Foreclosure Review- Panned by Government Accountablity Office

Posted by kevin on April 5, 2013 under Foreclosure Blog | Comments are off for this article

Earlier this week, I blogged about the Chairperson of he SEC going to Promontory, the audit company that has come under fire because of the botched Independent Foreclosure Reviews. Yesterday, the Government Accountability Office (GAO) faulted the Office of the Comptroller of Currency (OCC) and Federal Reserve for not insuring that banks were using consistent methods to determine which foreclosure files to scrutinize for possible errors.

Auditors including Promontory Financial Group, rather than following through on the audits, pushed for settlement. The settlement is listed at $9.3 billion, but like the so-called $25 billion settlement, the lenders are putting up only a small fraction of the settlement in hard cash. The rest are a complicated scheme of credits that defy common sense. More importantly, by abandoning the audits, the questions becomes, how do you know who is entitled to settlement proceeds and how much?

The GAO did not focus on these practical issues, but just said that the auditors should have at least had the same checklist for their audits- otherwise people with the same issue could get a different result. GAO said that the buck stopped with OCC and the Fed. I guess they dropped the buck.

The borrowers are the people. And the people get the short end when government takes care of the big guys. Our greatest President (or at least in the top 2) has been in the press a lot over the last couple of months because of the Spielberg movie. I wonder what Mr. Lincoln would think of this government of the people, by the people, for the people?

SEC shot down by US Supremes

Posted by kevin on February 28, 2013 under Foreclosure Blog | Comments are off for this article

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.

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.

Consumer Protection?

Posted by kevin on July 20, 2012 under Foreclosure Blog | Comments are off for this article

Over the last 25 years, there has been both Federal and New Jersey legislation that is to protect the consumer. Although such legislation is “on the books”, does it really protect the borrowers in mortgage related situations?

I am not so sure. Why? Because it is not enough to have a law on the books. The consumer protection law must be vigorously pursued by the appropriate enforcement agencies. That has not happened.

Last week, the Wall St. Journal ran an article that said that the SEC (which is supposed to regulate Wall St.) is pushing up against the 5 year statute of limitations in actions against investment banks and their employees for violations of the law relating to the 2008 mortgage meltdown and ensuing recession. They are rushing to file lawsuits at the last minute. Given that the actions of the large banks and Wall St went a long way to putting the US (and the world) in a terrible financial situation, to date, no investment bankers or executives at the “too big to fail” banks have been prosecuted or sent to jail. How could that be?

Also, last week, the news informed us that Barclay’s Bank was caught trying to manipulate the LIBOR by supplying false information as to interest rates. The LIBOR is used to to adjust interest rates involving adjustable rate mortgages. Articles have appeared which indicated that the Treasury Secretary had been aware of possible manipulations of the LIBOR but did nothing other than send a note to his British counterpart. Clearly, the government is protecting someone, but that someone is not you.

How could that happen? Why aren’t the staff at the SEC or the Federal Reserve doing more to protect the consumer? When I as intern at SEC enforcement years ago, my boss said when trying piece together a complex securities fraud, you had to follow the money. Well, many of the staff of these government agencies go to work for Wall St or the large when they leave government service. You draw your own conclusions.

If you are having problems with your lender, you would be naive to think that the government, whether federal or state, is going to step in to help you. You must help yourself. Make sure that you are protected (as best as you can be) by hiring competent legal counsel, experts, and the like. Your home may depend on it

SEC Investigation- Mortgage Repurchases

Posted by kevin on September 29, 2011 under Foreclosure Blog | Comments are off for this article

This is a part of the game that the consumer does not see.  The SEC is investigating Credit Suisse and RBS for misleading investors as to the number of bad loans that had to be repurchased (or should have been repurchased) by the originators for failure to live up to the warranties and representations made in the Pooling & Servicing Agreements (PSA) or other like documents.

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