I’ve been going over the mortgage settlement documents over the past few days – a lot has been released, with many implications. There is plenty to criticize. Subprime Shakeout has a great summary, and David Dayen has done a wonderful job going through the nitty gritty. Abigail Field has a spectacular review of the problems with the servicing standards. I’ll make a few criticisms of my own below. But I think the most interesting parts of the document release were the HUD Inspector General reports on the five banks and the DOJ complaint. What these prove is what we’ve always known – the law enforcement community knew exactly what these banks were doing. DOJ simply chose not to prosecute. There was intent to defraud, fraud, and frankly, according to HUD.
In fact, it’s not clear that the past tense is the correct tense to use. The Wells Fargo report is particularly interesting on that last point. Take it away, HUD OIG (italics are mine).
At the time of our review, affidavits continued to be processed by these same signers, who may not have been qualified, and these signers may not have adequately verified certain figures because they accessed a computer screen of data showing a compilation of figures instead of verifying the data against the information through review of the books and records kept in the regular course of business by the institution.
The nation’s five biggest banks will pay $25 million to the New York attorney general’s office to settle certain claims related to the use of Mortgage Electronic Registration Systems.
The agreement with New York Attorney General Eric Schneiderman releases Bank of America ($8.84 0.35), Citigroup ($35.21 -1.24), JPMorgan Chase ($43.58 0.19), Wells Fargo ($33.37 0.04) and Ally Financial from certain claims of robo-signing foreclosure documents.
Schneiderman sued Bank of America, JPMorgan and Wells Fargo, as well as MERS, in early February. The AG’s office said in the complaint the banks “created the MERS system as an end-run around the property-recording system.”
MERS is not involved in the agreement, and a company spokeswoman declined to comment.
Does anyone know the judge that is going to look over this case? If so, please forward their name or post in the comment section.
Business Week-
An audit of foreclosure practices at the Federal Housing Administration’s five largest mortgage servicers uncovered widespread failures to ensure the banks had proper legal documents.
According to reports released today by the inspector general of the Department of Housing and Urban Development, banks including Bank of America Corp. and Wells Fargo & Co. (WFC) violated the federal False Claims Act when they improperly foreclosed on homes insured by the FHA.
The audits, spurred by revelations in 2010 that mortgage servicers were seizing homes using improper paperwork, were forwarded to the Department of Justice last year. They formed part of the basis for a $25 billion settlement with five banks filed in U.S. court in Washington yesterday.
“I believe the reports we just released will leave the reader asking one question: How could so many people have participated in this conduct?” the inspector general, David Montoya, said in a statement accompanying the reports. “The answer: simple greed.’”
Top law enforcement officers from most of the 50 states gathered last week in Washington, D.C., for the annual spring meeting of state attorneys general, where the hot topic was the $25 billion foreclosure settlement finally filed in federal court on Monday.
More than a dozen state and federal officials who crafted the deal, which resolves charges that banks wrongfully foreclosed on homeowners, say it is the most ambitious of its kind ever reached, far outstripping the complexity and political machinations of the decade-old case against the giant tobacco companies.
But instead of high-fives and fist-bumps, officials, who had sniped at each other — and at the deal — for the better part of a year, tried to come to grips with the aftermath. The deal had to overcome disagreements between the banks and government officials, and between liberal Democrats and Tea Party-backed Republicans.
“It was like the Battle of Verdun, every square inch was fought over,” said George Jepsen, the Connecticut attorney general, of the 16 months of negotiations between federal officials, state attorneys general and five major financial institutions — Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial (formerly GMAC) — over the foreclosures and a host of other nasty “servicing” abuses.
Five of the nation’s biggest banks have agreed to pay New York a total of $25 million to settle claims brought by New York State Attorney General Eric Schneiderman regarding their use of a private national mortgage electronic system.
The agreement, filed in federal court Tuesday, resolves certain monetary claims by the New York attorney general against Ally Financial Inc., Bank of America Corp., Citigroup Inc., J.P. Morgan Chase & Co. and Wells Fargo & Co.
The agreement preserves the New York attorney general’s right to sue for damages suffered by consumers …
In a conference call on Feb. 14, Secretary Shaun Donovan of the Department of Housing and Urban Development promised about 90 mortgage-backed bondholders that the $25 billion national mortgage settlement would include a 15 percent cap on the number of investor-owned loans that the five settling banks would be permitted to modify, according to the three participants in the call.
Donovan made the promise in response to MBS investor concerns that banks would shift the cost of the settlement onto their shoulders by writing down the principal in securitized mortgages, rather than in the loans banks hold in their own portfolios. He had already said in a press conference that the settlement would provide incentives for the settling banks — Bank of America, JPMorgan Chase, Citigroup, Wells Fargo, and Ally Financial — to reduce the principal in their own portfolio loans, estimating that “a relatively small share, in the range of 15 percent” of the write-downs would be in investor-owned mortgages. In the Feb. 14 call with bondholders, according to the three participants, Donovan went a step farther, assuring MBS investors that the written settlement agreement would limit the percentage of investor-owned loans the banks were permitted to modify.
Best way to rob a bank is to own one – William Black
Reuters-
Top banks impeded a federal inquiry into their foreclosure processes, according to a report released Tuesday, dragging their feet on turning over documents and blocking investigators’ attempts to interview bank employees.
The inquiry led to the wide-ranging $25 billion mortgage settlement with the five largest mortgage servicers that was announced last month and filed in federal court on Monday.
But the banks hampered an early investigation into whether they were pursuing unlawful foreclosures through shoddy paperwork and lax controls, the inspector general’s office at the U.S. Department of Housing and Urban Development said in its report.
Bank of America (BAC.N), for example, provided only excerpts of files, incomplete documents, and conflicting information to government investigators, and refused to provide some of its foreclosure policies.
It also limited employee interviews, and refused to let employees answer certain questions, the report said.
As Abigail Field says “I thought the indictment that led to the far-too-weak settlement was damning enough;” check out the HUD OIG reports:
Audit Reports
The following reports disclose conditions noted during the identified audit period. They do not necessarily reflect current conditions at the subject auditee. Any questions regarding the current status of corrective actions recommended in these reports should be directed to the report addressee.
FEATURED
To save time we have provided these quick access links to the recently featured Audit Memorandums. You can also find all memorandums in their respective state sections with summaries.
Palm Beach Gardens homeowner and foreclosure fighter Lynn Szymoniak is slated to get $18 million from the nationwide settlement with the country’s five largest banks that was filed in federal court Monday.
Szymoniak, who was featured on the CBS news show 60 Minutes last year for the work she did uncovering the robo-signing scandal, said this morning that her gain from the settlement seems “surreal.”
“I always tend to discount everything until it’s signed,” she said. “I knew it was part of the settlement in February, but not how much.”
Szymoniak’s settlement is part of a larger $95 million agreement reached with the banks and Bill Nettles, the U.S. District Attorney of South Carolina. That agreement is written into the $25 billion nationwide settlement between 40 state attorneys general and Bank of America, JPMorgan Chase, Ally Financial, Wells Fargo and Citigroup.
The $25 billion mortgage servicing settlement means more due diligence work for servicers when assessing the work of law firms and other third parties assisting with foreclosures and bankruptcies.
The national mortgage servicer settlement involving the nation’s top five mortgage servicers shows firms taxed with ensuring that all law firms, trustees, subservicers and other third parties handling foreclosure or mortgage servicing activities are in line with best practices outlined in the settlement agreement.
The settlement, agreed to in February, was officially filed with the court on Monday.
Servicers are required to survey the firm’s qualifications, practices, information security for document handling and financial viability, according to settlement documents.
This famous postgame rant from former Arizona Cardinals coach Denny Green after his team’s epic meltdown on Monday Night Football against the Bears could just as easily apply to my reaction to reading the official terms of the Attorney General Foreclosure Settlement (the “AGFS”), filed today. The nation’s largest banks get off with a relatively small penalty (much of it paid by investors or in “credits” for things the banks should already be doing) in return for releases across a broad spectrum of misconduct that pervades just about every dark corner of mortgage servicing. The categories of servicer misconduct are laid out in detail in the complaint filed today in D.C. Federal Court, and include the following:
Providing false or misleading information to borrowers,
Overcharging borrowers and investors for services of dubious value,
Denying relief to eligible borrowers,
Foreclosing on borrowers who were pursuing loan mods in good faith,
Submitting forged or fraudulent documents and making false statements in foreclosure and bankruptcy proceedings
Losing or destroying promissory notes and deeds of trust,
Lying to borrowers about the reasons for denying their loan mods,
Signing affidavits without personal knowledge and under false identities,
Improperly charging excessive fees related to foreclosures,
Foreclosing on servicemembers on active duty,
Making false claims to the government for insurance coverage, and
Being unorganized, understaffed, and generally slower than molasses to respond to borrowers desperately in need of relief, while servicing fees continue to accrue.
57. In the course of their conduct, management and oversight of loan modifications in the plaintiff States, the Banks have engaged in a pattern of unfair and deceptive practices.
58. The Banks’ failure to discharge their required loan modification obligations, and related unfair and deceptive practices, include, but are not limited to, the following:
a. failing to perform proper loan modification underwriting;
b. failing to gather or losing loan modification application documentation and other paper work;
c. failing to provide adequate staffing to implement programs;
d. failing to adequately train staff responsible for loan modifications;
e. failing to establish adequate processes for loan modifications;
f. allowing borrowers to stay in trial modifications for excessive time periods;
g. wrongfully denying modification applications;
h. failing to respond to borrower inquiries;
i. providing false or misleading information to consumers while referring loans to foreclosure during the loan modification application process;
j. providing false or misleading information to consumers while initiating foreclosures where the borrower was in good faith actively pursuing a loss mitigation alternative offered by the Bank;
k. providing false or misleading information to consumers while scheduling and conducting foreclosure sales during the loan application process and during trial loan modification periods;
l. misrepresenting to borrowers that loss mitigation programs would provide relief from the initiation of foreclosure or further foreclosure efforts;
m. failing to provide accurate and timely information to borrowers who are in need of, and eligible for, loss mitigation services, including loan modifications;
n. falsely advising borrowers that they must be at least 60 days delinquent in loan payments to qualify for a loan modification;
o. miscalculating borrowers’ eligibility for loan modification programs and improperly denying loan modification relief to eligible borrowers;
p. misleading borrowers by representing that loan modification applications will be handled promptly when Banks regularly fail to act on loan modifications in a timely manner;
q. failing to properly process borrowers’ applications for loan modifications, including failing to account for documents submitted by borrowers and failing to respond to borrowers’ reasonable requests for information and assistance;
r. failing to assign adequate staff resources with sufficient training to handle the demand from distressed borrowers; and
s. misleading borrowers by providing false or deceptive reasons for denial of loan modifications.
Due to public interest in this case, the Department of Justice is releasing documents that may not be in an accessible format. If you have a disability and the format of any material on the site interferes with your ability to access some information, please email the Department of Justice webmaster at webmaster@usdoj.gov or contact Alisa Finelli at 202.514.2007. To enable us to respond in a manner that will be of most help to you, please indicate the nature of the accessibility problem, your preferred format (electronic format (ASCII, etc.), standard print, large print, etc.), the web address of the requested material, and your full contact information so we can reach you if questions arise while fulfilling your request.
Does anyone care how many lives were destroyed by these banks and continue to get hammered everyday??
NICK TIMIRAOS-
Banks won a handful of concessions in the landmark $25 billion settlement of alleged foreclosure abuses, as federal officials struck a balance between their desire to be tough on lenders and the need to provide immediate relief to the housing market.
A key sticking point in the year-long negotiations was how to structure mortgage write-downs, and who should bear the losses.
The banks that are party to the settlement—Ally Financial Inc., Bank of America Corp., Citigroup Inc., J.P. Morgan Chase & Co ., and Wells Fargo & Co .—heavily and publicly resisted initial government proposals that they absorb the hit for write-downs of loans held by investors for which the banks collect payments. They argued that doing so amounted to transfers of wealth to Fannie Mae, Freddie Mac, and investors in mortgage-backed securities such as hedge funds and pensions.
A previously announced $25 billion settlement between five major banks accused of abusive mortgage practices and government officials will be filed in federal court on Monday, people familiar with the matter said late Friday.
The pact unveiled Feb. 9 is expected to result in payments and other mortgage relief for about one million borrowers, but must first be approved by a judge.
Bank of America Corp, Wells Fargo & Co, JPMorgan Chase & Co, Citigroup Inc and Ally Financial Inc agreed to the settlement after 16 months of negotiations with state attorneys general and federal agencies, including the U.S. Justice Department and the U.S. Department of Housing and Urban Development.
But the fine print took another month to finalize.
Negotiators had hoped to file a settlement on Friday, but the deal was held up at the last minute over a disagreement between Nevada and Bank of America, people familiar with the matter said.
Just when you’ve thought you’ve seen, read it all.
David Dayen-
I think my disgust over federal housing policy is just about complete. As you know, we’re still waiting for the actual terms of the foreclosure fraud settlement, more than one month after the announcement. But more information has dribbled out, not much of it to the good. Michael Hiltzik rounded up some of the more troubling issues. He mentions that OCC penalties will get folded into the settlement, basically charging $0 for their violations. The Federal Reserve did the same thing. He mentions the Ted Gayer study showing that only 500,000 borrowers will even be eligible for the principal reduction in the settlement, half of what HUD and other regulators promised. And he adds that the Treasury Department restored all HAMP incentive payments for servicers who failed to meet their obligations under the programs. As Hiltzik writes, “If the banks had shown as much forbearance toward their struggling borrowers as these three agencies have shown toward the banks, the foreclosure settlement wouldn’t have been necessary in the first place.”
After years of incompetence, intransigence, malevolence and whatever else may explain how mortgage companies have managed to screw over millions of troubled American homeowners, a fix is finally at hand.
Officials have presented the deal as justice for the so-called robo-signing scandal, whereby major mortgage companies improperly foreclosed on millions of properties. They have touted its centerpiece: a $20 billion fund stocked with fines paid by the mortgage companies, which will deliver relief to as many as 1 million troubled borrowers via lowered monthly payments, principal reduction and refinanced loan terms.
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