with Rita Starr for the first time in 2013.
Micah Schnall, App. v. Deutsche Bank National Trust Company, Res., 68516-3 (Wash. Ct. App. 2013) Court of Appeals of Washington
Date Filed: November 18th, 2013 Status: Non-Precedential Docket Number: 68516-3 Fingerprint: 4dc8a463036f7175006b6653d81e9cf91fb057db
IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
MICAH SCHNALL,
Appellant,
v.
DEUTSCHE BANK NATIONAL TRUST COMPANY, MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, and JOHN DOEs inclusive 1 through 20,
Respondents.
UNPUBLISHED OPINION FILED: November 18, 2013
Lau, J. — Micah Schnall appeals the CR 12(b)(6) dismissal of his complaint
against Deutsche Bank National Trust Company and Mortgage Electronic Registration
Systems (MERS), claiming violations of the Consumer Protection Act (CPA), chapter
19.86 RCW, and the deeds of trust act (DTA), chapter 61.24 RCW. Schnall also
appeals the denials of a preliminary injunction and a motion to amend his complaint.
Because Schnall’s complaint alleged facts that, if proved at trial, would f ntitle him to
some relief, we reverse in part and remand for further proceedings.
FACTS
In October 2006, Micah Schnall executed a promissory note in the amount of
$460,000 to Quicken Loans. The loan was secured by a deed of trust encumbering 68516-3-1/2
Schnall’s real property in Redmond, Washington. The deed of trust identified Quicken
Loans as the lender, Stewart Title as the trustee, and MERS, “a separa e corporation
that is acting solely as a nominee for Lender and Lender’s successors ^ind assigns,” as the beneficiary. At some point, Schnall’s loan was sold to a securitized trust known as
“IndyMac INDX Mortgage Loan Trust 2006-AR39” (IndyMac Trust), Deutsche Bank serves as the trustee of the IndyMac Trust.
Schnall defaulted on the note. On August 18, 2010, MERS, “as nominee for
Quicken Loans,” assigned all beneficial interest in the deed of trust to Deutsche Bank in
its capacity as trustee of the IndyMac trust. The following day, Deutsch^ Bank
appointed Regional Trustee Services Corporation (RTSC) to succeed Stewart Title as
trustee under the deed of trust. On August 24, 2010, RTSC issued Schnall a notice of
default. RTSC scheduled a trustee’s sale for June 10, 2011.1
On June 3, 2011, Schnall sued Deutsche Bank and MERS, alleging violations of the CPA, chapter 19.86 RCW and the DTA, chapter 61.24 RCW.2 Schriell sought
damages, declaratory relief, and a preliminary injunction restraining the trustee’s sale.
On July 27, 2011, the trial court denied Schnall’s motion for a pre nminary
injunction.3 On November 10, 2011, Deutsche Bank and MERS moved to dismiss the suit under CR 12(b)(6). Schnall subsequently moved to amend the coniplaint to add
1 The trustee’s sale was originally scheduled for February 11, 2011, but was stayed when Schnall filed for bankruptcy.
2 Schnall also alleged violations of the federal Truth in Lending Act and Real Estate Settlement Procedures Act, but he abandoned those claims on appeal.
3 Schnall filed a second motion for a preliminary injunction, whicfi was denied on November 17, 2011.
-2- 68516-3-1/3
RTSC as a defendant and to incorporate additional facts and claims. The superior court
dismissed Schnall’s complaint without prejudice and denied Schnall’s rrtotion to amend
the complaint. The trial court subsequently denied Schnall’s motion for
reconsideration.4 Schnall appeals.
ANALYSIS
As a preliminary issue, we note that a dismissal without prejudio is not
appealable as a matter of right unless its effect is to determine the actic-n and prevent a
final judgment or to discontinue the action. RAP 2.2(a)(3); Munden v. Hazel rigg, 105
Wn.2d 39, 44,
711 P.2d 295
(1985). As Schnall’s reply brief tacitly acknowledges, it is
clear that the dismissal is not appealable under the above rule. The statute of
limitations had not run, and Schnall would have been entitled to refile hiis complaint.5
However, RAP 5.1(c) provides that a notice of appeal of a decision that is not
appealable will be treated as a notice for discretionary review. Under RAP 2.3(b)(2),
discretionary review will be accepted if the superior court has committed probable error
and the decision substantially limits the freedom of a party to act. Although neither
party has addressed the factors in RAP 2.3(b)(2), for the reasons discussed below, we
conclude that this appeal meets that standard and we accept discretionary review.
4 Though Schnall appealed the denial of his motion for reconsideration, he did not assign error to this order or otherwise challenge it on appeal. We therefore do not address it. See RAP 10.3(a)(4), (6).
5 See RCW 19.86.120 (limitations period for CPA claims is four years from the accrual of the cause of action); RCW 61.24.127 (limitations period for c aims made under the DTA is two years from the date of the foreclosure sale). -3- 68516-3-1/4
Standard of Review
Under CR 12(b)(6), a complaint may be dismissed if it fails to state a claim upon
which relief can be granted. The superior court properly dismisses a ctaim pursuant to
CR 12(b)(6) only “‘f it appears beyond a reasonable doubt that no facts exist that would
justify recovery.'” Atchison v. Great W. Malting Co., 161 Wn.2d 372 37(6, 166P.3d662
For purposes of a CR 12(b)(6) motion, we presume the plaintiff’s a Negations in the
complaint to be true. Cutler, 124 Wn.2d at 755. Moreover, in determin ing whether
dismissal is warranted, we may consider hypothetical facts outside of the record,
Burton v. Lehman, 153 Wn.2d 416, 422,
103 P.3d 1230
(2005). We review a CR
12(b)(6) dismissal de novo. Atchison, 161 Wn.2d at 376.
Rulings on motions to amend the complaint and for an injunction are within the
discretion of the trial court and may be reversed only for a manifest abuse of discretion.
See Lincoln v. Transamerica Inv. Corp., 89 Wn.2d 571, 577, 573 P.2d 316(1978)
(addressing motions to amend); Resident Action Council v. Seattle Hous Auth., 177
Wn.2d 417, 428,
300 P.3d 376
(2013) (grant or denial of an injunction). A superior court
abuses its discretion if its decision is manifestly unreasonable or based on untenable
grounds or untenable reasons. In re Marriage of Littlefield, 133 Wn.2d |39, 46-47,
940 P.2d 1362
(1997).
Deeds of Trust Act
Schnall alleges that the notice of default violated the DTA because it “did not clearly specify a beneficiary or noteholder, depriving Plaintiff of the opportunity to j
scrutinize and defend against action by the anonymous initiator of foredlosure action.”
-4- 68516-3-1/5
As we have done in recent cases raising similar issues, including Walker v. Quality Loan Service Corp.. Wn. App. ,
308 P.3d 716
(2013), and Bavdnd v. OneWest
Bank, F.S.B.. Wn. App. ,
309 P.3d 636
(2013), we characterize Schnall’s claims
of “wrongful foreclosure” as claims of damages arising from violations of the DTA.
Under the DTA, “only a proper beneficiary has the power to apppint a successor
to the original trustee named in the deed of trust.” Bavand, 309 P.3d at 720. Moreover,
“only a properly appointed trustee may conduct a nonjudicial foreclosur^ ” Bavand, 309
P.3d at 642. Accordingly, “when an unlawful beneficiary appoints a sudcessor trustee,
the putative trustee lacks the legal authority to record and serve a notic^ of trustee’s sale.” Walker, 308 P.3d at 720-21.
Approximately eight months after the dismissal of Schnall’s complaint, the
Washington Supreme Court issued its decision in Bain v. Metropolitan Mortgage Group,
inc., 175 Wn.2d 83, 93,
285 P.3d 34
(2012). Bain held that MERS is ” ineligible “ah
‘beneficiary within the terms of the Washington Deed of Trust Act,’ if it riever held the
promissory note or other debt instrument secured by the deed of trust.” Bain, 175
Wn.2d at 110. Instead, “only the actual holder of the promissory note or other
instrument evidencing the obligation may be a beneficiary with the power to appoint a
trustee to proceed with a nonjudicial foreclosure on real property.” Bain , 175Wn.2dat
89.
Here, Schnall alleges that MERS never held his note and, therefore , lacked
authority to act as a beneficiary under the DTA. He further alleges that if MERS was not
the holder, it lacked the authority to assign the deed of trust and note to Deutsche Bank.
Finally, Schnall reasons, because the assignment to Deutsche Bank wgs ineffective,
-5- 68516-3-1/6
Deutsche Bank’s designation of RTSC as successor trustee was also ineffective, and
RTSC lacked authority to initiate nonjudicial foreclosure proceedings. For the purpose
of this appeal, we accept Schnall’s allegations as true. Thus, Schnall hps pleaded facts
sufficient to show a violation of the DTA.
Deutsche Bank and MERS attempt to distinguish Bain, arguing tjnat the
assignment executed by MERS is valid because MERS acted solely as an agent for the
lender, Quicken Loans. But this same argument was raised and rejected in Bain
MERS attempts to sidestep this portion of traditional agency law by pointing to the language in the deeds of trust that describe MERS as “acting solely as a nominee for Lender and Lender’s successors and assigns.” But MERS offers no authority for the implicit proposition that the lender’s nomination of MERS as a nominee rises to an agency relationship with successor noteholders. MERS fails to identify the entities that control and are accountable for its actions. It has not established that it is an agent for a lawful principal.
Bain, 175 Wn.2d at 107 (citations and footnote omitted). Moreover, Schnall argues,
MERS could not have been acting as an agent for Quicken Loans in assigning the loan
to Deutsche Bank because, by the time of the assignment, Schnall’s loein had been sold
to the IndyMac trust.
Deutsche Bank and MERS also argue that Deutsche Bank proved it was the
lawful holder by demonstrating physical possession of the note. But this situation was
also addressed by Bain:
The difficulty with MERS’s argument is that if in fact MERS is not the beneficiary, then the equities of the situation would likely (though not necessarily in every case) require the court to deem that the real beneficiary is the lender whose interests were secured by the deed of trust or that lender’s successors. If the original lender had sold the loan, that purchaser would need to establish ownership of that loan, either by demonstrating that it actually held the promissory note or by documenting the chain oftransactions. Having MERS convey its “interests” would not accomplish this. 68516-3-1/7
Bain, 175 Wn.2d at 111 (footnote omitted). At a hearing on Schnall’s second motion for a preliminary injunction on September 27, 2011, counsel for Deutsche EJank presented
Schnall’s original note. But Schnall argues this was insufficient to show that Deutsche
Bank was the holder of the note on the date that it appointed RTSC as l:r rustee.
Presuming the facts stated by Schnall to be true, Schnall’s claim under the DTA
is a claim upon which relief could be granted. Accordingly, the superior court erred in
dismissing this claim pursuant to CR 12(b)(6).
Schnall further argues that because the trustee’s sale occurred outside the time
limits of RCW 61.24.040(6), RTSC lacked the statutory authority to conduct the sale.
Schnall concedes he did not raise this issue below. Even in the context of a CR
12(b)(6) motion, a litigant may not raise a legal issue for the first time on appeal when it
has failed to do so in the lower court. RAP 2.5(a); Karlberg v. Often, 167 Wn. App. 522,
531,
280 P.3d 1123
(2012) (“A failure to preserve a claim of error by presenting it first to the trial court generally means the issue is waived. While an appellate court retains the
discretion to consider an issue raised for the first time on appeal, such discretion is
rarely exercised.”). (Citation omitted.) Moreover, Schnall failed to name RTSC as a
party in his original complaint. We decline to address this issue.
Consumer Protection Act
Under Washington’s CPA, “[ujnfair methods of competition and Unfair or deceptive acts or practices in the conduct of any trade or commerce are . . . unlawful.” RCW 19.86.020. To prevail on a CPA claim, a plaintiff must prove (1) the defendant
engaged in an unfair or deceptive act or practice, (2) that the act occurred in trade or commerce, (3) that the act affects the public interest, (4) that the plaintiff suffered injury -7- 68516-3-1/8
to his business or property, and (5) the injury was causally related to the act. Hangman
Ridge Training Stables, Inc. v. Safeco Title Ins. Co.. 105 Wn.2d 778, 780 , 719P.2d531
(1986). The failure to establish even one of these elements is fatal to the claim. Indoor
Billboard/Wash., Inc. v. Integra Telecom of Wash.. Inc.. 162 Wn.2d 59, 74, 170P.3d10
(2007).
Schnall’s opening brief devotes a mere two sentences to his CPA claim. He cites
only to Bain, arguing that Bain “indicates there may be a Consumer Protection Act
violation, where the Deed of Trust seeks to label MERS as beneficiary.” Appellant’s Br.
at 18. But Bain held that only the first and third criteria are presumptively met when
MERS is characterized as the beneficiary in a deed of trust; it did not hold that the injury
and causation elements were conclusively established. Schnall has no argued on
appeal that his complaint adequately pleaded all five criteria of a CPA claim This court
will not consider arguments that an appellant has not developed in its opening brief and
for which the appellant has cited no authority. State v. Bello, 142 Wn. App. 930, 932
n.3,
176 P.3d 554
(2008); see also Saunders v. Lloyd’s of London, 113 Wn.2d 330, 345,
779 P.2d 249
(1989) (“Absent adequate, cogent argument and briefing, we decline to
wander through the complexities of the Consumer Protection Act.”). We therefore hold
that Schnall has abandoned his CPA claim on appeal.
Motion to Amend Complaint
Schnall assigns error to the superior court’s denial of his motion amend his
complaint to add RTSC as a party and to incorporate additional facts arid claims.6 Once
6Schnall’s amended complaint included claims for misrepresentation, breach of contract, and deprivation of due process. -8- 68516-3-1/9
a responsive pleading has been filed, a party may only amend its pleading by leave of
court or written consent of the opposing party. CR 15(a). Leave to amend a pleading
“shall be freely given when justice so requires.” CR 15(a). However, in deciding
whether to grant a motion to amend, “the court may consider the probable merit or futility of the amendments requested.” Doyle v. Planned Parenthood of Seattle-King
County, Inc., 31 Wn. App. 126, 131,
639 P.2d 240
(1982).
Schnall contends that the superior court erred because it gave nb explanation for
its denial of leave to amend the complaint. The written order denying Schnall’s motion
does not provide a basis for the superior court’s ruling. But the superior court heard
argument on Schnall’s motion and made an oral ruling that same day. Schnall does not
provide a transcript of the hearing.7 Schnall has the burden of perfecting the record so that this court has before it all of the evidence relevant to the issue. RAp 9.2(b); State
v. Sisouvanh, 175Wn.2d 607, 619,
290 P.3d 942
(2012). He has not dbne so. Absent an affirmative showing of error, we presume a superior court’s decision to be correct.
Resident Action Council v. Seattle Housing Auth., 177 Wn.2d 417, 446,
300 P.3d 376
(2013).
Denial of Preliminary Injunction
Finally, Schnall argues that the superior court erred in denying hils repeated
motions for a preliminary injunction. But an issue is “‘technically moot if the court
cannot provide the basic relief originally sought, or can no longer provide effective
7 It appears from the record that the hearing was not recorded, But the rules of appellate procedure contain provisions for circumstances where relevarit transcripts of the superior court proceedings are unavailable. Schnall has failed to provide either a narrative report of proceedings authorized by RAP 9.3 or an agreed report of proceedings as described in RAP 9.4. 68516-3-1/10
relief.'” IBF, LLC v. Heuft, 141 Wn. App. 624, 630-31,
174 P.3d 95
(20p7) (quoting
Josephinium Assocs. v. Kahli, 111 Wn. App., 617, 622,45 P.3d 627 (2002) 8 Here, the
trustee’s sale has already occurred; the action sought to be enjoined can no longer be
prevented. While Schnall has alleged facts that could establish that th^ trustee’s sale
did not lawfully comply with the DTA, the relief he seeks cannot be provided by this court. Thus, we do not address whether the superior court erred in denying the
preliminary injunction.9
CONCLUSION
We reverse the superior court’s CR 12(b)(6) dismissal of Schnall s claim for
violation of the DTA. We affirm the dismissal of the CPA claim. We also affirm the
superior court’s denial of Schnall’s motion to amend his complaint and the denial of the
preliminary injunction. We remand for further proceedings.
WE CONCUR:
8There are exceptions that permit a court to reach a moot issue, but these exceptions do not apply to this case.
9 Schnall contends that the superior court erred in making findings of fact in its order of dismissal pursuant to CR 12(b)(6). However, as Deutsche Bank and MERS point out, the findings to which Schnall assigns error were made in support of the order denying the preliminary injunction, not the order of dismissal. See San Juan County v. No New Gas Tax, 160Wn.2d 141, 154, 157P.3d831 (2007) (superior court required to make findings of fact when issuing a preliminary injunction).
A recent IRS letter to Senator Barbara Boxer concerning the income tax implications of short sales by California homeowners seems to be provoking unqualified celebration. This headline – IRS Will Not Penalize Cali Families Losing Homes To Short Sales -is fairly typical. There was a lot of concern about this because at the end of 2013 the generous exclusion from debt discharge income when qualified principal residence mortgages are involved is set to expire. People losing their homes in a short sale is upsetting enough. The idea that they will end up with a tax bill if the bank does not pursue a deficiency judgement is really upsetting. Hence the celebration since the import of the letter is that there will be no debt discharge income when California homeowners end up doing short sales.
I hate to spoil a nice celebration, but I am going to risk it. The position that the IRS outlined in the ruling is probably good news for most people affected by it. It may not be good news for everybody, though. In order to understand why you have to understand the IRS reasoning. Here is the deal. When debt is secured by property, it is either recourse or non-recourse. Recourse means that even if the property is taken in satisfaction of the debt the creditor can still pursue the debtor. If the debt is non-recourse, the debtor can just hand the creditor the keys and walk away.
WASHINGTON, D.C. – In the absence of a long-promised public report, leading Democratic Members of Congress have called on federal regulators to disclose critically important information related to the Independent Foreclosure Review (IFR) process for 14 mortgage servicers and the $9.3 billion settlement that abruptly replaced it in January of this year.
In a letter to Federal Reserve Chair Ben Bernanke and Comptroller of the Currency Thomas Curry, Congresswoman Maxine Waters (D-CA), top Democrat on the House Financial Services Committee, Senator Elizabeth Warren (D-MA) and Congressman Elijah Cummings (D-MD), Ranking Member of the House Committee on Oversight and Government Reform, noted the importance of this information to assess the adequacy of the terms and the amount of the settlement, as well as to understand what reforms may still be needed in the mortgage servicing industry
The Democrats reiterated their concerns over the decision to conclude the IFR process before all borrower requests for review and file sampling had been satisfied. They requested the report, as promised in April 2013, as well as answers to a number of specific inquiries. These included a summary of the financial remediation received by borrowers to date, a description of information that has been and will be released to borrowers whose foreclosure files were examined, and information on cases referred to the Department of Justice on suspicion of criminal activities, among others.
The lawmakers requested the Fed and OCC provide this information by no later than the end of the year.
“This information is critically important to addressing the continuing foreclosure processing problems in the mortgage servicing industry,” the letter reads. “An August 2013 [Consumer Financial Protection Bureau] report found that ‘sloppy account transfers,’ ‘poor payment processing,’ and ‘loss mitigation mistakes’ are still harming borrowers. Although the IFR process may be over, there are still many valuable lessons to be learned from it.”
In 2011, the Federal Reserve and the OCC entered into consent agreements with 14 mortgage servicers regarding their unsafe and unsound residential mortgage loan servicing and foreclosure processing practices. These agreements established the IFR process, which required the servicers to hire outside consultants to examine foreclosures to determine whether there had been illegal or improper practices and take remediation steps. On January 7, 2013, the Fed and the OCC announced settlements with many of the servicers, which resulted in a termination of the case-by-case review required under the IFR process, which led to servicers paying $9.3 billion in “cash payments and other assistance” to borrowers, including $3.6 billion in direct payments to borrowers who had homes in foreclosure in 2009 or 2010. Today’s letter was a follow up on assurances that these agencies would release a public report on the details of the Independent Foreclosure Review (IFR) process.
The Honorable Ben S. Bernanke The Honorable Thomas J. Curry
Chairman Comptroller of the Currency
Board of Governors Office of the Comptroller of the Currency
of the Federal Reserve System Independence Square
20th Street and Constitution Avenue, NW 250 E Street, SW
Washington, DC 20051 Washington, DC 20219
Dear Chairman Bernanke and Comptroller Curry: We write today to follow up on your agencies’ assurances that they would release a public report on the Independent Foreclosure Review (IFR) process.
In April 2011, the Board of Governors of the Federal Reserve System (the Board) and the Office of the Comptroller of the Currency (OCC) entered into consent agreements with 14 mortgage servicers regarding their unsafe and unsound residential mortgage loan servicing and foreclosure processing practices. Those consent orders required mortgage servicers to establish Action Plans outlining how they would correct deficiencies in their systems relating to loan modifications, communicating with borrowers, and complying with local, state, and federal foreclosure laws. Additionally, the consent orders established the Independent Foreclosure Review (IFR) process, which required the mortgage servicers to hire outside consultants to examine foreclosures initiated in 2009 and 2010, investigate whether borrowers had been the victims of illegal or improper practices, and remediate issues accordingly.
On January 7, 2013, the Board and the OCC announced settlements with many of the mortgage servicers subject to the April 2011 consent orders, which resulted in a termination of the case-by-case review required under the IFR process.[1] On February 28, 2013, the Board and the OCC executed formal amendments to the consent orders under which these servicers agreed to pay $9.3 billion in “cash payments and other assistance” to borrowers, including $3.6 billion in direct payments to borrowers who had homes in foreclosure in 2009 or 2010.[2] Staff for the Board and the OCC indicated that approximately 105,000 out of a possible 4.2 million borrower files had been reviewed at the time that the Board and the OCC finalized the majority of these settlements.
We have raised significant concerns about the decision to conclude the IFR process before all borrower requests for review had been satisfied and randomly selected samples of eligible loan files had been reviewed. Based on the information provided to us at the time of the settlements, we could not assess whether the settlement amount and terms were adequate, whether it was appropriate for the mortgage servicers themselves to decide how to compensate the borrowers they harmed, and whether the outside consultants hired by the servicers collected and analyzed accurate information.
Nonetheless, the Board and the OCC moved forward with the settlement processes and promised Congress that information relating to the IFR process would be forthcoming. In April 2013, Daniel Stipano, Deputy Chief Counsel at the OCC, testified before the Senate Banking Committee that “we do anticipate doing public reporting” on the lessons learned from the IFR.[3] Similarly, Chairman Bernanke testified before the same Committee in July 2013 that “we hope to have a report on this whole thing within the next couple of months that will lay out basically all the information we have” and that “we will try to provide as much transparency as we have.”[4]
Your agencies still have not issued a report on the IFR process. Accordingly, we request that you produce the following information:
A summary of the financial remediation received by borrowers to date, including the number of borrowers that have received and cashed checks in each of the Remediation Matrix categories. Please also include a description of the number and the amounts of any financial remediation checks that have not been cashed, as well as a description of any patterns the Board and the OCC have identified with borrowers who have not cashed checks. Finally, please provide a description of how the Board and the OCC plan on disbursing any settlement amounts that remain once efforts to reach eligible borrowers are exhausted, and enumerate what methods will be used in that outreach effort;
A description of information that has been and will be released to borrowers whose foreclosure files were examined as a part of the IFR process and, if applicable, a justification for the withholding of any information that will not be released to borrowers;
A description of any referrals to the Department of Justice on cases in which criminal violations are suspected, including cases related to the Servicemembers Civil Relief Act;
The status of mortgage servicers’ compliance with the Action Plans mandated by the April 2011 consent orders, including an explanation of efforts the Board and the OCC have taken to ensure compliance with the Action Plans; and
A description of the information sharing efforts on mortgage servicing issues between the Board and the OCC and the Consumer Financial Protection Bureau (CFPB) and the Office of the Monitor of the National Mortgage Settlement.
This information is critically important to addressing the continuing foreclosure processing problems in the mortgage servicing industry. An August 2013 CFPB report found that “sloppy account transfers,” “poor payment processing,” and “loss mitigation mistakes” are still harming borrowers.[5] Although the IFR process may be over, there are still many valuable lessons to be learned from it.
We request that you provide this information as soon as possible, but no later than the end of the 2013 calendar year. We look forward to continuing to work with you on this issue and thank you for your consideration of this request.
Sincerely,
Maxine Waters
Elizabeth Warren
Elijah Cummings
[1]Board of Governors of the Federal Reserve System and Office of the Comptroller of the Currency, JointPress Release (Jan. 7, 2013) (online at www.occ.gov/news-issuances/news-releases/2013/nr-ia-2013-3.html).
[2]Board of Governors of the Federal Reserve System and Office of the Comptroller of the Currency, JointPress Release (Feb. 28, 2013) (online at www.federalreserve.gov/newsevents/press/enforcement/20130228a.htm).
[3]United States Congress. Senate Committee on Banking, Housing and Urban Affairs, Subcommittee on Financial Institutions and Consumer Protection. “Outsourcing Accountability? Examining the Role of Independent Consultants.” (April 11, 2013).
[4]United States Congress. Senate Committee on Banking, Housing and Urban Affairs. “The Semiannual Monetary Policy Report to the Congress.” (July 18, 2013).
The mortgage foreclosure crisis raises legal questions as important as its economic impact. Questions that were straightforward and uncontroversial a generation ago today threaten the stability of a $13 trillion mortgage market: Who has standing to foreclose? If a foreclosure was done improperly, what is the effect? And what is the proper legal method for transferring mortgages? These questions implicate the clarity of title for property nationwide and pose a too- big-to-fail problem for the courts.
The legal confusion stems from the existence of competing systems for establishing title to mortgages and transferring those rights. Historically, mortgage title was established and transferred through the “public demonstration” regimes of UCC Article 3 and land recordation systems. This arrangement worked satisfactorily when mortgages were rarely transferred. Mortgage finance, however, shifted to securitization, which involves repeated bulk transfers of mortgages.
To facilitate securitization, deal architects developed alternative “contracting” regimes for mortgage title: UCC Article 9 and MERS, a private mortgage registry. These new regimes reduced the cost of securitization by dispensing with demonstrative formalities, but at the expense of reduced clarity of title, which raised the costs of mortgage enforcement. This trade-off benefitted the securitization industry at the expense of securitization investors because it became apparent only subsequently with the rise in mortgage foreclosures. The harm, however, has not been limited to securitization investors. Clouded mortgage title has significant negative externalities on the economy as a whole.
This Article proposes reconciling the competing title systems through an integrated system of note registration and mortgage recordation, with compliance as a prerequisite to foreclosure. Such a system would resolve questions about standing, remove the potential cloud to real-estate title, and facilitate mortgage financing by clarifying property rights.
The court’s Order also imposes a $100 million penalty on MF Global
Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) obtained a federal court consent Order against Defendant MF Global Inc. (MF Global) requiring it to pay $1.212 billion in restitution to customers of MF Global to ensure customers recover their losses sustained when MF Global failed in 2011.
The consent Order, entered on November 8, 2013 by U.S. District Court Judge Victor Marrero of the U.S. District Court for the Southern District of New York, also imposes a $100 million civil monetary penalty on MF Global, to be paid after MF Global has fully paid customers and certain other creditors entitled to priority under bankruptcy law. The Trustee for MF Global obtained permission from the bankruptcy court to pay restitution in full to customers to remedy any shortfall with funds of the MF Global general estate.
The consent Order arises out of the CFTC’s complaint, filed on June 27, 2013, charging MF Global and the other Defendants with unlawful use of customer funds (see CFTC Press Release 6626-13, June 27, 2013). In the consent Order, MF Global admits to the allegations pertaining to its liability based on the acts and omissions of its employees as set forth in the consent Order and the Complaint. The CFTC’s litigation continues against the remaining defendants: MF Global Holdings Ltd., Jon S. Corzine, and Edith O’Brien.
Gretchen Lowe, Acting Director of the CFTC’s Division of Enforcement, stated, “Division staff have worked tirelessly to ensure that 100 percent restitution be awarded to satisfy customer losses. The CFTC will continue to ensure that those who violate U.S. commodity laws and regulations designed to protect customer funds will be vigorously prosecuted.”
The CFTC’s Complaint charged MF Global, a registered Futures Commission Merchant (FCM), with violating provisions of the Commodity Exchange Act and CFTC Regulations intended to protect FCM customer funds and requiring diligent supervision by registrants. Specifically, the Complaint charged that during the last week of October 2011, MF Global unlawfully used customer segregated funds to support its own proprietary operations and the operations of its affiliates. In addition to the misuse of customer funds, the Complaint alleged that MF Global (i) unlawfully failed to notify the CFTC immediately when it knew or should have known of the deficiencies in its customer accounts, (ii) made false statements in reports it filed with the CFTC that failed to show the deficits in the customer accounts, (iii) used customer funds for impermissible investments in securities that were not considered readily marketable or highly liquid in violation of CFTC regulation, and (iv) failed to diligently supervise the handling of commodity interest accounts carried by MF Global and the activities of its partners, officers, employees, and agents.
The CFTC appreciates the assistance of the U.S. Attorneys’ Offices for the Southern District of New York and the Northern District of Illinois, the Federal Bureau of Investigation, the Securities and Exchange Commission, and the Financial Conduct Authority in the United Kingdom.
The consent Order recognizes the cooperation of the Trustee for MF Global and requires the Trustee’s continued cooperation with the CFTC.
CFTC Division of Enforcement staff members responsible for this case are Sheila Marhamati, David W. Oakland, Chad Silverman, K. Brent Tomer, Douglas K. Yatter, Steven Ringer, Lenel Hickson, and Manal Sultan. Staff from the CFTC’s Division of Swap Dealer and Intermediary Oversight, Division of Clearing and Risk, and Office of Data and Technology also assisted in this matter.
I respectfully disagree with what the real culprits are in this article…it’s plain and clear simple Corruption going on behind the scenes. We have witnessed this over and over again with the revolving door and in private emails involving regulators etc… INCLUDING the media that writes these articles.
Bloomberg-
In my previous post, I summarized Judge Jed Rakoff’s objections to all the reasons federal prosecutors have given for failing to charge top financial executives with criminal wrongdoing. So, what explains the hesitance to bring to justice those who contributed to the worst economic crisis since the Great Depression? In his speech before New York securities lawyers last week, Rakoff, the outspoken federal judge, laid out a few theories.
Notably, he doesn’t suspect the infamous “revolving door” — the idea that bureaucrats are simply positioning themselves to move to cushy private-sector jobs. Prosecutors, he said, want to make a name for themselves. The easiest way to do that is by bringing cases against high-level people, and the prospect of eventually going to work for a Wall Street firm isn’t a deterrent.
A few years ago, an American company placed a want ad for an aerospace engineering consultant in an Asian newspaper. It quickly drew a flurry of applicants – one of whom was just the kind of person the company was looking for: someone who worked in that country’s missile program, someone who was a little sleazy, someone looking to make a little cash on the side.
This was a CIA front operation, and soon that eager applicant was supplying the spy agency with details on his country’s ballistic missile program.
That kind of covert activity is a specialty of the CIA’s National Resources Division, a little-known, U.S.-based component of the agency’s National Clandestine Service.
A thriller about a genius algorithm builder who dared to stand up against Wall Street. Haim Bodek, aka The Algo Arms Dealer.
From the makers of the much-praised Quants: the Alchemists of Wall Street and Money & Speed: Inside the Black Box. Now the long-awaited final episode of a trilogy in search of the winners and losers of the tech revolution on Wall Street. Could mankind lose control of this increasingly complex system?
Interested in broadcasting this documentary? Please contact VPRO Sales at sales@vpro.nl.
Quants are the math wizards and computer programmers in the engine room of our global financial system who designed the financial products that almost crashed Wall st. The credit crunch has shown how the global financial system has become increasingly dependent on mathematical models trying to quantify human (economic) behaviour. Now the quants are at the heart of yet another technological revolution in finance: trading at the speed of light.
What are the risks of treating the economy and its markets as a complex machine? Will we be able to keep control of this model-based financial system, or have we created a monster?
A story about greed, fear and randomness from the insides of Wall Street.
What is the duty of a trustee to protect investors?
The answer to that question is at stake in an $8.5 billion settlement that is awaiting approval by a justice in New York State Supreme Court. Early this week, the court will hear closing arguments in a case about the settlement struck by Bank of America and 22 mortgage securities investors two years ago. The settlement would resolve Bank of America’s legal liability for more than one million loans made by Countrywide Financial — now owned by Bank of America — during the mortgage mania. The court will decide whether the settlement is fair and reasonable and can go forward.
While this case may appear to be about Countrywide’s lending practices, what’s really on trial here is the role played in the settlement by Bank of New York Mellon, the trustee charged with protecting all investors in these securities. Trustees for asset-backed securities have a duty to ensure that the companies administering them, known as servicers, do right by the investors who own them.
Former Treasury Secretary Timothy Geithner will join private-equity firm Warburg Pincus LLC next year after 26 years in public service, the company said.
Geithner will become president at the New York-based buyout firm starting March 1, according to a statement today from Warburg Pincus. He will work with Chip Kaye and Joe Landy, who have led the firm since 2000 and this year began sharing the title of co-chief executive officer, in managing the firm, investing its funds and communicating with investors.
“He brings a history of strong leadership, a deep understanding of economies and markets, and a truly global perspective,” Kaye said of Geithner in the statement. “These attributes will be of tremendous value to our firm in this increasingly interconnected world.”
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