Billion | FORECLOSURE FRAUD | by DinSFLA - Part 2

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The $265 Billion Wave That’s About to Crush Homeowners

The $265 Billion Wave That’s About to Crush Homeowners

Credit-

Millions of consumers will have to absorb a major hit to their household budget in the coming months. About $265 billion in home equity lines of credit (HELOCs) will enter the repayment period in the next few years, according to a study from Experian, and consumers may see their monthly payments spike — in some cases, triple or quadruple what they previously paid.

HELOC originations soared from 2005 up until the start of the housing crisis, and because many HELOCs enter the repayment phase after 10 years, these billions of dollars in outstanding credit balances are just now coming due. This wave of HELOC resets is expected to significantly stress borrowers’ finances and the lending industry.

“This analysis is critical as we want to not only help lenders prepare and understand the payment stress of their borrowers, but also give consumers an opportunity to understand what the impact may be to their financial status and how to be better prepared for it,” said Michele Raneri, Experian’s vice president of analytics and business development, in a statement about the study.

[CREDIT.com]

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Five global banks to pay $5.7 billion in fines over rate rigging

Five global banks to pay $5.7 billion in fines over rate rigging

Sex on the beach….15 yrs!

Continue to destroy the planet….0 yrs!!

 

Reuters-

Five of the world’s largest banks, including JPMorgan Chase & Co and Citigroup Inc, were fined roughly $5.7 billion, and four of them pleaded guilty to U.S. criminal charges over manipulation of foreign exchange rates, authorities said on Wednesday.

A fifth bank, UBS AG, will plead guilty to rigging benchmark interest rates, the U.S. Justice Department said.

U.S. banks JPMorgan Chase and Citigroup will pay $550 million and $925 million in criminal fines, respectively, as part of their guilty pleas.

[REUTERS]

 

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JPMorgan to Buy $45 Billion of Ocwen’s Loan-Servicing Rights

JPMorgan to Buy $45 Billion of Ocwen’s Loan-Servicing Rights

Just going to blow right up in their faces AGAIN and I betcha the taxpayers are going to get the bill.

 

Bloomberg-

JPMorgan Chase & Co., the second-biggest servicer of U.S. mortgages, agreed to buy the right to manage about $45 billion in home loans from Ocwen Financial Corp. starting June 1.

The deal involves servicing rights for 266,000 mortgages owned by Fannie Mae, the New York-based bank said Thursday in a statement that didn’t disclose terms. Bloomberg reported in March that JPMorgan was acquiring the rights.

The agreement will bring JPMorgan’s portfolio for overseeing billing, collections and foreclosures on U.S. mortgages to about $1 trillion, a threshold last exceeded in the fourth quarter of 2013. Its $948.8 billion loan-servicing portfolio as of Dec. 31 trailed only Wells Fargo & Co.’s $1.75 trillion, according to data compiled by Bloomberg.

[BLOOMBERG]

image: Reuters

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NYDFS ANNOUNCES DEUTSCHE BANK TO PAY $2.5 BILLION, TERMINATE AND BAN INDIVIDUAL EMPLOYEES, INSTALL INDEPENDENT MONITOR FOR INTEREST RATE MANIPULATION

NYDFS ANNOUNCES DEUTSCHE BANK TO PAY $2.5 BILLION, TERMINATE AND BAN INDIVIDUAL EMPLOYEES, INSTALL INDEPENDENT MONITOR FOR INTEREST RATE MANIPULATION

April 23, 2015

Contact: Matt Anderson, 212-709-1691

NYDFS ANNOUNCES DEUTSCHE BANK TO PAY $2.5 BILLION, TERMINATE AND BAN INDIVIDUAL EMPLOYEES, INSTALL INDEPENDENT MONITOR FOR INTEREST RATE MANIPULATION

Widespread Effort by Bank Employees to Manipulate Benchmark Interest Rate Submissions for LIBOR, EURIBOR, TIBOR

Deutsche Bank Employee: This “is a corrupt fixing and DB is part of it!”

Deutsche Bank Employee Seeking to Obtain Lower Rate: “I’m begging u, don’t forget me… pleassssssssssssssseeeeeeeeee… I’m on my knees…”

Benjamin M. Lawsky, Superintendent of Financial Services, announced today that Deutsche Bank will pay $2.5 billion, terminate and ban individual employees who engaged in misconduct, and install an independent monitor for New York Banking Law violations in connection with the manipulation of the benchmark interest rates, including the London Interbank Offered Bank (“LIBOR”), the Euro Interbank Offered Rate (“EURIBOR”) and Euroyen Tokyo Interbank Offered Rate (“TIBOR”) (collectively, “IBOR”).

The overall $2.5 billion penalty Deutsche Bank will pay includes $600 million to the New York State Department of Financial Services (NYDFS), $800 million to the Commodities Futures Trading Commission (CFTC), $775 million to the U.S. Department of Justice (DOJ), and 227 million GBP (approximately $340 million) to the United Kingdom’s Financial Conduct Authority (FCA).

Superintendent Lawsky said: “Deutsche Bank employees engaged in a widespread effort to manipulate benchmark interest rates for financial gain. While a number of the employees involved in misconduct have already left the bank, those that remain are being terminated or banned from the New York banking system. We must remember that markets do not just manipulate themselves: It takes deliberate wrongdoing by individuals.”

The London Interbank Offered Rate (“LIBOR”) is a benchmark interest rate used in financial markets around the world.  It is the primary benchmark for short term interest rates globally, written into standard derivative and loan documentation, used for a range of retail products, such as mortgages and student loans, and the basis for settlement of interest rate contracts on many of the world’s major futures and options exchanges.  It is also used as a barometer to measure the health of the banking system and as a gauge of market expectation for future central bank interest rates.

From approximately 2005 through 2009, certain Deutsche Bank traders frequently requested that certain submitters submit rate contributions that would benefit the traders’ trading positions, rather than the rates that complied with the IBOR definitions. For example, on February 21, 2005, a trader requested of another trader who performed submitter duties on a back-up basis, “can we have a high 6mth libor today pls gezzer?”  The trader/submitter agreed, “sure dude, where wld you like it mate ?”  The trader replied, “think it shud be 095?”  The trader/submitter replied, “cool, was going 9, so 9.5 it is.”  The trader joked, “super – don’t get that level of flexibility when [the usual submitter] is in the chair fyg!” Similarly, on December 29, 2006, a trader wrote to a submitter, “Come on 32 on 1. Mth… Cu my frd.”  The submitter agreed, “ok will try to give you a belated Christmas present…!”

Deutsche Bank also communicated and coordinated with employees of other banks and financial institutions regarding their respective rate contributions in advance of an IBOR submission. On September 7, 2006, a London desk head attempted to obtain a low EURIBOR submission from an external banker at Barclays, “I’m begging u, don’t forget me… pleassssssssssssssseeeeeeeeee… I’m on my knees…”  The external banker replied, “I told them 1 m up is that right?”  The London desk head continued, “please pal, insist as much as you can… my treasury is taking it to the sky… we have to counter balance it… I’m beggin u… can u beg the [a panel bank] guy as well?”   The external banker agreed, “ok, I’m telling him.”

As a bank’s IBOR rates are intended to correspond to the cost at which the bank concludes it can borrow funds, the rates are an indicator of a bank’s financial health.  If a bank’s submission is high, it suggests that the bank is, or would, pay a high amount to borrow funds.  This could indicate a liquidity problem and, thus, that the bank is experiencing financial difficulty.

Traders and submitters at Deutsche Bank were aware that the IBOR rates did not accurately reflect their definitions.  On August 21, 2008, a vice president wrote to an external banker employed at Merrill Lynch, “tibor going down or not?”  The external banker replied, “tibor will go down slightly but not much… euroyen tibor isn’t really reflective of actual money market condition in japan… people just randomly make those numbers up… pretty much like libors tho!”

On July 16, 2009, a managing director and the Head of the London Money Market Derivatives desk discussed the strength and accuracy of the Euro LIBOR panel in comparison to the EURIBOR panel.  The managing director asked, “u think the quality of the euro-libor panel is 4.5bps better than euribor?”  The Head of the London Money Market Derivatives desk responded yes, and the managing director replied, “not so sure, i have a hard time to believe if so many banks say they can better than the market while they are a part of it.”  The Head of the London Money Market Derivatives desk stated, “theyre all lying anyway.”  The managing director replied, “there is a philosophical saying: ‘one greek says: “all greeks are lying” who do u trust?”

On September 4, 2009, a vice president wrote to a trader regarding LIBOR and TIBOR, stating, “am purring 34 for 3m libor and I think am far too high… JPM [JP Morgan Chase] is putting 41 for tibor… I do not understand how come we can have 3m tibor/cash at 56 at DB… DB is the among the lowest libor contribution in all ccys… UBS is corrup/manipulator in tibor fixing… i think putting such a high tibor damage the reputation of deutsche bank… Second, It is not because all the tibors setters are corrupt/manipulators that deutsche bank has to be aswell… It is not because the japanese banks are manipulating the tibor fixing that DB has to do it as well… Tibor is a corrupt fixing and DB is part of it!”

From approximately 2007 through 2009, a number of large international banks were receiving negative press coverage concerning their high and potentially inaccurate LIBOR submissions.  Certain articles questioned particular banks’ liquidity position regarding the high LIBOR submissions and, as a result, the banks’ share prices fell.  Various Deutsche Bank senior managers circulated and discussed these articles.

On October 4, 2007, the Head of Short Term Interest Rate Trading in Australia and New Zealand forwarded an article, which reported a rumor that a large European bank was struggling for financing, including to senior management, commenting on the instability of the market, specifically in regards to bank illiquidity, and commented, “This market has the feel that we are about to have another run and panic on funding in my opinion just a gut feeling looking at the behavior of LIBORS if we look at the 3mth fix over the lst few days since we have gone over the TURN of the year there has been a bit of pressure… this feels like the period where we were edging up ever so slight back in early august where we fixed at 5.36 for months on end and then started edging up before the panic set in.” Later that day, a group head within the Global Finance and Foreign Exchange Unit forwarded the email to  a London desk head, directing, “Make sure our libors are on the low side for all ccys.”

Terminations and Bans of Individual Deutsche Bank Employees

As a result of the investigation, numerous employees that were involved in the wrongful conduct discussed in this Order, including those in management positions, have been terminated, disciplined or are otherwise no longer employed by the Bank, as a result of their misconduct.

However, certain employees involved in the wrongful conduct remain employed at the Bank.  The Department orders the Bank to take all steps necessary to terminate seven employees, who played a role in the misconduct but who remain employed by the Bank: one London-based Managing Director, four London-based Directors, one London-based Vice President, and one Frankfurt-based Vice President.

Additionally, ten of the individuals centrally involved in the misconduct were previously terminated as a result of the investigation.  Four of these employees were reinstated pursuant to a German Labour Court determination, and two of them remain at the Bank. Those employees that were reinstated due to the German Labour Court decision who remain at the Bank shall not be allowed to hold or assume any duties, responsibilities, or activities involving compliance, IBOR submissions, or any matter relating to U.S. or U.S. Dollar operations.

Superintendent Lawsky thanks the U.S. Department of Justice, the Commodities Futures Trading Commission, and the U.K. Financial Conduct Authority for their work and cooperation in this investigation.

To view a copy of the NYDFS order regarding Deutsche Bank, please visit, link.

###

Source: http://www.dfs.ny.gov

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Nomura, RBS ‘crap’ emails come into play in $1 billion mortgage bond trial

Nomura, RBS ‘crap’ emails come into play in $1 billion mortgage bond trial

Yahoo-

NEW YORK (Reuters) – In 2007, a Royal Bank of Scotland Group Plc employee emailed his boss with his view of a sample of mortgages underlying a bond that the bank was underwriting: “This one is crap.”

Asked about it this week in Manhattan federal court, Brian Farrell, the employee, said he did not recall the deal. But a U.S. regulator cited the email as evidence that Nomura Holdings Incand RBS made false statements about mortgage securities they sold to Fannie Mae and Freddie Mac.

The email and others like it are part of a $1.1 billion lawsuit by the Federal Housing Finance Agency against Nomura and RBS that went to trial this month. The messages add to a litany of arguably embarrassing electronic musings by bank employees that have resurfaced in litigation over the 2008 financial crisis.

[YAHOO]

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Ocwen Financial Intends to Sell Additional $25 Billion Portfolio of Mortgage Servicing Rights to Nationstar

Ocwen Financial Intends to Sell Additional $25 Billion Portfolio of Mortgage Servicing Rights to Nationstar

Source: OCWEN

March 24, 2015

Ocwen Financial Intends to Sell Additional $25 Billion Portfolio of Mortgage Servicing Rights to Nationstar

 

ATLANTA, March 24, 2015 (GLOBE NEWSWIRE) — Ocwen Financial Corporation (NYSE:OCN) announced today that its subsidiary, Ocwen Loan Servicing, LLC (“Ocwen”) and Nationstar Mortgage LLC, an indirectly-held, wholly-owned subsidiary of Nationstar Mortgage Holdings Inc. (NYSE:NSM) (collectively “Nationstar”) have agreed in principle to the sale by Ocwen of residential mortgage servicing rights on a portfolio consisting of approximately 142,000 loans owned by Freddie Mac and Fannie Mae with a total principal balance of approximately $25 billion. Subject to a definitive agreement, approvals by Freddie Mac, Fannie Mae and FHFA and other customary conditions, Ocwen and Nationstar expect the transaction to close before mid-year.

“This transaction, on top of the one announced in February between Ocwen and Nationstar, furthers our announced corporate strategy and demonstrates the strong working relationship we have developed with Nationstar,” said Ron Faris, Chief Executive Officer of Ocwen.

“This transaction builds upon our strong track record of portfolio acquisitions while serving the needs of homeowners, and we look forward to expeditiously closing and boarding this portfolio,” said Jay Bray, Chief Executive Officer of Nationstar. “We will continue to work cooperatively with Ocwen as they evaluate the sale of additional agency portfolios and look forward to continuing discussions with all counterparties.”

About Ocwen Financial Corporation

Ocwen Financial Corporation is a financial services holding company which, through its subsidiaries, is engaged in the servicing and origination of mortgage loans. Ocwen is headquartered in Atlanta, Georgia, with offices throughout the United States and support operations in India and the Philippines. Utilizing proprietary technology, global infrastructure and superior training and processes, Ocwen provides solutions that help homeowners and make our clients’ loans worth more. Ocwen may post information that is important to investors on its website (www.Ocwen.com).

About Nationstar

Based in Dallas, Texas, Nationstar earns fees through the delivery of quality servicing, origination and transaction based services related principally to single-family residences throughout the United States. Additional corporate information is available on the investors tab at www.nationstarmtg.com.

Forward Looking Statements

This news release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements by their nature address matters that are, to different degrees, uncertain. Forward-looking statements and involve a number of assumptions, risks and uncertainties that could cause actual results to differ materially.

Important factors that could cause actual results to differ materially from those suggested by the forward-looking statements include, but are not limited to, the following: adverse effects on our business as a result of recent regulatory settlements; reactions to the announcement of such settlements by key counterparties; increased regulatory scrutiny and media attention, due to rumors or otherwise; uncertainty related to claims, litigation and investigations brought by government agencies and private parties regarding our servicing, foreclosure, modification and other practices; any adverse developments in existing legal proceedings or the initiation of new legal proceedings; our ability to effectively manage our regulatory and contractual compliance obligations; the adequacy of our financial resources, including our sources of liquidity and ability to fund and recover advances, repay borrowings and comply with debt covenants; our servicer and credit ratings as well as other actions from various rating agencies, including the impact of recent downgrades of our servicer ratings; volatility in our stock price; the characteristics of our servicing portfolio, including prepayment speeds along with delinquency and advance rates; our ability to contain and reduce our operating costs; our ability to successfully modify delinquent loans, manage foreclosures and sell foreclosed properties; uncertainty related to legislation, regulations, regulatory agency actions, government programs and policies, industry initiatives and evolving best servicing practices; as well as other risks detailed in Ocwens reports and filings with the Securities and Exchange Commission (SEC), including its annual report on Form 10-K/A for the year ended December 31, 2013 (filed with the SEC on 08/18/14) and its quarterly report on Form 10-Q for the quarter ended September 30, 2014 (filed with the SEC on 10/31/14). Anyone wishing to understand Ocwens business should review its SEC filings. Ocwens forward-looking statements speak only as of the date they are made and, except for our ongoing obligations under the U.S. federal securities laws, we undertake no obligation to update or revise forward-looking statements whether as a result of new information, future events or otherwise.

CONTACT: FOR FURTHER INFORMATION CONTACT: Investors: Stephen Swett T: (203) 614-0141 E: shareholderrelations@ocwen.com Media: John Lovallo T: (917) 612-8419 E: jlovallo@levick.com Dan Rene T: (202) 973-1325 E: drene@levick.com
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The Nonprofit Behind Billions in Mortgage Aid Is a Mess

The Nonprofit Behind Billions in Mortgage Aid Is a Mess

Bloomberg-

Hoping to deliver relief to Americans pounded by the financial crisis, the government has poured billions of dollars into a sort of Red Cross for homeowners.

NeighborWorks America, a nonprofit chartered by Congress, distributes much of that money to counseling groups that dispense mortgage advice and sometimes financial aid.

A close look at the group reveals a house in disorder — with sweetheart contracts, document fudging and unexplained departures of top officials.

[BLOOMBERG]

Photographer: Bilyana Dimitrova via Bloomberg

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Ocwen to sell $9.6 billion mortgage servicing rights to Walter unit

Ocwen to sell $9.6 billion mortgage servicing rights to Walter unit

REUTERS-

Ocwen Financial Corp (OCN.N) said it was selling residential mortgage servicing rights worth $9.6 billion to a subsidiary of Walter Investment Management Corp (WAC.N).

The deal is the latest in a series of steps by Ocwen to slim down its operations amid regulatory scrutiny over its business practices.

Ocwen, which delayed filing its full-year results, also said it was reviewing the ability of its affiliate, Home Loan Servicing Solutions Ltd (HLSS.O), to meet obligations to fund new servicing advances.

[REUTERS]

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Nomura, RBS face U.S. mortgage trial; $1 billion damages at stake

Nomura, RBS face U.S. mortgage trial; $1 billion damages at stake

Reuters-

A U.S. housing regulator is set to take two of the world’s biggest banks to trial on Monday to try and recoup more than $1 billion in damages over mortgage bonds sold to government-run mortgage finance companies ahead of the 2008 economic crisis.

Lawyers for the regulator will face off with attorneys of Nomura Holdings Inc (8604.T) and Royal Bank of Scotland Group Plc (RBS.L) in a non-jury trial in Manhattan federal court, one of the few cases spilling out of the financial crisis by the U.S. government to reach trial.

Barring a last-minute settlement, the trial would be the first to result from 18 lawsuits filed in 2011 by the Federal Housing Finance Agency (FHFA) to recover losses on some $200 billion in mortgage-backed securities that various banks sold Fannie Mae (FNMA.OB) and Freddie Mac (FMCC.OB).

[REUTERS]

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OCWEN | Executes Letter of Intent to sell mortgage servicing rights on $45 billion of performing Agency loans || Form 8-K filing, the Company disclosed the following items related to its fourth quarter results.

OCWEN | Executes Letter of Intent to sell mortgage servicing rights on $45 billion of performing Agency loans || Form 8-K filing, the Company disclosed the following items related to its fourth quarter results.

  • Provides update on fourth quarter 2014 financial results
  • Executes amendment to Senior Secured Term Loan
  • Executes Letter of Intent to sell mortgage servicing rights on $45 billion of performing Agency loans
  • Secures replacement financing on $450 million Servicing Advance facility maturing in June

ATLANTA, March 2, 2015 (GLOBE NEWSWIRE) — Ocwen Financial Corporation, “Ocwen” or the “Company”, (NYSE:OCN), a leading financial services holding company, today reported significant updates about the Company.

As previously disclosed on February 5, 2015 in its Company Update to Stakeholders, Ocwen expects to report a loss for the fourth quarter and 2014 fiscal year.

In that Form 8-K filing, the Company disclosed the following items related to its fourth quarter results.

  • It recorded an additional $50 million expense related to its New York Department of Financial Services Settlement.
  • The Company expects to increase expenses related to uncollectable receivables and other servicing expenses by approximately $64 million. 
  • The Company expects the expense for third party monitoring costs in the fourth quarter of 2014 to be approximately $13 million.

In addition to these previously disclosed items, the Company anticipates that its fourth quarter results will be impacted by the following non-recurring items:

  • A $370 – $420 million non-cash charge to write-off goodwill.
  • The creation of a $15 million reserve relating to its remediation plan to address issues around certain erroneously dated borrower correspondence.

The above financial data is preliminary, based upon the Company’s estimates and subject to completion of the Company’s financial closing procedures. Moreover, this data has been prepared on the basis of currently available information. The Company’s independent registered public accounting firm has not audited or reviewed, and does not express an opinion with respect to, this data. This data does not constitute a comprehensive statement of the Company’s financial results for the year ended December 31, 2014, and the Company’s final numbers for this data may differ materially from these estimates.

Ocwen will file a Form 12b-25 with the U.S. Securities and Exchange Commission for an extension of time enabling the Company to file its 2014 Form 10-K on or before March 17, 2015, without penalty. Ocwen requires this extension to complete its goodwill valuation analysis and its financial closing procedures and to ensure appropriate disclosure of various recent events impacting the Company.

Upon finalizing fourth quarter and full year 2014 results the Company expects to host a call with the investment community.

2015 Other Events and Updates

So far in 2015, the Company has been executing on its previously announced plans to sell certain assets, reduce interest rate risk and further improve liquidity. Steps include:

  • On March 2, 2015 the Company entered into an amendment to its $1.3 billion Senior Secured Term Loan (SSTL) to remove certain restrictions on asset sales and permanently increase a financial covenant. Ocwen has agreed to an accelerated repayment schedule for cash received from asset sales.  

“We are pleased with the actions of our term loan investors. They have been supportive of Ocwen and recognize the importance and benefit of executing on our strategy. Additionally, their willingness to enter into an amendment with Ocwen is an affirmation that the Company is, and always has been, in compliance with all of its SSTL covenants,” said Ronald M. Faris, President and Chief Executive Officer of Ocwen. 

  • The Company signed a letter of intent with a buyer on the sale of mortgage servicing rights (MSRs) on a portfolio consisting of approximately 277,000 performing Agency loans owned by Fannie Mae with a total unpaid principal balance of approximately $45 billion. Subject to a definitive agreement, approvals by Fannie Mae and FHFA and other customary conditions, Ocwen expects the transaction to close by mid-year and the loan servicing to transfer over the course of the second half of 2015.
  • Including its previously announced $9.8 billion MSR sale to Nationstar, Ocwen is on track to sell Agency MSRs relating to approximately $55 billion of unpaid principal balance in the next six months for prices significantly above its estimated carrying value at December 31, 2014. Ocwen currently anticipates that these transactions will generate approximately $550 million of proceeds over the next six months and accelerate Ocwen’s strategy to reduce the size of its Agency servicing portfolio.
  • Ocwen awarded a sale of non-performing and performing loan assets to an undisclosed buyer. The transaction is subject to typical closing conditions, including finalizing due diligence and a definitive agreement. Total proceeds are expected to be approximately $40 million, and the Company expects the transaction to close by the end of March. The book value of the assets is approximately $26 million.
  • On February 27, 2015, the Company entered into an agreement with a global financial institution to provide replacement financing on Ocwen’s $450 million OFSART servicing advance facility should the existing lender seek not to refinance the facility upon its maturity in June 2015. This agreement is subject to definitive documentation and other customary funding conditions.

In its Company Update to Stakeholders on February 5, 2015, Ocwen provided numerous updates on the Company. Below are a number of additional updates:

  • Based on Ocwen’s current engagements with state regulators, the Company is not aware of nor anticipating any material fines, penalties or settlements. Ocwen still expects to resolve two open legacy matters for a total of less than $1 million. Ocwen is not aware of any pending or threatened actions to suspend or revoke any state licenses.
  • Since January 1, 2015, Ocwen has had an average daily cash balance of over $215 million and continues to forecast that it will have sufficient liquidity going forward.
  • Ocwen believes that the SSTL amendment shows that there is no event of default and there has not been any event of default under Ocwen’s SSTL. Ocwen has publicly refuted a number of times the allegations made by a purported noteholder of certain Home Loan Servicing Solutions advance financing notes which admits it is pursuing a strategy of shorting Ocwen’s stock. Ocwen continues to vigorously defend itself against the claims of this short seller.
  • In addition to the $55 billion in transactions noted above, the Company continues to look at additional asset sales and plans to complete other small or large transactions throughout the year.
  • The Company no longer expects to execute its first call rights transaction in the first quarter of 2015, but it still anticipates closing call right transactions in the year. In the near-term, we believe this strategy will still generate positive gains for the Company, although they are likely to be lower than initially forecasted.
  • On February 27, 2015, Ocwen commented on its receipt of two notices that would terminate the Company as the servicer of two private label RMBS trusts relating to 0.07% of Ocwen’s overall servicing portfolio. These two trusts were part of the 119 transactions referenced in the February 5, 2015 Company Update to Stakeholders. We anticipate that these terminations will result in a $0.5 million gain for Ocwen as the recovery of deferred servicing fees will more than offset the loss of the servicing asset. The Company has also learned that the same trustee concluded its voting process for at least one other RMBS trust (of the 119) and in that case, the certificateholders elected to retain Ocwen as the servicer.
  • Ocwen has hired Moelis & Company and Barclays Capital Inc. to support the Company and to advise regarding adjustments to its capital structure, as appropriate. Additionally these advisors are helping the Company explore its strategic options.

About Ocwen Financial Corporation

Ocwen Financial Corporation is a financial services holding company which, through its subsidiaries, is engaged in the servicing and origination of mortgage loans. Ocwen is headquartered in Atlanta, Georgia, with offices throughout the United States and support operations in India and the Philippines. Utilizing proprietary technology, global infrastructure and superior training and processes, Ocwen provides solutions that help homeowners and make our clients’ loans worth more. Ocwen may post information that is important to investors on its website (www.Ocwen.com).

Forward Looking Statements

This news release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements by their nature address matters that are, to different degrees, uncertain. Forward-looking statements involve a number of assumptions, risks and uncertainties that could cause actual results to differ materially.

Important factors that could cause actual results to differ materially from those suggested by the forward-looking statements include, but are not limited to, the following: adverse effects on our business as a result of recent regulatory settlements; reactions to the announcement of such settlements by key counterparties; increased regulatory scrutiny and media attention, due to rumors or otherwise; uncertainty related to claims, litigation and investigations brought by government agencies and private parties regarding our servicing, foreclosure, modification and other practices; any adverse developments in existing legal proceedings or the initiation of new legal proceedings; our ability to effectively manage our regulatory and contractual compliance obligations; our ability to execute on our strategy to reduce the size of our Agency servicing portfolio; the adequacy of our financial resources, including our sources of liquidity and ability to fund and recover advances, repay borrowings and comply with debt covenants; our servicer and credit ratings as well as other actions from various rating agencies, including the impact of recent downgrades of our servicer ratings; volatility in our stock price; the characteristics of our servicing portfolio, including prepayment speeds along with delinquency and advance rates; our ability to contain and reduce our operating costs; our ability to successfully modify delinquent loans, manage foreclosures and sell foreclosed properties; uncertainty related to legislation, regulations, regulatory agency actions, government programs and policies, industry initiatives and evolving best servicing practices; as well as other risks detailed in Ocwen’s reports and filings with the Securities and Exchange Commission (SEC), including its annual report on Form 10-K/A for the year ended December 31, 2013 (filed with the SEC on 08/18/14) and its quarterly report on Form 10-Q for the quarter ended September 30, 2014 (filed with the SEC on 10/31/14). Anyone wishing to understand Ocwen’s business should review its SEC filings. Ocwen’s forward-looking statements speak only as of the date they are made and, except for our ongoing obligations under the U.S. federal securities laws, we undertake no obligation to update or revise forward-looking statements whether as a result of new information, future events or otherwise.

Investors: Stephen Swett T: (203) 614-0141 E: Media: Sard Verbinnen & Co Margaret Popper/David Millar T: 212-687-8080

– See more at: http://globenewswire.com/news-release/2015/03/02/711593/10122803/en/Ocwen-Financial-Corporation-Provides-Significant-Updates.html#sthash.LWDjP3Ku.xB2iZil9.dpuf

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Morgan Stanley to pay $2.6 billion to settle mortgage-bond claims

Morgan Stanley to pay $2.6 billion to settle mortgage-bond claims

Reuters-

Morgan Stanley said it will pay $2.6 billion to the U.S. government to resolve potential claims stemming from the sale of mortgage bonds before the financial crisis, reducing its 2014 profit by more than half.

Morgan Stanley increased its legal reserves by about $2.8 billion, which lowered its 2014 income from continuing operations by $2.7 billion, or $1.35 per share, the bank said in a regulatory filing. (1.usa.gov/1FueJWH)

The bank had reported earnings from continuing operations of $5.83 billion, or $2.96 per share, for 2014.

[REUTERS]

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Ocwen Financial Intends to Sell $9.8 Billion Portfolio of Mortgage Servicing Rights to Nationstar

Ocwen Financial Intends to Sell $9.8 Billion Portfolio of Mortgage Servicing Rights to Nationstar

ATLANTA, Feb 23, 2015 (GLOBE NEWSWIRE via COMTEX) —

Ocwen Financial Corporation OCN, +4.27% announced today that its subsidiary, Ocwen Loan Servicing, LLC (“Ocwen”) and Nationstar Mortgage LLC, an indirectly held, wholly owned, subsidiary of Nationstar Mortgage Holdings Inc. NSM, +10.20% (collectively “Nationstar”), have signed an agreement in principle for the sale by Ocwen of residential mortgage servicing rights on a portfolio consisting of approximately 81,000 performing loans owned by Freddie Mac with a total principal balance of approximately $9.8 billion. Subject to a definitive agreement, approvals by Freddie Mac and FHFA and other customary conditions, Ocwen and Nationstar expect the transaction to close by March 31, 2015 and the loan servicing to transfer in April 2015.

“This transaction represents the first step in the execution of our previously-announced strategy to transfer certain types of non-strategic servicing,” said Ronald M. Faris, Chief Executive Officer of Ocwen. “We look forward to exploring additional MSR transactions with Nationstar.”

“We are pleased to enter into an agreement to acquire this portfolio from Ocwen,” said Jay Bray, Chief Executive Officer of Nationstar. “We look forward to expeditiously closing this portfolio and welcome the new customers to Nationstar.”

 

About Ocwen Financial Corporation

Ocwen Financial Corporation is a financial services holding company which, through its subsidiaries, is engaged in the servicing and origination of mortgage loans. Ocwen is headquartered in Atlanta, Georgia, with offices throughout the United States and support operations in India and the Philippines. Utilizing proprietary technology, global infrastructure and superior training and processes, Ocwen provides solutions that help homeowners and make our clients’ loans worth more. Ocwen may post information that is important to investors on its website (www.Ocwen.com).

About Nationstar

Based in Dallas, Texas, Nationstar earns fees through the delivery of quality servicing, origination and transaction based services related principally to single-family residences throughout the United States. Additional corporate information is available on the investors tab at www.nationstarmtg.com.

Forward Looking Statements

This news release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements by their nature address matters that are, to different degrees, uncertain. Forward-looking statements and involve a number of assumptions, risks and uncertainties that could cause actual results to differ materially.

Important factors that could cause actual results to differ materially from those suggested by the forward-looking statements include, but are not limited to, the following: adverse effects on our business as a result of recent regulatory settlements; reactions to the announcement of such settlements by key counterparties; increased regulatory scrutiny and media attention, due to rumors or otherwise; uncertainty related to claims, litigation and investigations brought by government agencies and private parties regarding our servicing, foreclosure, modification and other practices; any adverse developments in existing legal proceedings or the initiation of new legal proceedings; our ability to effectively manage our regulatory and contractual compliance obligations; the adequacy of our financial resources, including our sources of liquidity and ability to fund and recover advances, repay borrowings and comply with debt covenants; our servicer and credit ratings as well as other actions from various rating agencies, including the impact of recent downgrades of our servicer ratings; volatility in our stock price; the characteristics of our servicing portfolio, including prepayment speeds along with delinquency and advance rates; our ability to contain and reduce our operating costs; our ability to successfully modify delinquent loans, manage foreclosures and sell foreclosed properties; uncertainty related to legislation, regulations, regulatory agency actions, government programs and policies, industry initiatives and evolving best servicing practices; as well as other risks detailed in Ocwen’s reports and filings with the Securities and Exchange Commission (SEC), including its annual report on Form 10-K/A for the year ended December 31, 2013 (filed with the SEC on 08/18/14) and its quarterly report on Form 10-Q for the quarter ended September 30, 2014 (filed with the SEC on 10/31/14). Anyone wishing to understand Ocwen’s business should review its SEC filings. Ocwen’s forward-looking statements speak only as of the date they are made and, except for our ongoing obligations under the U.S. federal securities laws, we undertake no obligation to update or revise forward-looking statements whether as a result of new information, future events or otherwise.

CONTACT: Investors: Stephen Swett T: (203) 614-0141 E: shareholderrelations@ocwen.com Media: Sard Verbinnen & Co Margaret Popper/David Millar T: (212) 687-8080

Copyright (C) 2015 GlobeNewswire, Inc. All rights reserved.

________________

Under Nationstar’s Mergers & Acquisitions, It’s current status is pending. http://investors.nationstarholdings.com/mnahistory.aspx?iid=4288863&keydeal=200311

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Justice Department and State Partners Secure $1.375 Billion Settlement with S&P for Defrauding Investors in the Lead Up to the Financial Crisis

Justice Department and State Partners Secure $1.375 Billion Settlement with S&P for Defrauding Investors in the Lead Up to the Financial Crisis

FOR IMMEDIATE RELEASE
Tuesday, February 3, 2015

Justice Department and State Partners Secure $1.375 Billion Settlement with S&P for Defrauding Investors in the Lead Up to the Financial Crisis

Attorney General Eric Holder announced today that the Department of Justice and 19 states and the District of Columbia have entered into a $1.375 billion settlement agreement with the rating agency Standard & Poor’s Financial Services LLC, along with its parent corporation McGraw Hill Financial Inc., to resolve allegations that S&P had engaged in a scheme to defraud investors in structured financial products known as Residential Mortgage-Backed Securities (RMBS) and Collateralized Debt Obligations (CDOs).  The agreement resolves the department’s 2013 lawsuit against S&P, along with the suits of 19 states and the District of Columbia.  Each of the lawsuits allege that investors incurred substantial losses on RMBS and CDOs for which S&P issued inflated ratings that misrepresented the securities’ true credit risks.  Other allegations assert that S&P falsely represented that its ratings were objective, independent and uninfluenced by S&P’s business relationships with the investment banks that issued the securities.

The settlement announced today is comprised of several elements.  In addition to the payment of $1.375 billion, S&P has acknowledged conduct associated with its ratings of RMBS and CDOs during 2004 to 2007 in an agreed statement of facts.  It has further agreed to formally retract an allegation that the United States’ lawsuit was filed in retaliation for the defendant’s decisions with regard to the credit of the United States.  Finally, S&P has agreed to comply with the consumer protection statutes of each of the settling states and the District of Columbia, and to respond, in good faith, to requests from any of the states and the District of Columbia for information or material concerning any possible violation of those laws. 

“On more than one occasion, the company’s leadership ignored senior analysts who warned that the company had given top ratings to financial products that were failing to perform as advertised,” said Attorney General Holder.  “As S&P admits under this settlement, company executives complained that the company declined to downgrade underperforming assets because it was worried that doing so would hurt the company’s business.  While this strategy may have helped S&P avoid disappointing its clients, it did major harm to the larger economy, contributing to the worst financial crisis since the Great Depression.”

Attorney General Holder was joined in announcing the settlement with Acting Associate Attorney General Stuart F. Delery, Acting Assistant Attorney General for the Civil Division Joyce R. Branda and Acting U.S. Attorney for the Central District of California Stephanie Yonekura.  Also joining the Department of Justice in making this announcement are the attorneys general from Arizona, Arkansas, California, Connecticut, Colorado, Delaware, Idaho, Illinois, Indiana, Iowa, Maine, Mississippi, Missouri, New Jersey, North Carolina, Pennsylvania, South Carolina, Tennessee, Washington and the District of Columbia.

“This resolution provides further proof that the Department of Justice will vigorously pursue investigations and litigation, no matter how challenging, to protect the best interests of the American people,” said Acting Associate Attorney General Delery.  “As part of the resolution, S&P admitted facts demonstrating that it misrepresented itself to investors and the public, allowing the pursuit of profits to bias its ratings.  S&P also agreed to retract its unsubstantiated claim that this lawsuit was initiated in retaliation for the decisions S&P made about the credit rating of the U.S. government.  Today’s announcement is the latest result of our dedicated effort to address misconduct of every kind that contributed to the financial crisis.”

“Today’s historic settlement demonstrates that we will use all of our resources and every legal tool available to hold accountable those who commit financial fraud,” said Acting Assistant Attorney General Branda.  “Thanks to the tireless efforts of our team in Washington and California, S&P has not only paid a record-setting penalty, but has now admitted to the American people facts that make clear its own unlawful role in the financial crisis.”

Half of the $1.375 billion payment – or $687.5 million – constitutes a penalty to be paid to the federal government and is the largest penalty of its type ever paid by a ratings agency.  The remaining $687.5 million will be divided among the 19 states and the District of Columbia.  The allocation among the states and the District of Columbia reflects an agreement between the states on the distribution of that money.

In its agreed statement of facts, S&P admits that its decisions on its rating models were affected by business concerns, and that, with an eye to business concerns, S&P maintained and continued to issue positive ratings on securities despite a growing awareness of quality problems with those securities. S&P acknowledges that:

  • S&P promised investors at all relevant times that its ratings must be independent and objective and must not be affected by any existing or potential business relationship;
  • S&P executives have admitted, despite its representations, that decisions about the testing and rollout of updates to S&P’s model for rating CDOs were made, at least in part, based on the effect that any update would have on S&P’s business relationship with issuers;
  • Relevant people within S&P knew in 2007 many loans in RMBS transactions S&P were rating were delinquent and that losses were probable;
  • S&P representatives continued to issue and confirm positive ratings without adjustments to reflect the negative rating actions that it expected would come.

In addition, S&P acknowledges that the voluminous discovery provided to S&P by the United States in the litigation does not support their allegation that the United States’ complaint was filed in retaliation for S&P’s 2011 decisions on the credit rating of the United States.  S&P will formally retract that claim in the litigation.

“S&P played a central role in the crisis that devastated our economy by giving AAA ratings to mortgage-backed securities that turned out to be little better than junk,” said Acting U.S. Attorney Yonekura.  “Driven by a desire to increase profits and market share, S&P blessed innumerable securitizations that were used by aggressive lenders to offload the risks of billions of dollars in mortgage loans given to homeowners who had no ability to pay them off.  This conduct fueled the meltdown that ultimately led to tens of thousands of foreclosures in my district alone.  This historic settlement makes clear the consequences of putting corporate profits over honesty in the financial markets.”

Today’s settlement was announced in connection with the President’s Financial Fraud Enforcement Task Force.  The task force was established to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes.  With more than 20 federal agencies, 94 U.S. Attorneys’ Offices and state and local partners, it is the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud.  Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes, enhancing coordination and cooperation among federal, state and local authorities, addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations.  Over the past three fiscal years, the Justice Department has filed nearly 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,900 mortgage fraud defendants.  For more information on the task force, please visit www.StopFraud.gov.

15-126
Consumer Protection
StopFraud
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[VIDEO] Matt Taibbi and “The $9 Billion Witness” Who Exposed How JPMorgan Chase Helped Wreck the Economy

[VIDEO] Matt Taibbi and “The $9 Billion Witness” Who Exposed How JPMorgan Chase Helped Wreck the Economy

Democracy Now-

In holiday special, we feature a Democracy Now! broadcast exclusive interview with Alayne Fleischmann, the whistleblower who helped the Justice Department force JPMorgan Chase to pay one of the largest fines in U.S. history for its role in the financial crisis. She is featured in a Rolling Stone investigation by recently returned Matt Taibbi, who also joins us. Fleischmann details how she witnessed “massive criminal securities fraud” in the bank’s mortgage operations. Taibbi’s investigation is headlined, “The $9 Billion Witness: Meet the woman JPMorgan Chase paid one of the largest fines in American history to keep from talking.”

[DEMOCRACY NOW]

image: youtube

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New York’s Top Cop Scores as Credit Suisse Faces $10 Billion Mortgage Fraud Suit

New York’s Top Cop Scores as Credit Suisse Faces $10 Billion Mortgage Fraud Suit

BusinessWeek-

Credit Suisse Group AG (CSGN) was ordered to face a $10 billion lawsuit by New York’s attorney general accusing the Swiss bank of fraud in the sales of mortgage-backed securities before the 2008 financial crisis.

A New York State Supreme Court justice rejected the bank’s request to dismiss the case, a move that gives leverage to Attorney General Eric Schneiderman to demand internal bank documents and force a settlement. New York demonstrated the bank may have engaged in misconduct, Justice Marcy Friedman said in a Dec. 24 decision, allowing the suit to head toward trial.

In addition to forcing Zurich-based Credit Suisse to defend itself or settle, the ruling may strengthen Schneiderman’s hand in punishing other banks for bad behavior tied to the recession.

[BUSINESS WEEK]

image: BusinessWeek

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Billionaire investors at OneWest Bank rec’d $1 billion from FDIC. Expected to receive $1.4 billion more

Billionaire investors at OneWest Bank rec’d $1 billion from FDIC. Expected to receive $1.4 billion more

via: CalReInvest

Fact Sheet: OneWest Bank Expected to Receive Over $2.4 billion from the FDIC

CALIFORNIA
REINVESTMENT
COALITION

Background: When the Federal Deposit Insurance Corporation (FDIC) sold IndyMac in 2009 and La Jolla Bank in 2010, it agreed to share losses from bad loans with the billionaire investors who bought the two banks. Under the shared loss agreements, once a certain threshold of loans goes bad, the FDIC agrees to share in the costs of future losses. In July of 2014, OneWest Bank, which has the IndyMac and La Jolla shared loss agreements, announced plans to merge with CIT Group, creating a Systemically Important Financial Institution (SIFI). While executives from the two banks told community leaders they would answer any questions about the proposed merger, they later refused to answer questions about the shared loss agreements. The California Reinvestment Coalition (CRC), a non-profit coalition of over 300 member organizations, was forced to submit a Freedom of Information Act (FOIA) request to the FDIC to obtain the information.

Down Load PDF of This Case

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Matt Taibbi: The $9 Billion Witness: Meet JPMorgan Chase’s Worst Nightmare

Matt Taibbi: The $9 Billion Witness: Meet JPMorgan Chase’s Worst Nightmare

Meet the woman JPMorgan Chase paid one of the largest fines in American history to keep from talking

Rolling Stone-

She tried to stay quiet, she really did. But after eight years of keeping a heavy secret, the day came when Alayne Fleischmann couldn’t take it anymore.

“It was like watching an old lady get mugged on the street,” she says. “I thought, ‘I can’t sit by any longer.'”

Fleischmann is a tall, thin, quick-witted securities lawyer in her late thirties, with long blond hair, pale-blue eyes and an infectious sense of humor that has survived some very tough times. She’s had to struggle to find work despite some striking skills and qualifications, a common symptom of a not-so-common condition called being a whistle-blower.

[ROLLING STONE]

 

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US foreclosure rates are falling — unless you’re billionaire Bill Erbey… FORECLOSES on homeowners through is “captured” subsidiary Altisource

US foreclosure rates are falling — unless you’re billionaire Bill Erbey… FORECLOSES on homeowners through is “captured” subsidiary Altisource

He’s done and I hope this opens up more investigations! Was he part of the backdated letters to homeowners?

 

NY POST-

The real estate tycoon foreclosed on 1,022 houses last quarter through his company Altisource Residential — a record, according to a quarterly presentation released Tuesday.

The skyrocketing foreclosure rate seemingly contradicts statements Erbey made last week that one of his companies’ goals is “to keep people in their homes whenever possible.”

Erbey — chair of at least five companies, including Altisource Residential and mortgage servicer Ocwen Financial — stands to gain handsomely when one of his companies forecloses on more homes, as all his companies primarily do business with one another, industry experts say.

[NEW YORK POST]

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Investor to object to proposed $4.5 billion JPMorgan settlement

Investor to object to proposed $4.5 billion JPMorgan settlement

Reuters-

A group of funds that threw a monkey wrench in Bank of America Corp’s (BAC.N) proposed $8.5 billion settlement with investors in mortgage-backed securities will object to JPMorgan Chase & Co’s $4.5 billion offer to settle claims over similar investments, according to the lawyer that represents them.

The funds, collateralized debt obligations known as the Triaxx entities, received court permission on Wednesday to intervene in a proceeding seeking judicial approval of the JPMorgan settlement, people close to the case said.

JPMorgan last year reached the $4.5 billion agreement with some 20 institutional investors in 330 residential mortgage-backed securities trusts issued by JPMorgan and Bear Stearns, which the bank took over during the financial crisis.

[REUTERS]

IMAGE Credit: Reuters/Eduardo Munoz

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JP Morgan Set to Pay $1 Billion to Cover Yet Another Fraud

JP Morgan Set to Pay $1 Billion to Cover Yet Another Fraud

The Blaze-

JP Morgan has set aside another $1 billion to cover penalties for manipulating the foreign exchange market. The bank has paid out billions over regulatory violations and lawsuits in the last two years from the “London Whale” trading scandal to fraudulent sales of mortgage backed securities.

Meanwhile, Jamie Dimon, Wall Street’s darling, remains firmly in command of the fraud infested bank. It doesn’t seem to bother investors how banks make money, as long as the returns keep rolling in. Fines and penalties are merely a cost of doing business.

Back in the days when people were stigmatized for committing fraud, Dimon would have been out the door years ago. Now he is rewarded with oversize bonuses, stock options, and tons of perks. And the fines that JP Morgan has paid out have not gone to the victims; they have gone to the regulators instead.

[THE BLAZE]

(Photo by Diane Bondareff/Invision for JPMorgan Chase/AP Images)

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Geoffrey Graber | U.S. Prosecutor Masterminded $37 Billion Bank Penalty Win

Geoffrey Graber | U.S. Prosecutor Masterminded $37 Billion Bank Penalty Win

“It was Graber, though, who quietly muscled the deals through behind the scenes.” Not Eric Holder…so what did Holder do? NADA.

Bloomberg-

Geoffrey Graber, the 41-year-old Justice Department attorney tasked with holding Wall Street accountable for the financial crisis, has a message for his prosecutors: Always be closing.

In the past year, Graber has won almost $37 billion in penalties from some of the world’s largest banks, a record haul for prosecutors. To colleagues, he compares his job to that of Blake, the notorious motivational speaker played by Alec Baldwin in David Mamet’s 1992 film Glengarry Glen Ross, who chastises real estate salesmen for failing to lock in deals.

“My role was to identify the most promising cases and accelerate those,” Graber said in an interview. “We’ve done our best to put a short fuse on this.”

[BLOOMBERG]

Photographer: Andrew Harrer/Bloomberg

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COMPLAINT | COMMONWEALTH OF VIRGINIA vs. BARCLAYS CAPITAL INC. | VA AG HERRING BRINGS RECORD $1.15 BILLION LAWSUIT AGAINST BANKS FOR DEFRAUDING VIRGINIA TAXPAYERS

COMPLAINT | COMMONWEALTH OF VIRGINIA vs. BARCLAYS CAPITAL INC. | VA AG HERRING BRINGS RECORD $1.15 BILLION LAWSUIT AGAINST BANKS FOR DEFRAUDING VIRGINIA TAXPAYERS

State Seal
Commonwealth of Virginia
Office of the Attorney General

name and titleaddress

 

For media inquiries only, contact: 
Michael Kelly, Director of Communications
Phone:
Email: mkelly@oag.state.va.us

 

HERRING BRINGS RECORD $1.15 BILLION LAWSUIT AGAINST BANKS FOR DEFRAUDING VIRGINIA TAXPAYERS

 

~ Largest suit ever brought under Virginia Fraud Against Taxpayers Act seeks accountability for banks that fraudulently sold mortgage-backed securities to the Virginia Retirement System ~

RICHMOND (September 16, 2014)–Attorney General Mark R. Herring today announced a historic lawsuit against some of the largest commercial banks in the world for fraud committed against Virginia taxpayers during the height of the real estate bubble. A lawsuit unsealed today in Richmond Circuit Court seeks $1.15 billion in damages against thirteen banks that are each accused of fraudulently misleading the Virginia Retirement System (VRS) during the sale of residential mortgage-backed securities (RMBS) to the state retirement fund. The VRS was entitled to accurate information about the underlying mortgages when making decisions on how to invest taxpayer money and contributions by employees. Instead, these large banks purposefully included high-risk mortgages in securities and fraudulently misrepresented the quality of those loans to rating agencies and large investors like VRS. The securities were purchased starting around 2004, and before 2010, Virginia was forced to sell the vast majority of these toxic securities built on junk mortgages and lost $383 million.

In 2013, VRS was funded approximately 66% by Virginia taxpayers and 33% by contributions from state employees, with nearly 600,000 members including 145,000 teachers, 105,000 employees of city and county governments, and 78,000 state employees, as well as state troopers, local law enforcement, and court employees.

This is a rare state-level action brought by an Attorney General to hold banks accountable specifically for damages their fraud and recklessness caused state taxpayers through a public retirement system. It is the largest financial fraud action ever brought by the Commonwealth of Virginia and is the largest case ever brought under the Virginia Fraud Against Taxpayers Act. The Commonwealth will also seek civil penalties against each bank in the amount of $5,500-$11,000 for each violation.

“The message today is clear. It doesn’t matter if you’re a small-time con artist or a multi-billion dollar Wall Street bank. If you try to rip off or defraud Virginia consumers or Virginia taxpayers, you will be caught and you will be held responsible,” said Attorney General Herring. “Every Virginian was harmed by the financial crisis. Homes were lost, retirement accounts were devastated, small businesses saw their credit dry up almost overnight, and state and federal budget cuts hurt vulnerable Virginians. It will take many more years to recover the economic strength and stability we lost, but I will not allow Virginians to be left holding the bag for the reckless, fraudulent business practices of a few big banks who thought they were above the law. These banks lied to Virginia, and taxpayers and state employees lost hundreds of millions of dollars as a result.”

Each bank is alleged to have bundled risky residential mortgages into securities which were then sold to VRS in various quantities. The named banks are:

  • Barclays Capital Inc.
  • Citigroup Global Markets Inc.
  • Countrywide Securities Corporation
  • Credit Suisse Securities (USA) LLC
  • Deutsche Bank Securities Inc.
  • Goldman, Sachs & Co.
  • RBS Securities, Inc.
  • HSBC Securities (USA) Inc.
  • Morgan Stanley & Co. LLC
  • UBS Securities LLC
  • WAMU Capital Corp.
  • J.P. Morgan Securities LLC (and as current owner of Bear, Stearns & Co.)
  • Merrill Lynch, Pierce, Fenner & Smith Incorporated(and as current owner of Banc of America Securities LLC)

 

While the banks offered the securities to VRS as stable, solid investments, an analysis shows that nearly 40% of the 785,000 mortgages backing 220 securities purchased by Virginia’s retirement system were fraudulently misrepresented in a way that made them a significantly higher risk for default. These banks knew, or should have known, that claims they made about the quality of the mortgages were false, but they systematically disregarded and hid their own evaluations, and third-party evaluations, that revealed just how risky these securities were. The Commonwealth of Virginia suffered hundreds of millions in losses after receiving and relying on this false information.

 

The banks misrepresented the underlying mortgages in the following ways:

1.      Misrepresenting the loan-to-value ratio of mortgages– A higher loan-to-value ratio significantly raises the risk of default. Across all banks, it was claimed that only 23.4% of loans were for more than 80% of the value of the property, when in reality, it was 54%. Additionally, 15% of homes were underwater, with mortgages that exceeded the value of the home.
2.      Misrepresenting the owner occupancy rate of the homes–Borrowers are more likely to default on a home they do not occupy, such as a vacation home or rental property.
3.      Misrepresenting the percentage of homes with a second mortgage–This is a major risk factor for default because borrowers with second loans tend to have fewer assets relative to the amount they have mortgaged.

Hundreds of securities that were offered at AAA or similarly high ratings with a 0.00% mortgage delinquency rate were eventually downgraded significantly as delinquency rates of the mortgages skyrocketed, in some cases as high as 75%.

While the losses to the Virginia Retirement System are estimated at $383 million, the law allows Virginia to seek “treble damages,” or three times the actual damage, as compensation and to deter this kind of conduct. It is expected that money recovered as part of this suit will be returned to Virginia taxpayers and that damages suffered by VRS will be redressed.

The fraud was reported to the Commonwealth using a provision of the Virginia Fraud Against Taxpayers Act which incentivizes and allows whistleblowers to report fraud against Virginia taxpayers. After closely examining the evidence collected by the whistleblower and finding it to be accurate and convincing, Attorney General Herring is bringing the case on behalf of Virginia taxpayers. The whistleblower, a financial modeling and analysis firm called Integra REC, LLC, discovered the fraud using extremely sophisticated proprietary methods to match-up the RMBS purchased by VRS with the actual mortgages and properties they contained.

The case is being handled by Attorney General Herring’s Civil Litigation Division, including Deputy Attorney General Rhodes Ritenour, and Assistant Attorney General Peter E. Broadbent, III.

 

 

 # #

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(SOURCE: oag.state.va.us)

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GARY DUBIN LAW OFFICES FORECLOSURE DEFENSE HAWAII and CALIFORNIA
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