Tag: mortgage fraud

Cross posted from The Stars Hollow Gazette

While Iowa Attorney General Tom Miller and his merry band of AG sell outs push for an agreement to settle the mortgage fraud, it looks like California Attorney General, Kamala Harris, is sticking to her plan to hold the worst of the abusers feet to the fire.

The Miller agreement, which is also being backed by US Attorney General Eric Holder, could result in an even smaller settlement than the $25 million and would still leave the banks open to legal claims in the states that do not sign on to the agreement. While California is the state with the largest number of foreclosures, not signing onto the agreement would mean that homeowners would have to wait longer for relief but, as AG Harris has stated, it “would allow too few California homeowners to stay in their homes…. After much consideration, I have concluded that this is not the deal California homeowners have been looking for.”

Ms. Harris has been under considerable pressure from the Obama administration, who has considered her a replacement for Eric Holder should Obama be reelected. However. many community organizations, unions and liberal groups have urged to her not to sign on to the Miller agreement unless there is a larger monetary settlement or, that failing, the states are allowed to prosecute the banks for crimes they may have committed. Neither of those two stipulations appears to have happened, nor are they likely.

Along with New York’s Eric Schneiderman, Delaware’s Beau Biden, Nevada’s Catherine Cortez Masto and a couple of other state attorney generals, Ms. Harris’s position is good policy for the state, as well as, good politics for her. She has stood by the people who put her in office, the people she will need to support her should she run for governor or the US Senate. We could use a few like her in that body.

Cross posted from The Stars Hollow Gazette

Nevada Attorney General Catherine Cotez Masto has filed a 606 count criminal indictment against two title company employees for for supervising the filing of tens of thousands of fraudulent documents in a robo-signing scheme. This is the statement from Masto’s office (pdf):

   The Office of the Nevada Attorney General announced today that the Clark County grand jury has returned a 606 count indictment against two title officers, Gary Trafford and Gerri Sheppard, who directed and supervised a robo-signing scheme which resulted in the filing of tens of thousands of fraudulent documents with the Clark County Recorder’s Office between 2005 and 2008.

   According to the indictment, defendant Gary Trafford, a California resident, is charged with 102 counts of offering false instruments for recording (category C felony); false certification on certain instruments (category D felony); and notarization of the signature of a person not in the presence of a notary public (a gross misdemeanor). The indictment charges d efendant Gerri Sheppard, also a California resident, with 100 counts of offering false instruments for recording (category C felony); false certification on certain instruments (category D felony); and notarization of the signature of a person not in the presence of a notary public (a gross misdemeanor).

   “The grand jury found probable cause that there was a robo-signing scheme which resulted in the filing of tens of thousands of fraudulent documents with the Clark County Recorder’s Office between 2005 and 2008,”said Chief Deputy Attorney General John Kelleher.

   The indictment alleges that both defendants directed the fraudulent notarization and filing of documents which were used to initiate foreclosure on local homeowners.

   The State alleges that these documents, referred to as Notices of Default, or “NODs”, were prepared locally. The State alleges that the defendants directed employees under their supervision, to forge their names on foreclosure documents, then notarize the signatures they just forged, thereby fraudulently attesting that the defendants actually signed the documents, which was untrue and in violation of State law. The defendants then allegedly directed the employees under their supervision to file the fraudulent documents with the Clark County Recorder’s office, to be used to start foreclosures on homes throughout the County.

   The indictment alleges that these crimes were done in secret in order to avoid detection. The fraudulent NODs were allegedly forged locally to allow them to be filed at the Clark County Recorder’s office on the same day they were prepared.

Although the two Lender Processing Services employees, Gary Trafford and Gerri Sheppard, are deemed to be little fish there is speculation the Ms. Masto is using this as a hook to an go after the whales. Yves Smith at naked capitalism:

   That strongly suggests that Masto is, as we suggested earlier, using these indictments as a wedge to go after much broader abuses in the servicing industry. LPS’s biggest business is its Default Services Group, which both managed the operations of foreclosure mills (people with knowledge of LPS charge that the firm even kicks out certain standard form documents for foreclosure mill attorneys to file) and also often acted as the arms and legs of servicers in other arenas (for instance, managing, or more accurately, mismanaging property seized in foreclosure).

   LPS has always taken the position that anything it did was at the direction of and with the full knowledge of the servicers. If Masto is shrewd, her objective will be to audit LPSs’ software, since that will demonstrate pattern and practice, and it will be impossible for servicers to deny that processes embodied in ongoing, routinized activities were unknown to them.

David Dayen at FDL agrees that this may well be the first step in getting the higher ups who made, and are still, making a fortune on foreclosures:

LPS hasn’t been indicted, but you can see where this is going. We know enough now to know that this casual forgery and document fraud was official policy for the company. Indictments of Trafford and Sheppard will almost certainly not end there. Everyone who worked for LPS in Nevada will be culpable. [..]

The fact that they are LPS employees also suggests this is just a first step. This could be a way to get at the software that LPS uses to create documents, which would prove pattern and practice. LPS was central to the entire robo-signing scheme across foreclosure mill law firms and mortgage servicers. And they consistently maintain that they worked at the direction of the servicers and with their full knowledge. So that ropes in the servicers as well.

This is a very important indictment, and it shows how methodical Masto has been about going after widespread industry abuse. It’s only just beginning, but bravo for her.

As has been reported, despite the meager attempts at an agreement to settle this and exonerate the banks of any wrong doing by several other Attorney Generals, the robo-signing continues:

   Reuters reviewed records of individual county clerk offices in five states — Florida, Massachusetts, New York, and North and South Carolina — with searchable online databases. Reuters also examined hundreds of documents from court case files, some obtained online and others provided by attorneys.

   The searches found more than 1,000 mortgage assignments that for multiple reasons appear questionable: promissory notes missing required endorsements or bearing faulty ones; and “complaints” (the legal documents that launch foreclosure suits) that appear to contain multiple incorrect facts.

   These are practices that the 14 banks and other loan servicers said had occurred only on a small scale and were halted more than six months ago. [..]

   Reuters reviewed records of individual county clerk offices in five states — Florida, Massachusetts, New York, and North and South Carolina — with searchable online databases. Reuters also examined hundreds of documents from court case files, some obtained online and others provided by attorneys.

   The searches found more than 1,000 mortgage assignments that for multiple reasons appear questionable: promissory notes missing required endorsements or bearing faulty ones; and “complaints” (the legal documents that launch foreclosure suits) that appear to contain multiple incorrect facts.

   These are practices that the 14 banks and other loan servicers said had occurred only on a small scale and were halted more than six months ago.

Meanwhile, as Yves Smith pointed out this Summer, the bankers continue to lie to congress that they have stopped the practice:

We’ve heard numerous bank executives swear piously before Congressional hearings that those “paperwork problems” that led major servicers to halt or slow foreclosures on a widespread basis last year were “mistakes”. That was already a really big lies, since “mistake” means the practice was not deliberate and was presumably isolated, when in fact robosigning was a widespread, institutionalized practice.

14 major servicers then swore in consent orders earlier this year that they’d stop doing all that bad stuff. But with compliance weak (the banks get to hire the overseers!), they appear to have decided they don’t need to change their ways all that much. Indeed, the record of consent orders is underwhelming; for instance, both Nevada and Arizona are suing Countrywide for violations of past agreements.

Meanwhile the Obama Justice Department continues to try to sweep this massive fraud under the rug.

Yes, bravo, Ms. Masto.

Nevada Robosigning Indicment 11-16-11

Cross posted from The Stars Hollow Gazette

On of the biggest frauds that has been perpetrated in the housing collapse that has precipitated the foreclosure crisis has been robosigning especially done by MERS, Mortgage Electronic Registration Systems, a privately held company that operates an electronic registry designed to track servicing rights and ownership of mortgage loans in the United States. The current negotiations by the state attorney generals in conjunction with the Obama Justice Department will in all likelihood exonerate the banks of any criminal liability and allow them to continue using the fraudulent MERS to foreclose on homes that the banks may not legally own. Gretchen Morgensen wrote in the New York Times that “The deal being discussed now may also release the big banks that are members of MERS, the electronic mortgage registry, from the threat of some future legal liability for actions involving that organization.”  Matt Stoller and Mike Lux point to an even bigger issue, robosigning has not stopped:

What makes these discussions so utterly absurd, so ridiculous, and farcical, is that robo-signing, an abuse the banks have admitted to and clam they’ve ceased, is still going on. The AP reported this in July; mortgage servicers in Nevada have stopped foreclosing because of a law explicitly criminalizing robo-signing. Yes, the banks are asking for a release of claims on acts, or perhaps crimes, that are ongoing. And these abuses are extensive: lying to investors about the quality of the mortgages; violating their own contracts by failing to convey mortgages properly to securitization trusts; charging fees that are impermissible under Federal law and the contracts; making a mess of property records and engaging in deceptive consumer practices through the use of MERS; and engaging in document forgeries and fabrications in foreclosures. All these people trying to give the banks “a settlement” are in fact immunizing banks against acts they are committing and will commit going forward. Only in the future, when a voter complains to his or her state AG, that official will have to explain to that voter that his/her rights have been given away.

We’re talking about an ongoing case of criminal theft of private property by mortgage servicers charging illegal fees and then using fraudulent documents to foreclose. Now, a settlement implies that this practice is over, and that the banks are remediating past wrongs. It isn’t over, but the AGs and Federal regulators are treating it as if it is. Think about this incentive – why should a bank change its mortgage servicing once it has immunity for robo-signing, origination, pyramiding of fees, etc? The last consent decrees weren’t enforced, why would this one be enforced?

   A dozen banks would contribute a grand total of $3.5 to 5 billion toward the settlement, pocket change for massive companies that apparently approved their foreclosure mill law firms likely committing over 1,000,000 counts of perjury in the robo-signing process. The rest of the money, about $20 billion, would come in the form of “credits” banks essentially give themselves if they agree to reduce a certain amount of the principal owed on mortgages. We don’t know the details yet, but given that all banks in the home lending industry write down some mortgages, unless the details are tough on the banks (a phrase not generally heard of among regulators in this era), this will be giving banks credit for mortgages they would be writing down anyway. And if they don’t end up writing down as much as they project, they probably won’t end up being penalized for it given the history of programs like HAMP […]

   If the administration rams through this ultimate in Wall Street sweetheart deals – a laughably pocket change fine combined with “credit” for what they would have done anyway, at the expense for a get out of jail free card for 1 million counts of perjury and a wide range of other potential fraud – they will have zero credibility to run as the tough on Wall Street candidate. ZERO.

   This makes no sense. For example, for the Obama administration to be leaning so hard on California Attorney General Kamala Harris to sign off on this is truly politically suicidal, both for them and for her after she so strongly announced she was pulling out a couple of weeks ago. Yet they continue to push her. Why are they pushing so hard for this? It all boils down to Treasury Secretary Tim Geithner. It is apparent that Geithner believes the only thing that matters in terms of fixing the economy is to keep the big banks in good financial shape, which is ironic given that in public he claims that everything is fine with the banking sector now.

Yves Smith at naked capitalism suggests we make some phone calls:

It’s important to keep the pressure up, particularly on state AGs who might walk from a too bank friendly deal. States whose AGs might decamp include Oregon, Washington, Arizona, and Colorado. It’s also key to let the AGs in states who have left the talks and are under pressure to return that voters are watching and will be unhappy if they reverse themselves. Those states are New York, Delaware, Massachusetts, Kentucky, Nevada, Minnesota, and of course, California. You can find their phone numbers here.

The Obama administration, congress and the state attorney generals who refuse to hold the banks to the letter of the law hold this country’s economic future. If this passes it will destroy the housing market and this economy for decades.

Cross posted fromThe Stars Hollow Gazette

The latest proposal to come from of the State Attorney Generals investigating mortgage and foreclosure fraud is just a another band-aid on a hemorrhage that lets the banks off and does nothing to help homeowners who are underwater on their mortgage or behind in their payments. It appears that this is just a ploy to bring the California Attorney General “back into the fold.” Diana Olick, CNBC Real Estate Reporter, has tis analysis:

As first reported by the Wall Street Journal, the AG’s are proposing a refinance plan for underwater borrowers, trying to get banks to bring down interest rates on mortgages for those who owe far more than their homes are presently worth; that’s around 10.9 million borrowers, according to CoreLogic, but sources say it wouldn’t be all of them. It would, “target a finite number of borrowers who are current on their mortgages,” according to my source.

My source then went on to explain that this is a plan previously pushed by the California state attorney general, who has dropped out of the negotiations over issues surrounding banks’ release from future liability (the California AG did not comment in the WSJ article but claimed they had not seen said proposal). New York and Massachusetts have done the same. Apparently this could, “bring California back to the table,” says my source, because the California AG finds it, “intriguing.”

Ms. Olick also points out that this is the same plan that the Obama administration has proposed for Fannie Mae and Freddie Mac. The plan will only affect about 20% of homeowners with bank mortgages. While it would give some, who can afford the loans, a little extra cash, it doesn’t “change the fact that these folks still have no hope of seeing their home equity again any time soon, and it doesn’t address the greater ills of today’s housing market that are keeping true recovery at bay.”

David Dayen at FDL expounds further:

But wait! This is supposed to be a penalty on the banks. Is it a penalty on the banks when an eligible borrower with a bank-owned loan refinances? No, that’s just an option that the borrower has. Extending that option is supposed to be a penalty for committing systemic fraud on state courts? I don’t necessarily mind the Fannie/Freddie plan as a source of potential stimulus. I don’t consider it a penalty. And when you’re talking about 20% of the market, tops (and not all of those loans are underwater, so this is smaller), the benefits are miniscule (sic).

They’re just grabbing at straws to try and get a flawed settlement across the line that the remaining AGs can hold a press conference about. And economic stimulus, not accountability, is the main goal. Keep in mind that anything that leads to a round of sped-up foreclosures will not aid the housing market. It will bring prices down, just as a function of supply and demand. This will bring borrowers more underwater. So the idea that there’s a tension between the rule of law and helping people presumes that the only thing standing between America and a recovery is Kamala Harris and Eric Schneiderman. That’s just not true. There are tools at the disposal of the relevant regulators right now to foster recoery (sic), they’re just not choosing to do it.

Delaware Attorney General Beau Biden spoke with MSNBC’s Dylan Ratigan about fight to investigate the banks.

The biggest problem that is the gorilla in the room is chain of title. In a detailed article that is well worth the read, Yves Smith at naked capitalism:

And as we anticipated, the inducement that had led the Miller camp to hope it might clinch a deal is a juicy release. From Reuters:

   Originally, the states were only considering immunity for shortcuts taken during mortgage servicing and foreclosures, including the so-called “robo-signing” of documents to evict people behind on their mortgages.

   In recent days, the state attorneys general agreed to release major banks from claims that they made legal errors when first originating the loans, such as approving loans for borrowers without verifying any income, according to two people familiar with the talks.

   In exchange, banks would agree to refinance mortgages for borrowers who are current on their payments but owe more than their homes are currently worth, the sources said.

This is very troubling. Investors should be up in arms. Any release the banks get here is worth multiples of what the banks will pay for this (note that because investors are conservative creatures and have ongoing relationships with banks, having attorneys general pave the way is particularly important for them).

The failure to verify income is the tip of the iceberg of origination abuses. The most serious is chain of title, where the banks promised to investors to take a series of steps to convey the mortgages properly to the securitization trusts within a stipulated time frame. For reasons we’ve explained in gory detail in earlier posts, retroactive fixes or waivers simply won’t work. That is why the banks have resorted to widespread forgeries and document fabrication.

Cross posted from The Stars Hollow Gazette

Last Friday California Attorney General, Kamala Harris, notified Iowa Attorney General Tom Miller and U.S. Associate Attorney General Thomas Perrelli that she would no longer be participating in the multi-state talks to settle the mortgage and foreclosure fraud by the nation’s largest banks.

“Last week, I went to Washington, D.C., in hopes of moving our discussions forward,” Harris wrote. “But it became clear to me that California was being asked for a broader release of claims than we can accept and to excuse conduct that has not been adequately investigated.”

“[T]his not the deal California homeowners have been waiting for,” Harris adds one line later.

AG Harris joins the list of state attorney generals who have balked at letting the banks pay a mere $20 billion to settle their liability in the housing crisis they created without any real criminal investigations. In her letter (pdf), she states her plans:

   I intend to continue to investigate the mortgage practices that I believe have contributed to the growing housing crisis in my state. Months ago, I began California’s independent work in this respect by establishing a Mortgage Fraud Strike Force, and I have given the Strike Force attorneys a broad mandate to investigate all stages of the mortgage lending process, from origination to servicing and foreclosures to securitization of loans into investments in the secondary market. I am committed to doing as thorough an investigation as is needed – and to taking the time that is necessary – to set the stage for achieving appropriate accountability for misconduct.

   I will also push for additional legislation and regulations that enhance transparency and eliminate incentives to disregard borrower’s rights in foreclosure. Many of these reforms have been identified in the multistate talks, and I hope that in good faith the banks will adopt these reforms immediately.

While David Dayen doesn’t think that the legislation have a chance. he does say that public pressure has had a huge impact in pushing Harris to make this decision. It could also impact on her career, since she was rumored to be a possible replacement for US AG Eric Holder. Pushing hard against the Obama administration’s support of this agreement could take her out of consideration.

Dayen concludes, and I agree, that:

As for Tom Miller, his dream of getting the banks off the hook for their crimes is dead and buried. Without California and New York, you’re not going to be able to have a settlement that means anything. He’s probably looking for a way out right now.

The investigations have to be followed through. But this is a victory so far for accountability and against the whitewashes that have characterized the nation’s response to systemic fraud in an increasing and troubling fashion over the past several years.

Considering the success that Nevada Attorney General Catherine Cortez Masto had in a settlement with Morgan Stanley over mortgage practices that essentially garnered about $57,000 for some 600 to 700 Nevada homeowners, AG Harris’ withdrawal from the negotiations is a wise choice for Californians.

Cross posted from The Stars Hollow Gazette

There have been a couple of new developments in the foreclosure fraud investigation that was initiated by New York State Attorney General Eric Schneiderman. The coalition of state AG’s who want a real criminal investigation and oppose the 50 state settlement proposal of Iowa AG Tom Miller has grown by one with Kentucky’s AG Jack Conway adding name. From David Dayen at FireDogLake:

The latest AG to stand with Schneiderman and against the attempts to whitewash the fraud of the big banks is Kentucky AG Jack Conway. He is up for re-election this year, and is known nationally by virtue of his unsuccessful challenge to Rand Paul for Senate in 2010. Conway, in conjunction with the Progressive Change Campaign Committee, sent an email to supporters aligning himself with Schneiderman.

   The same Wall Street banks whose irresponsible actions led to our nation’s economic collapse are now pressuring all 50 states to give them legal immunity. The banks want to block any criminal or civil accountability for actions that have yet to be investigated.

   Attorneys General from Delaware, Minnesota, Nevada and New York have been fighting back. Today, I want to make a clear statement in support of Wall Street accountability and against immunity for banks – and I ask you to join me on this statement:

   “Today’s economic crisis was caused by Wall Street acting improperly. Every American has paid the price – with families losing their homes, investors losing their money, and many Americans losing their jobs. There should be absolutely no criminal or civil immunity given to banks for activity that has not yet been investigated.”

Several things are important here. Kentucky didn’t really have a big housing bubble – Conway is supporting this on principle, rather than in service to a wide swath of dispossessed and struggling borrowers who are victims of fraud. Second, he writes this in the context of an election which has tightened up minimally. So he obviously finds this to be a winning issue on the campaign trail. Third, it would be tempting to just ignore a proposed settlement that isn’t going to happen. Conway sees political advantage in stamping on this process, which is already flailing.

In another development in Nevada, an attorney has filed criminal charges against Wells Fargo accusing the bank of forging loan documents:

In court papers filed this month in Clark County District Court, attorney Dave Crosby alleged bank employees committed forgery and fraud in making a $350,000 loan to a father of four who was unemployed at the time.

“They forged signatures, they backdated documents,” Crosby said. “We’ve got them cold.”

Crosby said the bank has presented two deeds of trust for the same property. One bears the signature of Olivia A. Todd, who on Jan. 27, 2010, was identified as an assistant secretary with MERS, Inc., a mortgage servicer from the Phoenix area and a co-defendant in the lawsuit.

But on Feb. 16, 2010, Todd’s signature appears on a second deed of trust, where she is identified as the firm’s president. Both assignments were notarized as authentic, Crosby said in court papers.

Crosby made his allegations in a request to have a judge review three failed mediations between him and his clients, Ryan and Mical Henderson of Las Vegas, and lawyers with Wells Fargo, formerly Wells Fargo Home Mortgage.

Buried deep in the story was this interesting note:

Nevada Attorney General Catherine Cortez Masto is expected to file criminal charges against bank and title company employees, as well as notary publics, over allegations of robo signing.

The paltry deal of $20 billion by AG Miller that would let the banks off the hook for most civil and criminal liability seems hardly adequate when you really examine the scope of the fraud nation wide.  

Cross posted from The Stars Hollow Gazette

It is becoming quite apparent the New York State Attorney General Eric Scheiderman was right about the 50 state AG negotiations to settle the mortgage backed securities fraud. It will shield the banks from liability despite denial by Iowa Ag Tom Miller and others that it would not:

“The negotiation committee, working on behalf of all 50 states, does not have any intention of constraining the office of the New York attorney general in any way, has not tried to do so and could not do so,” Miller said. “Schneiderman was removed from the executive committee because he has, over the last several months, undermined our efforts to reach an agreement.”

In a Financial Times article on Labor Day by Shahien Nasiripour puts an end to that myth:

The talks aim to settle allegations that banks including Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial seized the homes of delinquent borrowers and broke state laws by employing so-called “robosigners”, workers who signed off on foreclosure documents en masse without reviewing the paperwork.

State prosecutors have proposed effectively releasing the companies from legal liability for allegedly wrongful securitisation practices, according to five people with direct knowledge of the discussions.

Some state officials have expressed concern that they have offered the banks far too broad a release from liability. . . . . .

The worry over the states’ counterproposal stems from its treatment of loan documents. The term sheet proposes to release the banks from legal liability over how mortgage documents were maintained, prepared and transferred, people familiar with the matter said.

Though the counteroffer attempts to release the banks from liability with respect to home repossessions, and explicitly states that the release does not include securitisation claims, the language is broad enough in that it could prevent state officials from bringing securitisation claims in the future should they sign up to the agreement.

At the heart of securitisation claims, which involve missteps in how home mortgages were bundled into bonds, are allegations that the banks did not properly maintain and transfer documents from one step in the complicated chain to the next.

If banks are released from liability regarding documentation practices, some industry officials believe they would be able to evade state lawsuits directed at how they bundled the loans into securities.

Robert Sheer observed This proposed a settlement for a pittance of $20 billion is chump change compared what the banks reaped in “direct cash subsidies, virtually zero-interest loans, and the Fed took $2 trillion in bad paper off their hands while the banks exacerbated the banking crisis they had created through additional shady practices.”

Matt Taibbi noted, too, that the banks are getting off the hook for really odious offenses:

   The idea behind this federally-guided “settlement” is to concentrate and centralize all the legal exposure accrued by this generation of grotesque banker corruption in one place, put one single price tag on it that everyone can live with, and then stuff the details into a titanium canister before shooting it into deep space.

   This is all about protecting the banks from future enforcement actions on both the civil and criminal sides. The plan is to provide year-after-year, repeat-offending banks like Bank of America with cost certainty… and will also get to know for sure that there are no more criminal investigations in the pipeline.

ship

To give you an indication of how absurdly small a number even $20 billion is relative to the sums of money the banks made unloading worthless crap subprime assets on foreigners, pension funds and other unsuspecting suckers around the world, consider this: in 2008 alone, the state pension fund of Florida, all by itself, lost more than three times that amount ($62 billion) thanks in significant part to investments in these deadly MBS.

The White House and AG Miller are doing everything in their power to discredit Schneiderman and block further investigations that could lead to recovering more than 20 pieces of silver.

Cross posted from The Stars Hollow Gazette

President Obama’s jettisoning the EPA regulations dominated the Friday news dump. What was buried in the usual media hullabaloo was this:

Apparently the FHFA has found something that this White House hasn’t, the courage to hold the banks accountable for the losses from the sale of mortgage backed securities (MBS) to Fannie Mae and Freddie Mac. The suit surpasses the $20 billion settlement that the 50 state AG settlement is reportedly attempting to extract from the banks for a liability release over ALL issues in foreclosure fraud.

The lawsuits cover $105 billion worth of securities, and FHFA wants returns on some portion of the losses taken on the securities, which they attribute to illegal actions by the banks when they sold the MBS (specifically, misrepresentations about the underlying loans). Earlier reports said that the losses for Fannie and Freddie on private-label MBS came to around $30 billion, so that’s probably around what they will ask for. The LA Times story puts it at $41 billion in losses. Whatever the number, this is more than the 50 state AG settlement is reportedly attempting to extract from the banks for a liability release over ALL issues in foreclosure fraud. And this is just a representations and warrants case.

This may derail the 50 state AG attempts at an agreement that absolves banks from any liability:

The biggest banks are already negotiating with the attorneys general of all 50 states to address mortgage abuses. They are looking for a comprehensive settlement that will protect them from future litigation and limit their potential mortgage litigation losses.

“This new litigation could disrupt the AG settlement,” said Anthony Sanders, finance professor at George Mason University and a former mortgage bond strategist.

Banks may be more reluctant to agree to a settlement if they know litigation from other government players could still wallop their capital, he said.

As David Dayen so astutely observes:

. . . . FHFA is just a canary in the coalmine for the losses and the liability that these banks are holding because of their actions in mortgage origination, securitization, and servicing. You cannot have a banking sector with this many liabilities and expect a robust, well-functioning economy. This action is necessary for the rule of law as well as for the health of the nation.

(emphasis mine)

Even better would be some of the people involved being held responsible and sent to prison.

Cross posted from The Stars Hollow Gazette

Well, well, this is getting juicy. The FDIC has filed a lawsuit objecting to the $8.5 billion bail out of the Bank of America:

The FDIC, the receiver for failed banks, owns securities covered by the settlement and said it doesn’t have enough information to evaluate the accord, according to a filing yesterday in federal court in Manhattan.

Under the agreement, Bank of America would pay $8.5 billion to resolve claims from investors in Countrywide Financial Corp. mortgage bonds. The settlement was negotiated with a group of institutional investors, including BlackRock Inc. (BLK) and Pacific Investment Management Co. LLC, and would apply to investors outside that group.

Bank of New York Mellon Corp. (BK), the trustee for the mortgage-securitization trusts covered by the agreement, has asked a New York state judge to approve the settlement in November. An investor group is trying to move the case to federal court, which Bank of New York opposes.

Investors that would be bound by the settlement, including American International Group Inc., have criticized the deal and Bank of New York’s role representing investors in the mortgage bonds. New York Attorney General Eric Schneiderman and Delaware Attorney General Beau Biden have sought to intervene in the case and asked the court to reject it.

The Nevada Attorney General Catherine Cortez Masto has further upped the ante:

The attorney general of Nevada is accusing Bank of America of repeatedly violating a broad loan modification agreement it struck with state officials in October 2008 and is seeking to rip up the deal so that the state can proceed with a suit against the bank over allegations of deceptive lending, marketing and loan servicing practices.

In a complaint filed Tuesday in United States District Court in Reno, Catherine Cortez Masto, the Nevada attorney general, asked a judge for permission to end Nevada’s participation in the settlement agreement. This would allow her to sue the bank over what the complaint says were dubious practices uncovered by her office in an investigation that began in 2009.

In her filing, Ms. Masto contends that Bank of America raised interest rates on troubled borrowers when modifying their loans even though the bank had promised in the settlement to lower them. The bank also failed to provide loan modifications to qualified homeowners as required under the deal, improperly proceeded with foreclosures even as borrowers’ modification requests were pending and failed to meet the settlement’s 60-day requirement on granting new loan terms, instead allowing months and in some cases more than a year to go by with no resolution, the filing says.

The complaint says such practices violated an agreement Bank of America reached in the fall of 2008 with several states and later, in 2009, with Nevada, to settle lawsuits that accused its Countrywide unit of predatory lending. As the credit crisis grew, the settlement was heralded as a victory by state offices eager to help keep troubled borrowers in their homes and reduce their costs. Bank of America set aside $8.4 billion in the deal and agreed to help 400,000 troubled borrowers with loan modifications and other financial relief, such as lowering interest rates on mortgages.

I’ll bet you this has Obama and the remaining AG’s panties in a twist, since, according to rumors they were looking to settle this by Labor Day.

Here’s the link to the FDIC’s brief:

FDIC Objection to Bank of America Mortgage Settlement

Cross posted from The Stars Hollow Gazette

Recent attempts by the Obama administration to persuade New York State Attorney General Eric Schneiderman to sign off on the 50 state agreement that was being brokered by Iowa AG has resulted in Schneiderman being removed from the panel last week. In the on going power play to get Schneiderman to play ball with an agreement that would allow the banks to get away with a piteous fine and protection from any litigation regarding fraudulent foreclosures, Matt Stoller, formerly of Open Left and former Senior Policy Advisor to Rep. Alan Grayson, writes a revealing article at Naked Capitalism that examines President Obama and AG Tom Miller dishonesty in the negotiations and their need to squash Schneiderman’s investigations. Stoller argues that all the parties are doing what they think is right not because any of them must but because it is their choice. While it can be said that is somewhat true, there is the matter of law that they have all sworn to uphold. Scheiderman seems to be the one of the few, along with Delaware AG Beau Biden and Massachusetts Attorney General Martha Coakley, who is doing just that:

The banking system is really at the heart of our politics, which is why it’s such a great test of one’s political theory of change. I’ve been following the foreclosure fraud story for a few years now, because it’s the tail end of a massive economy-wide fraud scheme that started as early as 2003. The securitization chain failure can’t be put back in the bottle, the housing system it collapsed is simply too big to bail. So elites keep trying to patch this up the way they have everything else. It isn’t working. And their scheme has been obvious and obviously dishonest. Along with Obama (who I criticized as empty as early as 2004, ratcheting this up to dishonest and authoritarian by 2006-2007), I pointed out that Iowa Attorney General Tom Miller was engaged in serious bad faith only a few months after the negotiations started.

I’m no genius, I just listened to what these people actually said and did. Obama mocks the idea that he is an honest politician, overtly, lying about NAFTA and FISA very early on in power. Miller lied to activists about being willing to put bankers in jail, and then said he was negotiating with banks in secret. It was overt. For Miller, as with Obama, few people really picked up on the lies until recently. Iowa activists who heckled Miller got it, as did Naked Capitalism readers. Now it’s becoming more and more obvious. That’s just how it is, I suppose, people in the establishment are paid to not notice corruption until the harsh glare is too bright.

The crazy thing is that robosigning is apparently still going on. Right now, the “settlement” talks are the equivalent of law enforcement negotiating with a serial killer over whether he’ll get a parking ticket, even as he continually sprays bullets into the neighborhood. Even having these “settlement” talks when the actual crimes haven’t been investigated or a complaint hasn’t been registered should be example enough that this process is rigged as badly as Dodd-Frank. It should not be a surprise that the administration is putting pressure on Eric Schneiderman, that Tom Miller is kicking him out of the club house. That’s who these people are. It’s what they believe in. Just as it should not be a surprise, though it is laudable, that Schneiderman isn’t knuckling under to the administration. I suspect he probably is laughing at the idiocy of Miller’s pressure tactic. I mean, this is a guy going up some of the most powerful entities in the United States: Bank of New York Mellon, Bank of America, the New York Fed, etc. And the Iowa Attorney General isn’t going let him on conference calls? Mmmkay.

Stoller doesn’t end there with his indictment of the corruption and sell out to the banks. He call out the failure of Obama’s policy agenda in the wake of the 2010 defeats as a wake up call to Democrats and the party:

From 2006-2008, the Bush administration’s failures crashed down upon conservatives, and they in many ways could not cope. But their intellectual collapse was bailed out by Obama. Faux liberals are seeing their grand experiment in tatters, though right now they can only admit to feeling disappointed because the recognition that they have been swindled is far too painful. And the recognition for many of the professionals is even more difficult, because they must recognize that they have helped swindle many others and acknowledge the debt they have incurred to their victims. The signs of coming betrayal were there, but in the end it all comes down to judging people based on what they do and who they choose as opponents. And this Democratic partisans did not do, choosing instead a comfortable delusional fantasy-land where foreclosures don’t matter and theft enabled by Obama (and Clinton before him) doesn’t matter.

Ouch.

Of course there is always the possibility that a “minor player” such as Schneiderman can be easily taken down with an overblown personal scandal, as was former NY AG and governor, Eliot Spitzer. Schneiderman seems unfazed and unmoved by the threats and accusations that he undermining a bogus settlement with the banks that would help thousands of homeowners. And after the failures of other programs, such as HAMP, who is really going to believe that this is the cure?

The latest development in this on going battle for a realistic Main St rescue came when John O’Brien, Registry of Deeds for Southern Essex County in Massachusetts is requested that Iowa AG Tom Miller step down:

Schneidernan getting kicked off the committee should come as no surprise to anyone following the foreclosure negotiations and is sickeningly similar to Pam Bondi, Florida’s Attorney General firing Theresa Edwards and June Clarkson, who were heading up investigations on a series of mortgage related crimes for over a year.

While Bondi insists that the firings were a result of poor job performance, Miller points more towards attitude and that Schneiderman is somehow not a team player.

snip

This is like Pam Bondi firing the two assistant AGs in Florida,” O’Brien said. “Miller claims that Schneiderman was undermining the negotiations. Why wouldn’t he since the negotiations are far from being in the best interest of homeowners and the general public? This settlement clearly favors the banks and I’m one hundred percent behind Eric Schneiderman. This is an outrage and they are beginning the process of selling the American people down the drain I say Miller should step down and all AGs should be appalled at what has happened.”

Schneiderman’s removal will likely make it easier for state and federal officials to reach an accord with the five banks. However, the potential amount of money they’ll be able to extract will likely decrease.

American Banker posted the 27 term sheet of the negotiations presented to the banks with major servicing operations by the AGs and Federal Banking Regulators.

The deal completely handcuffs state attorneys general whose constituents are suffering serious economic damage as a result of the foreclosure fiasco and fraud by the banks and servicers.

When the investigation into robo-signing and fraud, Tom Miller had a brief moment of righteous advocacy until he received $261,445 in campaign contributions from out-of-state law firms and donors from the finance, insurance, and real estate sector shortly after he announced he was seeking criminal charges and retribution from the banks for mortgage fraud — that’s 88 times what he has received in the past decade.

Nice pay off, Tom. Now, I wonder what Barack’s campaign is getting?

Cross posted from The Stars Hollow Gazette

Once again the President who campaign on the restoration of the rule of law falls on the wrong side. The New York Times writer, Gretchen Morgensen, revealed in an article that the Obama Justice Department and Housing and Urban Development were putting pressure on New York State Attorney General Eric Schneiderman to drop his investigation into the banking industries foreclosure fraud that led to the economic housing crisis:

Eric T. Schneiderman, the attorney general of New York, has come under increasing pressure from the Obama administration to drop his opposition to a wide-ranging state settlement with banks over dubious foreclosure practices, according to people briefed on discussions about the deal.

In recent weeks, Shaun Donovan, the secretary of Housing and Urban Development, and high-level Justice Department officials have been waging an intensifying campaign to try to persuade the attorney general to support the settlement, said the people briefed on the talks.

Mr. Schneiderman and top prosecutors in some other states have objected to the proposed settlement with major banks, saying it would restrict their ability to investigate and prosecute wrongdoing in a variety of areas, including the bundling of loans in mortgage securities.

But Mr. Donovan and others in the administration have been contacting not only Mr. Schneiderman but his allies, including consumer groups and advocates for borrowers, seeking help to secure the attorney general’s participation in the deal, these people said. One recipient described the calls from Mr. Donovan, but asked not to be identified for fear of retaliation.

In other words, this is going to take too long and we have an election to finance. Please, do not piss off the banksters, they’re the only ones with money.

Obama administration doesn’t want to help the homeowners or prosecute those who committed this fraud, as David Dayen so bluntly states, they want to “white wash the fraud”:

The White House must think that if they can get Schneiderman, the AG with the most leverage over the talks by virtue of New York’s important position with respect to mortgage securitization, to bend, they can roll the rest as well. The WSJ article says that federal officials have a Labor Day target date for a settlement, and that they’ll continue “outreach” to all AGs. I bet they will.

The banks want at least 40 states signing off on this settlement before they agree to it. I can think of at least 10 AGs right now who wouldn’t agree to the broadest terms. Democrats Madigan, Schneiderman, Delaware’s Beau Biden (the VP’s son, who has joined Schneiderman on his intervention into the Bank of America settlement with investors over mortgage backed securities), Massachusetts’ Martha Coakley and Nevada’s Catherine Cortez Masto are on the record against a broad liability release in one way or another, and others like Washington’s Rob McKenna (R), Colorado’s John Suthers (R), California’s Kamala Harris, and even Utah’s Mark Shurtleff (R) and Michigan’s Bill Schuette (R) have active investigations or lawsuits on this issue. That’s an incomplete list off the top of my head. And if you add Republican anti-government types who don’t want to see any monetary penalty at all, you might not get to 25 in favor.

Of course this has earned a couple of people the dubious honor of not being named “wankers” but two of the worst people by Dayen and our man of few words, Atrios.

From Dayen the honor goes to Kathryn S. Wylde, board member of the Federal Reserve Bank of New York:

   The lawsuit angered Bank of New York Mellon, and as Mr. Schneiderman was leaving the memorial service last week for Hugh Carey, the former New York governor who died Aug. 7, an attendee said Mr. Schneiderman became embroiled in a contentious conversation with Kathryn S. Wylde, a member of the board of the Federal Reserve Bank of New York who represents the public. Ms. Wylde, who has criticized Mr. Schneiderman for bringing the lawsuit, is also chief executive of the Partnership for New York City. The New York Fed has supported the proposed $8.5 billion settlement {…}

   Characterizing her conversation with Mr. Schneiderman that day as “not unpleasant,” Ms. Wylde said in an interview on Thursday that she had told the attorney general “it is of concern to the industry that instead of trying to facilitate resolving these issues, you seem to be throwing a wrench into it. Wall Street is our Main Street – love ’em or hate ’em. They are important and we have to make sure we are doing everything we can to support them unless they are doing something indefensible.”

And from Atrios, his honor goes to HUD Secretary Shaun Donovan for this gem:

In recent weeks, Shaun Donovan, the secretary of Housing and Urban Development, and high-level Justice Department officials have been waging an intensifying campaign to try to persuade the attorney general to support the settlement, said the people briefed on the talks. … In an interview on Friday, Mr. Donovan defended his discussions with the attorney general, saying they were motivated by a desire to speed up help for troubled homeowners. But he said he had not spoken to bank officials or their representatives about trying to persuade Mr. Schneiderman to get on board with the deal.

Remember HAMP? Right. They just want to help.