We Shall See re: JP Morgan Comes Quickly

Posted by kevin on November 17, 2012 under Foreclosure Blog | Comments are off for this article

In my last blog, I observed that the SEC was in negotiations with JP Morgan to settle the agency’s action relating to fraudulent loans sold to investors by Bear Stearns. I questioned whether JP Morgan would get the proverbial “slap on the wrist” or whether the sanctions would be substantial. I was not holding my breathe for substantial sanctions.

Yesterday, it was announced that the fine would be $300 million. Sounds like alot of money, but you have to put it into context. Bear Stearns probably did hundreds of mortgaged backed securitized trusts from 2003 to 2007. In fact, the Schneiderman lawsuit in NY alleges that even after a memo circulated Bear Stearns in June, 2006 which indicated that 60% of AHM loans in its trusts were at least 30 days delinquent (of course investors not told that), Bear Stearns issued at least 30 more trusts.

My review of most mortgaged backed securitized trusts indicates the average trust contains at least a billion dollars of loans. So, from June, 2006 until taken over by JP Morgan in or about March, 2008, Bear Stearns issued over $30 billion of securitized trusts. That means investors paid Bear Stearns or its affiliates over $30 billion dollars for bad deals. $300 million/ $30 billion. Now, I am not a whiz at math, but that sounds like a fine of a whopping 1% of what was earned in the last 18 months of the alleged ongoing fraud (issues dried up by the end of 2007. Just want to send out an “Atta boy” to the SEC.

To put this in perspective, your home probably has lost 30% of its value since 2007-8.

JP Morgan Settlement?

Posted by kevin on November 13, 2012 under Foreclosure Blog | Comments are off for this article

On October 2, 2012, I blogged that the NY AG, Eric Schneiderman, sued JP Morgan, purchaser of the imploded Bear Stearns based on BS’s sale of mortgage backed securities. Yesterday, it was reported that the SEC’s staff recommended settlement will with JP Morgan based on the BS mortgage backed securities and will not bring charges against individuals. The dollar amount of the “slap on the wrist” has not been set but JP Morgan will not be required to admit to any wrongdoing. Looks like an investigation into the same areas that Schneiderman is tackling in his lawsuit. How will this impact on the Schneiderman lawsuit considering that Schneiderman and SEC enforcement chief, Robert Khazami, are both on the federal mortgage task force that President Obama announced with great fanfare at his last State of the Union message (but did nothing until just before the election..

What is the purpose of the various investigations? Is it to make a news splash and then get some settlement money out of the “too big to fail” banks that pretty much ruined our economy. Or is it to get to the bottom of this mess, gets the facts and punish the wrongdoers? It looks like the SEC staff does not have the stomach to do the latter. Where do these staff members go to work after they leave government service? I hate to sound cynical but I am sure that it is not some consumer non profit.

So, what is going to happen with the lawsuit brought by Schneiderman? Another quick settlement with check written but no real investigation and no punishment of the bad guys? We shall see. It would be a shame if Schneiderman follows suit with the SEC staff.