Four years after mortgage-linked deals played a starring role in the worst financial crisis in decades, banks and real-estate investors are at work on a new type of security tied to the housing market.
This time, financial firms are seeking to engineer deals backed by the rental payments of residents living in previously foreclosed homes.
In recent months, firms such as Colony American Homes and Waypoint Homes have snapped up houses in foreclosure and rented them. Backed by investment banks and credit-rating firms, these firms think they have spotted a new opportunity: Packaging thousands of those rental payments into securities and selling them to other investors, a process known as securitization.
A day after a key ruling from a lower appeals court, the Oregon Supreme Court said it will resolve uncertainty surrounding the mortgage industry’s controversial loan tracking system and its role in out-of-court foreclosures.
The state’s highest court on Thursday officially accepted questions sent to it by U.S. District Court chief judge Ann Aiken.
The questions stem from four cases challenging the legality under Oregon law of the Mortgage Electronic Registration Systems Inc. and non-judicial foreclosures.
On Wednesday, the Oregon Court of Appeals ruled in a separate case that a record of past mortgage sales must be filed publicly in Oregon before an out-of-court foreclosure can begin.
Why is it up to the banks to call the shots? How can regulators settle with a massive world -wide crime scene?
We already saw how uncapable the regulators were in handling the Foreclosure Fraud settlement.
Reuters-
A group of banks being investigated in an interest rate rigging scandal are looking to pursue a group settlement with regulators rather than face a Barclays-style backlash by going it alone, people familiar with the banks’ thinking said.
Such discussions are preliminary, and it is unclear if regulators will enter these talks, aimed at resolving allegations that banks attempted to manipulate the London interbank offered rate, or Libor, a benchmark that underpins hundreds of trillions of dollars in contracts.
Still, there are powerful incentives for the banks to enter joint negotiations.
Barclays Plc was the first to settle with U.S. and British regulators, paying a $453 million penalty and admitting to its role in a deal announced June 27. Its chief executive, Bob Diamond, abruptly quit the next week, bowing to public pressure and erosion of the bank’s reputation.
The sources told Reuters that none of the banks involved now want to be second in line for fear that they will get similarly hostile treatment from politicians and the public. Bank discussions about a group settlement initially took place before the Barclays agreement, and picked back up in the aftermath.
It’s been roughly four years since the 2008 financial crisis, and it doesn’t feel like a whole lot has changed on Wall Street. Too Big to Fail Banks are bigger, 650 trillion dollars of over the counter derivatives are still out there, and financial scandals abound. Bloomberg reports Wall Street may face a formidable foe in the Libor scandal if investors and firms sue. That foe is Wall Street itself. And the Financial Times also reports regulators are narrowing in on at least four of Europe’s biggest banks in the rate rigging probe: HSBC, Deutsche Bank, Credit Agricole and Societe General. But will Libor mark a turning point in authorities’ serious pursuit and punishment of Wall Street crime? Lauren interviews director of “Inside Job,” Charles Ferguson about this, and what has or has not changed since 2008’s epic financial crisis.
Also, why haven’t there been convictions of senior level executives on Wall Street for crimes related to the financial crisis in the several years since? The director and producer of the Oscar-winning documentary “Inside Job” and author of the new book “Predator Nation,” Charles Ferguson discusses this with us and taking stock of the financial landscape and where we are four years later. We also examine the axis of finance, government and academia, and ask Charles Ferguson for his take on where this nexus stands today.
Roy Johnson fell so far behind on his $1,000-per-month mortgage payments that last year he allowed the redbrick, three-bedroom ranch he had owned since 1963 to lapse into foreclosure.
“I couldn’t pay it any longer,” he said. “One day, I woke up and said, ‘Hell, I’m through with it. I’m walking away from the house.’ ”
That decision swept Mr. Johnson, 79, into a rapidly expanding demographic: older Americans who have lost their homes in the Great Recession. As he hauled his belongings by pickup truck from this Atlanta suburb and moved into his daughter’s basement, Mr. Johnson became one of the one and a half million Americans over the age of 50 who lost their houses to foreclosure between 2007 and 2011. Of those, the highest foreclosure rate was for homeowners over 75.
The Libor scandal is more than just the latest financial deception to come to light. It exposes a fraud that runs to the heart of our financial system.
The London interbank offered rate is a benchmark for a range of interest rates, and the misdeeds making headlines have to do with how those rates are set. If insiders can manipulate the basic measurement of a loan — the interest rate — there is rot at the core of the financial system.
The British financial giant Barclays has admitted to manipulating the rate from 2005 to at least 2009. When the bank made a bet on the direction in which interest rates would turn, the Barclays employees who submit data for calculating interest rates would fake their numbers to help Barclays traders win the bet. Day after day, year after year, bet after bet, Barclays made money by fixing bets for its own traders.
The Department of the Treasury announced changes in January 2012 to its Making Home Affordable (MHA) programs, which are funded by the Troubled Asset Relief Program (TARP), to address barriers to borrower participation. These changes include expanding eligibility criteria and extending application deadlines through 2013. Not enough time has passed to assess the extent to which these changes will increase participation. Several large servicers were not able to fully implement the changes by the June 1, 2012, effective date, and servicers that GAO queried had mixed views about possible effects. Treasury consulted with servicers, investors, and federal banking regulators before implementing the changes but did not perform a comprehensive risk assessment for the changes or develop meaningful performance measures in accordance with standards for internal control. As a result, Treasury may have difficulty mitigating potential risks, such as an increase in redefaults or the misuse of funds; effectively assessing program outcomes; or holding servicers accountable.
After a slow start, states increased their spending on borrower assistance under the Housing Finance Agency Innovation Fund for the Hardest Hit Housing Markets (Hardest Hit Fund). The assistance provided as of March 2012 totaled about 5 percent of the $7.6 billion allocation. All but one state that GAO spoke to anticipated spending their full allocations, and all noted that with Treasury’s help they had dealt with challenges related to staffing, infrastructure, servicer participation, borrower outreach, and program implementation. Treasury officials said that they expected initial administrative spending to be high as states established their programs, and 27 percent of states’ total spending was for administrative expenses as of March 2012. Treasury officials stated that states would be required to report publicly on administrative costs beginning with the third quarter of 2012. Treasury has been monitoring states’ performance and compliance but has not reported consolidated performance and financial data (including administrative expenses) for the programs. The lack of consolidated reporting of performance and financial data limits transparency and efforts to ensure that resources are used effectively to achieve program goals.
Why GAO Did This Study
More than 3 years have passed since Treasury made up to $50 billion available to help struggling homeowners through the MHA program, and foreclosure rates remain near historically high levels. Further, more than 2 years after Treasury set up the Hardest Hit Fund to help homeowners in high-unemployment states, much of the money remains unspent. The Emergency Economic Stabilization Act of 2008, which authorized Treasury to create TARP, requires GAO to report every 60 days on TARP activities. This 60-day report examines (1) the steps Treasury took to design and implement recent changes to MHA, and (2) Treasury’s monitoring and oversight of states’ implementation of Hardest Hit Fund programs. To address these questions, GAO analyzed data and interviewed officials from Treasury, five selected Hardest Hit Fund states, and five large MHA servicers.
What GAO Recommends
Treasury should (1) expeditiously assess the risks associated with the recent changes to MHA and develop activity-level performance measures for each program, and (2) consolidate the states’ Hardest Hit Fund performance and financial data, including administrative expenses, into a single public report. Treasury neither agreed nor disagreed with the recommendations but took exception to the finding that it did not conduct a comprehensive risk assessment prior to implementing the MHA program changes. In response, GAO provided examples of key components of a comprehensive risk assessment that Treasury had not addressed.
For more information, contact Mathew Scirè at (202) 512-8678 or sciremj@gao.gov
Recommendations for Executive Action
GAO is currently experiencing technical difficulties and is temporarily not displaying recommendation status and comments information.
Recommendation: In order to continue improving the transparency and accountability of MHA and the Hardest Hit Fund programs, the Secretary of the Treasury should expeditiously conduct a comprehensive risk assessment of Home Affordable Modification Program (HAMP) Tier 2, using the standards for internal control in the federal government as a guide.
Agency Affected: Department of the Treasury
Recommendation: In order to continue improving the transparency and accountability of MHA and the Hardest Hit Fund programs, the Secretary of the Treasury should develop activity-level performance measures and benchmarks related to the HAMP Tier 2 program.
Agency Affected: Department of the Treasury
Recommendation: In order to continue improving the transparency and accountability of MHA and the Hardest Hit Fund programs, the Secretary of the Treasury should consolidate the state performance reports and financial reports, including administrative expenses, into a single Hardest Hit Fund report to provide policymakers and the public with the overall status of the program as well as the relative status and performance of the states’ efforts.
Tom Joyce, director of corporate public relations for Minneapolis-based U.S. Bancorp (U.S. Bank), says in an email statement to ABC News that the bank, no less than the city attorney, is troubled that properties are not properly maintained and have a corrosive impact on neighborhoods.
He says, however, that the city attorney has chosen the wrong party to sue: U.S. Bank is not the owner of the properties, “nor are we responsible for the servicing” of them.
The homes, says the bank’s statement, are owned by trusts and by investors in those trusts. Only the companies to whom homeowners send their mortgage payments are responsible for the homes’ upkeep. Says the bank’s email: “It is clear from the complaint that the city does not understand our role.”
Frank Mateljan, spokesman for the city attorney’s office, says he understands U.S. Bank’s role just fine.
[…]
Deutsche Bank’s position is that the city attorney “has sued the wrong party,” for reasons almost identical to those advanced by U.S. Bank.
Mateljan, who calls the suits very novel, says that L.A. is “the first city, or one of the first cities” to bring such an action.
Rolling Stone’s Matt Taibbi joins us to discuss the pattern of systemic corruption by 16 banks accused of rigging a key global interest rate used in contracts worth trillions of dollars. The London Interbank Offered Rate — known as LIBOR — is the average interest rate at which banks can borrow from each other; some analysts say it defines the cost of money. Barclays was recently fined $453 million for rigging LIBOR, and a number of other banks are under investigation. “Ordinary people actually suffered when LIBOR was manipulated downward, mainly because local governments tended to lose money,” Taibbi says. “Even the tiniest manipulation downward when you’re talking about a thing of this scale would result in tens of trillions of dollars of losses…
MOTION AND, IF FILED, DETERMINED. IN THE DISTRICT COURT OF APPEAL OF FLORIDA SECOND DISTRICT
ANASTASIOS ZERVAS and DINA ZERVAS, Appellants,
v. Case No. 2D11-750
WELLS FARGO BANK, N.A., as trustee for the MLMI Trust Series 2005-FM1, Appellee.
Opinion filed July 18, 2012.
Appeal from the Circuit Court for Pinellas County; W. Douglas Baird, Judge.
Daniel K. Schaffner, Clearwater, for Appellants.
Roy A. Diaz and Diana B. Matson of Smith, Hiatt & Diaz, P.A., Fort Lauderdale, for Appellee.
WHATLEY, Judge.
Anastasios and Dina Zervas appeal a final judgment of foreclosure entered in favor of Wells Fargo Bank, N.A., as trustee for the MLMI Trust Series 2005- FM1. We reverse because Wells Fargo did not establish that no answer which the Zervases might file could present a genuine issue of fact.
On October 6, 2009, Wells Fargo filed a mortgage foreclosure complaint against the Zervases when they stopped making their monthly mortgage payments in June 2009. Seeking additional time to obtain a mortgage loan modification, on November 9, 2009, the Zervases filed a motion to stay time for filing an answer to the complaint. Thereafter, on December 21, 2009, Wells Fargo filed a motion for final summary judgment and attorney’s fees. On June 24, 2010, the trial court granted the motion to stay and gave the Zervases ten days to file an answer to the complaint. The Zervases instead filed a motion to dismiss on July 1, 2010.
About one month later, on August 2, 2010, the trial court held a hearing on Wells Fargo’s motion for final summary judgment and on that same day entered an order granting the motion. There is no order in the record addressing the Zervases’ motion to dismiss. On August 12, 2010, the Zervases filed a motion to set aside judgment and notice of filing proposed answer and affirmative defenses. The Zervases alleged several affirmative defenses, including the allegation that Wells Fargo failed to satisfy the condition precedent in paragraph twenty-two of the mortgage, which specifically required Wells Fargo to provide the Zervases with notice of the alleged default and a reasonable opportunity to cure.
We conclude that this case was not at issue when summary judgment was entered. The Zervases had not filed an answer and a default had not been entered against them. “[I]f ‘a plaintiff moves for summary judgment before the defendant has filed an answer, “the burden is upon the plaintiff to make it appear to a certainty that no answer which the defendant might properly serve could present a genuine issue of fact.” ‘ ” Howell v. Ed Bebb, Inc., 35 So. 3d 167, 168-69 (Fla. 2d DCA 2010) (quoting BAC Funding Consortium Inc. ISAOA/ATIMA v. Jean-Jacques, 28 So. 3d 936, 937-38 (Fla. 2d DCA 2010)); see Goncharuk v. HSBC Mortg. Servs., Inc., 62 So. 3d 680, 682 (Fla. 2d DCA 2011) (“The plaintiff must essentially anticipate the content of the defendant’s answer and establish that the record would have no genuine issue of material fact even if the answer were already on file.”). Wells Fargo failed to meet its burden to show that no answer which the Zervases might file could present a genuine issue of fact.
Most mortgages on the market contain an acceleration clause which is a condition precedent to filing a complaint for foreclosure. The clause in this case, like others this court has observed, is located in paragraph twenty-two of the mortgage and provides as follows:
Lender shall give notice to Borrower prior to acceleration following Borrower’s breach of any covenant or agreement in this Security Instrument (but not prior to acceleration under Section 18 unless Applicable Law provides otherwise). The notice shall specify: (a) the default; (b) the action required to cure the default; (c) a date, not less than 30 days from the date the notice is given to Borrower, by which the default must be cured; and (d) that failure to cure the default on or before the date specified in the notice may result in acceleration of the sums secured by this Security Instrument, foreclosure by judicial proceeding and sale of the Property. The notice shall further inform Borrower of the right to reinstate after acceleration and the right to assert in the foreclosure proceeding the non-existence of a default or any other defense of Borrower to acceleration and foreclosure. . . .
Although Wells Fargo made the general allegation in its complaint that “[a]ll conditions precedent to the filing of this action have been met by Plaintiff,” there is no evidence in the record that Wells Fargo complied with paragraph twenty-two. Similar to Goncharuk, 62 So. 3d at 682, Wells Fargo did not establish that the record would have no genuine issue of material fact where it did not address the notice of acceleration in the motion for summary judgment or accompanying affidavits. See also Konsulian v. Busey Bank, N.A., 61 So. 3d 1283, 1285 (Fla. 2d DCA 2011); Sandoro v. HSBC Bank, 55 So. 3d 730, 732 (Fla. 2d DCA 2011).
We also note that the mortgage and note attached to the complaint show the lender to be Fremont Investment and Loan. On April 1, 2010, approximately six months after the complaint was filed, Wells Fargo filed a lost note affidavit, which alleged that the note was lost by its attorney sometime after the attorney received it on November 2, 2009. In their motion to dismiss, the Zervases alleged, among other grounds, that Wells Fargo did not have standing to bring the foreclosure complaint because it did not have a written assignment of the loan. Then on July 26, 2010, seven days before the hearing on the motion for summary judgment, Wells Fargo filed the note as a supplemental exhibit to its complaint. The note contains an endorsement in blank, but there is no evidence in the record establishing that the endorsement in blank was made to Wells Fargo prior to the filing of the foreclosure complaint. See Feltus v. U.S. Bank Nat’l Ass’n, 80 So. 3d 375, 377 n.2 (Fla. 2d DCA 2012) (holding that bank was required “to prove the endorsement in blank was effectuated before the lawsuit was filed”).
We reverse the final judgment of foreclosure and remand for further proceedings.
Bank of America ($7.92 0%) executives said Fannie Mae will either have to file litigation or agree to a settlement to resolve the dispute over mortgage repurchase claims.
The bank and the government-sponsored enterprise disagree over $7.9 billion in mortgages Fannie claims BofA should buy back because of faulty origination practices, up from $3.7 billion at the end of last year. The bank said it should not have to buy back the loans because borrowers made at least 25 monthly payments on them.
The claims stem from mortgages originated in 2006 and 2007, BofA Chief Financial Officer Bruce Thompson told investors Wednesday.
“We clearly have a disagreement,” Thompson said. “Either they bring an action or there would be a settlement. Those would be the two ways this would get resolved.”
Reserves for total repurchases increased slightly to $15.9 billion.
Total outstanding claims increased roughly 41% to $22.7 billion in unpaid principal balance.
Goldman Sachs Group Inc has agreed to settle a class-action lawsuit with investors who claimed losses on $698 million of securities backed by risky mortgage loans issued by defunct subprime lender New Century Financial Corp.
Lawyers for the investors said in a letter filed in U.S. District Court in Manhattan on Tuesday that a proposed settlement had been reached. Terms were not immediately disclosed, though they are expected to be included in court papers filed by July 31.
Goldman is one of many banks accused by U.S. legislators and regulators of fueling the nation’s housing and financial crisis by misleading investors about the quality of mortgage debt they sold.
A federal judge in February ordered Goldman to face the class-action lawsuit that accuses it of defrauding investors in GSAMP Trust 2006-S2, a $698 million offering of certificates backed by second-lien home loans.
The loans were made by New Century, a subprime mortgage specialist that went bankrupt in 2007.
DISTRICT COURT OF APPEAL OF THE STATE OF FLORIDA FOURTH DISTRICT July Term 2012
CHRISTOPHER W. HENDERSON, Appellant,
v.
LITTON LOAN SERVICING, LP, Appellee.
No. 4D10-1167
[July 18, 2012]
PER CURIAM.
We reverse the final summary judgment of foreclosure entered in this case. Whether the appellee is entitled to enforce the promissory note remains a disputed issue of material fact. In Harvey v. Deutsche Bank National Trust Co., 69 So. 3d 300, 303 (Fla. 4th DCA 2011), we explained that the person entitled to enforce a negotiable instrument such as a note is the “‘holder of the instrument.’” (quoting § 673.3011, Fla. Stat.). A “holder” is the person in possession of the instrument that is payable to bearer or to an indentified person in possession. § 671.201(21)(a), Fla. Stat. “Bearer” means “a person in possession of a negotiable instrument . . . that is payable to bearer or indorsed in blank.” § 671.201(5), Fla. Stat. (emphasis added). See also Riggs v. Aurora Loan Servs., LLC, 36 So. 3d 932 (Fla. 4th DCA 2010). The note presented in these proceedings does not appear to have an endorsement in blank. Instead, the endorsement is to a specific entity, Wells Fargo, which is not the plaintiff in this case.
Reversed and remanded for further proceedings.
WARNER, STEVENSON and GROSS, JJ., concur. * * *
Appeal from the Circuit Court for the Fifteenth Judicial Circuit, Palm Beach County; Meenu Sasser, Judge; L.T. Case No.
Somehow I get a feeling that this is going to be a big issue for some of you. Remember I posted this ALERT a few weeks ago to be prepared.
Ben Hallman-
It usually happens when homeowners are at work or out of town.
In Clawson, Mich., Nancy Cox returned home to find her possessions in the front yard, smashed with a sledgehammer, and a chalk drawing of a clown face on her garage with the tagline, “another job well done.”
For Kenneth and Margaret Karpa in Pittsburgh, china and photos of their daughter were damaged. Missing belongings included a coin collection and the family cat.
In Kansas City, Allen Danforth discovered his elderly parents’ furnishings — tables, chairs, family heirlooms — gone.
These homeowners allege in separate lawsuits that a contractor hired by a major bank to preserve abandoned properties against damage, mistakenly entered their homes while they were still occupied. In most cases, it appears that the contractor, known as a property inspector or property preserver, broke in after ignoring obvious signs of occupation: lights turned on, grass mowed and homes fully furnished.
“They need to be completely damn sure that the property is vacant,” said Richard Fersch, the sergeant in charge of foreclosures in the Allegheny County, Penn., Sheriff’s Office.
W. Jeffrey Barnes argued the cause for appellant. With him on the briefs were Elizabeth Lemoine and Luby Law Firm.
Robert J. Pratte argued the cause for respondents. With him on the brief were William G. Fig and Sussman Shank LLP.
David L. Koen and Legal Aid Services of Oregon filed the brief amicus curiae for Oregon Trial Lawyers Association.
Before Schuman, Presiding Judge, and Wollheim, Judge, and Nakamoto, Judge.
NAKAMOTO, J.
Reversed and remanded.
NAKAMOTO, J.
This case, one of first impression in the Oregon appellate courts, involves the intersection between Oregon’s nonjudicial foreclosure laws and a creature of more modern vintage: Mortgage Electronic Registration Systems, Inc., also known as MERS.
Since 1959, the Oregon Trust Deed Act has authorized the use of trust deeds as security for home loans and allowed foreclosure of a defaulting homeowner’s interest by means of a privately-conducted, advertised trustee’s sale of the home rather than pursuant to a court-ordered, judicial foreclosure–provided, however, that certain statutory requirements are met. One of those requirements is that “any assignments of the trust deed by the trustee or the beneficiary” must be “recorded in the mortgage records in the counties in which the property described in the deed is situated.” ORS 86.735(1).
MERS, meanwhile, was created by the mortgage industry in the early 1990s to make it easier to bundle and sell promissory notes and their related security interests on the secondary market. MERS is not itself a lender. Rather, lenders, loan servicers, investors, and other industry participants can become members of MERS. When a MERS member originates a home loan, MERS–as opposed to the lender–is named as the “beneficiary” of the trust deed that the home buyer provides as security for the home loan. MERS then allows members to transfer and track their beneficial interests in those promissory notes and associated trust deeds through a private, internal database rather than by publicly recording each assignment in county mortgage records.
The question before us–and one that homeowners and MERS are litigating under similar state laws1–is whether MERS and its members can avail themselves of Oregon’s statutory, nonjudicial foreclosure process for trust deeds. Plaintiff is a homeowner who, like many other borrowers, executed a trust deed that named MERS as the “beneficiary.” After plaintiff defaulted on her loan repayment obligation, she received a notice of trustee’s sale that identified MERS as the “beneficiary” of the sale and that asserted a power of sale under the trust deed. Plaintiff then filed this declaratory judgment and injunctive relief action to stop the trustee’s sale, arguing that, notwithstanding the labels used in the trust deed, MERS is not the “beneficiary” of the trust deed for purposes of Oregon’s nonjudicial foreclosure laws.
The trial court granted summary judgment in favor of MERS and the other defendants (the loan servicer and the trustee), ruling that MERS was the designated “beneficiary” of the trust deed and that each statutory requirement for nonjudicial foreclosure had been met–including the requirement that any assignments of the trust deed must be recorded in the county mortgage records, ORS 86.735(1). Plaintiff now appeals, again arguing that the “Oregon legislature intended the ‘beneficiary’ to be the one for whose benefit the [deed of trust] is given, which is the party who lent the money,” rather than MERS. We agree and hold that the “beneficiary” of a trust deed under the Oregon Trust Deed Act is the person designated in that trust deed as the person to whom the underlying loan repayment obligation is owed. The trust deed in this case designates the lender, GreenPoint Mortgage Funding, Inc., as the party to whom the secured obligation is owed. And, because there is evidence that GreenPoint assigned its beneficial interest in the trust deed but did not record that assignment, the trial court erred in granting summary judgment in favor of defendants.
The Oregon Court of Appeals struck a blow to the mortgage industry in Oregon today, ruling that its controversial document-registry system could not be used to skirt state recording law in out-of-court foreclosures.
In a decision with implications beyond the Mortgage Electronic Registration Systems Inc., the state’s second-highest court also held today that a lender must ensure a complete ownership history of the mortgage on file in county records before it can foreclose outside a courtroom.
MERS was created by the mortgage industry to make it easier to bundle and sell loans to investors without having to record every assignment with county clerks. It is involved in an estimated 60 percent of mortgages across the country.
But the court found that the Oregon Trust Deed Act requires the party who receives loan payments to publicly record all changes in mortgage ownership before starting a so-called nonjudicial foreclosure.
Seeing how well he did of a job to protect Florida foreclosed victims, I’d vote for him (sarcasm). He failed every state.
My Florida senior citizen friend compared voting for either Obama or Romney as to choosing between Cancer and Heart Disease.
Bloomberg-
By day, Lynnette Acosta, a 34-year- old mother of two, is an information-technology manager in Orlando, Florida. By night, she’s a sleuth for President Barack Obama’s re-election campaign, scouring for potential voters.
In central Florida, that means knocking on doors in Hispanic neighborhoods with foreclosure rates as high as 30 percent, where once-registered Democrats have been evicted, their homes now owned by the bank. Volunteers walk house-to- house to determine the number of empty homes per precinct, then look for contact information for voters who once lived in them.
“It’s almost like playing detective, asking questions,” said Acosta, who is Puerto Rican and one of five campaign volunteers selected to join governors, senators and other officials serving as national co-chairs of the Obama campaign. “We take one door at a time, one person at a time.”
The Lying Bankers Scandal should be called the Bailout Theater scandal. I don’t mean the perhaps decades-long part where traders manipulated LIBOR by 0.01% or so, up and down, for personal profit. I mean the part that started in 2007 when the bankers lied by much more so they’d look healthier than they in fact were. That part is bailout theater because Friday’s data dump by the New York Fed proves the Fed and other “regulators” knew what was happening and effectively approved.
Why? Apparently the Fed decided that allowing criminal fraud was necessary to calm markets, even though the fraud did nothing to actually make the banks safer or sounder: Bailout Theater. And for that, the top guy at the NY Fed at the time, our current Treasury Secretary Timothy Geithner needs to be fired by President Obama and indicted if possible by Eric Holder. Not that I’m holding my breath on either point.
Bank of America Corp (BAC.N) agreed to settle a lawsuit alleging that its unit Countrywide Financial fraudulently misrepresented mortgage-backed securities insured by Syncora Guarantee, sources close to the settlement said.
The terms of the settlement were not immediately available.
In a filing in state court in New York on Tuesday, Syncora Guarantee, a unit of Syncora Holdings Ltd (SYCRF.PK), said it had agreed to discontinue the lawsuit.
Syncora was among bond insurers, including MBIA Inc (MBI.N), that sued Bank of America over representations made by Countrywide, a mortgage lender bought by Bank of America in 2008.
Certain protections under the Servicemembers Civil Relief Act (SCRA) only apply to those servicemembers who obtained mortgages prior to becoming active duty, but at least 15,000 instances of financial institutions failing to properly reduce servicemembers’ mortgage interest rates and over 300 improper foreclosures have been identified by federal investigations and financial institutions in recent years. Additional independent reviews of financial institutions’ compliance are under way, and staff from some of these institutions told GAO that they have implemented improved practices—such as creating single points of contact familiar with military issues for borrowers—to better comply with SCRA.
Federal regulators’ oversight of SCRA compliance has been limited. GAO estimates that from 2007 through 2011 prudential depository institution regulators—the Federal Deposit Insurance Corporation, Federal Reserve Board, National Credit Union Administration, and Office of the Comptroller of the Currency—reviewed 48 percent of all banks and credit unions for SCRA compliance. Of these institutions that were reviewed for SCRA compliance, only about half received examinations that involved testing of compliance by reviewing loan files. Further, GAO found that examiners had only reviewed loans identified by the institution as involving servicemembers and had not independently selected a statistical sample of loan files, which would have provided greater assurance of SCRA compliance. Without more testing, which examination and auditing guidance suggest provides increased verification, regulators are less likely to detect SCRA violations. Various other federal agencies are involved in SCRA compliance oversight. The Department of Justice has explicit SCRA enforcement authority and since 2007 has brought three cases against mortgage servicers for violations. The Department of Veterans Affairs (VA), Federal Housing Administration, and Federal Housing Finance Agency—which regulates the government-sponsored enterprises—all obtain information about SCRA compliance at the servicers that participate in the mortgage programs they administer or regulate, but the agencies and the prudential regulators do not share such information among themselves. Collaboration among these agencies could lead to more effective supervision and improve their awareness of potential problems with SCRA compliance. Further, VA oversight of mortgage servicers does not specifically review for SCRA compliance. By increasing its SCRA compliance monitoring efforts, VA could better ensure that servicemembers with VA loans are better protected.
SCRA requires that the Department of Defense (DOD) and Department of Homeland Security (DHS)—which oversees the Coast Guard—inform servicemembers of their SCRA rights. The military services provide this information in various forms, such as briefings and websites. However, some military officials said that servicemembers—particularly members of the National Guard and reserve—often receive SCRA information as part of briefings with numerous other topics prior to deployment and do not always retain the necessary awareness when they need it later. DOD and DHS do not assess the effectiveness of their SCRA education methods, such as by using focus groups of servicemembers or testing to reinforce retention of SCRA information. Without such assessment, they may not be able to ensure that they are informing servicemembers of their rights in the most effective manner.
Why GAO Did This Study
SCRA protects servicemembers whose active duty military service prevents them from meeting financial obligations, by allowing interest rates on certain debts to be reduced and requiring a court order before certain foreclosures on their homes can occur. With foreclosures rising, reports surfaced of instances in which financial institutions failed to comply with SCRA. GAO examined the (1) eligibility for SCRA protections and extent of SCRA mortgage-related violations by depository institutions, (2) SCRA compliance oversight by prudential regulators and other federal agencies, and (3) the military services’ efforts to educate servicemembers on SCRA. GAO collected data on populations eligible for SCRA from DOD and SCRA violations from banking and law enforcement agencies and reviewed a stratified random sample of prudential regulators’ examinations of banks and credit unions. GAO also interviewed regulators, law enforcement and military officials, and military service organizations.
What GAO Recommends
Prudential regulators should conduct more extensive loan file testing for SCRA compliance. Regulators and other agencies that oversee mortgage activities should also explore opportunities for information sharing on SCRA compliance oversight, and VA should expand its SCRA compliance monitoring efforts. Finally, DOD and DHS should assess the effectiveness of their efforts to provide SCRA information to servicemembers. The agencies generally agreed and noted actions responsive to GAO’s recommendations.
For more information, contact Mathew Scirè at (202) 512-8678 or sciremj@gao.gov.
According to Al Lewis on The News Hub, we’re actually in a depression right now, but most people don’t see it. One out of seven Americans are on food stamps – if they weren’t getting cards in the mail every month, you’d see them in soup lines.
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