California Atty. Gen. Kamala D. Harris has subpoenaed Citigroup Inc. and its banking subsidiary, Citibank, ordering the two entities to answer questions regarding the selling and marketing of mortgage-backed securities in the Golden State, a person familiar with the investigation said.
The person, who was not authorized to speak publicly about the matter and spoke on condition of anonymity, would not further characterize the nature of the investigation. Spokespeople for the attorney general’s office and Citi declined to comment.
WASHINGTON — Federal bank regulators are scrutinizing more than 150 home loan-related lawsuits directed at lenders and mortgage companies, a top official at the Federal Deposit Insurance Corporation plans to say Thursday, underscoring the threat the largest U.S. banks face from faulty and improper mortgage and foreclosure practices.
The revelation will likely add to large banks’ woes, as the five biggest servicers — Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial — currently face up to $30 billion in penalties from state attorneys general and federal agencies for wrongful foreclosures and other mortgage-related misdeeds.
Lets not act surprised in this as we always knew there was something cooking behind the scenes and not everyone agreed and probably disappointed with the approach Tom Miller from Iowa was heading.
WaPO-
As state attorneys general continue their months-long settlement negotiations with the nation’s largest banks over widespread problems in foreclosure practices, they have yet to resolve differences within their own group on key issues.
Even within the 14-member “executive committee” of attorneys general who are leading the 50-state coalition, some have very different visions of what exactly a settlement should look like.
[…]
A handful of crucial states, including California, Illinois and New York, have undertaken their own investigations into mortgage industry practices, subpoenaing information about business practices and seeking meetings with executives about such things as securitization to faulty court affidavits. Other officials, such as in Oklahoma, have threatened to pursue their own settlements with mortgage servicers.
The nation’s largest mortgage companies are operating on the assumption that they will have to pay as much as $20 billion to resolve claims of widespread foreclosure abuse, an amount four times what they had originally proposed, the top federal official overseeing the discussions told state officials Monday, according to people who participated in the conversation.
Associate U.S. Attorney General Tom Perrelli told a bipartisan group of state attorneys general during a conference call that he believes the banks have accepted the realization that a wide-ranging settlement to the months-long probes will cost them much more than the $5 billion offer they floated last month, according to officials with direct knowledge of the call. Perrelli said he’s basing his belief on his recent conversations with representatives of the five targeted firms: Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial.
A settlement between a coalition of federal and state agencies and banks over foreclosure practices will come in a “matter of weeks,” Shaun Donovan, secretary of Housing and Urban Development, told the Los Angeles Times.
Donovan’s agency is involved in the negotiations with the banks, along with attorneys general from all 50 states and officials from the Justice Department and other federal agencies.
U.S. banks and state attorneys general, seeking to avoid $17 billion in court claims over faulty foreclosures, are discussing a settlement framework that may let firms choose from a menu of options for helping borrowers, two people briefed on the talks said.
Under the proposal, Bank of America Corp. (BAC), Wells Fargo & Co. (WFC), JPMorgan Chase & Co. (JPM), Citigroup Inc. (C) and Ally Financial Inc. would pay penalties and pledge billions of dollars in relief to home buyers, one of the people said, asking not to be named because the talks are private. Firms may fulfill obligations to borrowers over time, choosing among options such as reducing loan principal, cutting fees or paying moving costs, the people said.
Mortgage lenders like Bank of America and Wells Fargo are fighting the fight on all fronts, with the latest being False Claims Act violations. Here’s what to look for in any settlements.
FORTUNE — The trouble for America’s largest mortgage lenders just keeps mounting. How much will it cost them to make it all go away?
ATTORNEY GENERAL GEORGE JEPSEN
STATEMENT BY ATTORNEY GENERAL GEORGE JEPSEN
CONCERNING MORTGAGE FORECLOSURE INVESTIGATION
For immediate release ……………………………………..TUESDAY MAY 17, 2011
“The multistate investigation of the nation’s largest mortgage servicing companies confirms what my office has been told by thousands of Connecticut consumers, that these banks have done an incredibly poor job in dealing with the mortgage foreclosure mess they were instrumental in creating. As a result, millions of families have needlessly suffered, homeowners have lost billions of dollars in equity, and the real estate market continues to stagnate. Time is of the essence to fix this problem.
“Thus far, the national servicers have been unwilling to step up to the plate with the money necessary to address the full scope of the problems they themselves created. I believe they face substantial legal liability for their clearly illegal behavior should states be forced to sue. After being bailed out by American taxpayers, the banks owe those same taxpayers a real effort to partner with state and federal officials to clean up this mess.”
Attorney General Jepsen is a member of the National Association of Attorneys General multi-state task force seeking resolution of the mortgage foreclosure crisis
WASHINGTON — A set of confidential federal audits accuse the nation’s five largest mortgage companies of defrauding taxpayers in their handling of foreclosures on homes purchased with government-backed loans, four officials briefed on the findings told The Huffington Post.
The five separate investigations were conducted by the Department of Housing and Urban Development’s inspector general and examined Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial, the sources said.
[…]
The state of Illinois has begun examining potentially-fraudulent court filings, looking at the role played by a unit of Lender Processing Services. Nevada and Arizona already launched lawsuits against Bank of America. California is keen on launching its own suits, people familiar with the matter say. Delaware sent Mortgage Electronic Registration Systems Inc., which runs an electronic registry of mortgages, a subpoena demanding answers to 75 questions. And New York’s top law enforcer, Eric Schneiderman, wants to conduct a complete investigation into all facets of mortgage banking, from fraudulent lending to defective securitization practices to faulty foreclosure documents and illegal home seizures.
This Special Foreclosure Edition describes lessons learned from an interagency review of foreclosure practices at the 14 largest residential mortgage servicers and includes examples of effective mortgage servicing practices derived from these lessons.
“We’re not happy” with the time it takes to give borrowers an answer, said Christine Larsen, head of operations for retail financial services at J.P. Morgan, who is responsible for implementing the consent orders. The bank is trying to speed response times by setting new customer-communication deadlines.
TWO individual investors just scored a remarkable win against Citigroup.
A few weeks ago, the pair was awarded a total of $54.1 million in a securities arbitration case against the Smith Barney unit of the company — the largest amount ever awarded to individuals in such a case, according to the Financial Industry Regulatory Authority.
ROBERT E. RUBIN, C. MICHAEL
ARMSTRONG, JOHN M. DEUTCH,
ANNE M. MULCAHY, VIKRAM PANDIT,
ALAIN J.P BELDA, TIMOTHY C. COLLINS,
JERRY A GRUNDHOFR, ROBERT L. JOSS,
ANDREW N. LIVERIS, MICHAEL E. O’NEILL,
RICHARD D. PARSONS, LAWRENCE R.
RICCIARDI, JUDITH RODIN, ROBERT
L. RYAN, ANTHONY M. SANTOMERO,
DIANA L. TAYLOR, WILLIAM S. THOMPSON,
JR., AND ERNESTO ZEDILLO
~ Excerpts:
I. This is a shareholder derivative action brought on behalf and for the benefit of Citigroup against certain of its current and former directors. Citigroup is a global . financial services company, and provides consumers, corporations, governments and institutions with a range of financial products and services. The recipient of some $45 billion of federal government bail-out monies, Citigroup has suffered, and will continue to suffer, serious financial and reputational impacts from the inadequate servicing of its troubled residential mortgage loans.
2. On April 13, 2011, the Office of the Comptroller of the Currency (“OCC”) publicized findings from its fourth quarter 2010 investigation into Citigroup’s mortgage servicing and foreclosure processing practices. As a result of that investigation, the OCC concluded that Citigroup (through its wholly-owned subsidiary, Citibank, N.A.): engaged in improper servicing and foreclosure practices; lacked sufficient resources to ensure proper administration of its foreclosure processes; lacked adequate oversight, internal controls, policies, and procedures, compliance risk management, internal audit, third party management; failed to supervise outside counsel and other third parties handling foreclosure-related services; and engaged in unsafe or unsound banking practices. The above findings were made public in the OCC’s formal enforcement agreement with Citibank as set forth in the Consent Order captioned In the Matter of Citibank, NA. Las Vegas, Nevada AA -EC-II-I3 (the “Consent Order”).
<SNIP>
13. Apar from a dismal track record in complying with its obligations under TARP and HAMP, Citigroup also suffered from the effects of a lack of adequate controls over its foreclosure processes. By third and fourth quarters of 20 10, reports had surfàced alleging that companies (including Citigroup) servicing $6.4 trillion in American mortgages may have bypassed legally required steps to foreclose on a home. For example, a New Jersey state cour administrative order specifically implicated Citi Residential Lending, Inc. (“Citi Residential,” a business of Citigroup) in the so-called “robosigning” scandal. Robo-signers, as the court put it, “are mortgage lender/servicer employees who sign hundreds-in some cases thousands-of affidavits submitted in support of foreclosure claims without any personal knowledge of the information contained in the affidavits. ‘Robo-signing’ may also refer to improper notarizing practices or document backdating.” The administrative order cited devastating evidence of the inadequacies of Citigroup’s internal controls over its loan documentation and foreclosure processes:
An individual employed by Nationwide Title Clearing, Inc., with signing authority for Citi Residential Lending, Inc., testified in a deposition that when he signed documents for Citi, he did not review them for substantive correctness. He could not even explain what precisely an assignment of a mortgage accomplishes. He had no prior background in the mortgage industry.
Further, a second person with signing authority for Citi Residential Lending, Inc. testified that she never reviewed any books, records, or documents before signing affidavits and that she instead trusted the company’s internal policies and procedures to ensure the accuracy of the information she signed. She signed several documents each day (in many instances without knowledge of what she was signing) and indicated that they were often notarized outside of her presence.
14. The deficiencies in Citigroup’s controls over its loan documentation and foreclosure processes have led to tens of thousands of adverse outcomes for the Company throughout the United States. On November 23, 20 i 0, a Managing Director of Citi- Mortgage, in a written statement to the House Committee on Financial Services, Subcommittee on Housing and Community Opportunity, admitted that: (a) the Company was reviewing approximately 10,000 affidavits executed in pending foreclosures initiated before February 2010; (b) affidavits executed before fàll 2009 would need to be refilled;
(c) that the Company was reviewing another approximately 4,000 pending foreclosure affidavits that may not have been properly executed; and (d) it was transferring approximately 8,500 foreclosure files from its former Florida law firm that engaged in robo-signing.
That Aug. 20, Commerzbank of Germany borrowed $350 million at the Fed’s discount window. Two days later, Citigroup, JPMorgan Chase, Bank of Americaand the Wachovia Corporation each received $500 million. As collateral for all these loans, the banks put up a total of $213 billion in asset-backed securities, commercial loans and residential mortgages, including second liens.
Thus began the bank run that set off the financial crisis of 2008. But unlike other bank runs, this one was invisible to most Americans.
The Securities and Exchange Commission upheld a New York City Pension Funds request that big bank shareholders will get to vote on whether or not those vested financial institutions conduct foreclosure reviews.
Shareholders of Bank of America (: ), Citigroup (: ) and Wells Fargo (WFC: 31.27 -0.76%) will vote at annual meetings this spring, because of the ruling. Wells did not contend the proposal at the SEC. In January, The New York City Comptroller John Liu asked the boards of the banks and JPMorgan Chase (JPM: 45.20 -0.59%) to conduct the reviews to catch potential problems related to robo-signing and other documentation issues.
NEW YORK — The Obama administration is seeking to force the nation’s five largest mortgage firms to reduce monthly payments for as many as three million distressed homeowners in as little as six months as part of an agreement to settle accusations of improper foreclosures and violations of consumer protection laws, six people familiar with the matter said.
Described as a “shock and awe” approach, the deal would accomplish the four goals set out by state and federal policy makers and regulators as part of their multi-agency investigations into abusive mortgage practices by the nation’s largest financial firms: punish banks for violations of state law and federal regulations; provide much-needed assistance to distressed borrowers; stabilize a deteriorating housing market; and dissuade firms from abusing homeowners in the future.
Earnings at Bank of America, the largest U.S. lender, may suffer materially if using Mortgage Electronic Registration Systems or MERS is found to be invalid, according to a regulatory filing last week. Citigroup and PNC said fines or other penalties may result from investigations into MERS and allegations of faulty foreclosure practices.
“They’re recognizing the writing on the wall, that there are serious problems associated with the basic business model and legal theories of the MERS system,” Christopher L. Peterson, a law professor at the University of Utah in Salt Lake City who has written articles on Reston, Virginia-based MERS, said yesterday.
HSBC North America Holdings, the nation’s ninth-largest bank by assets, warned investors Monday of impending fines after receiving notice from federal bank regulators admonishing the lender for improper foreclosure practices.
The bank is the latest in a string of large financial companies that have used recent securities filings to prep investors for fines and a significant increase in costs associated with processing mortgages and repossessing homes, after being cited by regulators for deficient and sometimes illegal operations. On Friday, Ally Financial, Wells Fargo & Co., and SunTrust Banks — three of the nation’s 10 largest handlers of home mortgages — said in regulatory documents that they expect to be sanctioned by the U.S. government for their foreclosure practices.
The penalties follow months-long criminal and civil probes by federal and state regulators into lenders’ mortgage practices. Officials said they found significant shortcomings and violations of various state laws. A “small number” of foreclosures should not have occurred, John Walsh, the interim head of the Office of the Comptroller of the Currency, the federal regulator of national banks, told a Senate committee earlier this month after his agency surveyed less than 3,000 out of millions of loan files.
CHARLOTTE, N.C./NEW YORK (Reuters) – Bank of America, Citigroup and Wells Fargo — three of the biggest banks in the United States — said they could face fines from a regulatory probe into the industry’s foreclosure practices.
The statements, made in regulatory filings on Friday, are the most direct admission yet from major banks that they could have to pay significant amounts of money to settle probes and lawsuits alleging that they improperly foreclosed on homes.
Bank of America Corp (BAC.N), the largest U.S. bank by assets, said the probe could lead to “material fines” and “significant” legal expenses in 2011.
Wells Fargo & Co (WFC.N), the largest U.S. mortgage lender, said it is likely to face fines or sanctions, such as a foreclosure moratorium or suspension, imposed by federal or state regulators. It said some government agency enforcement action was likely and could include civil money penalties.
Citigroup Inc (C.N) said it could pay fines or set up principal reduction programs.
The biggest U.S. mortgage lenders are being investigated by 50 state attorneys general and U.S. regulators for foreclosing on homes without having proper paperwork in place or without having properly reviewed paperwork before signing it.
The bad documentation threatens to slow down the foreclosure process and invalidate some repossessions.
By Donal Griffin and Dakin Campbell – Feb 8, 2011 12:00 AM ET
Citigroup Inc., the third-largest U.S. bank, settled or lost at least five claims in 2010 brought by borrowers who accused the bank of filing fraudulent mortgage documents provided by a Texas firm.
In the most recent settlement in December, a bankrupt homeowner in Wappingers Falls, New York, challenged Citigroup’s use of a mortgage “assignment,” which shows the transfer of ownership of a mortgage. It was signed by an employee at Orion Financial Group Inc., a Southlake, Texas, firm that provides document services to lenders.
The document was “of fraudulent nature and questionable origin,” the borrower’s attorney, Linda Tirelli, wrote in an August objection to the bank’s claim at U.S. Bankruptcy Court in New York. Citigroup created and filed the assignment after proceedings began because it otherwise couldn’t prove its right to collect the debt, she wrote in an e-mail. The bank denied the allegations and didn’t admit liability in the settlement.
WASHINGTON, Jan 26 (Reuters) – A top congressional cop said on Wednesday he would consider investigating U.S. mortgage servicers, which have been accused of shoddy home foreclosure practices.
If the House Oversight Committee decides to take on this probe, it will add yet another layer of pressure on top servicers such as Citigroup Inc (C.N), Wells Fargo & Co (WFC.N) and Bank of America Corp (BAC.N).
The nation’s 50 state attorneys general, the Securities and Exchange Commission, bank regulators and the Justice Department are among those probing the handling by banks of mortgage-related paperwork and foreclosure procedures.
At the House Oversight Committee’s first hearing of the year, lawmakers said more had to be done. Democratic Representatives Dennis Kucinich and Elijah Cummings asked the Republican committee Chairman Darrell Issa to haul in servicers such as JPMorgan Chase & Co (JPM.N).
Issa, who became chairman when Republicans took control of the House of Representatives in January, said he would consider the request.
A coalition of seven major public pension systems called on the boards of directors of Bank of America (NYSE: BAC), Citigroup (NYSE: C), JP Morgan Chase (NYSE: JPM), and Wells Fargo (NYSE: WFC) to immediately undertake independent examinations of the banks’ mortgage and foreclosure practices.
PR11-01-003
Contact: Sharon Lee / Matthew Sweeney, (212) 669-3747January 9, 2011
$432 BILLION PENSION FUND COALITION DEMANDS
BANK DIRECTORS IMMEDIATELY EXAMINE
FORECLOSURE PRACTICES
NEW YORK, NY – A coalition of seven major public pension systems called on the boards of directors of Bank of America (NYSE: BAC), Citigroup (NYSE: C), JP Morgan Chase (NYSE: JPM), and Wells Fargo (NYSE: WFC) to immediately undertake independent examinations of the banks’ mortgage and foreclosure practices.
Led by New York City Comptroller John C. Liu on behalf of the five NYC Pension Funds, the coalition also includes the Connecticut Retirement Plans and Trust Funds, the Illinois State Board of Investment, the Illinois State Universities Retirement System, the New York State Common Retirement Fund, the North Carolina Retirement Systems, and the Oregon Public Employees Retirement Fund.
The coalition of pension funds called for the banks’ Audit Committees to launch independent examinations of their loan modification, foreclosure, and securitization policies and procedures.
“This will help to prevent future compliance failures and restore the confidence of shareholders, regulators, legislators and mortgage markets participants,” the coalition advised in its letter.
The coalition members’ insistence on immediate action reflects the urgency of their concerns over mishandled mortgages. In November, the New York City Pension Funds and Comptroller Liu made a similar request for bank boards to conduct independent policy reviews as part of a shareholder proposal to the banks’ annual meetings in the spring.
“The banks’ boards cannot continue to pretend the foreclosure mess is the result of technical glitches and paperwork errors,” Comptroller Liu said. “There is a fundamental problem in their procedures that endangers not just homeowners, but shareholders, and local economies. Given the risks involved, only a swift and unbiased audit can reassure shareholders that the pension funds of 700,000 working and retired New Yorkers are in safe hands. The boards of directors have no time to waste.”
The coalition represents more than $430 billion in pension fund investments, including $5.7 billion invested in the four banks.
“We don’t know exactly what the banks were doing, and we don’t know if they did it right,” New York State Comptroller Thomas P. DiNapoli said. “Millions of families have lost their homes, and the investments of the million members of the Common Retirement System have been put at risk. As investors, we need to understand what happened. A full and open examination of the procedures used to foreclose on millions of families is the only way to make sure our investments are protected and no one is ever wrongfully evicted from their home.”
Federal Reserve Governor Daniel K. Tarullo testified to the Senate Banking Committee on December 1 that the Federal Reserve’s preliminary findings on bank foreclosure procedures suggested “significant weaknesses in risk-management, quality control, audit and compliance practices as underlying factors contributing to the problems associated with mortgage servicing and foreclosure documentation.”
The Congressional Oversight Panel has estimated that banks’ potential mortgage liability could total $52 billion, borne largely by the four banks contacted by the pension funds. The Panel’s November 16 report, “Examining the Consequences of Mortgage Irregularities for Financial Stability and Foreclosure Mitigation,” concluded that banks’ could suffer “disabling damage” if they were found to have misrepresented the quality of loans sold for securitization and forced to reabsorb billions in troubled loans.
“The responsibility for making sure that internal controls and compliance process are in place for mortgage and foreclosure practices rests squarely with these Audit Committees,” said North Carolina State Treasurer Janet Cowell. “The recent testimonies and studies strongly suggest the need for these Audit Committees to act swiftly and objectively in conducting an independent and comprehensive review of these practices.”
The coalition of pension funds called for the banks to report the findings of their independent examinations in their 2011 proxy statements this spring. As of December 31, 2010, the coalition’s combined holdings in each bank included: 97.1 million Bank of America shares valued at $1.3 billion; 226.6 million Citigroup shares valued at $1.1 billion; 40.7 million JPMorgan Chase shares valued at $1.7 billion; and 50.6 million Wells Fargo shares valued at $1.6 billion.
The New York City Comptroller serves as the investment advisor to, custodian and trustee of the New York City Pension Funds. The New York City Pension Funds are comprised of the New York City Employees’ Retirement System, Teachers’ Retirement System, New York City Police Pension Fund, New York City Fire Department Pension Fund and the Board of Education Retirement System. The New York City Pension Funds hold a combined 138,786,887 total shares in Bank of America Corporation (NYSE: BAC), Citigroup Inc. (NYSE: C), JPMorgan Chase & Co. (NYSE: JPM), and Wells Fargo & Company (NYSE: WFC) for a combined asset value of $1,933,160,319 as of 12/31/2010.
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