Posted by kevin on February 28, 2013 under Foreclosure Blog | 
One of the recurring themes in this blog (and others) has been the dismal record of US governmental agencies in trying to thwart lawlessness on the part of banks and individuals in the securities industry. Whether it was the sell out known as the $25B settlement, or the OCC’s abrupt curtailment of the foreclosure audits or the administration’s about face on Chapter 13 cramdowns, you get the impression that the consumer enforcement agencies are not there for the consumers.
In the latest debacle, the US Supreme Court voted 9-0 against the SEC effectively throwing out an enforcement action against two money managers at Gabelli Funds. The grounds- the SEC did not bring the action within the 5 year statute of limitations. The acts complained of happened between 1999 and 2002. The SEC claims it discovered the violations in 2003 but did not bring the penalty action until 2008. Given that the US Supremes are so divided, it is a real slap in the face of the SEC that they were shot down by a unanimous court.
On one hand, you could say that the SEC was thwarted in trying to protect the public. However, on the other hand, the question is why did it take the SEC 5 years from discovery to file its complaint. Clearly, it could not have been a high priority. Which gets us back to the initial question of whether the agencies are helping the consumer or playing ball with their future employers. Without strong restrictions on going from agencies like the SEC to Wall St, I do not think that you are going to root out this problem.
Posted by kevin on October 22, 2012 under Foreclosure Blog |
In February, 2012, 5 Too Big to Fail banks, the federal government and 49 of the States announced a $25B settlement of the “robo-signing” investigation. From this settlement, States recently received $2.5 billion from the major banks for foreclosure prevention and related help for homeowners. But much of that is not being used for those purposes.
So what is supposed to happen to that money?
The answer to that should be found in the Consent Judgment, the document signed by all 49 states, the federal government and the banks, AND by the federal judge approving the settlement. Actually there are five consent judgments, one for each of the banks, but all containing identical language for our purposes. This language says:
“To the extent practicable, such funds shall be used for purposes intended to avoid preventable foreclosures, to ameliorate the effects of the foreclosure crisis, to enhance law enforcement efforts to prevent and prosecute financial fraud, or unfair or deceptive acts or practices and to compensate the States for costs resulting from the alleged unlawful conduct of the Defendants. Such permissible purposes for allocation of the funds include, but are not limited to, supplementing the amounts paid to state homeowners under the Borrower Payment Fund, funding for housing counselors, state and local foreclosure assistance hotlines, state and local foreclosure mediation programs, legal assistance, housing remediation and anti-blight projects, funding for training and staffing of financial fraud or consumer protection enforcement efforts, and civil penalties.”
(See pp. B-2 and B-3 of Exhibit B of the Consent Judgment.)
But the money is not being used for these purposes in many states, according to two different sources.
A report by Enterprise Community Partners called $2.5 Billion: Understanding How States are Spending their Share of the National Mortgage Settlement says that “despite the language contained in the settlement, a number of states have diverted the settlement funds away from housing and foreclosure prevention activities.”
A more recent article by ProPublica, the independent investigative organization, is titled “Billion Dollar Bait & Switch: States Divert Foreclosure Deal Funds.” Its analysis concludes that “[s]tates have diverted $974 million from this year’s landmark mortgage settlement to pay down budget deficits or fund programs unrelated to the foreclosure crisis… . That’s nearly forty percent of the $2.5 billion in penalties paid to the states under the agreement.” This interactive map and table shows each state’s use of the funds.
How can this happen? Easy. No one has the public’s back on this. Why? Because one must conclude cynically that the real purpose of the settlement was not to help the people but to help the big banks. It was the big bank’s that bought off a huge potential liability for a few pennies on the dollar. Now that the States have some of that money in their hands, who is there to protect the borrowers that need help to save their homes? You would think, their elected officials. However, it appears, that for the most part, this may not be the case.
Posted by kevin on October 2, 2012 under Foreclosure Blog |
Eric Schneiderman, the New York AG appointed by Obama to co-chair the federal/state probe into the 2008 mortgage meltdown (called, I believe, the Residential Mortgage Backed Securities Working Group), filed suit against JP Morgan Chase alleging widespread fraud by the company’s Bear Stearns unit in the sale of mortgaged backed securities.
You may recall that Schneidermann was a real carnivore who threatened to go after not only the big banks but the securitized trusts. Together with AG Biden in Delaware and the tough women AG’s in California, Massachusetts, Illinois and Arizona, Schneiderman was standing up to the big banks on improper/illegal servicing practices. Then, the President appointed Schneiderman to the chair of the Working Group, the $25 Billion settlement went through, the servicer/banks are still conning the public into thinking that they are effecting meaningful loan modifications, and nothing much happened on the litigation front until yesterday. Forgive me if I appear cynical, but isn’t there an election in about a month.
Cynicism aside, this appears to be a positive event. It is alleged that Bear Stearns, which was bought by JP Morgan, defrauded investors by packaging and selling mortgages that they knew had a high likelihood of defaulting. Damages to investors are in the billions of dollars. Schneiderman is seeking unspecified damages. If Schneiderman aggressively litigates this matter, a substantial recovery could be in the cards. More importantly, a positive result can lead to more actions be AG’s and investors. One can only hope. On the other hand, if we see a settlement for pennies on the dollar, similar to the $25 Billion settlement, we can conclude that the government just wants to sweep this continuing mess under the carpet. Time will tell.
The federal statute of limitations is 5 years, and most state statutes of limitations for these types of offenses is six years. So time is running out. Let’s hope that the Working Group and the various AG’s “man up” and go after the banksters.
