BofA Older News Page 6

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Kamala Harris a key player in settlement over mortgage crisis

California Atty. Gen. Kamala Harris, shown in November, has been under increased pressure from advocates who say she has not done enough to battle banks’ efforts to get off lightly. (Brian van der Brug, Los Angeles Times / September 24, 2011)

The importance placed on California puts the state attorney general in a significant position to hold banks accountable for improper foreclosures.

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Piggybankblog posted on 09/26/11

Cross linked story with Latimes.com

Reporting from New York and Los Angeles— California Atty. Gen. Kamala Harris has emerged as a key player in pursuing a nationwide settlement with major U.S. banks accused of wrongful foreclosures and is facing increased pressure from consumer groups seeking help for homeowners devastated by the mortgage crisis.

Harris, who was in closed-door talks with banks Friday, has been negotiating with the five largest mortgage servicers for months as part of a coalition of attorneys general and federal agencies seeking to a hammer out a deal surrounding allegations that banks committed widespread foreclosure errors.

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FOR THE RECORD:

Kamala Harris: A story in Friday’s Business section about California Atty. Gen. Kamala Harris’ working on a settlement with banks on wrongful foreclosures identified Liz Ryan Murray as chair of Americans for Financial Reform. While that is correct, she said she was speaking on behalf of National People’s Action, another group to which she belongs. —

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Those involved in the talks see Harris’ involvement in any settlement as crucial because of California’s size and because so many home repossessions are concentrated in the Golden State.

The importance placed on California puts Harris in a significant position to hold banks accountable for improper foreclosures. She has been the subject of increased pressure from advocates who say she has not done enough to battle banks’ efforts to get off lightly.

“The banks want to get away with everything, and she is probably one of the linchpins in saying that is going to happen or isn’t going to happen,” said Liz Ryan Murray, the chairwoman of the foreclosure task force at Americans for Financial Reform. “We would like to see her come forward and be more public on what she will and won’t give up.”

The progressive group Credo sent out a message to its supporters Thursday asking them to tell Harris to speak up more forcefully and reject a previously proposed settlement that would reportedly allow the banks some immunity from further investigation.

This echoed an earlier petition circulated by the liberal advocacy group MoveOn, and came after the Los Angeles County Federation of Labor passed a resolution this week stating that Harris should reject the previously proposed settlements.

Harris’ office declined to comment on the specifics of the negotiations, but a spokesman said her main goal in any settlement would be to provide the maximum amount of relief for California homeowners.

“That means listening keenly to what the California public has to say on this issue, and rigorously evaluating any settlement proposals,” said Shum Preston, the spokesman.

The efforts to pressure Harris go to the core of a growing disagreement among law enforcement officials nationwide about the best way to pursue banks for their role in the meltdown.

The settlement being wrangled over in Washington on Friday was originally negotiated by a committee representing all 50 states to deal with so-called robo-signing, the practice of bank employees signing sworn documents without reading or understanding them.

However, New York Atty. Gen. Eric Schneiderman, who was originally part of the negotiations, has launched his own investigation of the banks’ practices before the crisis. He is focusing on the institutions’ efforts to bundle low-quality mortgages into sophisticated bonds.

Schneiderman has grown increasingly critical of the 50-state settlement and expressed concern that his counterparts in other states may let the banks off too lightly and provide immunity from other efforts to bring them to account for mortgage misdeeds.

The head of the 50-state committee, Iowa Atty. Gen. Tom Miller, has said that a settlement would not limit further investigations and that any release from further legal claims would not be overly broad.

“We have conveyed to the banks and we have stated publicly that we will not release all civil liability,” Geoff Greenwood, a spokesman for Miller, said in an emailed statement. “Indeed, the release of civil liability will be limited.”

Miller removed Schneiderman from the committee in August, saying that he had “actively worked to undermine the negotiations.”

Schneiderman has won support from attorneys general in Delaware, Nevada, Massachusetts and Minnesota, some of whom have launched their own investigations.

On Thursday, Kentucky Atty. Gen. Jack Conway announced his support for Schneiderman and his opposition to any immunity for the banks. In a letter to supporters he wrote, “Frankly, all elected leaders owe it to their constituents to take this position.”

The Progressive Change Campaign Committee sent Conway’s message to California residents Thursday, urging them to sign a petition urging Harris and other elected officials to take a stand. That echoed an email blast sent by MoveOn last week, asking its members to contact Harris and urge her to stand with Schneiderman.

“We are hoping that Kamala Harris comes along and says that California homeowners were harmed by these banks and that we are not going to let them get away with a slap on the wrist,” said Daniel Mintz, a MoveOn representative in California.

Harris has generally resisted committing to any position among the sparring parties.

Harris met with Schneiderman in July and at that point told The Times that she was considering joining his investigation, but she has not done so.

In May, Harris announced the creation of a 25-person task force to look at mortgage fraud. In August she subpoenaed Citigroup Inc. and its banking subsidiary, Citibank, ordering them to answer questions regarding the selling and marketing of mortgage-backed securities. She has also subpoenaed a Florida firm that processes foreclosures for many of the nation’s major financial institutions, Lender Processing Services.

PICO California, an advocacy group for homeowners, has said that Harris appears to be pursuing the best for Californians but is not being clear enough about where she stands.

“We think she could more strongly relate her core principals around this settlement,” said Brian Heller de Leon, a representative for the group.

nathaniel.popper@latimes.com

alejandro.lazo@latimes.com

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Gunning for Wall Street, With Faulty Aim

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Piggybankblog posted on 09/25/11

Picture posted by piggybankblog

Cross linked with story from New York Times

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By late morning on Wednesday, Occupy Wall Street, a noble but fractured and airy movement of rightly frustrated young people, had a default ambassador in a half-naked woman who called herself Zuni Tikka. A blonde with a marked likeness to Joni Mitchell and a seemingly even stronger wish to burrow through the space-time continuum and hunker down in 1968, Ms. Tikka had taken off all but her cotton underwear and was dancing on the north side of Zuccotti Park, facing Liberty Street, just west of Broadway. Tourists stopped to take pictures; cops smiled, and the insidiously favorable tax treatment of private equity and hedge-fund managers was looking as though it would endure.

“I’ve been waiting for this my whole life,” Ms. Tikka, 37, told me.

“This,” presumably was the opportunity to air societal grievances as carnival. Occupy Wall Street, a diffuse and leaderless convocation of activists against greed, corporate influence, gross social inequality and other nasty byproducts of wayward capitalism not easily extinguishable by street theater, had hoped to see many thousands join its protest and encampment, which began Sept. 17. According to the group, 2,000 marched on the first day; news outlets estimated that the number was closer to several hundred.

By Wednesday morning, 100 or so stalwarts were making the daily, peaceful trek through the financial district, where their movements were circumscribed by barricades and a heavy police presence. (Various arrests for disorderly conduct were made.) By Thursday, the number still sleeping in Zuccotti Park, the central base of operations, appeared to be dwindling further.

Members retained hope for an infusion of energy over the weekend, but as it approached, the issue was not that the Bastille hadn’t been stormed, but that its facade had suffered hardly a chip. It is a curious fact of life in New York that even as the disparities between rich and poor grow deeper, the kind of large-scale civil agitation that Mayor Michael R. Bloomberg recently suggested might happen here hasn’t taken shape. The city has two million more residents than Wisconsin, but there, continuing protests of the state budget bill this year turned out approximately 100,000 people at their peak. When a similar mobilization was attempted in June to challenge the city’s budget cuts, 100 people arrived for a sleep-in near City Hall.

Last week brought a disheartening coupling of statistics further delineating the city’s economic divide: The Forbes 400 list of wealthiest Americans, which included more than 50 New Yorkers whose combined net worth totaled $211 billion, arrived at the same moment as census data showing that the percentage of the city’s population living in poverty had risen to 20.1 percent. And yet the revolution did not appear to be brewing.

Most of those entrenched in Zuccotti Park had indeed traveled from somewhere else; they had come from Pennsylvania, Massachusetts, Missouri, Texas and so on with drums, horns, tambourines and, in the instance of one young man, a knee-length burlap vest, fur hat, ski goggles and tiny plastic baby dolls applied to the tips of his fingers.

One of the few New Yorkers I met, a senior at Bronx High School of Science, was stopping by in fits and spurts, against the wishes of his psychiatrist mother, who feared the possibility of tear gas and had chastised her son for giving his allowance to the cause.

That cause, though, in specific terms, was virtually impossible to decipher. The group was clamoring for nothing in particular to happen right away — not the implementation of the Buffett rule or the increased regulation of the financial industry. Some didn’t think government action was the answer because the rich, they believed, would just find new ways to subvert the system.

“I’m not for interference,” Anna Katheryn Sluka, of western Michigan, told me. “I hope this all gets people who have a lot to think: ‘I’m not going to go to Barcelona for three weeks. I’m going to sponsor a small town in need.’ ”

Some said they were fighting the legal doctrine of corporate personhood; others, not fully understanding what that meant, believed it meant corporations paid no taxes whatsoever. Others came to voice concerns about the death penalty, the drug war, the environment.

“I want to get rid of the combustion engine,” John McKibben, an activist from Vermont, declared as his primary ambition.

“I want to create spectacles,” Becky Wartell, a recent graduate of the College of the Atlantic in Maine, said.

Having discerned the intellectual vacuum, Chris Spiech, an unemployed 26-year-old from New Jersey, arrived on Thursday with the hope of indoctrinating his peers in the lessons of Austrian economics, Milton Friedman and Ron Paul. “I want to abolish the Federal Reserve,” he said.

The group’s lack of cohesion and its apparent wish to pantomime progressivism rather than practice it knowledgably is unsettling in the face of the challenges so many of its generation face — finding work, repaying student loans, figuring out ways to finish college when money has run out. But what were the chances that its members were going to receive the attention they so richly deserve carrying signs like “Even if the World Were to End Tomorrow I’d Still Plant a Tree Today”?

One day, a trader on the floor of the New York Stock Exchange, Adam Sarzen, a decade or so older than many of the protesters, came to Zuccotti Park seemingly just to shake his head. “Look at these kids, sitting here with their Apple computers,” he said. “Apple, one of the biggest monopolies in the world. It trades at $400 a share. Do they even know that?”

E-mail: bigcity@nytimes.com

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BofA Case May Be Followed by More Mortgage Suits by Counties

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Piggybankblog posted on 09/24/11

Piggybankblog posted picture

Cross linked story with Bloomberg.com

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Bank of America Corp. (BAC) is among a group of lenders that may face a wave of new lawsuits claiming cash-strapped counties were cheated out of millions of dollars by a system used for more than a decade to register mortgages.

Dallas County District Attorney Craig Watkins said state attorneys general and county officials across the U.S. have expressed interest in his lawsuit against Mortgage Electronic Registration Systems Inc. and Bank of America, filed in Texas state court on Sept. 21. Dallas County could be owed as much as $100 million in filing fees, he said.

“This is a big new front,” said Christopher L. Peterson, associate dean and professor at the University of Utah S.J. Quinney College of Law. “This case is scary because if Dallas wins then there are a lot of other counties around the country that are going to follow.”

MERS, a unit of Reston, Virginia-based Merscorp Inc., says on its website that its aim is to place every mortgage in the country on an electronic, rather than a paper, system that allows members to buy and sell mortgages.

MERS acts as the lender’s nominee and remains the mortgagee of record as long as the note promising repayment is owned by a MERS member. Dallas County claims this allows banks to buy and sell loans without properly recording transfers with counties and paying the fee.

‘Practices are Legal’

“The MERS business model and practices are legal and comply with the recording statutes and regulations of Texas,” Janis Smith, a spokeswoman for Merscorp, said in an e-mail. The claims in the lawsuit “are without legal or factual merit.”

Shirley Norton, a spokeswoman for Charlotte, North Carolina-based Bank of America, the biggest U.S. lender by assets, declined 2to comment on the suit.

Liability in the Dallas case could exceed $1 billion, based on the number of mortgages in the county, Peterson said. Local laws impose substantial penalties, as well as back payments of fees and taxes, if false documents were filed in land transactions, said Peterson, who has advised private plaintiffs making similar claims.

Faulty mortgages and foreclosures have already cost the five biggest home lenders $66 billion, according to data compiled by Bloomberg. Bank of America’s credit rating was cut on Sept. 21 by Moody’s Investors Service in part because the bill for mortgage disputes may climb past the $39 billion committed since 2007. County clerks in Kentucky have also sued MERS, while officials in Massachusetts and Michigan say they are exploring the possibility.

Half of Mortgages

MERS, operating since 1997, has registered more than half of all U.S. home mortgages. The company came under scrutiny last year after attorneys general in all 50 states began investigating claims that banks and loan servicers used faulty documentation in foreclosures.

Merscorp said on Feb. 16 that it will propose a rule change to stop members from foreclosing in its name.

Damages in the MERS claims won’t rival the tens of billions of dollars of losses banks have suffered due to faulty mortgages, said Chris Gamaitoni, a bank analyst with Washington- based Compass Point Research & Trading LLC.

The banks are more threatened by lawsuits that question the way mortgages were originated, pooled and securitized, Gamaitoni said in an interview.

“This is going to test the foresight of the people who created MERS,” said Peter Henning, a law professor at Wayne State University in Detroit.

The prospects for the lawsuits are difficult to determine because every state has its own property laws and requirements, Henning said.

‘Will Pursue’

“It will depend on what they say constitutes a transfer of a mortgage,” he said. “Counties sure could use these revenues, so if they can find an opening there they will pursue it.”

MERS is owned by financial institutions including Citigroup Inc. (C), JPMorgan Chase & Co. (JPM), Wells Fargo & Co. (WFC) and Stewart Title Guaranty Co., and industry trade groups including the Mortgage Bankers Association and the American Land Title Association. It’s also partly owned by Fannie Mae and Freddie Mac, the housing finance agencies now controlled by the U.S. government after being bailed out in the 2008 financial crisis.

Dallas County called that crisis “a direct result of the financial system’s commoditization, packaging, securitization and sale of tens of millions of mortgages throughout the U.S.,” according to the complaint. “Without the fiction of the MERS system, these activities would not have been possible.”

‘Avoiding Recordation’

The county said that through MERS, notes and mortgages are being “sold, assigned or transferred” without being recorded in county deed records. The defendants “misrepresented the true beneficial owner of notes and related mortgages filed by them in Dallas County, Texas, for the purpose of avoiding the recordation of subsequent transfer and payment of attendant filing fees.”

Watkins, 43, is seeking reimbursement for fees lost, punitive damages and a judgment of $10,000 a violation.

He asked the court to find that a violation of the Texas code occurred each time MERS was identified as a mortgagee or beneficiary under a deed of trust when it had no interest in the note secured by that deed. According to the complaint, MERS was the “grantee” in 157,319 records in Dallas as of Sept. 11.

The lawsuit also seeks a court order preventing the defendants from filing anything in deed records that identified MERS or anyone as a beneficiary who doesn’t have an interest in the secured note. The county said Bank of America “knew or should have known” the MERS system would cause improper filing.

‘More Banks’

“We expect more banks will be in this before it’s over,” Watkins said in an interview. The litigation could spread, he said. “This is not just going to be a Texas deal.” He wouldn’t specify which states or counties had contacted him or his lawyers about the suit.

Peterson, the Utah professor, who wrote an academic article on MERS that is cited in the Texas complaint, said he has advised plaintiffs in whistleblower cases against MERS in California, Nevada and Tennessee. The California case was dismissed when the court determined the purported whistleblower didn’t meet filing standards. A Nevada court said state law didn’t require recording the assignment of a mortgage.

The clerks of Kentucky’s Christian and Washington counties sued MERS, Chase Home Mortgage Corp., CitiMortgage, Wells Fargo, Bank of America and others in federal court in Louisville in April, seeking to represent all 120 counties in the state.

“According to MERS’s own website, its system saves money for its members and is specifically designed to avoid paying the fees” to county clerks, according to the April 25 filing. “MERS president, R.K. Arnold, testified in 2009 that assuming each mortgage has been resold and recorded just once, it would have saved the industry $2.4 billion in recording expenses.”

‘Immediately Cease’

The Kentucky suit seeks compensatory and punitive damages and an injunction ordering defendants “to immediately cease the practice of nonrecording of assignments of mortgages.”

Dennis Pantazis Jr., attorney for the counties, declined to

comment on the suit.

Thomas Kelly, a spokesman for New York-based JPMorgan Chase, and Vickee Adams, a spokeswoman for San Francisco-based Wells Fargo, the biggest U.S. home lender, declined to comment.

The banks and MERS asked the court to dismiss the case, saying Kentucky law doesn’t require recording transfers of promissory notes or interests in loans. MERS remains the “mortgagee of record” during these transactions, so no duty to record is triggered, the companies said in a July 1 filing.

Oakland County, Michigan is “evaluating a possible suit” against MERS, said Keith Lerminiaux, corporate counsel. The county has sued Freddie Mac and Fannie Mae in federal court in Detroit alleging they failed to pay transfer taxes on foreclosure sales.

Massachusetts Probe

Martha Coakley, the Massachusetts attorney general, said this year that she’s investigating MERS. The probe includes complaints by registers of deeds in the state over unpaid filing fees, said Brad Puffer, a spokesman for Coakley.

Delaware is also investigating MERS, according to a person familiar with the matter.

John O’Brien, register of deeds for Southern Essex County, Massachusetts, said he was among the officials pushing Coakley for an investigation. He estimates that since 1998 his district has lost $44 million in fees and the state has lost $250 million to $300 million.

“I’m hopeful that she will be filing the same type of lawsuit against MERS,” he said in an interview. If Coakley doesn’t sue, O’Brien said, there’s a “very strong” chance he would do it himself.

Fees Vary

Recording fees vary and may depend on the length of a filing, Watkins, the Dallas district attorney, said. A county may charge $21 for the first page of a document and $9 for each succeeding page, he said. The recording fee for assignment of a mortgage in Christian County is about $13, according to the Kentucky lawsuit.

The Dallas county clerk has estimated that at least $58 million in fees have gone unpaid as a result of MERS-related transactions, dating back to 1997, Watkins said. “Our research shows it could be more than $100 million,” he said.

Claims against Bank of America stem mainly from loans originated by Countrywide Financial Corp., the subprime mortgage company acquired in 2008 when it was on the verge of collapse.

The mounting costs of buybacks, settlements and litigation helped push Bank of America’s stock to levels last seen in early 2009. Chief Executive Officer Brian T. Moynihan, 51, has sold at least $40 billion of assets and preferred shares to bolster the company’s finances.

Budget Woes

U.S. states have already dealt with four straight years of budget imbalances and closed gaps totaling about $511 billion, according to the National Conference of State Legislatures in Denver. Dallas county has a budget shortfall of $36 million, Watkins said.

“We’re in the position that we can’t even provide basic services,” he said. Had MERS not existed, “we could have collected those fees,” he said.

The Texas case is Dallas County v. Merscorp Inc., CC-11-06571-E, County Court at Law, Dallas County, Texas. The Kentucky case is Christian County Clerk v. Mortgage Electronic Registration Systems Inc., 5:11-cv-00072, U.S. District Court, Western District of Kentucky (Louisville).

To contact the reporters on this story: Margaret Cronin Fisk in Detroit at mcfisk@bloomberg.net; James Sterngold in New York at jsterngold2@bloomberg.net

To contact the editors responsible for this story: Michael Hytha at mhytha@bloomberg.net; Rick Green at rgreen18@bloomberg.net

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Deputy for Oregon Attorney General John Kroger silent on foreclosure settlement talks

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Piggybankblog posted on 09/24/11

Picture posted by piggybankblog

Cross linked story with oregonlive.com

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Oregon Attorney General John Kroger‘s office, relatively mum until now on the state’s foreclosure crisis, chimed in on Wednesday about underlying legal disputes — and didn’t say much new.

Keith Dubanevich, testifying before an interim committee at the Oregon Legislature, declined to comment on the status of a multistate investigation into mortgage modification and foreclosure practices of top U.S. lenders.

Kroger’s chief of staff did hint that his office takes seriously any reports that lenders in Oregon had falsified or “robo-signed” documents used to justify a foreclosure.

“Suffice it to say we have great concerns about any representations that are not accurate and factual and truthful,” Dubanevich told the five-member Senate General Government, Consumer and Small Business Protection Committee.

Dubanevich was the lone person invited to testify at the hearing about the Mortgage Electronic Registration Systems. The industry clearinghouse was created to avoid cumbersome document recordings and enable the rapid sales and securitization of loans. It’s been the subject of multiple lawsuits and investigations around the country as to its legal standing in foreclosures.

Dubanevich said it remains unclear whether lenders can foreclose on a homeowner without going through court if they had not publicly recorded each time the promissory notes changed hands previously. In some cases, mortgages were bought and sold by multiple finance companies as time went by.

At least seven judges in Oregon have ruled that Oregon law requires them to record mortgage note assignments, or else go through a court process to determine standing. Three judges have ruled the law does not require it, Dubanevich said.

Judges have also disagreed on whether MERS has standing to foreclose on a home, though 10 have ruled it does. MERS does not accept mortgage loan payments, but is named on millions of deeds representing lenders.

The Oregon Supreme Court might not resolve the dispute for a year, Dubanevich said. The Legislature likely won’t decide to tackle the issue until February.

Sen. Larry George, R-Sherwood, said he was skeptical of borrowers’ motives in the debate.

“Is this truly (homeowners) trying to figure out who I talk to?” George asked. “Or is this an attempt to slow down the foreclosure so I can live in a house for longer that I’m not making mortgage payments on?”

Some distressed homeowners have called on Kroger’s office to reject a reported multi-billion settlement between state attorneys general and the nation’s top lenders that would release lenders of certain future claims.

Attorney generals in New York, Delaware and Nevada have broken off from the talks, and Nevada’s recently filed a more forceful lawsuit against Bank of America. Washington Attorney General Rob McKenna has sued Bank of America’s foreclosure arm, accusing it of illegal foreclosures.

Brent Hunsberger; 503-221-8359

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Bank of America’s $8.5 billion settlement behind jump in home default notices

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Piggybankblog posted on 09/24/11

Picture posted by piggybankblog

cross linked story with washingtonpost.com

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NEW YORK — It’s no secret that Bank of America wants to put its mortgage-related woes behind it. But it appears that a key $8.5 billion settlement with large investors is playing a role in pushing many more people into foreclosures.

The number of homes across the country that received an initial default notice — the first step in the foreclosure process — jumped 33 percent in August from July, the foreclosure listing firm RealtyTrac reported last week. It was the largest monthly increase since August 2007, right after the housing bubble had burst.

Now a preliminary analysis reveals the largest escalation of foreclosures came from Bank of America. Just in California, default notices sent by Bank of America soared 96 percent in August from the previous month.

The dramatic rise is particularly evident in certain California towns and cities. For instance, notices surged 95 percent in Fresno and 76 percent in Sacramento.

Bank of America says that taking action on its foreclosure pipeline will set the stage for a housing market recovery. However, consumer advocates say Bank of America and the other lenders are ramping up foreclosures without cleaning up shoddy paperwork practices, which led to a moratorium in foreclosures last October.

“Bank of America has a ticking time bomb in its books and it needs to show investors that it is moving,” said Ira Rheingold, an attorney and executive director of the National Association of Consumer Advocates.

“ ‘Does that mean it has improved its practices?’ No. But Bank of America is in a desperate place,” said Rheingold.

On June 29 the Charlotte, N.C. bank struck an $8.5 billion settlement with a group of large investors— including Pimco, the New York Fed and Blackrock— who claimed the bank had sold them poor quality investments based on faulty mortgages. The settlement is still subject to court approval; a decision is expected in November. Several other investors and homeowners have also filed objections with the court to block the settlement.

Bank of America spokesman Richard Simon said the bank’s increased foreclosure actions had nothing to do with the settlement. Instead it stems mainly from a return to more timely filings on new defaults. He also noted that the bank has improved quality controls and was moving homes into foreclosure “only after all other options with homeowners have been exhausted.”

Clearing the backlog of foreclosures and defaulted loans is a key part of the terms of the settlement. Bank of America has to reduce the number of risky mortgage loans and find third-party companies that can help speed up the process. This includes helping homeowners modify loans or herding defaulted loans into foreclosure sales.

The bank’s actions to start clearing the backlog started from the date the settlement was signed, said Scott Humphries, a partner at law firm Gibbs & Bruns, which represented investors in the settlement. “It does not have to wait for court approval,” he said.

Bank of America is hopeful that the settlement will be approved, as it’s a key part of the process to enable management to focus on other issues.

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Moody’s Shanks Bank of America Stock

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Piggybankblog posted on 09/22/11

Picture posted by piggybankblog

Cross linked story with Wall Street Journal

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Moody’s just drove a knife into the heart of Bank of America’s stock, and gave an implicit thumbs up to Citigroup.

The rating firm downgraded BofA’s short- and long-term credit ratings. In part, Moody’s says the downgrade resulted from the waning implicit government support for big banks including Bank of America.

The credit-rating firms have been warning seemingly forever that with the U.S. government (in theory) less likely to bail out big banks in the future, the banks’ credit ratings might be too high. But Moody’s hadn’t pulled the trigger on its warning — until now.

Bank of America shares are off 4.1% to $6.61. The Moody’s downgrade of the long-term credit rating is a two-notch slide, to Baa1.

Wells Fargo, Citigroup, BofA, Goldman Sachs and Morgan Stanleywere on Moody’s list for possible downgrades considering the government’s (in theory) decreasing willingness to prop up the Too Big to Fail set. Wells Fargo’s stock fell off a cliff when the Moody’s headlines hit, but now they’re slightly positive. Take THAT, Moody’s.

UPDATE: Moody’s also cut Wells Fargo’s credit rating, but only by one notch. And Citigroup — which was the banking industry’s.

punching bag until BofA took its place — actually had its long-term credit rating stay stay in Moody’s books. Moody’s did cut the short term credit rating.

Citi’s stock price initially popped as the first headlines of the Moody’s rating action crossed, but now is back down a fraction.

Bank of America and Citi say they disagree with Moody’s conclusions. (No mention of a $2 trillion math error.)

 

 

 

Nevada AG puts Bank of America on notice over foreclosures\

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Piggybankblog posted on 09/20/11

Picture posted by piggybankblog

Cross linked story with vegasinc.com

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Call it Nevada’s version of David versus Goliath.

As foreclosures continue and homeowners cry foul against lenders in their bids to stay in their homes, Nevada’s Attorney General Catherine Cortez Masto is taking on Bank of America in federal court. And the issue is going to heat up as Cortez Masto’s office investigates BofA and other parties in the foreclosure process. She says criminal charges are likely coming to the industry soon, which could provide more ammunition for her foreclosure fraud case.

Cortez Masto wants to revoke a 2009 settlement with BofA over loan abuses involving its Countrywide Financial Corp., saying the bank has violated its terms. She claims the banking giant has harmed homeowners by failing to modify their mortgages and maliciously deceived some by telling them their loans would be modified, then foreclosing on them. BofA denies the allegations.

Cortez Masto has long been viewed as a rising star in the party. She was criticized for politicizing her office after her charge that Lt. Gov. Brian Krolicki, a Republican, misallocated office funding for a marketing campaign in order to benefit himself was dismissed in District Court in 2009. Cortez Masto denied the move was politically motivated as alleged by Krolicki supporters.

Cortez Masto stopped by the VEGAS INC offices to discuss Assembly Bill 284, which she and Assembly Majority Leader Marcus Conklin, D-Las Vegas, pushed in the last session to protect homeowners and businesses from mortgage fraud.

The law, which takes effect October 1, requires documents used in the foreclosure process to be recorded with counties and specifies who can be a trustee on a deed of trust along with a trustee’s duties in the foreclosure process.

This is big stuff, but Masto says she’s up to the task. Hey, big bank: Bring it on.

What was the basis for this legislation?

The impetus for this legislation and previous legislation we worked on in 2007 and 2009 is based on complaints that came into my office as well as our investigations. In 2007, we had some great legislation that made mortgage fraud a crime, and it was important for my office to be able to go after and hold those people accountable who were violating the law and taking advantage of others. This new legislation makes foreclosure fraud a crime. We needed to protect the integrity of the process. It’s important because the criminal element is always evolving around the laws, and people are looking for loopholes. We have to be vigilant and make sure my office is working with the Legislature to protect the citizenry and business as well. This law is not just beneficial to the homeowners but it’s beneficial to the lenders and banks and good players in the process. That’s why this is so important.

What is the status of your office’s work?

We’re in the middle of investigations right now looking at documents on homes that have been foreclosed that have been forged and materially altered. There are players involved in this process who are intentionally violating the law to make a quick buck. That always seems to be the impetus behind this type of crime.

Who are the people you’re looking at?

There are a lot of players in this process—from notaries to third parties to those hired by the servicers to prepare the documents and law firms to move through that process. I’ll be honest with you: We’re starting at the bottom right now. You’ll see in the next month or so some actions on the criminal side in holding people accountable who are engaged in this process. At the same time, it’s a piece of what I’m seeing in my office on mortgage fraud. The legislation here is important because it will not only allow us to hold people accountable, but it continues the integrity of the process and its transparency. Not only for the homeowners but the legitimate buyers and the servicers. They want to be good players and weed out those bad players, have them held accountable. That’s what this legislation does.

Are any lending institutions involved in this?

All I can tell you right now is that we’re investigating. As our investigation unfolds and we have enough information to bring an action forward, we will. The areas we’ve been focusing on are all of the players involved in this whole mortgage crisis. At the same time, this is cutting edge because we’re one of only a few states that have an ability to enforce actions on a civil and criminal side. I will tell you other AGs only have civil remedies. It’s because of our working relationship and the legislators willing to delve into the specifics of these areas and pass laws that give us the ability to pursue criminal action. There are some activities that are so egregious that criminal action is called for.

What’s the status of the BofA lawsuit you filed in December 2010 in US District Court?

We’re moving forward with an appeal to the (9th US Circuit Court of Appeals) on whether our Bank of America litigation should be in state court or federal court. We think it should be in state court because state law has been violated. The defendants moved it to federal court, and the judge in the federal court ruling said it should remain in federal court. We’re appealing that ruling.

What’s your case pending in the court?

There are a couple of additional things. The first part of the complaint was allegations that Bank of America violated the settlement agreement in relation to Countrywide. We think the violation was such a material breach, we’re asking the court to terminate our consent judgment.

What are you alleging in the case?

The complaints we’re getting tell us it’s happening every day. The goal of the loan modification process was to help people get lower payments and lower interest rates. We’re finding it just the opposite. Individuals getting loan modifications actually have to pay higher payments and higher interest rates. Based on our original allegations, it runs the gamut from foreclosing on people who were told they were in a trial modification and making payments, to losing the documentation and asking them numerous times to resubmit.

Any examples?

I had a poor woman, a senior citizen, who was trying to get a modification, and she had to verify at least ten times to many different people in Bank of America that her husband had passed away two or three years prior. They were asking for documentation that was not necessarily required. We’re seeing a lot of that. We’re seeing that people were denied modifications when in fact the claims they were making for denial were not true and accurate. There’s a combination of things.

Why is this happening?

When we interviewed current and former employees as part of our investigation, we were told they were never properly trained on the modification process and programs that were out there. That often times, the whole process was chaotic. There was insufficient staffing. They were told to be on the phone with borrowers for a limited period of time—seven to ten minutes—and if they were on the phone any longer they would be penalized. The defense will be whatever Bank of America comes up with why they didn’t violate the settlement. It is a clear indication based on what we’ve seen that it has.

If a specific house is worth, say, 25 percent of the total mortgaged, and lenders know this won’t qualify for a modification, why are they leading people to apply?

That’s part of the concern in referring to the loan-to-value ratio. When the federal HAMP (Homes Affordable Modification Program) first came out, homeowners had to satisfy loan-to-value ratio criteria. In Nevada, our loan-to-value ratio was 150 percent or more, so most people couldn’t qualify on that basis alone. But it goes back to servicers. They needed to tell that to homeowners in a timely manner. That’s why we’re investigating Bank of America. We want answers to those questions. Why weren’t homeowners told in a timely manner and did you just not have good employees, or was it intentional? That’s part of the discovery we’re engaging in now. Obviously, something happened. Something fell through the cracks and people weren’t getting answers in a timely manner.

Would what you allege BofA did fall under the new law?

This new law prevents BofA from engaging in that type of activity or anybody from engaging in that activity, which we call “robo-signing.” The banks or any agency that wants to take action and foreclose has to follow the law that takes effect October 1. Before that, if there are violations, we could go after them for certain activities. This gives us additional tools on the foreclosure side. It creates a foreclosure fraud process.

Is any bank besides BofA being targeted?

I can only tell you we’re in the middle of investigations right now. If we have information to move forward against other servicers, we’ll make that public at the appropriate time. We did enter into a settlement with Wells Fargo on the servicing standards. But the majority of complaints that come into my office are from Bank of America.

Is the industry learning anything from this?

From what I have seen of the complaints coming in the office, there doesn’t seem to be as many complaints against the other servicers as there have been against Bank of America and Wells Fargo.

Do you view yourself as a legitimate crusader going against big business?

I’m motivated every day. As the attorney general, I took the oath of office and by the statutes, I had the ability to protect the public and protect the state. I take that very seriously. It’s a public trust and from my perspective, every AG I talk to and work with, we enforce the laws and at the same time protect our citizenry, and when they’re victimized, we’re going to hold individuals accountable.

How have you had to deal with banks on a personal level as a homeowner?

I haven’t asked to modify my loan so I haven’t gone through that process. Are we underwater with our home? Absolutely. It’s frustrating and part of what we’re seeing happening in our economy.

BofA plans to lay off 30,000 employees. Will that make it harder for homeowners to deal with them?

It depends on where their layoffs are and if they’re laying off people in the servicing units. I would imagine it would make it worse.

How does this all relate to Nevada, where lenders don’t have to go to court to foreclose on a home?

When you foreclose in Nevada, you choose a nonjudicial route. You can choose judicial but most choose nonjudicial. You just have to file a notice of default and follow that procedural process. The documentation prepared by the bank, the holder and trustee—what we’re seeing is a lot of information in that documentation is forged. For example, there’s a notary required to sign off as to the legitimacy of the signatures. We have some indications the notaries are signing massive amounts of blank documents and attaching them to notices of default. We have concerns about middlemen, whether notaries or people preparing the documents, who are grabbing signatures from other documents and adding them to new documents. The resulting documents look legitimate. We have concerns that some attorneys focus on just foreclosures and have incentive to move the documents without knowing whether they’re legitimate because they get a fee and are penalized if they don’t move them quickly.

So problems can happen with both processes?

It goes back to the integrity of the documents: Whether you’re in a nonjudicial foreclosure or judicial foreclosure, it’s hard to determine whether signatures have been forged. Even if you were in a judicial foreclosure state and the judge sees these documents, unless he has some indication that a forgery is going on, you wouldn’t know the documents have been created and altered. That’s the challenge. The massive number of foreclosures means notaries are making money, third parties are making money and attorneys are making money. Nobody is questioning the legitimacy of the documents and who actually owns the deeds of trust. That’s why recording is so important in Nevada. These documents have to be recorded.

Why are foreclosures down in Nevada?

I don’t know. The numbers don’t tell me anything. It could be the banks are just not foreclosing.

Do you have advice for the thousands of people facing foreclosure in Nevada?

They should follow the process we have in place. If they’re trying to save their homes and they think a servicer is lying to them or treating them inappropriately, I want them to file a complaint with my office. But for homeowners to save their homes, they can follow the statutory requirements and go to foreclosure mediation. They have legal options. Hire an attorney.

Do any other industries have you concerned?

Everything we do in my office is complaint generated. One area of concern is consumer fraud. Grant scams arise because of the federal dollars out there to provide grants to individuals. We’re always concerned about corporate fraud. The secretary of state with the IRS and my office are looking at that area as well, regarding straw corporations (suspected of tax evasion, money laundering, securities violations and marketing for fraudulent purposes).

Is fraud a bigger problem than when times were good?

I’ve seen more consumer fraud happening with the downturn in the economy. People need to be alert. It comes at all levels, whether it’s in the mail, over the phone or on the Internet. Never give out your personal information. No legitimate company is going to ask for that. If you get a check in the mail that says you won this amount of money and to get this check you have to give us this information about your bank account, it’s probably a fraud. You just don’t get money for free. That’s your next red flag. It runs the gamut from charitable organizations to firemen’s funds or police associations. A lot of them are scammers. If Nevada residents get those calls or mailings, they can call my office. They can ask organizations to send information to check legitimacy. Most of the time, they will hang up the phone.

What’s the most challenging about your job?

There’s not one thing that’s the most challenging. Everything is challenging, and that’s why I love the job. There are so many areas that the AG focuses on that most people don’t realize. We’re just talking about consumer protection. That’s a small component of what I do in my office. To really understand the office itself and the depth and breadth of what we do in Nevada is a longer conversation. We look at natural resource issues and wild horse issues, as well as represent the executive branch of government and constitutional officers. We’re working on domestic violence and child predator laws and protecting our kids and working with senior citizens, Medicaid fraud and insurance fraud, workers liability fraud.

What’s your relationship with Gov. Brian Sandoval? You had a public disagreement with him when it came to the budget.

The governor is one of my clients, so we have a very good working relationship. There are times we’re going to disagree and that’s a normal part of the job. That’s why I’m an independently elected constitutional officer. I’m not, per se, just the governor’s legal counsel. I represent the public and public trust in general and the state of Nevada. I also respect the working relationship I have with the governor as a client.

What do you see in your future?

I enjoy what I’m doing. I’ve just been re-elected. I only have eight years at this job, and I’ll make the most of it.

What about running for governor?

I can never say never, but that doesn’t necessarily mean I won’t be out in private practice or I won’t be running for some other office or retire all together. I don’t know. I don’t close the door to all the options I hope are available for me.

CORRECTION: This story originally reported that Cortez Masto was the lone Democrat to hold statewide office after being elected to a second term in 2010. | (September 20, 2011)

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Regulator defends Bank of America deal with Fannie Mae

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Piggybankblog posted on 09/19/11

Picture posted by piggybankblog

Cross linked story with kansascity.com

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Bank of America Corp.’s sale of mortgage servicing rights to Fannie Mae, a transaction that spurred a congressional inquiry last week, “made sense for both companies,” the regulator of the government-controlled mortgage giant told reporters Monday.

“We are certainly concerned about ensuring that these higher-risk mortgages are adequately and appropriately serviced, and this was an arrangement that helped to realize that goal,” Edward DeMarco, acting director of the Federal Housing Finance Agency, said after remarks at a mortgage conference sponsored by the N.C. Bankers Association.

Rep. Darrell Issa, R-Calif., chairman of the House Oversight and Government Reform Committee, last week called the sale a possible “back-door bailout” for the Charlotte-based bank, which is working to shed mortgage-related liabilities and meet new capital standards. Issa sent a letter to DeMarco asking him to provide documents on the transaction and to explain the agency’s decision-making process.

“Congress and the American people deserve a full explanation for what appears to be yet another bailout paid for by taxpayers benefitting businesses that made bad business decisions,” Issa said in a statement.

Fannie Mae reportedly paid $500 million for the right to service the mortgages. Bank of America has not disclosed the purchase price or the buyer.

Bank of America spokesman Dan Frahm said the bank periodically sells mortgage-servicing rights or transfers mortgage-related assets to third parties. “This is a commonly accepted, industry-wide practice that many mortgage loan servicers, including Bank of America, have engaged in for many years,” he said.

In this case, he noted, the third-party purchaser already held the exposure to possible losses on the loans. Bank of America only serviced the mortgages.

DeMarco said Fannie Mae will not service the loans itself, instead transferring the loans to an undisclosed third party.

The Federal Housing Finance Agency oversees the two mortgage giants that were placed into government conservatorship in September 2008 after suffering huge losses in the housing bust. Fannie and Freddie buy mortgages from lenders, freeing up capital so banks can make more loans. Policy makers are debating ways to reform the nation’s housing finance system but action isn’t expected until after the 2012 presidential election.

In a move that shook bank stocks earlier this month, the FHFA filed lawsuits against 17 financial institutions, including Bank of America, alleging the banks sold Fannie and Freddie mortgage-backed securities during the housing boom using documents that misrepresented the quality of the underlying loans. The documents “significantly overstated the ability of the borrowers to repay their mortgage loans,” according to the suit filed against Bank of America.

DeMarco declined to comment on the suits.

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Occupy Wall Street: The Revolution Will be Livestreamed!

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Piggybankblog posted on 09/18/11

Picture posted by piggybankblog

Cross linked with Global Revolution

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Livestream is a way to stream real time film to an international audience. Global Revolution used it to show global protests despite the Tea Party ‘trolls’.

On September 17th 2011, an international day of action, thousands gathered in the Global Revolution livestream to experience demonstrations through the use of social media. The screen showed real time footage and pre-recorded videos from a variety of protests taking place across the world. Commentators reported in Greek, Spanish, Italian and English, with accents from both sides of the Atlantic. Meanwhile, text in the chat channel moved thick and fast. These were individuals sourcing information or eye-witnesses typing what they saw.

With social media increasingly seen as an important tool in organising protests, it wasn’t long before the chat channel was swamped by counter-demonstrators autotyping abuse and chanting Tea Party slogans.

#OccupyWallStreet and Other Demonstrations in September 2011

September 17th 2011 was marked by protests in New York, Madrid, London and Paris. They followed in the wake of a week of similar mass demonstrations on a global scale. People gathered in their thousands to campaign against anti-austerity measures; the undemocratic influence on governments by wealthy lobbyists; and the monetisation of basic needs, like food, shelter and healthcare. With unemployment and poverty on the rise throughout Europe and North America, the protestors were expressing their desperation or dissatisfaction with their government’s economic policies.

Read more at Suite101: Occupy Wall Street: The Revolution Will be Livestreamed! | Suite101.com http://www.suite101.com/news/occupy-wall-street-the-revolution-will-be-livestreamed-a389265#ixzz1YLm30lQe

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Bank Of America Reportedly Keeping Countrywide Bankruptcy As Option

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Piggybankblog posted on 09/18/11

Piggybankblog posted picture

Cross linke story with Huffington Post

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Countrywide Financial’s lawsuit losses could compel parent Bank of America Corp (BofA) (BAC.N) to put up the unit on the bankruptcy block, Bloomberg reported citing four people with knowledge of the firm’s strategy.

The bankruptcy option exists because the bank maintained a separate legal identity for the subprime lender after buying it in 2008, said the people, who declined to be identified because the plans are private.

However, a filing is not imminent and the executives are aware that the move could backfire and cast doubt on the largest U.S. bank’s financial strength, Bloomberg cited the people as saying.

Charlotte, North Carolina-based Bank of America has lost more than $22 billion from its consumer mortgage division in the last four quarters, in large part because of loan losses and legal settlements linked to Countrywide.

In August, American International Group Inc (AIG.N) sued BofA for over $10 billion, saying the bank was liable for Countrywide’s mortgage bonds as its legal successor.

(Reporting by Shravya Jain in Bangalore, editing by Bernard Orr)

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BofA May Keep Bankruptcy Open for Countrywide

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Piggybankblog posted on 09/16/11

Piggybankblog posted picture

Cross linked story with Bloomberg

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Bank of America Corp. (BAC), the lender burdened by its Countrywide Financial Corp. takeover, would consider putting the unit into bankruptcy if litigation losses threaten to cripple the parent, said four people with knowledge of the firm’s strategy.

The option of seeking court protection exists because the Charlotte, North Carolina-based bank maintained a separate legal identity for the subprime lender after the 2008 acquisition, said the people, who declined to be identified because the plans are private. A filing isn’t imminent and executives recognize the danger that it could backfire by casting doubt on the financial strength of the largest U.S. bank, the people said.

The threat of a Countrywide bankruptcy is a “nuclear” option that Chief Executive Officer Brian T. Moynihan could use as leverage against plaintiffs seeking refunds on bad mortgages, said analyst Mike Mayo of Credit Agricole Securities USA. Moynihan has booked at least $30 billion of costs for faulty home loans, most sold by Countrywide during the housing boom, and analysts estimate the total could double in coming years.

“If the losses become so great, how can Bank of America at least not discuss internally the relative tradeoff of a Countrywide bankruptcy?” Mayo, who has an “underperform” rating on the bank, said in an interview. “And if you pull out the bazooka, you’d better be prepared to use it.”

Countrywide Practices

Just before former CEO Kenneth D. Lewis bought Calabasas, California-based Countrywide, the firm was the biggest mortgage lender in the U.S. with 17 percent of the market and $408 billion of loans originated in 2007, according to industry newsletter Inside Mortgage Finance. Regulators later found its growth was fueled by lax lending standards, with loans marred by false or missing data about borrowers and properties.

Bankruptcy for Countrywide has gained credence with some investors and analysts after Bank of America lost almost half its market value this year. The shares have been whipsawed as the caseload of lawsuits by mortgage bond investors expanded, along with doubts about whether the bank has enough reserves to handle claims. The lender fell 1.4 percent to $7.23 at 4:15 p.m. in New York Stock Exchange composite trading.

A Countrywide bankruptcy could halt legal proceedings and consolidate litigation into one court that would split up the subsidiary’s remaining assets for creditors, said Jay Westbrook, a law professor at the University of Texas at Austin. In effect, this would trade one type of litigation for another, one of the people said. The decision would turn on whether the potential savings of a filing outweigh the risks involved in disavowing some of the firm’s obligations, the person said.

What Could Go Wrong

Pitfalls include the possibility that a bankruptcy filing would cast doubt on the entire company’s willingness to support its other subsidiaries and damage Bank of America’s standing in the credit markets or with rating firms, hurting its ability to borrow, according to analysts.

“It’s not some sort of magic elixir that makes it all just go away,” Westbrook said. “I suspect that’s one reason they haven’t done it yet.”

Moynihan, 51, has been asked publicly about a potential Countrywide bankruptcy at least three times in the past year, most recently this week at a conference in New York. The bank’s mortgage division is his only unprofitable business, reporting a $25.3 billion pretax loss in the first half of this year.

Larry DiRita, a Bank of America spokesman, said he couldn’t comment on whether the company planned to file a Countrywide bankruptcy. The bank “took great pains to preserve the separate identity of Countrywide,” DiRita said.

Separate Accounting

Those steps include using separate accounting systems and profit-and-loss statements for Countrywide units, according to a report prepared for Bank of New York Mellon Corp. (BK), the trustee for a group of investors who agreed to an $8.5 billion settlement in June with Bank of America over faulty loans.

Bankruptcy “makes absolute good sense if they can do that,” said David Felt, a Washington-based consultant and former deputy general counsel at the Federal Housing Finance Agency. The FHFA sued Bank of America and 16 other banks this month to recover losses on about $200 billion in mortgage-backed securities sold to Fannie Mae and Freddie Mae, the government- backed mortgage firms. Bank of America and its subsidiaries created more than a quarter of those bonds.

“Given the size of these lawsuits, the potential liability could exceed the net worth of the subsidiary,” Felt said. “They could say the claims far exceed the amount that we have and therefore we need a bankruptcy court to pick and choose between those creditors.”

Assets Available

Countrywide has $11 billion in assets that could be depleted through demands to repurchase defective mortgages, Jonathan Glionna of Barclays Plc said in an Aug. 31 note. After that, Bank of America may not have any obligation to pay claims from Countrywide’s creditors, he said.

Typically, a corporation that acquires another firm’s assets isn’t liable for the seller’s debts, unless the transaction is considered a de facto merger or there was fraud in the takeover, Robert M. Daines, a Stanford Law School professor, wrote in a legal opinion prepared for BNY Mellon, trustee for the Countrywide mortgage bonds. Daines analyzed whether Bank of America would have to pay bond investors if Countrywide couldn’t.

American International Group Inc. (AIG), the insurer that sued Bank of America last month to recoup more than $10 billion in losses on Countrywide mortgage bonds, argued that the bank is a legal successor to the unit. New York-based AIG cited a series of transactions by Bank of America in 2008 that “were structured in such a way as to leave Countrywide unable to satisfy its massive contingent liabilities.”

Just in Case

Firms in the $8.5 billion settlement handled by BNY Mellon didn’t take any chances. Their agreement specified that Bank of America was responsible for making good on the payment because they were concerned that Countrywide might be thrown into bankruptcy, said Bob Madden, a Gibbs & Bruns LLP partner representing institutional investors that sued the bank.

“Bank of America didn’t do this stuff, it was Countrywide, which they had the misfortune of acquiring,” Madden said in an interview. “Anybody who tells you they have a solid handle on whether Bank of America can be forced to pay Countrywide liabilities hasn’t looked very closely at the issue.”

The chances of a bankruptcy filing rise “every time another suit gets put on the pile,” Madden said. Mark Herr, a spokesman for New York-based AIG and Stefanie Johnson of the FHFA declined to comment.

Bankruptcy’s Backlash

Bankruptcy would be a “last-ditch option,” and possibly a costly one, because counterparties might become hesitant to buy the parent company’s debt or open trading lines with its Merrill Lynch unit, David Hendler, a CreditSights Inc. analyst, said in a Sept. 8 note. Credit-rating firms could downgrade Bank of America subsidiaries, which benefit from the implicit support of their corporate parent, he said. That would drive up the bank’s cost of borrowing.

“Most counterparties I speak to think this would be a very difficult option for Bank of America and unlikely to be sanctioned by regulators,” said Manal Mehta, a partner at Branch Hill Capital, a San Francisco-based hedge fund that has bet against the lender’s stock in the past. “The whole reason they would pursue the nuclear option of a Countrywide bankruptcy would be to put this behind them, but all you would be doing is opening up a Pandora’s box.”

Outstanding Debt

Countrywide has $6.53 billion of debt outstanding, including $2.81 billion of senior unsecured notes, $2.2 billion of preferred securities and $529 million of mortgage-backed bonds, Bloomberg data and Bank of America figures show. The unit’s $1 billion in 6.25 percent notes have plunged 9.2 cents since Aug. 1 to 97.1 cents on the dollar as of Sept. 13, according to Trace, the bond price reporting system of the Financial Industry Regulatory Authority.

The lender assumed about $16.6 billion in Countrywide debt in the November 2008 asset transaction, meaning that Bank of America must stand by those bonds as it does its other securities, according to an Aug. 12 note by Adam Cohen, founder of Covenant Review. His New York-based publication analyzes safeguards for bond investors.

Claimants without such a guarantee typically would have to persuade a judge that the parent should be liable for other obligations that it didn’t explicitly assume.

What Moynihan Said

Management’s public stance on a potential Countrywide bankruptcy has evolved. In November, responding to a question from Mayo — who had written a report that month entitled “Is a Countrywide Bankruptcy Possible?” — Moynihan said he didn’t “see any liability that would make us think differently about working through it in the way we’re working.”

Since then, damage from Countrywide has widened as U.S.- owned Fannie Mae and Freddie Mac stepped up demands that the bank repurchase soured loans and new suits emerge, including from AIG and the FHFA. Further, New York Attorney General Eric Schneiderman is seeking to scuttle the $8.5 billion deal, which may result in greater mortgage costs, Bank of America has said.

Last month, when Moynihan was asked during a conference call held by fund manager and bank shareholder Bruce Berkowitz if a Chapter 11 restructuring would be a “viable solution” for Countrywide, the CEO declined to say what he’d do.

“When you face liabilities like this, we thought of every possible thing we could,” Moynihan said, “but I don’t think I’d comment on any outcome.”

To contact the reporters on this story: Hugh Son in New York at hson1@bloomberg.net

To contact the editor responsible for this story: Rick Green in New York at rgreen18@bloomberg.net.

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Bank of America found in violation of whistle-blower law

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Piggybankblog posted on 09/14/11

Picture posted by piggybankblog

Cross linked story with bizjournals.com

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The U.S. Department of Labor says Bank of America Corp. .. violated the whistleblower-protection provisions of the Sarbanes-Oxley Act for improperly firing an employee who was reporting mortgage fraud.

The department has ordered the Charlotte-based bank(NYSE:BAC) to reinstate and pay the employee $930,000. The figures includes back wages, interest, compensatory damages and attorney fees.

The findings follow an investigation by the Justice Department’s Occupational Safety and Health Administration, which was prompted by a complaint from the Los Angeles-area employee.

“It’s clear from our investigation that Bank of America used illegal retaliatory tactics against this employee,” says OSHA Assistant Secretary David Michaels. “This employee showed great courage reporting potential fraud and standing up for the rights of other employees to do the same.”

The employee worked for Countrywide Financial Corp., which merged with Bank of America in July 2008. OSHA says the employee led internal investigations that revealed “widespread and pervasive wire, mail and bank fraud” involving Countrywide employees. The employee alleged those who attempted to report fraud to Countrywide’s employee relations department suffered persistent retaliation. The employee was fired shortly after the merger.

“Whistleblowers play a vital role in ensuring the integrity of our financial system, as well as the safety of our food, air, water, workplaces and transportation systems,” Michaels adds. “This case highlights the importance of defending employees against retaliation when they try to protect the public from the consequences of an employer’s illegal activities.”

Bank of America can appeal the monetary damages within 30 days of receiving the findings.

Its intentions and reaction weren’t immediately available.

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Huge Surge in Bank of America Foreclosures

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Piggybankblog posted 09/14/11

Picture posted by piggybankblog

Cross linked story with cnbc.com

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Bank of America is ramping up its foreclosure processing, sending out far more notices of default to borrowers in August than in previous months, well over 200 percent more month-to-month.

A notice of default is the first stage of the foreclosure process in non-judicial foreclosures states, that is, where foreclosures do not go before a judge.

The notice of default is usually sent when a borrower is 90 days or more overdue in payments, but that timeline has been extended significantly during this housing crisis, due to the so-called “robo-signing” processing scandal and the sheer volume of troubled loans.

Mortgage and housing analyst and strategist Mark Hanson alerted me to unusually high legal default filing activity, and his research points to Bank of America [ BAC 7.02 +0.02 (+0.29%) ] as the primary driver. I contacted a Bank of America spokesman, who responded:

“It appears the numbers you noted to me this afternoon generally track with our own numbers for key categories. It should be noted it’s driven more in key states like California and Nevada than overall, and certainly the progress we’re seeing is limited to non-judicial states. Judicial states continue to move very slowly, with key states like New Jersey only beginning to start processing foreclosures again this month.”

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Bank Of America Job Cuts Fail To Address Looming Legal Costs, Experts Say

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Piggybankblog posted 09/13/11

Piggybankblog posted picture

Cross linked with Huffington Post


NEW YORK — Bank of America’s announcement that it plans to shed 30,000 jobs doesn’t address the bank’s most pressing concerns, experts said Monday.

The job cuts come as part of an initiative known as Project New BAC, the first phase of which aims to save $5 billion in annual costs by 2014, the bank announced Monday. But shareholders have been preoccupied in recent months with something other than overhead costs — namely, the lawsuits from investors and government regulators that potentially threaten the bank with billions in losses. The company’s stock price has fallen about 50 percent this year as speculation has swirled that it doesn’t have enough capital to defend against losses, despite the bank’s persistent statements to the contrary.

But experts say Project New BAC, which also included a shake-up of top management, doesn’t address these legal concerns — and say it may be for naught.

“What Bank of America should be doing is spending all their energy cleaning up legacy liabilities,” said Manal Mehta, a partner at the San Francisco-based hedge fund Branch Hill Capital. “At this point, whatever progress they make in streamlining the company could easily be overshadowed by the loss of a critical legal ruling.”

The layoffs and other cost-cutting measures, Mehta said, may turn out to be “pointless.”

Bank of America spokesman Jerry Dubrowski objected to that characterization, saying the issue of legal liabilities shouldn’t be part of an assessment of the effort to cut costs.

“If anyone is trying to connect Project New BAC to litigation, they are missing the point. This isn’t about that,” Dubrowski said. “This is about making the company a simpler company, a more efficient company and ultimately a more profitable company.”

The bank has been plagued over the past year by lawsuits largely stemming from its 2008 acquisition of Countrywide Financial, the subprime mortgage lender that sold loans investors say didn’t meet basic standards. Such legal costs turned what would have been a profit into a record $8.8 billion loss during the second quarter of this year, as the bank set aside money to settle claims.

And the legal woes aren’t over. After the bank announced it had struck a deal for an $8.5 billion settlement with investors this summer, New York Attorney General Eric Schneiderman moved to block the settlement, saying another bank involved in the mortgage transactions had behaved improperly. Another state attorney general, a group of investors and a federal regulator also lodged complaints.

Bank of America, the nation’s biggest bank by assets, is also in talks with all 50 state attorneys general and a host of federal agencies to resolve allegations that it illegally foreclosed on homeowners. The penalty being discussed for the group of big banks in those talks could be around $20 billion, The Huffington Post reported in June.

In August, the insurance company AIG sued Bank of America over losses on $28 billion of mortgage securities, seeking $10 billion. And early this month, the Federal Housing Finance Agency sued the bank on behalf of the mortgage giants Fannie Mae and Freddie Mac, seeking compensation on tens of billions in mortgage investments that went sour.

Bank of America chief executive Brian Moynihan spoke about legal threats during a conference with investors Monday in New York.

“It wasn’t unexpected that people would intervene,” he said of the $8.5 billion deal that was held up this summer. “We will put this settlement through the court systems. As we told you back when we made the settlement in June, that settlement will take 12 to 18 months from that time frame to get final.”

But the chief’s words, and the bank’s subsequent statement about Project New BAC, drew criticism from some finance professionals.

“The money he’s talking about saving wouldn’t even pay the lawyers,” said Christopher Whalen, managing director of the financial research firm Institutional Risk Analytics.

In a report from IRA, Whalen argued Monday that Bank of America must be restructured in order to resolve the legal claims. The parent company should be placed in bankruptcy, wiping out shareholders and replacing them with bondholders, he added in an interview.

“No amount of layoffs or other cost-savings by the management of BAC will resolve the crisis of confidence affecting the bank,” Whalen wrote in the confidential report, referring to Bank of America by its stock ticker symbol.

Project New BAC aims at “delivering long-term value for shareholders,” the bank said in its Monday release. The company has also been selling assets this year, earning several billions on those transactions.

Job cuts are set to happen over “the next few years,” the bank said. The cuts represent more than 10 percent of its total workforce as of the end of June, according to a recent filing with the Securities and Exchange Commission.

Bank of America’s declaration that it would cut 30,000 jobs was the biggest single workforce reduction announcement by a U.S.-based employer so far this year, according to a Monday report from the consulting firm Challenger, Gray & Christmas.

It dwarfs the nearly 11,000 job cuts announced by the Borders bookstore in July, and it’s the largest planned cut since the U.S. Postal Service announced 30,000 cuts last year, Challenger said.

But it may not be enough to give investors faith in the bank. Bank of America shares hardly budged after Moynihan’s conference Monday morning, and then slumped downward in the afternoon as the Standard & Poor’s 500 Index declined. The stock ended the day 1 percent above Friday’s close.

This type of cost-cutting is fundamentally misguided, said Amar Bhide, a professor of international business at the Fletcher School of Law and Diplomacy at Tufts University. It addresses only known costs, Bhide said.

“The only costs you’re taking into account are the upfront costs, not the costs of things going bad,” he said. “In finance, the costs of things going bad swamp the upfront costs.”

Other news stories today: click here

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Bank of America plans deep job cuts

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Piggybankblog posted on 09/12/11

Piggybankblog posted picture

Cross linked story with Ottawa Citizen

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Bank of America, facing a wave of mortgage-related lawsuits, plans layoffs.

Photograph by: Lucy Nicholson, Reuters

Bank of America Corp. said it is cutting 30,000 jobs in the coming years as it looks to slash annual expenses by $5 billion, but investors were disappointed in the scant new detail the bank provided about its plans.

The bank’s chief executive, Brian Moynihan, said Bank of America is focusing for now on cutting costs in consumer banking and is taking steps like combining data centres to reach its target. Many of the job cuts will come from attrition and eliminating positions that are open now.

Bank of America’s shares have lost more than half their value this year, as mortgage litigation and a weakening economy threatened to sap the bank’s profits for years.

Media reports last week said the bank could cut as many as 40,000 jobs, and many investors had hoped the bank would announce a dramatic turnaround plan Monday to show how it is addressing its difficulties.

The Moynihan speech “was pretty underwhelming. They need to address the bigger issues the bank faces,” said Jason Ware, equity analyst at Salt Lake City-based Albion Financial Group.

Moynihan was speaking at a Barclays Capital financial services conference in New York, and the bank announced the 30,000 layoff figure in a separate statement later Monday morning.

Bank of America is in the middle of a broad cost-cutting initiative known as New BAC after the company’s stock symbol. The first phase aims to reduce expenses by $5 billion by 2014.

The bank is targeting an expense-to-revenue ratio to 55 per cent, compared with the first quarter when it was about 57 per cent.

It is cutting roughly $73 billion in annual expenses, excluding interest expenses. The next phase of cost cutting will focus on corporate and institutional businesses, like commercial lending.

Bank of America built itself through acquisitions over decades and, according to analysts, has not properly integrated systems or closed unnecessary branches. The bank had 5,700 branches nationwide and 287,000 employees as of June 30.

Bank of America has about 50 senior employees reviewing some 150,000 ideas for cutting costs, Moynihan said.

The bank’s talk of cost cuts came as U.S. President Barack Obama unveiled a plan to boost employment amid the struggling economy.

Bank of America shares were down 2 cents at $6.96 Monday afternoon on the New York Stock Exchange.

Bank of America shares have lost nearly half their value this year amid rising fears the bank will need to sell more shares to boost capital levels.

By many estimates, the bank will need to raise about $50 billion in coming years to meet new global capital requirements, a level the bank says it can reach through earnings and asset sales.

Investors fear mortgage settlements could boost the bank’s capital requirements, and that any stock offering would further dilute shareholder equity. The bank’s share count has risen from 4 billion in 2007, before the financial crisis peaked, to more than 10 billion this year.

The bank’s share price decline was temporarily arrested in late August by a $5 billion investment from billionaire Warren Buffett, who purchased preferred stock and warrants to buy 700 million common shares over the next decade.

The initial news of the Buffett investment sent Bank of America shares soaring more than 20 per cent, but they have since retreated to levels seen before the investment.

At the Barclays conference, Moynihan said the bank was not required by regulators to seek outside capital. He also said the Buffett deal was “absolutely the right thing” for the bank to do.

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BofA to cut at least 40,000 jobs

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Piggybankblog posted 09/12/11

Picture posted by Piggybankblog

Cross linked story with New York Times

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The layoffs reflect Bank of America’s deepening woes and are likely to take a heavy toll on its California operations.

By Walter Hamilton and E. Scott Reckard, Los Angeles Times

September 10, 2011

Bank of America Corp. is preparing to slash 40,000 or more jobs nationwide, a dramatic retrenchment that reflects the deepening woes of the country’s largest bank and the magnitude of the U.S. economic slowdown.

The layoffs will come mainly from the BofA’s sprawling consumer-banking operations, which will take a heavy toll on branches, loan centers and other offices throughout California.

Bank of America has 45,000 employees in the state, about 1 in 6 of its nearly 300,000-person workforce, and is expected to roll out the job cuts over the next several years. The company, which for years was based in San Francisco and maintains its huge mortgage unit in Calabasas, also is in the process of closing 10% of its branches nationwide.

California has the highest concentration of BofA branches in the U.S. with 956 throughout the state, though it has been losing ground in recent years to rivals like Wells Fargo & Co. and JPMorgan Chase & Co.

The layoffs are another blow to California, with its battered economy and nearly 12% unemployment rate. From tellers to middle managers, laid-off Bank of America employees are likely to have a tough time finding new jobs.

“We don’t need to lose any jobs in this environment, whether in financial services or anywhere else,” said Esmael Adibi, a Chapman University economist.

The details of the cutbacks were not officially announced, but the information was disclosed by three Bank of America executives who have been briefed on the plan but were not authorized to speak publicly. Brian Moynihan, Bank of America’s beleaguered chief executive, is expected to unveil details at an investor conference Monday in New York.

Investors sent shares of the BofA down 3.1% to $6.98 on Friday on a day banks led the overall market sharply lower on more worries about global economies falling into a recession. The Dow Jones industrial average fell 303.68, or 2.7%, to 10,992.13

Executives met at the bank’s Charlotte, N.C., headquarters Thursday and Friday to finalize the plan, which has been under discussion for months. Moynihan is grappling with how to wring more profit from the bank’s core customer base, which includes about 58 million consumer and small-business accounts.

At least one analyst said the cutbacks could weigh heavily on BofA’s millions of Southern California customers, who would have to deal with fewer branches and longer lines for tellers.

“You’re definitely going to see decreased service levels for consumers,” said Christopher Whalen, a bank analyst at Institutional Risk Analytics. “They’re talking about either closing branches or reducing the head count in the branches.”

Moynihan hopes to fashion a smaller but more focused company that can withstand the fallout from its disastrous 2008 takeover of mortgage lender Countrywide Financial Corp. in Calabasas. The home-lending unit has run up $30 billion in losses, and faces billions more in potential liability from a barrage of mortgage-related lawsuits.

Federal regulators and private investors allege that Countrywide misled them about the quality of loans and bonds tied to high-risk mortgages bought during the housing boom. Earlier this month, federal regulators sued Bank of America and 16 rivals, contending that the banks sold loans to housing goliaths Fannie Mae and Freddie Mac under false pretenses.

Bank of America’s retrenchment is also being driven by the slack U.S. economy and darkening outlook for the banking industry. Intensifying worries about its prospects have cut Bank of America’s stock price by more than half since mid-January, a far larger hit than its peers have suffered.

“The financial-services industry as a whole is going to shrink,” said Nancy Bush, a banking analyst and contributing editor at research firm SNL Financial. “We don’t need as many loans, as many credit cards, as many mortgages as we did in the past two decades.”

The flailing economy has struck particularly hard at Bank of America, which critics say has been beset by poor management and a flawed growth strategy of rapid-fire acquisitions of other companies. To overcome its woes, BofA executives have worked for much of the past year on the ambitious restructuring known as Project New BAC, a reference to the ticker symbol for the company’s stock.

Moynihan has made a number of bold steps in recent weeks, including signing on billionaire Warren Buffett as a major shareholder. This week he ousted two senior executives, including Sallie Krawcheck, one of the highest-ranking women on Wall Street.

The first phase of New BAC is designed to streamline the consumer businesses, including home loans, credit cards and wealth management. It also will make cuts in the corporate support staff, such as legal, marketing, human relations and finance employees.

The bank previously had announced another 6,000 job cuts this year and has closed, sold or put on the auction block former Countrywide divisions that made loans through independent brokers, bought loans from smaller lenders and sold specialty insurance.

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Charleston-raised Krawcheck out at Bank of America

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Piggybankblog posted on 09/08/11

Picture posted by Piggybankblog

Cross linked story with postandcourier.com

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Charleston-raised Sallie Krawcheck is leaving her high-profile role at embattled Bank of America Corp. as part of a top-level management shakeup.

One other key officer will leave the financial giant and two others are being promoted to share the chief operating officer role.

The moves, announced Tuesday night, are the latest effort by Brian Moynihan, the bank’s CEO since early 2010, to turn around a company that was once an industry stalwart but is still struggling under the weight of toxic mortgage loans.

He took over the bank after predecessor Ken Lewis stepped down amid controversy over his purchase of Merrill Lynch.

Krawcheck had been head of global wealth and investment management and oversaw the Merrill Lynch business. The Porter-Gaud graduate was hired in 2009, toward the end of Lewis’ tenure.

Analysts said it didn’t appear that Krawcheck or Joe Price, who had been president of the company’s consumer bank, were dismissed for performance. Krawcheck’s division, which included private banking and the financial advisers who focused on serving wealthy individuals, increased its profit by 54 percent in the second quarter, to $506 million.

Moynihan said in a statement that he wished Krawcheck and Price well, and he portrayed their departures as a means of removing a layer of management in order to cut costs. “De-layering and simplifying at the scale in which we operate requires difficult decisions,” he said.

Moynihan also described the moves as a way to streamline the bank’s operating units to serve its key customer groups: individuals, companies and institutional investors.

David Darnell, a Bank of America veteran, will become co-chief operating officer. He will share the newly created position with Tom Montag, who joined the bank when it bought his employer, Merrill Lynch, in early 2009.

Krawcheck left Citigroup in 2008 and joined Charlotte-based Bank of America in August 2009 as part of a previous executive reorganization. She was tapped to take over the role that previously had been held by Moynihan, who would go on to become CEO.

Born in New Orleans and raised in Charleston, Krawcheck was a presidential scholar and track star at Porter-Gaud. Krawcheck was a respected Wall Street analyst before joining Citigroup in 2002. She was promoted to chief financial officer of the banking giant in 2004.

John Wright writes: Looks like Warren Buffett is cleaning house. When is Brian Moynihan’s last day of work?

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Krawcheck and Price Out in BofA Shakeup

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Piggybankblog Posted 09/07/11

Picture posted by Piggybankblog

Cross linked story with fins.com

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Bank of America Corp. Chief Executive Brian Moynihan shook up his management team on Tuesday, ousting wealth-management head Sallie Krawcheck and consumer-banking head Joseph Price.

The Charlotte, N.C.-based company installed David Darnell and Thomas Montag as co-chief operating officers.

Darnell will run the businesses that serve consumers, including deposit, card, mortgages, wealth management and small business. Montag will oversee the areas that serve companies and institutional investors such as investment banking and trading.

The moves represent the most dramatic steps yet taken by Moynihan to put his own stamp on the nation’s largest bank by assets. Both Price and Krawcheck were installed by Moynihan’s predecessor, Kenneth Lewis.

As part of the shakeup, Moynihan also has demoted Barbara Desoer, the former mortgage chief. She will report to Darnell as part of the new lineup.

 

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California Attorney General Kamala Harris “Acted as the Pawn of America’s Most Powerful Banks” While Violating Homeowners’ Civil Rights, Lawsuits Allege

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Press Release

BREAKING NEWS!

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Piggybankblog posted 09/06/11

LOS ANGELES, Sept. 6, 2011 /PRNewswire/ — Hundreds of homeowners and former homeowners filed lawsuits in three states alleging that California Attorney General Kamala Harris “acted as the pawn of America’s most powerful banks” when she seized their legal files and denied them the right to the legal counsel of their choice.

Suits were filed Tuesday in federal courts in New York, Florida and California, according to Erikson M. Davis, an attorney involved in the actions. Davis said he expect homeowners to file against Harris in additional states.

The California lawsuit filed in U.S. District Court in Los Angeles said:

On August 17, 2011, Defendant Kamala D. Harris, Attorney General for Defendant State of California, grossly violated Plaintiffs’ civil rights by seizing Plaintiff’s legal files and denying Plaintiffs the right to the legal counsel of their choice. Defendant Harris did this under the cover of secrecy without any public airing of the facts, without proper court approval, and without allowing either Plaintiffs or their counsel or any court a chance to respond. Harris did so based on an inadequate investigation while citing demonstrably false accusations against Plaintiff Mitchell J. Stein, an attorney. And Harris did so at the behest of Bank of America, whose attorneys had been deeply alarmed by the substantive progress that attorney Stein has achieved in Plaintiffs’ mass joinder case against the bank.

Defendant Harris took this action while making the transparently false claim that she was protecting “consumers.” Plaintiffs herein are among the consumers she purports to be protecting and they hereby vigorously reject Harris’ jaded interpretation of “protection.” Plaintiffs’ desire is to continue to be represented by the LLP – and one of its partners Mr. Stein – and for him to continue to unravel the worst systematic fraud committed by any financial institution in United States history. . . .

Rather than protecting consumers, Defendant Harris’ actions primarily benefitted Bank of America, which has sought repeatedly to discredit attorney Stein ever since he filed the original lawsuit against Bank of America in 2009, a lawsuit that the attorney general herself described as the “granddaddy” of mass joinder bank cases,

Defendants’ lawsuit . . . claimed, among other things, that attorney Stein had participated in illegal and unethical soliciting of clients through mail advertising. On February 3, 2011, Bank of America lawyer Keith Klein went into Superior Court with the very same allegations and was told that the bank had not presented a legitimate complaint against attorney Stein. Bank of America then took those same claims to Defendant Harris and arranged for her to do their bidding, . . .

Defendant Harris disingenuously stated that “her office takes no position as to the legal merits of any claims asserted in the mass joinder lawsuits filed by defendants.” Yet she clearly has taken a position by seeking to remove the single most effective lawyer in prosecuting those cases.

Also to the benefit of Bank of America, Harris has chosen to support less able competitors to pursue the mass joinder claims against banks. In fact, the primary evidence cited by Harris against attorney Mr. Stein was provided by an affidavit from attorneys at a competitor law firm, Brookstone Law Group. . . Further, Harris and other Defendants approved and provided cover for a blatantly illegal marketing mailer . . .[which] states unequivocally that anybody signing up with Brookstone Law will receive $75,000 from a “class action settlement.” The facts are that such a $75,000 “class action settlement” does not exist and is not close to existing. . . .

Plaintiffs were neither induced nor deceived in any fashion before asking Mr. Stein to represent them. To the contrary, had Harris taken the time to contact Stein’s clients, she might have learned that many of Mr. Stein’s clients were referred not by advertising but by the offices of California Senator Dianne Feinstein or the Department of Homeland Security. . . .

Mr. Stein was the first attorney to file a lawsuit against the Bank of America – in the California Bank of America litigation — laying out a massive fraud against homeowners that has since been validated in reports from the Senate Permanent Subcommittee on Investigations, the Government Accountability Office and the Federal Reserve and in a series of lawsuits by AIG, attorneys general and – this week — the Federal Housing Finance Agency. All of these subsequent reports and lawsuits were built on attorney Stein’s foundation. . . .

The simple truth is this: Mitchell Stein and his legal associates, who have built their case load not through fraudulent mailings but through tens of thousands of hours of detective work, are Bank of America’s biggest nightmare. And while Defendant Harris claims to be on the side of the California homeowner, she is effectively trying to provide Bank of America, one of the nation’s worst corporate citizens in history who is now being sued again by a very recent federal lawsuit, a “get out of jail free card” by silencing attorney Stein. . . .

Defendant Harris has acted as the pawn of America’s most powerful banks, rather than in the interests of California homeowners. Plaintiffs refuse to be made victims of Harris’ poor judgment. . . .

Since Defendants unlawfully shut down the LLP by duping a superior court into believing that it was only shutting down Mitchell Stein’s law practice, the LLP’s clients have not been given any information about their lawsuits from the attorney general or by Defendant California State Bar, which has reportedly taken over their cases nationwide. Many Plaintiffs are fearful that Defendant Harris has shared their files with the very banks they are suing. Some have been told they cannot get their personal legal files for at least three years. By that time, if the evidence of fraud is correct, their homes will be long gone, Bank of America will no longer exist and they will have been denied their day in court.

COURTS:

U.S. District Court for the Southern District of New York: Case 11CIV 6230.

U.S. District Court for the Southern District of Florida: Case 0:11-CV-61967-WJZ

U.S. District Court for the Central District of California: Case LACV-117303-CBM(MRWx)

Press Release Source: Erikson M. Davis On Tuesday September 6, 2011, 7:06 pm EDT

 

Download LA Complaint Filed: Click here

 

Download FL Complaint Filed: Click here

 

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Man sues bank for $1,784 billion, trillion

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Piggybankblog posted on 09/05/11

Piggybankblog posted picture

Cross linked story with abc.net

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Dalton Chiscolm is unhappy about the customer service at his bank – really, really unhappy.

In August, Mr Chiscolm sued Bank of America, the largest US bank and its board, demanding that “$US1,784 billion, trillion” be deposited into his account the next day.

He also demanded an additional $US200,164,000, court papers show.

Attempts to reach Mr Chiscolm were unsuccessful and a Bank of America spokesman declined to comment.

“Incomprehensible,” US District Judge Denny Chin said in a brief order released in Manhattan federal court.

“He seems to be complaining that he placed a series of calls to the bank in New York and received inconsistent information from a ‘Spanish woman,’” the judge wrote.

“He apparently alleges that cheques have been rejected because of incomplete routing numbers.”

Judge Chin has experience with big numbers.

He is the judge who sentenced Bernard Madoff to a 150-year prison sentence for what the government called a $US65 billion Ponzi scheme.

Bank of America Corp faces real legal problems, including New York Attorney-General Andrew Cuomo’s threat to sue its chief executive and a judge’s embarrassing rejection of a settlement with the US Securities and Exchange Commission.

Yet the money Mr Chiscolm wants could dwarf all the bank’s other problems.

It is larger than a sextillion dollars, or a 1 followed by 21 zeros. Mr Chiscolm’s request is equivalent 1 followed by 22 digits.

The sum also dwarfs the world’s 2008 gross domestic product of $US60 trillion, as estimated by the World Bank.

“These are the kind of numbers you deal with only on a cosmic scale,” said Sylvain Cappell, New York University’s Silver Professor at the Courant Institute for Mathematical Sciences.

“If he thinks Bank of America has branches on every planet in the cosmos, then it might start to make some sense.”

Judge Chin gave Mr Chiscolm until October 23 to better explain the basis for his claims, or else see his complaint dismissed.

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Full-Blown Civil War Erupts On Wall Street: As Reality Finally Hits The Financial Elite, They Start Turning On Each Other

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Piggybankblog posted 09/04/11

Cross linked story ampedstatus.org

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Finally, after trillions in fraudulent activity, trillions in bailouts, trillions in printed money, billions in political bribing and billions in bonuses, the criminal cartel members on Wall Street are beginning to get what they deserve. As the Eurozone is coming apart at the seams and as the US economy grinds to a halt, the financial elite are starting to turn on each other. The lawsuits are piling up fast. Here’s an extensive roundup:

As I reported last week:

Collapse Roundup #5: Goliath On The Ropes, Big Banks Getting Hit Hard, It’s A “Bloodbath” As Wall Street’s Crimes Blow Up In Their Face Time to put your Big Bank shorts on! Get ready for a run… The chickens are coming home to roost… The Global Banking Cartel’s crimes are being exposed left & right… Prepare for Shock & Awe…

Well, well… here’s your Shock & Awe:

First up, this shockingly huge $196 billion lawsuit just filed against 17 major banks on behalf of Fannie Mae and Freddie Mac. Bank of America is severely exposed in this lawsuit. As the parent company of Countrywide and Merrill Lynch they are on the hook for $57.4 billion. JP Morgan is next in the line of fire with $33 billion. And many death spiraling European banks are facing billions in losses as well.

FHA Files a $196 Billion Lawsuit Against 17 Banks

The Federal Housing Finance Agency (FHFA), as conservator for Fannie Mae and Freddie Mac (the Enterprises), today filed lawsuits against 17 financial institutions, certain of their officers and various unaffiliated lead underwriters. The suits allege violations of federal securities laws and common law in the sale of residential private-label mortgage-backed securities (PLS) to the Enterprises.

Complaints have been filed against the following lead defendants, in alphabetical order:

1. Ally Financial Inc. f/k/a GMAC, LLC – $6 billion

2. Bank of America Corporation – $6 billion

3. Barclays Bank PLC – $4.9 billion

4. Citigroup, Inc. – $3.5 billion

5. Countrywide Financial Corporation -$26.6 billion

6. Credit Suisse Holdings (USA), Inc. – $14.1 billion

7. Deutsche Bank AG – $14.2 billion

8. First Horizon National Corporation – $883 million

9. General Electric Company – $549 million

10. Goldman Sachs & Co. – $11.1 billion

11. HSBC North America Holdings, Inc. – $6.2 billion

12. JPMorgan Chase & Co. – $33 billion

13. Merrill Lynch & Co. / First Franklin Financial Corp. – $24.8 billion

14. Morgan Stanley – $10.6 billion

15. Nomura Holding America Inc. – $2 billion

16. The Royal Bank of Scotland Group PLC – $30.4 billion

17. Société Générale – $1.3 billion

These complaints were filed in federal or state court in New York or the federal court in Connecticut. The complaints seek damages and civil penalties under the Securities Act of 1933, similar in content to the complaint FHFA filed against UBS Americas, Inc. on July 27, 2011. In addition, each complaint seeks compensatory damages for negligent misrepresentation. Certain complaints also allege state securities law violations or common law fraud. [read full FHFA release]

You can read the suits filed against each individual bank here. For some more information read Bloomberg: BofA, JPMorgan Among 17 Banks Sued by U.S. for $196 Billion. Noticeably absent from the list of companies being sued is Wells Fargo.

And the suits just keep coming…

BofA sued over $1.75 billion Countrywide mortgage pool

Bank of America Corp (BAC.N) was sued by the trustee of a $1.75 billion mortgage pool, which seeks to force the bank to buy back the underlying loans because of alleged misrepresentations in how they were made. The lawsuit by the banking unit of US Bancorp – read more

 

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Wikileaks Releases Entire 65 Gigabyte Uncensored Cablegate Archive (With Or Without Bank Of America Disclosure)

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Piggyankblog posted 09/03/11

Piggybankblog posted picture

Cross linked story with zerohedge.com

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Looks like Wikileaks is not waiting to see how litigation with the Guardian turns out and is set on doing all it can to bring the world to the brink of, what’s that word again, oh yes, war. And a free Zero Hedge hat to the first guy or gal (the latter gets a choice of ZH thong instead) to discover whatever it is that Wiki may or may not have had on Bank of America. Something tells us not many people will be sleeping at the Department of State tonight.

From a just released tweet by @WikiLeaks

Full, unencrypted, Cablegate2 archive:

Cut and paste the following URL into a “magnet” compatible Bittorrent download client:

magnet:?xt=urn:btih:AUHKVFRXREM7DCVK54MBDBGHQNPHLG5J

Or for older Bittorrent clients:

http://88.80.16.63/torrent/cablegate/cablegate-201108300212.7z.torrent

The files are compressed with “7zip”(http://www.7-zip.org/) and unpack to 60Gb.

If you have 60Gb or more of web-server space, unpack the material and tweet a link to it, prefixed by #wlmir

IF you downlaoded the encrypted file we announced previously, you don’t have to download the unencrypted torrent Instead, decrypt the encrypted file, name it cablegate-201108300212.7z and put it into your torrent client’s download directory. Then tell your client to add the torrent at http://88.80.16.63/torrent/cablegate/cablegate-201108300212.7z.torrent and it will be automatically seeded.

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My names is John Wright AND I AM FIGHTING BACK!

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Bank Suits Over Mortgages Are Filed

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Piggybankblog posted on 09/02/11

Picture posted by piggybankblog

Cross linked with New York Times

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Federal regulators filed suit on Friday against more than a dozen leading banks, seeking billions in compensation for huge losses suffered by Fannie Mae and Freddie Mac on mortgage-backed securities the banks assembled during the housing boom.

Bank of America, Goldman Sachs, JPMorgan Chase, Deutsche Bank, Citigroup, Barclays and Morgan Stanley are among the defendants in the suits, brought by the Federal Housing Finance Agency, which oversees Fannie and Freddie.

The agency’s plan to file the suits was reported on Thursday night by The New York Times.

In the suit filed against Bank of America, the agency alleges that bank sold securities that “contained materially false or misleading statements and omissions.” The company and several individual bankers named as defendants “falsely represented that the underlying mortgage loans complied with certain underwriting guidelines and standards, including representations that significantly overstated the ability of the borrowers to repay their mortgage loans,” the suit says. Fannie Mae and Freddie Mac bought $6 billion in securities from the bank between September 2005 and November 2007.

The legal action opens a broad front in a rapidly growing attempt to force the banks to pay tens of billions of dollars for helping stoke the housing bubble. It was the collapse of the housing market that helped prompt the financial crisis in 2008, and the hangover is still being felt in the housing sector as well as the broader economy.

The litigation also marks a more intense effort by the federal government to go after the financial services industry for its alleged mortgage misdeeds. The Obama administration as well as regulators like the Federal Reserve have been criticized for going too easy on the banks, which benefited from a $700 billion bailout package shortly after the collapse of Lehman Brothers in the fall of 2008.

Much of that money has been repaid by the banks — but the rescue of the mortgage giants Fannie and Freddie has already cost taxpayers $153 billion, and the federal government estimates the effort could cost $363 billion through 2013.

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U.S. to sue big banks over mortgage securities: report

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Piggybankblog posted on 09/02/11

Piggybankblog posted picture

Cross linked story wih yahoo news

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WASHINGTON (Reuters) – The agency that oversees mortgage markets is preparing to file suit against more than a dozen big banks, accusing them of misrepresenting the quality of mortgages they packaged and sold during the housing bubble, The New York Times reported on Thursday.

The Federal Housing Finance Agency, which oversees mortgage giants Fannie Mae and Freddie Mac, is expected to file suit against Bank of America, JPMorgan Chase, Goldman Sachs and Deutsche Bank, among other banks, the Times reported, citing three unidentified individuals briefed on the matter.

The suits stem from subpoenas the finance agency issued to banks last year. They could be filed as early as Friday, the Times said, but if not filed Friday it said the suits would come on Tuesday.

The government will argue the banks, which pooled the mortgages and sold them as securities to investors, failed to perform due diligence required under securities law and missed evidence that borrowers’ incomes were falsified or inflated, the Times reported.

Fannie Mae and Freddie Mac lost more than $30 billion, due partly to their purchases of mortgage-backed securities, when the housing bubble burst in late 2008. Those losses were covered mostly with taxpayers’ money.

The agency filed suit against UBS in July, seeking to recover at least $900 million for taxpayers, and the individuals told the Times the new suits would be similar in scope.

A spokesman for the Federal Housing Finance Agency was not immediately available for comment.

The Times said Bank of America, JP Morgan and Goldman Sachs all declined comment. A Deutsche Bank spokesman told the Times, “We can’t comment on a suit that we haven’t seen and hasn’t been filed yet.”

The practice of subprime lending, wherein mortgage brokers lowered their standards to entice homebuyers to take out large mortgages to buy more expensive homes than they could afford, was a root cause of the mortgage market implosion.

News of the suit could have a negative impact on stocks of the banks in question on Friday. JPMorgan Chase, Bank of America and Goldman Sachs are traded on the New York Stock Exchange, while Deutsche Bank is traded on the German exchange.

S&P 500 stocks index futures were trading down 0.6 percent in Asia. U.S. Treasury futures also ticked higher..

The Times report said investors fear that if banks are forced to pay out billions for mortgages that defaulted, the suit could sap earnings for years and contribute to further losses across the financial services industry.

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BofA May Sell, Shut Correspondent Mortgage Unit as It Seeks to Cut Losses

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Piggybankblog posted 09/01/11

Piggybankblog posted picture

Cross linked story with Bloomberg.com

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Bank of America Corp. (BAC), the largest U.S. lender, plans to sell or shut its correspondent-mortgage unit as Chief Executive Officer Brian T. Moynihan seeks to stop losses on home loans.

“We intend to sell the correspondent-mortgage lending division or, if a suitable deal is not identified, we will consider other options,” including winding down the business, Dan Frahm, a company spokesman, said in an e-mail today. For now, those operations “continue business as usual,” he wrote.

Moynihan, 51, is selling assets and overhauling mortgage operations, which had a $14.5 billion loss in the second quarter as investors demanded the firm buy back soured loans. The Charlotte, North Carolina-based bank split the division earlier this year, separating distressed loans from performing mortgages and new lending.

“They’ve gotten the picture of what they need to do,” said Marty Mosby, a Nashville, Tennessee-based analyst at Guggenheim Securities LLC, which manages more than $100 billion, including Bank of America shares. “They’re following that prescription pretty aggressively at this point, which is a positive sign that management has finally gotten their hands around what they need to do here.”

Bank of America is in talks with a potential buyer for the correspondent business, Frahm said, declining to identify the party.

Correspondent loans are typically originated by third-party firms, which then sell them to larger lenders, such as Bank of America. If the loans sour, buyers can ask originators to repurchase the debt.

Outstanding Claims

Bank of America said in a regulatory filing this month that correspondent loans accounted for 27 percent of outstanding claims as of June 30. Many of the correspondent firms that had sold loans to Bank of America during the housing boom between 2004 and 2008 are no longer in business, leaving the company unable to recover funds, it said.

Hundreds of mortgage banks and brokers collapsed in 2007 and 2008, including Melville, New York-based American Home Mortgage Investment Corp. (AHMIQ) and Atlanta-based HomeBanc Corp.

About 1,400 employees run Bank of America’s correspondent operations, which are overseen by John Dixon, Frahm said. Dixon reports to Barbara Desoer, the firm’s head of home loans.

“There is no impact to this team at this time, and ultimate decisions will be determined as part of the potential sale process,” he said.

‘Very Close Look’

Bank of America said last month that changing capital rules were pushing it to take on fewer new contracts to oversee outstanding debt, a key part of the correspondent mortgage business in which closed loans are bought from the initial lenders and usually resold.

“We’re taking a very close look at the types of activities we’re originating and servicing, so on the front end, you’ll see actions where we look to scale back,” Chief Financial Officer Bruce Thompson said during a July 19 conference call.

Correspondent originations accounted for $21.8 billion, or 54 percent, of the bank’s mortgage lending in the second quarter of 2011, Frahm said. This compared to $27.4 billion, or 46 percent, in the first quarter.

Bank of America climbed 11 cents, or 1.4 percent, to $8.22 in New York Stock Exchange composite trading as of 2:07 p.m. The shares have slid 38 percent this year, compared with a 23 percent drop in the 24-company KBW Bank Index. (BKX)

Moynihan has booked about $30 billion in housing-related charges since replacing Kenneth D. Lewis as CEO at the start of 2010, mostly because of the 2008 takeover of subprime lender Countrywide Financial Corp.

The company agreed this week to sell about half its stake in China Construction Bank Corp. for a $3.3 billion gain as it seeks to bolster capital ahead of new international standards and focus on core clients. The U.S. lender has also agreed to sell its Canadian credit-card unit, First Republic Bank and holdings in BlackRock Inc.

To contact the reporters on this story: Donal Griffin in New York at dgriffin10@bloomberg.net; Jody Shenn in New York at jshenn@bloomberg.net

To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net

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Nevada Says Bank Broke Mortgage Settlement

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Piggybankblog posted 08/31/11

Piggybankblog posted picture

Cross linked with New York Times

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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.

But foreclosure problems mounted in Nevada, where Countrywide originated 262,622 loans, and complaints about the bank’s loan servicing practices began flooding into Ms. Masto’s office shortly after the settlement was struck. She found that Bank of America had “materially and almost immediately violated” the terms of the settlement, according to the complaint

Ms. Masto declined to comment beyond the court filing.

Jumana Bauwens, a spokeswoman for Bank of America, said the bank was reviewing Ms. Masto’s complaint. “We disagree that there has been any material breach of the consent decree and will continue to vigorously defend this action,” she said.

Ms. Masto’s request to terminate the 2008 deal could raise further questions about the extent of its liabilities arising from Countrywide’s lending practices and from the bank’s own loan servicing activities in the foreclosure crisis. The move by the Nevada attorney general could also imperil the already shaky negotiations over improper foreclosure practices being conducted by state attorneys general and the four largest banks, including Bank of America.

Those talks, which also involve federal officials, have stalled over the summer with disagreements over whether the deal would allow state regulators to bring future lawsuits against the institutions for questionable practices. Attorneys general who do not want to give up the right to file additional suits against the banks — including Ms. Masto, Eric Schneiderman of New York and Beau Biden of Delaware — have declined to endorse a proposed settlement.

The breadth of the new Nevada complaint indicates that Bank of America’s problems extend throughout its mortgage operations, including origination, loan servicing and securitization. Nevada officials also found broad problems in the bank’s interactions with imperiled borrowers.

For example, the complaint says the bank advised credit reporting agencies that consumers were in default when they were not, and contends that Bank of America employees deceived borrowers about why their requests to modify loans were denied. In addition, it says, the bank falsely claimed that the actual owners of loans had refused to allow changes to their mortgages, and it incorrectly claimed that borrowers had failed to make payments on trial loan modifications when in fact they had. Bank of America also misled borrowers, the Nevada attorney general’s filing noted, by offering loan modifications with one set of terms only to come back with a substantially different deal.

Among the more troubling findings in the Nevada complaint is the contention by several Bank of America employees that the company imposed strict limits on the amount of time they could spend on the phone assisting troubled borrowers seeking help with their loans.

One worker said in a deposition cited in the complaint that employees were punished if they spent more than seven minutes or 10 minutes with a customer. Even though these limits allowed almost no time for assistance, Bank of America employees who did not curtail their conversations were reprimanded, this employee said.

The Nevada filing also maintains that Countrywide, which Bank of America acquired in 2008, did not deliver necessary loan documentation when it put together mortgage securities and sold them to investors during the boom. Under the typical pooling and servicing agreements struck between Countrywide and investors who bought the securities, the bank was required to endorse the mortgage note and deliver it to the trustee overseeing the pool. Countrywide failed to do so, the complaint notes.

These paperwork failures should have barred the bank from foreclosing on borrowers, the Nevada complaint says, but it went ahead nonetheless. This aspect of Ms. Masto’s complaint echoes a lawsuit filed in early August by Mr. Schneiderman, the New York attorney general, to block a settlement between Bank of New York and Bank of America covering 530 Countrywide mortgage pools. In that case, Mr. Schneiderman contends that Countrywide did not deposit loans into the mortgage pools as required and that the bank had no right to bring foreclosure actions against these borrowers.

Ms. Masto’s complaint asks that the court impose civil penalties on Bank of America and order it to cover the costs of caring for foreclosed properties borne by municipalities.

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Nevada AG questions Bank of America foreclosures, seeks to scuttle settlement

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Piggybankblog posted on 08/30/11

Piggybankblog posted picture

Cross linked vegasinc.com

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Nevada Attorney General Catherine Cortez Masto hit Bank of America with a new charge Tuesday: That it’s been foreclosing on homes it had no authority to foreclose on.

The allegations were made in an amended complaint in a lawsuit initially filed in December charging the banking giant had harmed struggling Nevada consumers by failing to help them modify their mortgages and had deceived some by leading them to believe their loans would be modified — but then foreclosed on them anyway.

Bank of America has denied those allegations.

The amended complaint, filed in U.S. District Court for Nevada Tuesday, charges that even after the bank was sued in December, it continued to harm by consumers.

“Bank of America’s misconduct in misrepresenting its mortgage modification program continues through the present and has been confirmed in interviews with consumers, former employees and other third parties and through review of relevant documents,” Tuesday’s complaint charged.

In Tuesday’s filing, Masto sought to revoke a 2009 settlement she reached with Bank of America over loan abuses involving its Countrywide Financial Corp. unit, charging the bank has breached the settlement terms.

For instance, the complaint says B of A increased Countrywide consumers’ interest rates and monthly payments, even though the settlement allows only modifications that decrease consumers’ interest rates.

The state also claims the bank required Countrywide borrowers to provide extensive documentation — including pay stubs, tax returns and sworn affidavits — to qualify for modifications, when a streamlined process was supposed to have been in place.

Bank of America on Tuesday denied allegations that it had violated the settlement, called a consent decree.

“While we are continuing to review the attorney general’s amendment, we disagree that there has been any material breach of the consent decree and will continue to vigorously defend this action. Bank of America believes that the best way to get the housing market going again in every state is a global settlement that addresses these issues fairly, comprehensively and with finality,” the bank’s statement said. “Bank of America leads all servicers with more than 148,000 permanent HAMP modifications completed since the program began for a total of more than 895,000 modifications through all available programs since January 2008.”

HAMP stands for Home Affordable Modification Program.

If the settlement is terminated, the state would continue with its initial Countrywide lawsuit charging predatory lending and fraud in originating, marketing and servicing mortgage loans.

Countrywide, for instance, was accused of failing to disclose that low teaser rates in loans would, after a short time, often more than double, leaving homeowners unable to make the new higher payment.

The new complaint asserts broad allegations that the bank’s loan modification process has been understaffed, riddled with technical problems and not oriented to consumers. Employees, for instance, were directed to spend no more than 7 to 10 minutes on average with each customer, not enough time to deal with questions or offer assistance, the state alleges.

“The second amended complaint alleges that Bank of America’s misconduct cuts across virtually every aspect of its operations — from originating to servicing and, all too often, to foreclosing on the loans and homes of Nevada consumers,” a statement from Masto’s office said.

“The state alleges that defendants’ deceptive practices have resulted in an explosion of delinquencies and unauthorized and unnecessary foreclosures in the state of Nevada, stripping homeowners of their assets (including those who do not have loans originated or serviced by defendants, but whose property values have fallen dramatically), dislocating families, blighting neighborhoods and deeply disrupting the state’s housing market,” the statement said.

Most startling in the amended complaint is a charge titled “Bank of America’s deceptions with regard to its authority to collect and foreclose.”

Citing rulings by the Nevada Supreme Court, the complaint says that for anyone to enforce a mortgage note in Nevada, the enforcer must have a properly assigned deed of trust and the note must have been either properly negotiated or validly transferred.

“Valid assignments are needed when a beneficiary of a deed of trust seeks to foreclose on a property,” the Nevada Supreme Court said in one of those rulings last month.

In the case of Countrywide, however, there is “mounting evidence that Countrywide failed to follow the steps required to transfer its notes into securitization trusts,” the amended complaint says.

Virtually all of the loans Countrywide originated were securitized — that is grouped into collateral pools and sold on Wall Street to investment trusts. In Nevada, Countrywide was a huge lender during the mid-2000s real estate boom, originating some 262,000 loans, the state says.

“Countrywide failed to ensure that these notes were properly assigned or endorsed. Second, Countrywide failed to deliver the original notes to the trusts, or provided notes with incorrect terms, missing riders or missing notary seals,” the amended complaint says.

Investigations and lawsuits around the country have found instances where these problems have resulted in improper foreclosure attempts, the amended complaint says.

“As a servicer, Bank of America and its subsidiaries and agents similarly sought to enforce mortgage notes in Nevada, engaged in collection activity in Nevada, pursued nonjudicial foreclosure proceedings in Nevada, defended foreclosure actions in Nevada and filed proofs of claim in bankruptcy in Nevada in instances in which Bank of America did not have authority to act,” the amended complaint says.

“Bank of America misrepresented, both in communications with Nevada consumers and in documents it recorded and filed, that it had authority to foreclose upon consumers’ homes as servicer for the trusts that held these mortgages,” the complaint says. “Defendants knew (and were on notice) that they had never properly transferred these mortgages to those trusts, (by) failing to deliver properly endorsed or assigned mortgage notes as required by the relevant legal contracts and state law.

“Because the trusts never became holders of these mortgages, defendants lacked authority to collect or foreclose on their behalf and never should have represented they could,” the complaint says.

A request for comment was placed with Bank of America on this new allegation, but it wasn’t addressed in the response to Masto’s amended complaint.

The backdrop of the amended complaint is that Masto has been balking at having Nevada participate in a proposed multistate settlement with several major banks over problems with their loan modification and foreclosure programs.

Masto’s concern with the proposed settlement, she told Bloomberg News for a story Aug. 16, is that she’s concerned it could short-circuit her existing lawsuit against Bank of America and affect potential future lawsuits and current investigations.

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Bank of America, ready for a significant sale of assets

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Piggybankblog posted on 08/29/11

Picture posted by piggybankblog

Cross linked story with dotspress.com

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It seems that Bank of America is in desperate need for cash. New York Times wrote that the largest U.S. bank plans to sell half of its ownership interest in the China Construction Bank that could bring in nearly $10 billion.

The announcement comes shortly after billionaire Warren Buffett invested $5 billion in the financial giant.

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MATT TAIBBI: Is the SEC Covering Up Wall Street Crimes?

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Piggybankblog posted on 08/27/11

Picture posted by piggybankblog

Cross linked story with RollingStone

Imagine a world in which a man who is repeatedly investigated for a string of serious crimes, but never prosecuted, has his slate wiped clean every time the cops fail to make a case. No more Lifetime channel specials where the murderer is unveiled after police stumble upon past intrigues in some old file – “Hey, chief, didja know this guy had two wives die falling down the stairs?” No more burglary sprees cracked when some sharp cop sees the same name pop up in one too many witness statements. This is a different world, one far friendlier to lawbreakers, where even the suspicion of wrongdoing gets wiped from the record.

That, it now appears, is exactly how the Securities and Exchange Commission has been treating the Wall Street criminals who cratered the global economy a few years back. For the past two decades, according to a whistle-blower at the SEC who recently came forward to Congress, the agency has been systematically destroying records of its preliminary investigations once they are closed. By whitewashing the files of some of the nation’s worst financial criminals, the SEC has kept an entire generation of federal investigators in the dark about past inquiries into insider trading, fraud and market manipulation against companies like Goldman Sachs, Deutsche Bank and AIG. With a few strokes of the keyboard, the evidence gathered during thousands of investigations – “18,000 … including Madoff,” as one high-ranking SEC official put it during a panicked meeting about the destruction – has apparently disappeared forever into the wormhole of history.

Under a deal the SEC worked out with the National Archives and Records Administration, all of the agency’s records – “including case files relating to preliminary investigations” – are supposed to be maintained for at least 25 years. But the SEC, using history-altering practices that for once actually deserve the overused and usually hysterical term “Orwellian,” devised an elaborate and possibly illegal system under which staffers were directed to dispose of the documents from any preliminary inquiry that did not receive approval from senior staff to become a full-blown, formal investigation. Amazingly, the wholesale destruction of the cases – known as MUIs, or “Matters Under Inquiry” – was not something done on the sly, in secret. The enforcement division of the SEC even spelled out the procedure in writing, on the commission’s internal website. “After you have closed a MUI that has not become an investigation,” the site advised staffers, “you should dispose of any documents obtained in connection with the MUI.”

Many of the destroyed files involved companies and individuals who would later play prominent roles in the economic meltdown of 2008. Two MUIs involving con artist Bernie Madoff vanished. So did a 2002 inquiry into financial fraud at Lehman Brothers, as well as a 2005 case of insider trading at the same soon-to-be-bankrupt bank. A 2009 preliminary investigation of insider trading by Goldman Sachs was deleted, along with records for at least three cases involving the infamous hedge fund SAC Capital. read more

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Buffett’s Move Marks the Beginning of the End

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Posted by piggybankblog on 08/27/11

Picture posted by piggybankblog

Cross linked story with zerohedge.com

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However, the big story for me today is Warren Buffett’s decision to buy BAC.

For starters, Buffett didn’t even spend 24 hours studying BAC before buying it. And I can tell you point blank that no one, certainly not Buffett, has a clue about BAC’s real balance sheet risk. The mere notion of due diligence or sound investing analysis here is absurd.

Moreover, the fact Buffett plowed $3-5 billion (depending on how the deal was structured) with so little research tells you what this was: a political move, and nothing more.

Truly you can’t even really consider this an “investment” since the deal Buffett got (which no one else on the planet would get) was so rigged in his favor that he can’t help but make some money off of it (at least until BAC collapses and is nationalized… of course Buffett’s stake would be made whole in that scenario too).

But regardless of his reasoning and fiscal prudence, the mere idea that Buffett’s purchase was a positive for stocks is absurd. Buffett bought Goldman Sachs in September 2008. How’d that work out? – read more

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Former Florida State Prosecutor Michael S. Riley Announces Kamala D. Harris, California Attorney General, Is Enjoined

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Piggybankblog posted 08/26/11

Piggybankblog psoted picture

Cross linked with Yahoo Finance

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MIAMI, FL–(Marketwire -08/26/11)- In court proceedings earlier today, a Federal Judge enjoined Kamala Harris and various other agents from attempting to seize or take any action as to Mitchell J. Stein’s (of Mitchell J. Stein & Associates) property. (Case No. 11-02425-PGH United States Federal Court)

Former Florida State Prosecutor Mike Riley, who was in attendance at the hearing, said, “Having already protected his personal property, The Doberman, Mr. Stein, has taken the first bite out of the Attorney General, and will proceed to protect the property of all U.S. citizens, as ordered by the U.S. Government.” Licensed attorney Mitchell J. Stein commented after the proceedings, “Thousands of friends of Mitchell J. Stein shall be suing Ms. Harris and the State of California early next week for multiple violations of Federal Law.” Mr. Riley further stated about the California Attorney General, “She has been found to have acted in excess of her jurisdiction.”

The Court denied other relief, leaving the parties to their rights and remedies under CA law.

About Michael S. Riley: Mr. Riley is a former Deputy Attorney General and Florida State Prosecutor. He serves on national task forces with the FBI, The Bureau of Alcohol, Tobacco and Firearms, as well as other state and federal law enforcement agencies. Mr. Riley currently represents numerous, large, national and international corporations and high profile individuals. His offices are located in the state of Florida, where he has been a member of the Florida Bar for 35 years.

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Has Warren Buffett just called the bank bottom?

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Piggybankblog posted 08/25/11

Picture posted by piggybankblog

Cross linked story with moneycnn.com

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NEW YORK (CNNMoney) — Bank of America CEO Brian Moynihan has a new BFF. His name is Warren Buffett. Heard of him?

Shares of the bewitched, bothered and bewildered bank were up 9% in early afternoon trading Thursday after Buffett’s Berkshire Hathaway (BRKB) announced it was investing $5 billion in preferred shares of Bank of America (BAC, Fortune 500).

The news helped lift shares of other bruised financials as well. Shares of Citigroup (C, Fortune 500) and Morgan Stanley (MS, Fortune 500) each rose more than 3%.

But BofA’s stock is still down more than 40% year-to-date. And the initial Buffett bump was much bigger and faded quickly. BofA was up as much as 26% shortly after the market opened Thursday.

So is the Berkshire investment — an Omaha stake if you will — in BofA really the bottom for the stock and the rest of the banking sector? Probably not.

Buffett is not making a call on the near-term for BofA or other big banks.

What’s clear from this investment — which is similar to ones Berkshire made in Goldman Sachs (GS, Fortune 500) and General Electric (GE, Fortune 500) during the 2008 financial crisis — is that he thinks the bank will eventually recover. And he’s happy to get paid handsomely to wait while it happens.

Berkshire is buying preferred stock that pays a 6% annual dividend. The common shares that average schlubs like you and I are more likely to own pays a paltry penny per quarter share dividend. That works out to a yield of 0.5%.

“BofA may be a good value here but that doesn’t mean it’s a great stock for average investors,” said Keith Springer, president of Springer Financial Advisors in Sacramento, Calif.

“Buffett knows that the government is not going to let BofA fail. So he’s got a quasi-government insured CD with a 6% yield and upside potential,” Springer added.

BofA stock spikes as Apple shares cool

Other money managers said they also wouldn’t rush back into BofA just yet simply because of Berkshire’s blessing.

While BofA now has $5 billion it didn’t have before, it still has legal risks tied to bad mortgage assets that not even Buffett can magically wipe away.

“This move by Buffett does show a lot of confidence in BofA. He’s drawing a line in the sand on the stock. But at the same time, I still feel uncomfortable with bank stocks,” said Craig Hodges, president of Hodges Capital on Dallas.

“I just don’t know what the banks have on their balance sheets.” Hodges added. His firm sold shares of BofA earlier this year and Hodges said he’s still wary of most major banks.

Even fund managers who still own shares of BofA said that investors need to be cautious. The problems facing BofA may be surmountable, but that doesn’t mean they will be solved quickly. BofA will likely be a slow-growth stock for a long time.

“Buffett sees value for three to five years, not three to five weeks or months,” said Dan Genter, CEO of RNC Genter Capital, a Los Angeles-based investment firm that does own BofA shares. “BofA is not back on a solid track for double-digit earnings increases.”

Genter said that the case for buying bank stocks now is vastly different than a few years ago. The days of banks churning out ridiculously strong earnings thanks to exorbitant risks are gone for good.

“Banks are the new utilities. Much of what they did that was highly profiable is now either rendered infeasible by the market or will be legislated out of existence,” he said.

With that in mind, Genter said investors should look more closely at banks that, like utilities, pay big dividends. Although he still owns BofA, he said that he has larger positions in Wells Fargo (WFC, Fortune 500) and JPMorgan Chase (JPM, Fortune 500). Those stocks pay dividends that yield 2% and 2.9% respectively.

Sandy Villere III, co-manager of the Villere Balanced Fund (VILLX) in New Orleans, agreed that dividends are key. He owns two regional banks in his fund, Lafayette, La.-based IberiaBank (IBKC) and Cullen/Frost (CFR) of San Antonio. They both yield over 3%.

But he said he actually made a move similar to Buffett a few months ago and still owns some exposure to BofA.

Villere said his fund sold its stake in BofA common shares shortly after the company announced an $8.5 billion settlement with big investors in soured mortgage securities in June. He said he was nervous that not all investors would back the settlement and that the stock could take a further hit.

Market slide’s good news? Higher dividend yields

But he said he still liked BofA’s long-term potential. So he bought convertible preferred shares of Bank of America instead. Those pay a healthy dividend.

“It’s the same logic as Buffett,” Villere said.

Still, the average investor is unlikely to score big investments in preferred shares like Buffett and other institutions. And it’s worth pointing out that even after Berkshire invested in Goldman and GE in 2008, their shares took months to bottom.

The same thing may happen with BofA and the rest of the big banks.

“The banks have more trouble ahead. BofA may have all its laundry out on the line now, but the whole sector may follow suit,” Springer said.

Reader comment of the week … and slip sliding away? So many jokes about BofA earlier this week when shares were trading closer to $6 than $8 like they are now.

I tweeted about how BofA could juice its stock price by selling the iPhone 5. I suggested that the bank’s celebrity voice-over spokesman Kiefer Sutherland could take over as CEO so Jack Bauer could battle short sellers.

Heck, I even compared former CEO Ken Lewis to Slimer in “Ghostbusters” in a BullHorn video with @reformedbroker Josh Brown.

But Daniel Gross of Yahoo Finance took me to task for missing an obvious reference to BofA’s headquarters. “Can’t believe that you have yet to use “charlotte’s web” in a bank of america-related tweet,” he wrote.

Ah yes. Wilbur! Better late than never.

anyway, reader comment goes out today since I am out tomorrow. Kind of sad I won’t be around to tweet about Bernanke and Jackson Hole. But oh well.

And although Hurricane Irene threatens to dampen the early part of a planned trip down to the Jersey Shore, the Buzz is eager for a much-needed vacation. I am also out all of next week and Labor Day. So buckle up, East Coast. See you in September. (Tuesday the 6th to be precise.)

he opinions expressed in this commentary are solely those of Paul R. La Monica. Other than Time Warner, the parent of CNNMoney, and Abbott Laboratories, La Monica does not own positions in any individual stocks.

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Bank Of America’s No-Good, Very Bad Enablers

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Piggybankblog posted 08/24/11

Picture posted by piggybankblog

Cross linked story with Yahoo news

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What’s the worse than Bank of America acting as if it deserves immunity from all its bad foreclosure behavior? A presidential administration that agrees.

President Obama’s administration is putting pressure on New York Attorney General Eric T. Schneiderman to give into a deal with big banks that would block him from bringing future mortgage investigations, Grethchen Morgenson reports in The New York Times today.

For months, Schneiderman has said he will not agree to any nationwide agreement with banks that would block individual states from investigating the mortgage-servicing industry on their own. At one point Bank of America was said to be in talks to with state and federal officials without the involvement of Schneiderman. But now the pressure is on Schneiderman to join the agreement, say ‘okay’ and move on.

Schneiderman’s position on the matter was of course not sitting well with banks that would rather shell out a huge sum of money (reportedly $20 billion) than deal with ongoing suits. Bank of America, JPMorgan Chase, Citigroup and Wells Fargo are among the banks being investigated for foreclosing on struggling homeowners without proper paperwork and procedure.

When the nation’s 50 state attorneys general joined forces in the fall to look into the matter the probe seemed to have some teeth. The AGs were appalled at some of the alleged behavior by banks with Connecticut Attorney General Richard Blumenthal saying at the time. “At the best, banks engaged in careless negligence, at worst, outright fraud.”

Now though, an investigation that once felt like it might end in prosecution for some in the mortgage service industry is turning into a joke. There are only a handful of AGs still looking to thoroughly investigate exactly what banks did wrong and how they should be punished. AG Schneiderman is the leader among that group, and as I pointed out last week is a big thorn in struggling Bank of America’s side.

Unfortunately there aren’t enough thorns willing to look into what was once believed by the AGs to be “outright fraud.” Instead, officials are working with banks to work out a deal, and anyone who isn’t on board risks being viewed as someone who is stalling a housing recovery. The most recent example of this is cited in Morgenson’s story where she reports that “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” Schneiderman to a deal that would give banks a free pass over future foreclosure claims.

The problem, as The Big Picture’s Barry Ritholtz points out this morning, is that the federal regime’s interest is so closely tied to the banking industry that bad news for banks is inherently bad news for the administration. From Ritholtz:

Note that the Federal Reserve (and indirectly, the NY Fed) are conflicted players in this. On the one hand, they are supposed to be bank regulators (a task they have performed poorly). But they are also substantial investors in the banks, and their regulatory oversight role is obviously conflicted.

There have been all manner of criminal and civil trespasses committed, and we should find out who ordered them, who committed them and why. AG Schneiderman should continue investigating the robo-signing, bring civil and criminal charges where necessary.

Recall that the original problems came about in large part due to Alan Greenspan’s Nonfeasance — the failure to perform his professional obligations of oversight and regulation. That any member of the Federal Reserve or NY Fed wants this closed before any investigation has been undertaken is a scandal of the highest magnitude.

But it’s Kathryn S. Wylde, member of the board of the Federal Reserve Bank of New York and president and chief executive officer of the Partnership for New York City, a nonprofit organization of the city’s business leaders, that personifies the reason banks will never be held accountable for anything.

Wylde has openly been critical of AG Schneiderman’s suit that aims to block an $8.5 billion settlement between Bank Of America and 22 investor groups (including the NY Fed, PIMCO and BlackRock) over mortgage securities. But it’s her comment about Schneiderman’s reservations to agree to a deal that would give banks immunity that will really boggle your mind.

According to the Times, here’s what she says she told Schneiderman about his resistance:

I guess the billions in bailout money wasn’t enough “support”, and hiring hairstylists, teenagers and Wal-Mart employees who didn’t not know the meaning of an “affidavit” to foreclose on home owners is apparently defensible.

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Attorney General of N.Y. Is Said to Face Pressure on Bank Foreclosure Deal

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Piggybankblog posted on 08/24/11

Picture posted by piggybankblog

Cross linked story with Huffington Post

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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.

Not surprising, the large banks, which are eager to reach a settlement, have grown increasingly frustrated with Mr. Schneiderman. Bank officials recently discussed asking Mr. Donovan for help in changing the attorney general’s mind, according to a person briefed on those 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.

“Eric and I agree on a tremendous amount here,” Mr. Donovan said. “The disagreement is around whether we should wait to settle and resolve the issues around the servicing practices for him — and potentially other A.G.’s and other federal agencies — to complete investigations on the securitization side. He might argue that he has more leverage that way, but our view is we have the immediate opportunity to help a huge number of borrowers to stay in their homes, to help their neighborhoods and the housing market.”

And Alisa Finelli, a spokeswoman for the Justice Department. said: “The Justice Department, along with our federal agency partners and state attorneys general, are committed to achieving a resolution that will hold servicers accountable for the harm they have done consumers and bring billions of dollars of relief to struggling homeowners — and bring relief swiftly because homeowners continue to suffer more each day that these issues are not resolved.”

Terms of the possible settlement under consideration center on foreclosure improprieties like so-called robo-signing and submitting apparently forged documents to the courts to speed up the process of removing troubled borrowers from homes. Negotiations on this deal have been led by Thomas J. Perrelli, associate attorney general of the United States, and Tom Miller, the attorney general of Iowa.

An initial term sheet outlining a possible settlement emerged in March, with institutions including Bank of America, Citigroup, JPMorgan Chase and Wells Fargo being asked to pay about $20 billion that would go toward loan modifications and possibly counseling for homeowners.

In exchange, the attorneys general participating in the deal would have agreed to sign broad releases preventing them from bringing further litigation on matters relating to the improper bank practices.

The banks balked at the $20 billion figure. And the talks seemed to stall over the summer, as Mr. Schneiderman and a few other attorneys general — Beau Biden of Delaware and Catherine Cortez Masto of Nevada, for example — questioned aspects of the deal.

Mr. Schneiderman began objecting a few months ago to the proposed releases barring future litigation, declining to participate as long as they were included.

“The attorney general remains concerned by any attempt at a global settlement that would shut down ongoing investigations of wrongdoing related to the mortgage crisis,” said Danny Kanner, the spokesman for Mr. Schneiderman. His office has opened several inquiries into mortgage practices during the credit boom.

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There Is A Rumor That JP Morgan May Take Over Bank Of America

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Piggybankblog posted on 08/23/11

Picture posted by piggybankblog

Cross linked story with businessinsider.com

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There is a rumor circulated on Wall St. that JP Morgan (NYSE: JPM) will take over Bank of America (NYSE: BAC) within the week. The government will support the deal with a $100 billion investment in preferred shares issued by the combined entity. Alternatively, the government may guarantee the value of a large pool of Bank of America assets. The word is that Treasury Secretary Geithner has discussed the transaction with JP Morgan CEO Jamie Dimon.The “merger” would completely destroy the value of BAC’s common shares.

The government feels that the deal may be necessary as Bank of America struggles unsuccessfully to close several transactions to bolster its balance sheet. The Wall Street Journal reported that the financial firm will need to raise $200 billion which would be another possible event that would wipe out common shareholders.

Bank of America’s fortunes have been hurt by events in just the last few days. A New York State judge agreed to allow institutional investors to intervene in an $8.5 billion settlement between the bank and groups that lost money on mortgage-backed securities. China Construction Bank Corp said Bank of American will continue to hold 50% of its share in the foreign financial firm. Many investors hoped Bank of America would sell its entire stake to raise money. Several analysts believe that the costs of owning mortgage firm Countrywide Credit have grown unexpectedly large.

 

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Here’s Why Bank Of America’s Stock Is Collapsing Again

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Piggybankblog posted 08/23/11

Pictture poste by piggybankblog

Cross linked with businessinsider.com

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It’s deja vu all over again.

The stock of a humongous American bank, Bank of America (BAC), is collapsing.

This is stoking fears that Bank of America will go bust, taking the whole economy down with it.

Why is Bank of America’s stock tanking?

Because the market thinks Bank of America is worth much less than Bank of America’s management says it is.

In fact, in what is fast becoming a formal law of bank-stock thermo-dynamics, the more the bank insists that everything’s fine, the more investors take this as a signal to run for the hills.

Meanwhile, the more the bank’s stock drops, the more expensive and painful it will be for it to raise cash if and when it finally admits that the market was right all along (the next formal law of bank stock thermo-dynamics being that the market is generally right.)

Youtube not in article and provided by piggybankblog

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And given that Bank of America has now persuasively broken the $7 barrier and now has a mere $65 billion of equity value left, this death spiral can’t continue much longer. (The good news, we suppose, is that the stock can’t fall below zero).

Let’s leave aside for a moment the question of what will happen if Bank of America’s stock keeps tanking. After observing the government’s behavior during the financial crisis, the obvious bet would be that Treasury Secretary Tim Geithner is even now cooking up some new bailout scheme that, per usual, will save the bank and hose taxpayers. But Americans certainly have gotten sick to death of bailouts, so maybe that isn’t such a foregone conclusion this time.

(A year or so ago, if memory serves, the Treasury was trumpeting “financial reform” that allows it to go in and seize any huge institution whose failure threatens the economy, so maybe that’s also a possibility. But the government had that power last time, too–at least with respect to the banks–and it refused to use it. So we’re not sure why it would use it this time.)

The question for today is why is Bank of America’s stock collapsing? What does the market see that Bank of America’s management and auditors don’t?

Thanks to the efforts of a few tireless Bank of America observers, including Zero Hedge and Yves Smith at Naked Capitalism, we have our answers.

Bank of America has about $222 billion of “book value”–the amount that’s supposedly left over when you subtract Bank of America’s stated liabilities from its stated assets.

The trouble is that the market doesn’t believe Bank of America’s assets are worth anything close to what Bank of America says they are worth. The market also doesn’t believe that Bank of America has reserved anywhere near enough to pay the costs of litigation surrounding its mortgage behavior during the housing boom.

And when you put a more reasonable value on Bank of America’s assets, the market thinks, the difference between that reasonable value and today’s current value will have to be subtracted from the company’s “book value.” And that subtraction, the market thinks, will so demolish Bank of America’s book value that the company is basically insolvent. (And, therefore, will need to raise more capital or go bust).

Here are some of the things that the Bank of America observers think should or will be subtracted from the bank’s $222 billion of book value:

$15-$20 billion in Increased mortgage-litigation reserves.Zero Hedge thinks BOFA is understating the liability for mortgage litigation costs by this amount. See explanation here.

Some percentage of $80 billion of “second mortgages.” Yves Smith thinks these should probably be written down by 60%, or $48 billion. You can pick your own number.

Some percentage of $182 billion in commercial real estate loans. The “extend and pretend” game in commercial real-estate is even more pronounced than in residential real estate. So as Yves Smith observes, there’s almost no chance those loans are actually worth $182 billion.

A healthy percentage of $78 billion of “goodwill.” Bank of America built itself by acquisition. “Goodwill” is what’s left over when management overpays for something. As Yves Smith observes, Bank of America’s former CEO Ken Lewis loved overpaying for things. He overpaid for Countrywide, for example, which has since been written off to zero, and Merrill Lynch, which he could have had for free by waiting a couple more days.

Untold amounts of exposure to collapsing European banks and sovereign debt. Yves Smith says Bank of America says its sovereign exposure is $17 billion. Really? Has the firm not written any credit default swaps protecting customers in the event that European banks or countries go belly up? Might the firm have to post some cash “collateral” to satisfy these contracts? That’s what Lehman had to do, after all. And that’s what made Lehman go from “having plenty of capital” to being broke overnight.

So, taking some back of the envelope numbers, it looks as though we could easily come up with, say, $100-$200 billion in write-offs and exposures to “clean up” Bank of America’s balance sheet.

A $100-$200 billion hit to Bank of America’s $222 billion of equity capital, needless to say, would do some serious damage. Specifically, it would force the company to raise about the same amount to restore its capital ratios.

That’s why Bank of America’s stock is tanking. The owners of that stock will be the first folks to get hit if Bank of America has to raise more capital. And the lower Bank of America’s stock is when it raises more capital, the more they’ll get hit.

And, for obvious reasons, they’re not excited about that.

Youtube not in article and posted by piggybankblog

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Bank of America’s Dead Drop To Rick Perry: “We Will Help You Out”

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Piggybankblog posted on 08/21/11

Picture posted by piggybankblog

Cross linked with zerohedge.com

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Should we be surprised, frightened, disgusted or simply say “we knew it”, that in the informal mixer just after Texas Governor and Republican presidential candidate Rick Perry spoke at a Politics and Eggs breakfast in Bedford, New Hampshire, an unknown gentlemen approaches a casual Perry like an Ian Flemming character, and proceeds to dead drop the following: “Bank of America… We will help you out”… and silently moves on. At least we know now who is funding what, and whose interests potential future president Perry will be paid to defend.

Fast forward to precisely 40 minutes into the blow clip (full event can be found here).

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SEC may have destroyed documents, senator says Grassley: Agency may have got rid of Goldman, Madoff documents

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Piggybankblog posted 08/21/11

Picture posted by piggybankblog

Cross linked story with marketwatch.com

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WASHINGTON (MarketWatch) — The Securities and Exchange Commission may have destroyed documents and compromised enforcement cases involving activity at large banks and hedge funds during the height of the financial crisis in 2008, according to allegations made by a lawmaker on Wednesday.

“From what I’ve seen, it looks as if the SEC might have sanctioned some level of case-related document destruction,” said Sen. Chuck Grassley, Republican of Iowa, in a letter to the agency’s chairman, Mary Schapiro.

“It doesn’t make sense that an agency responsible for investigations would want to get rid of potential evidence. If these charges are true, the agency needs to explain why it destroyed documents, how many documents it destroyed over what timeframe, and to what extent its actions were consistent with the law.”

Agency staff “destroyed over 9,000 files” related to preliminary agency investigations, according to a letter sent in July to Grassley, the top Republican on the Senate Judiciary Committee, and obtained by MarketWatch.

The allegations were made by SEC enforcement attorney, Darcy Flynn, in a letter to Grassley. Flynn is a current employee, and according to the letter, received a bonus for his past year’s work.

Flynn alleges the SEC destroyed files related to matters being examined in important cases such as Bernard Madoff and a $50 billion Ponzi scheme he operated as well as an investigation involving Goldman Sachs Group Inc. /quotes/zigman/188479/quotes/nls/gs GS -1.22% trading in American International Group credit-default swaps in 2009.

Flynn also alleged that the agency destroyed documents and information collected for preliminary investigations at Wells Fargo & Co. /quotes/zigman/239557/quotes/nls/wfc WFC -1.52% , Bank of America Corp. /quotes/zigman/190927/quotes/nls/bac BAC -0.57% , Citigroup /quotes/zigman/5065548/quotes/nls/c C -4.32% , Credit Suisse /quotes/zigman/172227/quotes/nls/cs CS -1.80% , Deutsche Bank /quotes/zigman/207002/quotes/nls/db DB -3.66% Morgan Stanley /quotes/zigman/182639/quotes/nls/ms MS -1.23% and the now-bankrupt Lehman Brothers.

The letter goes into particular detail about Deutsche Bank, the former employer of current SEC enforcement chief Robert Khuzami as well as former enforcement chiefs Gary Lynch and Richard Walker.

The allegations that the SEC destroyed documents were first reported by the Rolling Stone magazine in a report Wednesday.

An SEC spokesman did not return a request for comment. However, according to the Rolling Stone article, the SEC told the National Archives and Records Administration that the commission “is not aware of any specific instances of the destruction of records from any other MUI.”

The SEC added that it “cannot say with certainty that no such documents have been destroyed over the past 17 years.” Read Grassley’s letter to the SEC

Flynn’s lawyer, Gary Aguirre, was a former SEC attorney. Aguirre was fired in September 2005 as he was investigating allegations of insider trading at the major hedge fund Pequot Capital Management.

At the time, the SEC said Aguirre had personality conflicts with other staff attorneys, was reticent to be supervised and did not follow the agency’s chain of command.

However, the SEC in 2010 agreed to pay $755,000 to Aguirre as a settlement of a wrongful termination suit he filed, and two Senate committees disagreed with the agency’s stance in a 2007 report.

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Ahead of the Bell: Bank of America may cut jobs

Piggybankblog posted on 08/20/11

Picture posted by piggybankblog

Cross linked story with bloomberg.com

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By The Associated Press

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Shares of Bank of America Corp. slipped Friday in premarket trading after reports that the bank is working on restructuring plans that could cut several thousand jobs.

The Charlotte, N.C., bank is cutting 3,500 employees this quarter and working on plans that will ax several thousand more jobs, according to The Wall Street Journal and The New York Times, which cited people familiar with the situation. The reports said job cuts at the biggest U.S. bank by assets might exceed 10,000, or about 3.5 percent of its work force.

The report follows announcements earlier this month that the bank planned to sell its $8.6 billion credit card business in Canada to TD Bank Group, and it will exit its credit card businesses in the United Kingdom and Ireland. Those moves are part of a broader shift by Bank of America out of international credit cards. The bank also agreed to sell its card business in Spain to Apollo Capital Management Inc. and also recently sold its U.K. business lending portfolio.

BoA CEO Brian Moynihan is trying to engineer a recovery for the bank, which was hit hard by the housing bubble and has seen its share price fall nearly 50 percent this this year. The stock also has dropped more than 28 percent this month, as financial stocks have been hit hard by recent market turmoil.

Positive market reaction to news of the layoffs may be lost in what could become another Wall Street selloff Friday. Dow futures are down 1.5 percent after markets dropped sharply in Asia and Europe.

BoA shares fell 11 cents to $6.90 in premarket trading.

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APNewsBreak: Lawyers accused of scam in bank suits

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Piggybankblog posted on 08/19/11

Picture posted by piggybankblog

Cross linked story with wwltv.com

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COSTA MESA, Calif. (AP) — California prosecutors filed a major lawsuit against several lawyers and call center operators for allegedly running a nationwide scam to dupe desperate homeowners into paying thousands of dollars to join dubious lawsuits against some of the country’s largest banks.

The complaint unsealed Thursday in Los Angeles County Superior Court accuses prominent foreclosure attorneys Philip Kramer and Mitchell Stein and at least 17 other individuals and businesses of luring borrowers into a scheme that falsely promised a cut of future settlements.

The lawsuit portrays the defendants as the most recent in the chain of mortgage-related scammers who helped fuel the housing bubble and have cashed in on its collapse. The defendants previously worked in the fraud-ridden loan modification industry.

Borrowers were lured into the scheme with claims that courts have found most mortgage lenders to have practiced predatory lending or approved inappropriate loans, and that the homeowners’ own banks meet the criteria for having perpetrated such “violations,” the complaint says.

“Defendants use deceptive advertising and telemarketing to recruit consumers to join these lawsuits,” according to the complaint filed by prosecutors.

California Attorney General Kamala Harris was set to announce the case Thursday, a day after state bar investigators and state Department of Justice agents served defendants with copies of the complaint at nine locations in Los Angeles and Orange counties.

Defendants in the complaint are all based in California, but the investigation could eventually ensnare associates in other states.

Florida bar spokeswoman Zannah Lyle confirmed that her organization was looking into allegations of rule violations concerning Tallahassee-based lawyer and lobbyist David Ramba’s work with Kramer to recruit struggling homeowners to join lawsuits against banks. Ramba did not immediately respond to a message seeking comment.

The raids in Orange County on Wednesday took place in sprawling office parks with manicured lawns surrounding Irvine’s airport. Officials loaded boxes of seized documents into moving vans and armed police guarded the entrances to emptied offices, which appeared to contain wall-to-wall cubicles for phone center workers.

Outside one office, a man in a business suit said he had worked for the raided company but refused to answer any other questions as he carried a stack of framed pictures from the building and oversaw the removal of a small refrigerator by younger apparent employees.

At another office, a manager who would only give his first name, David, said he and his colleagues had been questioned about their connection with Kramer. He said they had done business with the lawyer two years ago but not since.

Prosecutors accuse the defendants of making false representations and three counts of unfair competition. They are seeking an injunction stopping the defendants from continuing with the business in addition to unspecified monetary damages.

No criminal charges have been filed in connection with the case.

Calls to Kramer’s office were being forwarded to a state bar phone number early Thursday. Calls to Stein, who refers to himself on his firm’s website and other communications as “The Doberman,” went straight to a busy signal.

Attorney general’s spokesman Shum Preston declined to discuss the case ahead of Harris’ announcement.

Kramer gloated in an October 2010 e-mail to another defendant about the virtues of their new undertaking compared with the loan modification business, in which lawyers offer to negotiate better mortgage terms on behalf of troubled borrowers in exchange for a fee.

“Only morons would prefer to ‘sell’ mods from this day forward,” Kramer wrote, according the complaint.

In fact, the scheme Kramer and Stein allegedly perpetrated was a new spin on loan modifications.

Prosecutors accuse Kramer and Stein of exploiting an existing lawsuit known as Ronald v. Bank of America NA filed in Los Angeles Superior Court in March 2009. Stein was one of the lawyers who first filed that case, which alleged on behalf of a few dozen clients that the bank committed mortgage-related improprieties. Kramer later joined as counsel to another defendant who was added to the case.

The lawyers used the Ronald case to drum up business and have since filed separate lawsuits against JPMorgan Chase & Co, Wells Fargo Bank NA, Citibank NA and others to broaden their base of clients, the complaint alleges.

The lawyers and their associates sent mailers that looked like official class-action lawsuit notifications to up to 2 million homes nationwide, prosecutors said.

The mailings stated that their recipients were potential plaintiffs in a litigation settlement and claimed they could cut their mortgage to as little as 70 percent of their value, prevent foreclosure and get $75,000 in damages.

They directed people to phone supposed law offices that were actually call centers staffed by operators with no legal expertise.

In addition to using mailers, Stein used his law firm’s Facebook page to make overblown claims about bank behavior and his ability to seek retribution, according to the complaint.

“Look for Patriot Act violations in your mortgage,” Stein wrote in a Jan. 17 posting. “Talk to a lawyer. You might just cancel the mortgage.”

Prosecutors estimated hundreds or even thousands of people paid between $5,000 and $10,000 to join the lawyers’ suits.

In some cases, the lawyers have collected money from borrowers who were told they were being added as plaintiffs to lawsuits that had not even been filed, the complaint alleges. Some borrowers had their homes foreclosed on after paying to join the suits filed by Kramer and Stein, prosecutors said.

Bank records show more than $7 million deposited in three of Kramer’s accounts connected to the investigation, with millions more paid to call centers that provided answers to prospective clients responding to the mailers, the complaint said.

Those workers are accused in the complaint of overstating lawyers’ progress in the lawsuits, all of which are in their earliest stages, and of misrepresenting judges’ apparent disposition toward the banks.

Some salespeople are alleged to have told borrowers that the judge in the Ronald v. Bank of America has told the lender it has “no defense” and that its main argument is “absurd.”

The salespeople also tell homeowners that the case’s lawyers have proven banks have taken money from investors that can’t be accounted for, the complaint says.

Philip Warmanen, a 71-year-old travel agent in Jacksonville, Fla., was among those who joined the lawsuit. Warmanen said he responded to a mailer that turned out to be from Kramer’s law firm early this year after Bank of America failed to offer him a modification on his home that had lost about half its value since he paid $525,000 for it in 2006.

Warmanen was told he should receive a modification and other settlement benefits in just a couple months when he paid $4,000 to join the lawsuit but has heard little of the case since then.

“They said there was a strong likelihood that this would be successful and that they had a few cases where the judgment had come through positively in favor of the complainants,” he said. “They led me to believe that that might be my case.”

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Attorney General Kamala D. Harris Sues Law Firms Engaged in National “Mass Joinder” Mortgage Fraud

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Press release on 08/18/11

Cross linked California Department of Justice

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SAN FRANCISCO — Attorney General Kamala D. Harris today announced that the California Department of Justice, in conjunction with the State Bar of California, has sued multiple entities accused of fraudulently taking millions of dollars from thousands of homeowners who were led to believe they would receive relief on their mortgages.

Attorney General Harris sued Philip Kramer, the Law Offices of Kramer & Kaslow, two other law firms, three other lawyers, and 14 other defendants who are accused of working together to defraud homeowners across the country through the deceptive marketing of “mass joinder” lawsuits. “Mass joinder” lawsuits are lawsuits with hundreds, or more, individually named plaintiffs. This is the first consumer action by the Attorney General’s Mortgage Fraud Strike Force.

Kramer’s firm and other defendants were placed into receivership on Monday, Aug. 15. The legal actions were designed to shut down a scheme operated by attorneys and their marketing partners, in which defendants used false and misleading representations to induce thousands of homeowners into joining the mass joinder lawsuits against their mortgage lenders. Defendants also had their assets seized and were enjoined from continuing their operations. Nineteen DOJ special agents participated as the firms were taken over Wednesday, Aug. 17, along with 42 agents and other personnel from HUD’s Office of Inspector General, the California State Bar, and the Office of Receiver Thomas McNamara at 14 locations in Los Angeles and Orange Counties. Sixteen bank accounts were seized.

“The defendants in this case fraudulently promised to win prompt mortgage relief for millions of vulnerable homeowners across the country,” said Attorney General Harris. “Innocent people, already battered by the housing crisis, were targeted for fraud in their moment of distress.”

“The number of lawyers who have tried to take advantage of distressed homeowners in these tough economic times is nothing short of shocking,” said State Bar President William Hebert. “By taking over the practices of four attorneys accused of fraudulent marketing practices, the State Bar can put a stop to their deplorable conduct as part of our ongoing effort to protect the public.”

It is believed that at least two million pieces of mail were sent out by defendants to victims in at least 17 states. Defendants’ revenue from this scam is estimated to be in the millions of dollars.

As alleged in the lawsuit, defendants preyed on desperate homeowners facing foreclosure by selling them participation as plaintiffs in mass joinder lawsuits against mortgage lenders. Defendants deceptively led homeowners to believe that by joining these lawsuits, they would stop pending foreclosures, reduce their loan balances or interest rates, obtain money damages, and even receive title to their homes free and clear of their existing mortgage. Defendants charged homeowners retainer fees of up to $10,000 to join as plaintiffs to a mass joinder lawsuit against their lender or loan servicer.

Consumers who paid to join the mass joinder lawsuits were frequently unable to receive answers to simple questions, such as whether they had been added to the lawsuit, or even to establish contact with defendants. Some consumers lost their homes shortly after paying the retainer fees demanded by defendants.

This mass joinder scam began with deceptive mass mailers, the lawsuit alleges. Some mailers, designed to appear as official settlement notices or government documents, informed homeowners that they were potential plaintiffs in a “national litigation settlement” against their lender. No settlements existed and in many cases no lawsuit had even been filed. Defendants also advertised through their web sites.

When consumers contacted the defendants, they were given legal advice by sales agents, not attorneys, who made additional deceptive statements and provided (often inaccurate) legal advice about the supposedly “likely” results of joining the lawsuits. Defendants unlawfully paid commissions to their sales representatives on a per client sign-up basis, a practice known as “running and capping.”

Defendants’ alleged misconduct violates the following laws:

-False advertising, in violation of section 17500 of the Business and Professions Code

-Unfair, fraudulent and unlawful business practices, in violation of section 17200 of the Business and Professions Code

-Unlawful running and capping, in violation of section 6152, subdivision (a) of the Business and Professions Code (i.e., a lawyer unlawfully paying a non-lawyer to solicit or procure business)

-Improper fee splitting (defendants unlawfully splitting legal fees with non-attorneys)

-Failing to register with the Department of Justice as a telephonic seller.

Homeowners who have paid to be added to one of the lawsuits should contact the State Bar if they feel they may be victims of this scam. They can also contact a HUD-certified housing counselor for general mortgage related assistance.

The Department of Justice has seized the practices of the following non-attorney defendants:

Attorneys Processing Center, LLC; Data Management, LLC; Gary DiGirolamo; Bill Stephenson; Mitigation Professionals, LLC; Glen Reneau; Pate Marier & Associates, Inc.; James Pate; Ryan Marier; Home Retention Division; Michael Tapia; Lewis Marketing Corp.; Clarence Butt; and Thomas Phanco.

The State Bar has seized the practices and attorney accounts of the attorney defendants:

The Law Offices of Kramer & Kaslow; Philip Kramer, Esq; Mitchell J. Stein & Associates; Mitchell Stein, Esq.; Christopher Van Son, Esq.; Mesa Law Group Corp.; and Paul Petersen, Esq.

Attorney General Harris is challenging the defendants’ alleged misconduct in marketing their mass joinder lawsuits; her office takes no position as to the legal merits of any claims asserted in the mass joinder lawsuits filed by defendants.

Victims in the following states are known to have received these mailers, or signed on to join the case. This is a preliminary list that may be updated:

Alaska, Arizona, California, Colorado, Connecticut, Florida, Hawaii, Maryland, Massachusetts, Michigan, Missouri, Nevada, New Jersey, New York, Ohio, Texas, Washington

The complaint, temporary restraining order, examples of marketing documents and photos of the enforcement action are available with the electronic version of this release at http://oag.ca.gov/news.

John Wright responds: Wow I wish they used the same diligence raiding the banks!

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Paulson slashes stake in Bank of America

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Piggybankblog posted on 08/17/11

Picture posted by piggybankblog.com

Cross linked story with Rueters.com

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* Sticks with SPDR Gold Trust (Adds details on other holdings, Paulson’s investment style, background, bylines)

NEW YORK, Aug 15 (Reuters) – Billionaire investor John Paulson, whose flagship funds are down some 30 percent for the year to date, cut back on one of his biggest holdings but largely kept the other major holdings unchanged.

Weeks after telling investors in July that he had been overly aggressive with some of his calls, Paulson showed the world that he began scaling back and diversifying within the financial sector during the second quarter.

At the end of June Paulson owned 60.4 million shares in Bank of America (BAC.N), down from 124 million at the end of the first quarter.

Paulson had told investors on that rare conference call in July that he was surprised by the size of Bank of America’s mortgage problems and said he would be shifting money into financial companies with fewer problems.

He had already begun to do so.

In the second quarter he raised his stake in Wells Fargo (WFC.N) to 33.6 million shares from 20.5 million shares and lifted his stake in Capital One (COF.N) to 21.1 million shares from 18 million shares. [nN1E7780AL]

While Paulson was clearly adjusting some holdings, the moves were too small to save his roughly $35 billion fund firm from the battering it endured over the last few weeks as Bank of America’s stock price declined further. In the last three months the company’s shares have tumbled 41.07 percent.

Paulson is known for making big bets and sticking with them often for very long periods.

On Aug. 11 Reuters wrote in a Special Report [nN1E7780AL] that some hedge fund industry analysts and investors were beginning to worry that Paulson’s Advantage funds, his two largest portfolios, were too large and taking mutual-fund style bets on too many stocks.

One thing that has helped Paulson is that his firm has kept its stake in the SPDR Gold Trust unchanged at 31.5 million. It is the firm’s biggest holding and one of its most profitable given the surge in gold prices,

The funds’ holdings of Hartford Financial Services Group (HIG.N), Paulson’s seventh largest holding, were cut to 40.5 million shares from 43.9 million shares. His holdings of SunTrust Banks (STI.N) were reduced to 32.1 million shares from 34.3 million shares. And he trimmed his MGM Resorts International (MGM.N) holdings to 41.7 million shares from 43.8 million shares.

AngloGold Ashanti (AU_pa.N), Paulson’s second biggest position, weighed in at 39.9 million shares, down only slightly from 41 million shares.

In the past, especially when he bet against the overheated U.S. housing market, Paulson’s ability to spot trends early and stick with them has paid off big for himself and investors.

This time around though some investors are beginning to worry that Paulson has lost his magic touch, particularly now that the economy is not recovering as quickly as he initially forecast. (Reporting by Svea Herbst-Bayliss; editing by Carol Bishopric)

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BofA Weighs Foreclosure Deal With N.Y. Probe

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Piggybankblog posted on 08/16/11

Picture posted by piggybankblog

Cross linked story with bloomberg.com

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Bank of America Corp. (BAC) may settle a state and federal probe of foreclosure practices in a deal that lets New York proceed with an inquiry into securitizations, said two people with direct knowledge of the talks.

The firm may pursue an accord with most of the 50 state attorneys general, even if it omits New York’s Eric Schneiderman and at least two other states who are opposed because a deal would impede related inquiries, said one of the people. Negotiations on a broad settlement stalled after Schneiderman indicated he wouldn’t let it block his probe into the bundling and sale of mortgages, said the people, who declined to be identified because talks are private.

Chief Executive Officer Brian T. Moynihan, seeking to reverse a 44 percent stock slide this year, has booked about $30 billion in settlements and writedowns to clean up mortgage liabilities at the biggest U.S. bank since the start of 2010. One of the largest legal matters still pending is the multi- state probe into whether firms servicing mortgages used bogus documents to justify foreclosures.

“They need to resolve this because it’s looming out there as an unknown liability,” said Brian Chappelle, a partner at mortgage-finance consultancy Potomac Partners LLC in Washington and former executive at the Mortgage Bankers Association. “It’s harming the housing recovery because the large institutions are reluctant to originate new loans because of the uncertainty.”

Bank of America executives, concerned that a delay in resolving the case is hurting the firm’s stock, are open to a deal that would resolve most of it, even if some mortgage investigations continue, said one of the people. The bank has been pushing for liability releases for loan activities besides servicing, such as securitization and lending.

Other States

Attorneys general from Delaware, Massachusetts and Nevada have also voiced concern that a proposed settlement would protect banks from mortgage investigations that aren’t yet finished. Nevada Attorney General Catherine Cortez Masto, whose office sued Bank of America and is conducting civil and criminal foreclosure probes, said in an interview this week that she will be “very cautious” about agreeing to a settlement that hinders those inquiries.

Danny Kanner, a spokesman for Schneiderman, and Melissa Karpinsky, a spokeswoman for Massachusetts Attorney General Martha Coakley, declined comment on Bank of America’s settlement talks. Edie Cartwright, a spokeswoman for Masto, didn’t immediately comment. Jason Miller, a spokesman for Delaware Attorney General Beau Biden, didn’t respond to an e-mail.

Global Settlement

Negotiations with regulators and the five largest mortgage servicers including Bank of America, JPMorgan Chase & Co., Citigroup Inc., Wells Fargo & Co. and Ally Financial Inc. have bogged down over details of the proposed deal, which may cost the firms a total of more than $20 billion, people with knowledge of the talks have said. At least one of the banks objected to the size of its share of the settlement, arguing that its practices were better than others.

The holdup has spurred Bank of America to pursue talks with some states separately from the larger group, two people with knowledge of the matter said earlier this month. A settlement is probably still at least weeks from being completed, one person said.

The bank’s preference is still for a “global settlement,” said Dan Frahm, a spokesman for the Charlotte, North Carolina- based lender, who declined to comment further.

Moynihan, 51, met with Treasury Secretary Timothy F. Geithner and Federal Reserve governor Daniel Tarullo in Washington last week to press for a resolution to the foreclosure talks, said the people. Moynihan had argued that delays were interfering with a housing market’s recovery.

Servicing Standards

Officials are seeking a deal that sets standards for how the banks service loans, interact with borrowers and conduct foreclosures, according to terms proposed in March. They are also seeking payments including fines.

“Attorney General Schneiderman remains concerned by any settlement agreement that would preclude state attorneys general from conducting comprehensive investigations of the mortgage crisis,” his spokesman, Kanner, said last month in an e-mailed statement.

Bank of America shares have been dogged by concerns that mortgage expenses and a stagnating U.S. economy will crimp profit and force it to bolster capital by selling new shares. Moynihan has repeatedly said this year that the firm won’t need to issue common stock. The company plunged 20 percent on Aug. 8 after a ratings downgrade of U.S. debt sparked concern that the economy may stall into recession.

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Bank of America Gets Garden State Greenlight on Foreclosures: Report

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Piggybankblog posted 08/16/11

Picture posted by piggybankblog

Cross linked story with thestreet.com

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According to a Bloomberg report, Superior Court Judge Mary Jacobson signed an order granting approval to the four lenders after outlining a series of conditions. The banks had to show that they had “established specific procedures for staff to ensure that the information set forth in affidavits/certifications submitted in foreclosure proceedings is based on a personal review of business records.”

The four lenders were among the six banks whose improper foreclosure practices, dubbed “robo-signing,” came under scrutiny. The banks were accused of signing off on foreclosure documents without personally verifying the information.

All six are in the process of negotiating a settlement with state and federal officials.

New Jersey was among the first states to take action against lenders for their shoddy foreclosure practices, Judge Jacobson noted in her order. The state’s courts received 21,752 new foreclosures in 2006 and 65,222 in 2010 through late December. Only 6 percent of cases were contested last year, meaning 94 percent lacked “any meaningful adversarial proceeding,” according to a court order at the time.

New Jersey, which follows a judicial foreclosure process, meaning a lender has to get court approval to initiate a foreclosure sale. The foreclosure process, from notice of foreclosure action to completed sale, takes 944 days in New Jersey, according to RealtyTrac.

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MultiFunding: Big banks fall short in small business loans

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Piggybankblog posted on 08/16/11

Picture posted by piggybankblog

Cross linked story with MercuryNews.com

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SANTA CRUZ – Small business owners are discouraged about seeking loans for expansion, as many of the nation’s biggest banks have yet to open up the spigot for federally guaranteed loans, which closed due to the recession.

The findings were released last week by MultiFunding, a Philadelphia small business loan adviser, 11 months after the $30 billion Small Business Jobs Act was signed into law.

MultiFunding reported Bank of America and Citibank control about a fifth of all bank deposits in the U.S. but made only 0.6 percent of all U.S. Small Business Administration 7(a) loans in 2010. Bank of America is second in deposit market share in Santa Cruz County.

Wells Fargo, which has the largest market share locally, ranked fifth on MultiFunding’s Lender Responsibility Index, holding 9 percent of deposits nationwide and making 6.5 percent of the SBA loans nationwide.

Chase ranked 10th, with 10.8 percent of deposits nationwide and 4 percent of SBA loans nationwide. Chase is third in Santa Cruz County marketshare.

MultiFunding’s July survey of 1,200 small business owners nationwide found 18 percent applied for a loan in the past year, with 58 percent getting what they requested.

Of those that did not apply, 73 percent say they still need a loan to improve business, but more than half held off, waiting for revenues to improve, fearful of rejection and discouraged by high interest rates.

Teresa Thomae of the Small Business Development Center at Cabrillo College sees the same trend locally.

With the weak recovery, many businesses have weak cash flow, and banks that lend on cash flow may say no, she said.

The SBA guaranteed 93 loans for $25 million in the county in fiscal 2006. That dropped to 56 loans for $12 million in fiscal 2009, then rose to 68 loans for $16 million in fiscal 2010.

“It’s really a difficult credit market,” said Thomae, noting some large lenders have a minimum. “Small business loans are not real profitable.”

She recommended business owners contact local lenders to get help with revenue projections.

Santa Cruz Community Credit Union led in volume last year followed by Santa Cruz County Bank, which made fewer but larger loans.

As of July 31, the credit union made 74 loans totaling $3.4 million, compared to 23 totaling $1.9 million a year ago.

“It’s picking up,” Frank Nuciforo, chief lending officer at the credit union, noting loans as small as $5,000 or $10,000 are possible.

Santa Cruz County Bank, which has no minimum loan amount, is on pace to exceed the volume and dollar from a year, according to David Heald, president and chief executive officer.

The bank has had more SBA loan applications compared to a year ago.

“Small business lending takes effort,” said Rick Hofstetter, president and chief executive officer at locally owned Lighthouse Bank, who has seen a “marked increase” in small business loan applications.

“How much easier for the nationals to make a single $100 million loan rather than 1,000 loans that might average only $100,000?” Hofstetter asked. “Those are choices you can make if you’re a multibillion- or trillion-dollar organization.”

The city of Santa Cruz has stepped in to help with the Grow Santa Cruz loan program, funded in part by Comerica, open to businesses in the city limits.

Karl Heiman, owner of Caffe Pergolesi, the oldest coffeehouse in Santa Cruz, is among those small business owners discouraged from applying for a loan. He researched the requirements, learning more than 18 different documents need to be submitted for financial verification.

“Once they go through these documents they usually have many questions, need clarification and require more documents,” he said. “It’s basically a document nightmare.”

As a borrower, he has fewer choices.

“The last bank institution I was talking to about an SBA loan wasn’t really interested in lending anything less than $1 million,” Heiman said. “So if you want a smaller loan, there are fewer banks willing to do this.”

The cost is another issue.

Lenders consider 5.25 percent historically low, but Heiman doesn’t see that as a bargain.

“Banks typically tag on one to two points on top of the prime rate,” he said.

The prime rate is about what it was a year ago, 3.25 percent.

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Is Bank of America Headed Toward Collapse?

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Piggybankblog posted on 08/15/11

Picture posted by piggybankblog

Cross linked story with alternet.org

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The nation’s largest bank has only gotten bigger since the financial crisis and the government bailouts. But is big trouble ahead for the big bank?

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Bank of America is no stranger to controversy. The largest bank in the United States has seen, in just the last six months, nationwide protests of its branches by groups like US Uncut, National People’s Action and other progressive activists angered by the company’s tax dodging, foreclosures, massive bonuses (paid after taxpayer bailouts) and other practices.

But could the too-big-to-fail behemoth actually be headed for failure?

On August 5, Yves Smith of the blog Naked Capitalism started a Bank of America Death Watch, writing:

“It is clear that the Charlotte bank has too much in the way of legal liability that it will not be able to shed and yet-to-be-taken writedowns on balance sheet items (for instance, roughly $125 billion of home equity loans and junior liens on residential real estate as of end of last year) for it not to be at risk of a death spiral.”

Back in 2008, Bank of America snapped up Countrywide, one of the subprime lenders that preyed on low-income home buyers, often with adjustable-rate mortgages that ballooned after a couple of years, leaving homeowners unable to make payments. Though it doesn’t seem hard to figure out that many people would be driven into foreclosure by such loans, Countrywide was able to repackage these loans into mortgage-backed securities that were then resold as prime products to investors—investors that often were state pension funds, like CalPERS, the funds responsible for paying the benefits owed to public employees. These are the same public employees who are now being targeted around the country as greedy and unwilling to take cuts to their pensions. The unethical actions of big banks and mortgage lenders are at fault, yet working people are expected to take the hit.

“Countrywide exploited the American dream of homeownership,” then-state attorney general, now California governor Jerry Brown said when he announced his state’s lawsuit against the lender. “Countrywide was, in essence, a mass-production loan factory, producing ever increasing streams of debt without regard for borrowers,” he said. “Californians…were ripped off by Countrywide’s deceptive scheme.”

As part of a massive settlement of Countrywide’s practices, Bank of America was supposed to modify loans to help keep people in their homes, but it’s all too often claimed the right to foreclose instead. Meanwhile, if borrowers happen to default again on a modified loan, B of A could profit from tacking added fees to the bill its investors are expected to foot.

But a wrench was thrown into B of A’s plans this summer. In June, the bank announced an $8.5 billion settlement with investors, but New York’s attorney general Eric Schneiderman, filed a motion to intervene. He called the settlement “unfair and inadequate,” and alleged “fraudulent and deceptive conduct” on the part of Bank of New York Mellon, which is the trustee in this case–supposedly acting on behalf of investors, but, Schneiderman alleges, possibly making a deal with Bank of America that gives the big bank the far better end of the bargain.

Schneiderman, unlike many government officials on the state and federal level, took the step of intervening because signing off on the settlement might affect his ability, later, to file charges against any of the companies involved.

As David Dayen at FireDogLake noted, the suit alleges that Countrywide sold what amounted to non-mortgage-backed securities to those investors. It reads:

“These provisions are central to any mortgage securitization, but they are now vitally important to trust investors in light of the housing market collapse. Any action to foreclose requires proof of ownership of the mortgage. This must be demonstrated by actual possession of the note and mortgage, together with proof of any chain of assignments leading to the alleged ownership. Moreover, complete mortgage files give borrowers assurance that their properties are properly foreclosed upon. The failure to properly transfer possession of complete mortgage files has hindered numerous foreclosure proceedings and resulted in fraudulent activities including, for example, ‘robo-signing.’ These fraudulent activities have burdened borrowers as well as the courts with flawed foreclosure proceedings.” – read more

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Bank of America’s Moynihan Begs Geithner to Give Him a Positive Mortgage Talking Point

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Piggybankblog posted on 08/14/11

Picture posted by nakedcapitalism.com

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Matt Stoller pointed out this Bank of America story on Bloomberg, “BofA’s Moynihan Said to Press Geithner on Foreclosure Agreement,” which has the perverse effect of revealing how desperate the beleaguered Charlotte bank is:

Bank of America Corp. Chief Executive Officer Brian T. Moynihan met Treasury Secretary Timothy F. Geithner to press for a settlement of probes tied to the industry’s shoddy foreclosure practices….

A settlement among banks, state attorneys general and the Department of Justice would enable lenders to resolve delinquent loans and in turn allow the U.S. housing market to recover, Moynihan told the officials.

“In the states where foreclosure can take place you’re seeing the system unclog and move through,” Moynihan said during in an Aug. 10 conference call hosted by mutual fund manager Bruce Berkowitz. “That’s different than states where foreclosure is going through very slowly.”

Let’s parse what is really going on.

First, with Bank of America stock falling 12% last week from the previous Friday’s close, down 26% over the last two weeks, and credit default swap spreads widening considerably, Moynihan is desperate for any shred of good news to stem the widely growing (and accurate) perception that the bank faces a crushing wave of mortgage litigation. Yes, BoA probably probably put Countrywide into bankruptcy, but it apparently stripped its two major entities, Countrywide Financial and Countrywide Home Loans, of assets. If true, this is almost certainly fraudulent conveyance, since it was well known at the time of the deal that Countrywide was a sinkhole of liability (your truly inveighed on that issue at the time). That means at a minimum Bank of America will still be in the headlines as to whether and how much residual liability it would have to Countrywide.

Second, Moynihan’s statement, “In the states where foreclosure can take place you’re seeing the system unclog and move through,” bears a lot of scrutiny. Whether foreclosures are “moving through” may be of benefit to banks, who get paid to foreclose, but I have not seen evidence that faster foreclosures help the housing market clear. For a market to “clear” you need to find a price where enough buyers step forward to take up the available supply. Does anyone think that if someone were to wave a magic wand and put all the defaulted properties on sale tomorrow, that hedgies and speculators around the world would snap them up? It took the Resolution Trust Corporation over four years to sell conseratorship assets that that peaked in 1990, and again roughy four years to dispose of receivership assets that peaked in mid 1991. read more

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Piggybankblogger Isabel Santamaria Fights back!

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Piggybankblog posted 08/13/11

Picture posted by piggybankblog

Piggybankblog member : Click here

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Bank of America Files A New Robo-Signed Assignment of Mortgage on Florida Couple Suing Bank of America for Racketeering

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Palm Bay, Florida, United States of America (Free-Press-Release.com) August 10, 2011 — The Palm Bay, Florida Couple that is suing Bank of America for Racketeering and other counts, just noticed that after almost two years, an Assignment of Mortgage was recently recorded on their property in the Clerk of County Courts. Bank of America acquired their mortgage sometime in August 2009 after Taylor, Bean & Whitaker, who was the couple’s original lender, went bankrupt.

Bank of America has consistently told Mrs. Santamaria that they only “service” the loan and that they do not make any decisions on the loan. The lending giant has also stated that Ginnie Mae is the investor on their loan and therefore they cannot make any decisions regarding a loan modification without Ginnie Mae’s approval. These statements by Bank of America were also submitted to the Office of the Comptroller of the Currency (OCC) and the Florida Attorney General Bill McCullom when a formal investigation was being conducted on the couple’s mortgage account due to a complaint submitted by Mrs. Santamaria.

Mrs. Santamaria had recently started to conduct her own investigation and contacted Ginnie Mae by email on July 18, 2011. Ginnie Mae responded quickly the next day. In this email, Ginnie Mae affirms that they are only an agency within the Department of Housing and Urban Development that guaranties the issuance of certain mortgage-backed securities in partnership with financial institutions such as banks, savings institutions and mortgage companies. Ginnie Mae does not lend money directly and Ginnie Mae is not directly responsible for the administration of their loan. Bank of America takes care of all aspects of the loan, they confirm.

The Assignment of Mortgage clearly states that the mortgage was transferred to BAC Home Loans. Mrs. Santamaria found all this information quite interesting and it completely contradicts what Bank of America has told her and other Federal and Regulatory Agencies regarding her loan which she alleges is an “obstruction of justice” because Bank of America intentionally provided inaccurate information about the investigation to government agencies which would be a clear violation of a RICO law. In addition, the Assignment of Mortgage was executed on July 18, 2011 and recorded on July 20, 2011, about 3 weeks after Mr. Echeverria and Mrs. Santamaria had filed a “Response in Opposition to Defendant’s Motion to Dismiss” in which the couple alleged that there was still no Assignment of Mortgage recorded on the property and that it was suspicious. The married Florida couple have reason to believe that Bank of America allegedly finally executed this Assignment in order to cover their tracks or to start foreclosure proceedings on their home.

To make matters worse, the MERS Assignment of Mortgage was allegedly signed by two “robo-signers” named Luis Roldan and Malik Basulto which are now known to be two of Bank of America’s new robo-signers so far for 2011. Who are the newest signers – who use MERS titles to assign mortgages TO BAC while actually working FOR BAC – signing as if they were MERS officers for dozens of different companies? Well, Luis Roldan and Malik Basulto are allegedly listed as robo-signers according to the investigation: http://frauddigest.com/news.php. As stated previously, these robo-signers also work for Bank of America (BAC) and therefore are not authorized under MERS. This attempt by Bank of America allegedly further confirms the massive fraud against Mr. Echeverria & Mrs. Santamaria and complete disregard of their promise back in October 2010 to stop robo-signing. According to recent investigations, Bank of America continues to file sketchy paperwork and continues to use “robo-signers” for foreclosures, affidavits, mortgage assignments and other documents

The couple had already included “wire fraud” in their lawsuit against Bank of America and if this accusation by the Plaintiffs holds true, this Assignment of Mortgage and any other foreclosure documents that Bank of America might file will also be considered as “wire fraud” which is also a racketeering (RICO) crime.

The couple plan to organize a large protest in front of Bank of America’s Downtown Orlando building. They intend to prove that Bank of America is racketeering and that they intentionally show complete disregard for minorities and families that have disabled family members (as in Mr. Echeverria & Mrs. Santamaria’s case) even after many pleas for help and assistance.

The case is Echeverria et al v. BAC Home Loans Servicing, LP et al; 6:2010cv01933 (Middle District of Florida Orlando Division).

For more information about this case or the upcoming protest, please send all requests or questions via email to: andyecorso@yahoo.com

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Under new rules, loan modification won’t protect you from foreclosure

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Piggybankblog posted on 08/13/11

Picture posted by piggybankblog

Cross linked story with sun-sentinel.com

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Many South Florida homeowners facing foreclosure may believe getting a preliminary loan modification offer from their lender will save them from losing their home. But, in fact, new rules approved by Fannie Mae allow lenders to continue foreclosure proceedings on those who haven’t made a mortgage payment in more than 120 days.

Those homeowners are safe only when they go back to regularly paying their mortgage, which typically happens only after a permanent loan modification is in place.

In June, Fannie Mae, which backs many mortgages in South Florida and across the country, ordered lenders not to start foreclosures on homeowners who are less than 120 days behind. Instead, lenders must offer loan modifications or other solutions.

But that’s not the case for those who are at least four months behind in their payments. Lenders can continue with the controversial “dual tracking” for them, so struggling owners can be paying in a trial modification program while going to court to fend off foreclosure.

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Video: Animated hypersonic aircraft flight

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With Fannie Mae’s backing, lenders won’t call off a foreclosure, until those homeowners prove that they can make the cheaper monthly payments, said Fannie Mae spokesman Andrew Wilson.

“We don’t want foreclosures to happen; we want to prevent them from happening but at some point it becomes necessary to proceed with foreclosure,” Wilson said.

Under the new policies Fannie Mae adopted in June, lenders can be stricter with owners with more delinquent loans — and that includes tens of thousands of Floridians, with the state leading the nation with foreclosure cases.

About 149,000 Florida mortgage holders were delinquent more than 90 days in the first quarter of this year, according to the Mortgage Bankers Association. A majority of the delinquent loans in the state are at least 90 days late, the association said. It does not have statistics for loans more than 120 days delinquent or for how many are in South Florida specifically.

In the past year, many South Florida homeowners have reported lenders have proceeded to foreclose on their homes, even though they have sought or secured preliminary loan modification agreements. Homeowner advocates have said many people may mistakenly believe such an agreement can save them from foreclosure.

Broward teacher Saint-Pierre Pierre, 40, is one of those late payers caught in what he considers a scary, confusing web involving Broward County foreclosure courts and his lender. He is making payments under a preliminary modification plan for his home in Pompano Beach. Meanwhile, he files court briefs on his own — he says he can’t afford an attorney — to fight off foreclosure. “I don’t want to walk away from my home,” Pierre said.

Pierre, who teaches history at Stranahan High, said he thought he was protected from foreclosure if he enrolled in a loan modification program. But Fannie Mae lenders will cancel foreclosures only when homeowners start on a regular permanent payment plan, Wilson said.

Pierre, who started a second job teaching at Broward College, has made the first two of three payments in his trial period, Wilson confirmed. PHH Mortgage first offered Pierre new loan payments in late May.

“We want to continue to work with you to modify your mortgage and help make your payments more affordable,” the lender wrote Pierre in a letter. PHH Mortgage told Pierre that if he made three trial payments of $1,146.61 — about $400 less than his original payment — then “your mortgage will be permanently modified.”

Pierre said he had been asking for two years to have his payments permanently reduced after his income dropped about 20 percent when Broward Public Schools could no longer afford to pay him and other teachers to work extra hours. His income fell from $66,309 in 2008 to $52,837 in 2009.

One early loan modification offer was rescinded. Then PHH Mortgage, he said, lost paperwork he sent in to apply for a new program. “They asked me to resend it four or five times,” he said. He hadn’t paid his mortgage for two years, because Pierre said he kept waiting for a new payment schedule.

So, he said he was thrilled to finally get a new offer in the mail. Then Pierre said he was surprised to receive a letter from attorney Lara Diskin informing him that PHH Mortgage would ask at a July 21 hearing for a summary judgment to foreclose on his home. The lender had started foreclosure in late 2010.

Broward Circuit Judge Maria Garcia-Wood set a December date for the house to be sold on the courthouse steps.

Dico Akseraylian, vice president of PHH Mortgage communications, said his company could not cancel Pierre’s foreclosure proceedings until he paid the final trial payment due Sept. 1. Pierre said he mailed the final payment Friday. If he did, then the foreclosure will be called off and his house won’t be sold, Fannie Mae spokesman Wilson said.

Meanwhile, Pierre plans to ask Garcia-Wood at an Aug. 19 hearing to reconsider her final foreclosure judgment. “I live at the courthouse,” he said. “It’s been a running circle. It’s driving me crazy.”

Where to find help

For information on loan modifications or other programs to help struggling homeowners, go to knowyouroptions.com that has a number of resources, interactive tools and other information for homeowners

You can call toll-free 877- 208-3652 to set up an interview to talk about your loan. The help center’s email address is south_florida@fanniemae.com

dgehrke@tribune.com or 954-356-4205

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Bank of America CEO struggles to turn stock around

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Piggybankblog posted 08/12/11

Picture posted by piggybankblog

Cross linked story with fiercefinance.com

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Whenever a bank stumbles as mightily as Bank of America has, you will inevitably hear criticism aimed at the CEO. Usually, it starts very subtly, and then over time, as the woes linger, the criticism morphs into a full-throated howl for the CEO to step down.

Regarding Bank of America CEO Brian Moynihan, we’re still very early in this process, leaving him much time to get the bank moving in the right direction. But we are hearing some intimations. No use sugarcoating that.

Breakingviews for example writes: “Mr. Moynihan should act fast. He may be running out of time to win investors over.” FOX Business star correspondent Charlie Gasparino has reported, “I have spoken to at least four people close to Mr. Moynihan; they tell me he is under tremendous pressure to turn the stock around or he will have to go.”

Youtube not part of article and posted by piggybankblog:

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A lot of this is heat-of-the-moment stuff. The CEO’s chin will always be the first in line for verbal jabs. Just as Lloyd Blankfein at Goldman Sachs. Everything is magnified right now, especially mistakes and verbal gaffes (not that Moynihan has made any). In any case, he’ll have to watch his every word. Much of the plunge in the Bank of America stock can be sourced to the larger market downdraft. Mr. Market will start to differentiate among the banks at some point. Then, if the bank stays at 30-35 percent of book value, people will start to take the talk about Moynihan’s status more seriously. A more positive spin on this, if he can get the stock moving north, he’ll be the hero.

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Bank of America death-watch

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Piggybankblog posted on 08/12/11

Piggybankblog posted picture

Cross linked story with salon.com

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By Yves Smith

One of the most mesmerizing aspects of the market rout of the last week is the decline in Bank of America’s stock price. It fell a stunning 20% yesterday, and even with a strong rebound today, it closed over 22% below its level of two week ago. That puts it well below half of the book value, which is a serious vote of no confidence. An even more troubling sign is that its credit default swaps, which strongly influence the bank’s cost of raising new funds in the bond market, have also shown considerable decay.

Yet officials at the Financial Stability Oversight Council, which had an emergency conference call last night, as well as many equity analysts believe that banks in general, and Bank of America in particular, have good liquid reserves and are in a much better position than they were going into the crisis.

So why is Bank of America at risk? The short answer is that it may be insolvent even if it is liquid. Consider two individuals. One makes only $30,000 a year but spends $50,000. He inherited 20 Picassos worth at least $1 million each even in a terrible art market. He has arranged to sell one which he figures will cover his expenses for a very long time. However, the buyer, who pretended to be from a reputable gallery, instead absconds with the painting. Until the owner sells a second painting, he is scrambling for cash. No one doubts that he will be money good, but he is having trouble raising the funds right now.

Consider a second individual. He makes $70,000 a year and his expenses are $60,000. But a friend lent him $500,000 personally to start a business, and that never got off the ground. They have a former written agreement, but the borrower pays no cash interest (his friend is treating the annual interest due as a gift under IRS rules). The note is due in five years but they plan to replace the old loan with a new one if he can’t repay, which looks certain.

The lender gets in a financial pickle himself, and enters into agreement with Mr. Tough Collector to sell some assets to raise cash. Due to inartful drafting by his attorney, the $500,000 loan gets transferred to Mr. Tough Collector. So our hapless entrepreneur is going to face a shakedown by Mr. Tough Collector in five years, since absent winning the lotto, he looks unlikely to have $500,000, and will probably have to go bankrupt.

Bank of America’s situation is a lot like that of the borrower who has a looming obligation he can’t meet. But unlike having a well identified big debt to pay down the road, the financial behemoth faces large but uncertain in size payments in the future thanks to pending and growing lawsuits to recover alleged damages resulting from the misdeeds of its acquisition, Countrywide. The current wave of litigation that has investors rattled results from Countrywide telling investors that the loans they were packing into securities were much better than they really were.

The Charlotte bank tried to put most of that problem behind it by entering into a settlement for $8.5 billion, which if they can pull it off, will be the bargain of the century. But that deal is being challenged on multiple fronts, including by New York state attorney general Eric Schneiderman. It looks like that pact either will not go through or will be renegotiated substantially and cost Bank of America a good deal more.

Another blow landed Monday when it was sued by AIG for $10 billion, for the same sort of liability it was seeking to discharge in the settlement. If one investor thinks it is owed $10 billion on $28 billion of mortgages,. or 35%, when the old settlement deal for $8.5 billion was for only about 3.5% of the total amount of bonds, that alone shows how much more Bank of America might have to shell out.

And that’s only one risk Bank of America faces. The meteor-hitting-the-financial-system sort of lawsuit, which no one has dared to launch, would attack originators and packagers like Countrywide for failing to transfer mortgages properly to the mortgages securities in the first place, in violation of their own contract. This astonishing and apparently widespread “securitization fail” is leading to more and more underwater homeowners successfully challenging foreclosures in court. And it is also leading to banks undermining the rule of law. The robosigning scandal of last fall is only the tip of the iceberg. Both Schneiderman and Delaware’s attorney general Beau Biden are investigating conduct by mortgage securitizers on a broad basis. Schneiderman’s objection to the Bank of America settlement notes:

The ultimate failure of Countrywide to transfer complete mortgage loan documentation to the Trusts hampered the Trusts’ ability to foreclose on delinquent mortgages, thereby impairing the value of the notes secured by those mortgages. These circumstances apparently triggered widespread fraud, including BoA’s fabrication of missing documentation.

This language suggests that he may be considering legal action against Bank of America over this issue.

And on top of that, Bank of America has roughly $125 billion of home equity loans and other second liens on its balance sheet. Most of these will be worth nothing in a foreclosure but bank like BofA have taken only relatively modest writedowns because they are applying strong arm tactics to borrowers to persuade them to pay (in preference to the first mortgage which is actually senior). And for home equity loans, which are the overwhelming majority of the bank’s second liens, the banks can count a loan as current even if the borrower sends only a partial payment (this isn’t the case with first mortgages). So they are a great vehicle for extend and pretend.

The danger of BofA lumbering on if it is truly insolvent is that its counterparties and creditors are effectively throwing good money after bad. The poster child of this phenomenon is Greece, which virtually all economists agree is going to have to default on its loans or have them restructured. But since May of 2010, the Eurozone supervising adults have engaged in a succession of rescue packages, the latest of which was economically equivalent to a restructuring, but far short of what was necessary. The ultimate result will be bigger losses than if the problem were dealt with sooner.

Banking expert Chris Whalen, in a Reuters opinion piece today, argues that Bank of America needs to be put into Dodd Frank resolution because it threatens other banks and the economy. But no one has ever used the new Dodd Frank approach, and both the Bank of International Settlements and the well respected Institute for International Finance have said Dodd Frank won’t work on overseas operations. This is a major problem, since the Bank of America subsidiary has major trading operations around the world. Merrill was too big to fail before the crisis, and Dodd Frank’s only viable approach for dealing with major dealer firms is to get them sold, rather than to resolve them.A former Treasury official has also expressed serious doubts. But no banks look like obvious Merrill buyers, ex a subsidy, and it’s hard to imagine subsidies will be easy to arrange with the Tea Party on an anti-spending and anti-Federal Reserve warpath.

So Bank of America is a sword of Damocles over the banking system, and looks more and more troubled as time passes. Yet the history of the crisis and its aftermath suggests that the officialdom is loath to intervene unless forced to. And we know how well that turned out the last time around.

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Brian Moynihan’s Credibility Crunch at Bank of America

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Piggybankblog posted 08/12/11

Picture posted by piggybankblog

Cross linked story with businessweek.com

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Bank of America CEO Moynihan is taking heat from shareholders Arnd Wiegmann/Reuters

Bank of America (BAC) Chief Executive Officer Brian Moynihan may wish he had stuck to his November vow to fend off mortgage-refund demands with “hand-to-hand combat.” Since January, he has forged a series of multibillion-dollar settlements with buyers and insurers of shoddy loans created by Countrywide, the subprime lender the bank took over in 2008.

So far, the conciliatory approach has backfired. The Charlotte-based firm disclosed this month that Fannie Mae (FNMA) and Freddie Mac (FMCC), the government-sponsored enterprises that settled with the bank for $3 billion, are stepping up demands that it repurchase soured loans. Attorneys general from New York and Delaware have challenged the bank’s June $8.5 billion deal with institutional investors. And on Aug. 8 bailed-out insurer American International Group (AIG) said it will seek more than $10 billion from the bank over mortgage securities gone bad. The bank did not respond to requests for comment.

The expanding legal risk has shareholders concerned that Bank of America, the biggest U.S. lender by assets, may need to sell new shares to comply with more strict international rules on capital—something the bank’s chief has repeatedly said would not be necessary. Adding to Moynihan’s woes are signs the U.S. economy is stalling, a prospect that would punish Bank of America most out of the big U.S. lenders: 80 percent of the bank’s 2009 revenue came from the U.S.

All of these worries are reflected in the stock, which has shed nearly half of its value this year, including a 20 percent plunge on Aug. 8. Bank of America trades at about one-third of its book value, the lowest among the 10 largest U.S. lenders, compared with above 70 percent for JPMorgan Chase (JPM) and Wells Fargo (WFC), reflecting doubt about Bank of America’s assets. “If we continue to see the stock crater, if we continue to see these lawsuits come up, at some point people are going to rise up and say maybe we need to break this thing up and have a different structure,” says Paul Miller, an analyst at FBR Capital Markets (FBRC). “Brian is probably not the guy to lead that.” Adds Joshua Rosner, an analyst at the New York-based research firm Graham Fisher: “Management has either misled investors or incorrectly assessed the cost of their litigation risks for the better part of the past year.”

Moynihan, 51, has repeatedly stated the bank is stable and that it can set aside enough earnings to comply with the new capital requirements, which will probably be phased in through 2019. “The most important point to keep in mind is that our company remains financially strong—in particular, much stronger than we were either during or coming out of the economic downturn of 2008-9,” he wrote in an Aug. 8 memo to employees. Moynihan declined to be interviewed for this story.

One analyst speculates Bank of America might sell the Merrill Lynch operations, acquired in 2009, to raise capital. The business may garner $50 billion, wrote Mike Mayo of Crédit Agricole Securities in an Aug. 8 note. The Merrill investment bank and wealth management units generated about $4.7 billion in earnings in the first half of 2011, while the overall company posted a $6.8 billion loss on a record $20.7 billion in second-quarter mortgage charges. “If I’m Merrill Lynch, I’d want out of there,” says Miller. “Any profit I bring to the table gets sucked up by the Countrywide vortex.”

Moynihan could also put the Countrywide unit into bankruptcy, say analysts including Jonathan Glionna of Barclays Capital (BCS) and Chris Whalen of Institutional Risk Analytics. Yet such a move risks being deemed a default by bond investors, which could lead to a forced restructuring by regulators, Whalen says.

The least unpalatable of Moynihan’s options could be reversing his pledge to not issue stock. While the bank may earn enough to reach capital standards over the next few years, regulators could force Moynihan’s hand, Glionna said in an Aug. 9 research note.

That wouldn’t sit well with current investors, who would suffer yet another decline in their holdings. “It’s not a zero percent probability,” says Glenn Schorr, an analyst at Nomura Holdings (NMR). “But unless a regulator puts a gun to their head, they’re going to do their best to not dilute shareholders.”

The bottom line: Bank of America faces few palatable options for raising fresh capital, even as the cost of settling mortgage loan claims balloon. – read more

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BofA Has Activist Arrested For Delivering Complaint

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Piggybankblog posted on 08/11/11

Piggybankblog posted picture

Cross linke story with thinkprogress.org

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Two weeks ago, the Chicago city council passed a new statute that “will make lenders liable for the upkeep of vacant homes even when the borrower still holds the title.” The law was passed unanimously and will take effect in September. The importance of this new law came into focus last week when two firefighters were injured battling a fire that sprung up in a vacant home in the Englewood neighborhood on the south side of Chicago.

As Aaron Krager notes, this outraged activists from Action Now, a local community group. Marsha Goddard, who is a board member of the organization, led a group of five people to a local branch of Bank of America, which owned the vacant property, to inform the bank about code violations that it would be liable for when the law goes into effect.

The megabank responded by having Goddard arrested. Action Now explains that it was not engaging in a civil disobedience action and simply wanted to share the code violations with Bank of America:

Marsha Godard, 52, a Westside mother and account holder at Bank of America, is a board member of Action Now. She led a group of five people into the Bank of America headquarters at LaSalle and Jackson today with copies of complaint forms filled out by community residents who want the bank to clean up and maintain the thousands of vacant properties the bank owns in neighborhoods across the city. Bank of America had refused to accept the complaints, and Marsha had said she wasn’t leaving until they did. They had her arrested immediately. [...] This was not a planned civil disobedience action. We had no intention of taking arrests. In fact, we thought we had gone out of our way to do Bank of America a favor by doing the research for them on code violations.

Goddard and her fellow activists are not deterred by the arrest. They plan to hold rallies outside the bank branch every day for the rest of the week and will continue to call attention to dangerous vacant properties that it will soon be liable for maintaining.

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Bank of America Harasses Widow During Husband’s Wake

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Piggybankblog posted on 08/10/11

Picture posted by piggybankblog

Cross linked story with 4closurefraud.org

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HONOLULU (CN) – A widow says Bank of America cruelly harassed her during her husband’s wake, making repeated dunning calls to a speaker phone set up for condolences, though the bank knew her husband had just died, and that it would get its money as soon as she received her life insurance check.

Deborah Crabtree sued Bank of America Home Loans Servicing, Bank of America, and Countrywide Home Loans on 16 counts, including unconscionability, bad faith, outrage, misrepresentation, unjust enrichment and violations of state laws.

She says the bank called her “incessantly every day” after her husband died. During the wake at their home, she says, she and her children had set up a speaker phone to receive condolence calls. She says the bank called “every 15 minutes during the wake,” broadcasting “throughout the house, stating, ‘This is Bank of America, and we are calling to collect with regards to a debt.’”

Crabtree says that other companies granted her requests for 30 days to get her husband’s business affairs in order, and her life insurance money – but not Bank of America.

She says the bank’s collectors called throughout the wake, “every 15 minutes, forcing plaintiff, her son, Daniel, or her daughter, Tracy, to rush to the phone to hang it up before the message was broadcast throughout the house again.”

And it didn’t stop with the wake. She says Bank of America has continued its barrage of “incessant … every 15-minute” phone calls, up to “48 phone calls daily,” as it tried to foreclose on her home.

The day after her husband died, the widow says, she “tried to explain to defendants that her husband, Robert, had died the day before, and that she needed at least 30 days [to] get her husband’s business affairs in order, and that she would pay them and get her accounts up-to-date as soon as she received his life insurance.”

She told the bank she had only “$5K on hand for food for the family, to bury her husband and prepare for the wake.”

But the bank told her that “the calls are computer generated and they won’t stop until they are paid.”

She says the bank did this even though she had “repeatedly told defendants she had the canceled checks, telephone payment confirmation numbers and/or a record of bank withdrawals to prove her payments.”

Fat chance. Crabtree says Bank of America told her that “they could legally call her up every 15 minutes, every hour from 7:00 a.m. until 7:00 p.m. at night, seven (7) days a week and they would continue to make such calls.”

She says she and her husband had been current on their mortgage since the inception, except for the immediate period surrounding Robert Crabtree’s death.

She says Bof A also charged her for unnecessary hurricane insurance coverage, after she provided proof of coverage with a non-party, and says it continues to threaten her with foreclosure.

Crabtree, 63, is represented by Gary Shigemura.

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‘Sweet Justice’: A Florida Couple ‘Forecloses’ On Bank Of America.

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Piggybankblog posted on 08/10/11

Piggybankblog posted picture

Cross linked story with NPR

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by Eyder Peralt

Over the past few years, we’ve heard plenty of horror stories about bungled foreclosures. The one of Warren and Maureen Nyerges, from the Naples, Fla. area, is just as bad. In 2009, they bought a home with cash, yet in 2010 Bank of America tried to foreclose on them. It took two months of phone calls and eventually court intervention to clear up the misunderstanding.

In December, a judge ordered the bank to pay the couple $2,500 in attorney fees. But months went by and the bank never cut a check. So, the Naples Daily News reports, Nyerges hired a lawyer, who pursued a levy, and this past Friday the showdown was on: The Nyergeses showed up to a local branch of Bank of America with the sheriff, the media and some movers with a truck:

“I’m either leaving the building with a whole bunch of furniture, or a check or cash or something,” the attorney, Todd Allen, vowed.

It was a scene that turned the foreclosure crisis on its head, if briefly. Collier County sheriff’s deputies entered the bank shortly after 9 a.m., located the bank manager and presented him with a court writ and a familiar choice: Pay the money or prepare to lose possessions.

Allen told local station WFMY that he had ordered the deputies to take photocopiers, desks, computers and even whatever cash was in the drawer to settle the debt. Allen said the bank manager on duty was “visibly shaken.”

“Having two sheriff’s deputies sitting across your desk and a lawyer standing up behind them demanding whatever assets are in the bank can be intimidating, but so is having your home foreclosed on, when it wasn’t right,” Allen said.

An hour later, the bank cut a check. Allen called it “sweet justice,” because this case, he said, is a symptom of a larger problem. If you remember, Bank of America, GMAC and JPMorgan Chase were forced to freeze their foreclosures late last year, to evaluate whether they had made errors.

Here is video of WFMY’s report:

 

 

 

Moynihan tells staff Bank of America on right path

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Moynihan says unsettling times for clients and staff

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Piggybankblog posted 08/09/11

Piggybankblog posted picture

Cross linked story reuters.com

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* CEO says bank taking aggressive action on legacy issues

* Reassures staff the bank will weather latest crisis

By Joseph A. Giannone

NEW YORK, Aug 9 (Reuters) – With Bank of America Corp (BAC.N) stock in freefall, Chief Executive Brian Moynihan moved to reassure employees that the big, bloodied bank was on the right path and could weather the current storm.

“We are aggressively taking action to put the legacy mortgage issues behind the company — even at great short-term cost — and to help get the U.S. housing market going again,” he said in a letter to the bank’s nearly 288,000 employees late on Monday. “We have weathered challenging times before and we will now.”

 

The largest commercial bank’s stock price sank 20 percent on Monday to its lowest level since the end of March 2009, a period when many investors were worried the U.S. government might nationalize BofA and other banks saddled under unwanted mortgage and credit assets.

Now Moynihan, besieged by a weak economy choppy markets and a stream of litigation and regulatory probes, is under the gun to keep clients and employees from fleeing the ship

“This is an unsettling time — not just for our shareholders, but also for all of our teammates,” he wrote.

Moynihan said the bank’s capital ratios are much stronger than during the financial crisis of 2008, when the Charlotte commercial bank received a $45 billion bailout by the Treasury Department. Bank of America had been weakened by its 2008 takeover of mortgage giant Countrywide and its agreement to rescue hard-hit investment bank Merrill Lynch.

And with the exception of the residential mortgage business, which continues to get slammed by falling home prices and legal fallout stemming from the crisis, Bank of America’s businesses are all in the black, he said.

Stocks broadly have plunged in the past week, capped off by frenzied selling on Monday after Standard & Poor’s cut its rating on U.S. government debt to AA-plus.

On top of that, BofA was clobbered by news that insurer American International Group filed suit seeking $10 billion for losses on mortgage securities.

Moynihan said the bank’s capital ratios and excess cash are higher than they were a year ago, and that most of its legacy mortgage issues have been resolved. BofA has reserved $18 billion to settle outstanding mortgage-related issues.

“Most of the factors driving market volatility are beyond our control,” he said, “but for matters within our control, we are taking action.”

Moynihan’s letter is one part of a full-court press by Bank of America management to soothe customers and employees during these unsettled days

Bank of America wealth and investment management president, Sallie Krawcheck early on Monday taped a message of reassurance for the bank’s Merrill Lynch, U.S. Trust and retirement services advisers and employees

Krawcheck late on Friday had canceled a teleconference with the press, which had scheduled for Monday morning to discuss a quarterly survey of the views of affluent investors.

“Sallie and those guys are so focused on advisers right now they don’t have time for the call,” a spokesman said.

 

Moynihan will on Wednesday submit to a public grilling from hedge fund Fairholme Capital founder Bruce Berkowitz, one of the bank’s top shareholders. Fairholme set up the call and solicited questions from investors before BofA shares sank.

In midday Tuesday trading, Bank of America shares rose 7 percent to $6.99 a share, about one-third its June 30 reported book value.

 

(Reporting by Joseph A. Giannone and Joe Rauch; editing by Gunna Dickson)

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Bank of America: Rumors Provide Rare Opportunity

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Piggybankblog posted 08/09/11

Piggybankblog posted picture

Cross linked story with seekingalpha.com

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With Bank of America (BAC) dropping precipitously in the last week, the rumor mill is running faster than the central bankers’ printing presses. From a close of $9.81 last Monday, to a current price of $6.51, the stock has dropped more than $3 in a week. The rumors predicting the demise of this bank have fed on their own success and created downward movement. And with each drop in price, new more damaging rumors emerge.

Rumor #1- Management Misunderstands Mortgage Issues

Everyone is aware that Bank of America owns Countrywide, and along with that purchase came many tens of billions of dollars of bad loans, lawsuits, and settlements. Management has been slow to react, and controversial in how they have handled the issues in a very piecemeal fashion. In fact, many of those settlements and bad loans have already been charged off over the past 2 years by the bank, with the most recent charge offs totaling over $20B. However the rumors still persist, and the fear that the surface has barely been scratched is alive and thriving.

Rumor #2- Hedge Fund’s Being Squeezed Out

Some high profile hedge funds have been large holders (and defenders) of BAC, including Tepper, Berkowitz, and Paulson; and there are rumors that some may be the subject of a targeted bear raid in anticipation of redemptions. While we have no information that would support or deny the rumored allegations, we do not care who the other owners are at these half-off prices.

Rumor #3- BAC’s Creditors Will Demand More Collateral

As their CDS (credit default swaps) increase in price, the fear that BAC will need more money to cover their counter-party risk has risen. Management has consistently stated that they do not anticipate needing more capital, but rumors are circulating that several creditors are getting nervous.

The market fears that if true, then BAC will undergo another painful round of dilution, which theoretically can be done at whatever the prevailing market price is at the time they discover they need the new capital. We certainly would care if the bank had to dilute their common shareholders, but two points are relevant when evaluating this rumor:

BAC as recently as today has denied that they need new capital.

If they needed new capital, the haircut wouldn’t be at a 50% discount to its current tangible book value.

Tangible Book Value

Bank of America had $12.65 on tangible book value per common share on June 30, 2011. That is assets minus liabilities minus intangible assets such as goodwill. This measure assumes that the value of the asset is exactly the value of the asset, and gives no premium for the market position (ie. largest bank in the United States and one of the major primary dealers of the Fed).

The difference between their $20 book value, how most banks were valued in the past, and tangible book value simply highlights the degree of skittishness in this market. As the evaluation metrics move to discount the already discounted metrics, then it is a sign that the valuation has become silly.

Rare Opportunity

BAC is very cheap and a rare opportunity to buy into a franchise that has the power to earn $3 per share once the environment stabilizes. As the price of BAC has dropped to roughly half of its tangible book value, the opportunity to profit has increased proportionally. Yes, Bank of America has more mortgage issues to work out, and those will drag on earnings for the balance of this year. However, to shave $60B off of the market cap for a situation that is closer to the 7th inning stretch than the first pitch, is too much fear and belief in the rumors of the day. We believe that investors should buy BAC on this short-sighted fear surge, and dollar cost average down if it continues to go lower.

Disclosure: I am long BAC.

 

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A.I.G. to Sue Bank of America Over Mortgage Bonds

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Piggybankblog posted 08/08/11

Picture posted by piggybankblog

Cross linked story with nytimes.com

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The American International Group is planning to sue Bank of America over hundreds of mortgage-backed securities, adding to the surge of investors seeking compensation for the troubled mortgages that led to the financial crisis.

The suit seeks to recover more than $10 billion in losses on $28 billion of investments, in possibly the largest mortgage-security-related action filed by a single investor.

It claims that Bank of America and its Merrill Lynch and Countrywide Financial units misrepresented the quality of the mortgages placed in securities and sold to investors, according to three people with knowledge of the complaint.

A.I.G., still largely taxpayer-owned as a result of its 2008 government bailout, is among a growing group of investors pursuing private lawsuits because they believe banks misled them into buying risky securities during the housing boom. At least 90 suits related to mortgage bonds have been filed, demanding at least $197 billion, according to McCarthy Lawyer Links, a legal consulting firm. A.I.G. is preparing similar suits against other large financial institutions including Goldman Sachs, JPMorgan Chase and Deutsche Bank, said the people with knowledge of the complaint, as part of a litigation strategy aimed at recovering some of the billions in losses the insurer sustained during the financial crisis.

The private actions stand in stark contrast to the few credit crisis cases brought by the Justice Department, which is wrapping up many of its inquiries into big banks without filing any charges. The lack of prosecutions — the Justice Department has brought three cases against employees at large financial companies and none against executives at large banks — has left private litigants, mainly investors and consumers, standing more or less alone in trying to hold financial parties accountable.

“When federal authorities don’t fulfill their obligation to enforce the law, they essentially give an imprimatur to the financial entities to do whatever they want and disregard the law,” said Kathleen C. Engel, a professor at Suffolk University Law School in Boston. “To the extent there are places where shareholders and borrowers can pursue claims, they are really serving the function of the government. They are our private attorneys general.”

Though many in the public have called for more accountability for parties involved in the financial crisis, criminal charges on complex financial matters can be difficult to prosecute.

A spokeswoman for the Justice Department said the government was vigorously pursuing cases where appropriate, and she pointed to a recent jail sentence for the chairman of the mortgage company Taylor, Bean & Whitaker. The spokeswoman, Alisa Finelli, declined to say how many people the government had assigned to that task.

“Prosecutors and agents determine on a case by case basis the importance of relevant evidence developed in private litigation and how such evidence should be pursued,” Ms. Finelli said. “Civil litigation involves a lower standard of proof than is required for a criminal prosecution, where prosecutors must have sufficient evidence to prove beyond a reasonable doubt that a crime has been committed.”

On Friday, the department announced it had concluded its investigation into Washington Mutual, the Seattle-based bank that nearly collapsed because of its risky mortgages, without finding evidence of criminal wrongdoing. The Justice Department has also concluded its investigation into Countrywide’s conduct leading into the financial crisis, according to a person with knowledge of that case.

Even more investigations may soon be shut down because the Justice Department is heavily involved in negotiations between big banks and state attorneys general that may give the banks broad immunity against future claims. The state attorneys general are weighing these requests in the mortgage servicing and foreclosure cases, even though the government has not pursued the most basic investigation of these practices.

As it has in similar cases, Bank of America is likely to dispute A.I.G.’s claims, in the suit, which is expected to be filed on Monday in New York State Supreme Court. When asked generally about the quality of mortgage bonds issued by companies that are now part of the bank, Lawrence Di Rita, a spokesman for Bank of America, said the disclosures were robust enough for sophisticated investors. He said many of the loans lost value because housing fell.

“Now you have a lot of investors and lawyers who are seeking to recoup the losses from an economic downturn,” Mr. Di Rita said. The bank has not yet seen A.I.G.’s suit.

A.I.G. also plans to file a request to intervene in the $8.5 billion settlement proposed in June by Bank of America and Bank of New York Mellon, which represents mortgage security investors including BlackRock and Pimco. Mr. Di Rita said on Sunday that large sophisticated investors have signed on to that deal.

A.I.G. plans to object to the deal because it believes the amount is too low and that Bank of New York’s role was rife with conflicts, according to the people with knowledge of A.I.G.’s plans.

A spokesman for A.I.G. declined to comment. but the company’s chief executive, Robert H. Benmosche, told shareholders in 2010 that he was considering litigation to recover loss – read more

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Bank of America agrees to write down California mortgage principal

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Piggybankblog posted 08/08/11

Piggybankblog posted picture

Cross linked with latimesblogs.latimes.com

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Bank of America has begun writing down principal on the mortgages of some troubled borrowers in California through a state program intended to help people facing foreclosure.

The bank has signed on to the principal reduction component of the Keep Your Home California program, which uses federal funds reserved for the 2008 rescue of the financial system to help homeowners behind on their mortgages. For full details of the program, click here.

BofA is the largest of the nation’s major banks to join the program, which was launched this year with $2 billion in federal funds. The California Housing Finance Agency, which runs the program, said BofA has been writing down principal on some mortgages as part of a pilot program since February and is now moving into full participation.

“California has been particularly hard hit by reductions in property values,” Rebecca Mairone, national mortgage outreach executive for BofA, said in a statement.

The bank services more than 2.2 million home loans in California, according to the housing agency. Consumer advocates criticized the lack of major mortgage servicer participation when the program was launched this year. Officials said they hope the program will encourage other major financial institutions to join.

“We’re excited to have Bank America on board for one more of the Keep Your Home California programs,” Claudia Cappio, executive director for the agency, said. “We believe principal reduction can be an appropriate tool for helping qualified homeowners obtain an affordable and sustainable modification. We continue to work with other mortgage servicers to offer this to their customers.”

The principal reduction program is aimed at helping cash-strapped Californians who are “underwater” on their mortgages — those owing more on their properties than what those homes are worth. Those borrowers who qualify could be eligible for a total principal reduction of up to $100,000 through the program.

The program allows for up to $50,000 in aid to troubled borrowers. Banks participating in the principal reduction component are required to match that aid. Mortgages owned or guaranteed by Fannie Mae or Freddie Mac are among those that are not eligible for principal reduction.

Keep Your Home California has several other programs, including one that helps people pay their mortgages as well as provides moving assistance to certain borrowers who lose their homes to foreclosure. State officials hope to fend off foreclosure for about 95,000 borrowers and provide moving assistance to about 6,500 people who do lose their homes.

RELATED:

California plans $2-billion program to help distressed homeowners

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Exclusive | Citizen Warrior Video of Washington AG Rob McKenna’s Press Conference Aug 5, 2010, Announcing Lawsuit Against Recontrust (BofA) in Washington v Recontrust

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Piggybankblog posted 08/07/11

Youtbe and story from 08/06/11

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Fannie’s Bailout Grows by $5 Billion as It Squeezes Bank of America

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Piggybankblog posted on 08/07/11

Picture posted by piggybankblog

Cross linked story with thealantic .com

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The firm is taking a more aggressive stance on forcing the institution to repurchase its bad loans, which is good news for taxpayers

Fannie Mae hasn’t given up yet. Although the troubled mortgage company requested another $5.1 billion from the U.S. government to survive on Friday, it appears to be squeezing every penny out of Bank of America that it can. The bank reports that its loss on Fannie repurchases is no longer certain, as Fannie’s strategy evolves. This is good news for taxpayers, but bad news for Bank of America’s shareholders.

Taxpayers Throw Fannie Another $5.1 Billion

As home prices began to fall in the second half of last year, Fannie’s losses began to grow again. In the second quarter, the firm lost $6.1 billion, down a bit from its first quarter loss of $6.5 billion. Most of this loss will be covered by taxpayers, however. Fannie was seized by the U.S. government in 2008 in order to prevent a catastrophic market failure.

In the second quarter, it needed $5.1 billion from the U.S. Treasury, also down from its first quarter need request of $8.5 billion. At this time, taxpayers have plowed $103.8 billion into the troubled company. Together with Freddie Mac’s Treasury requests through the first quarter, the mortgage companies’ bailout now totals $168.5 billion.

Fannie has already said that it does not foresee a time when it will manage to pay back taxpayers in full. Even if its losses decline and it becomes profitable again, it will never overcome the headwind of dividend payments on its bailout that it must pay Treasury. For example, in the second quarter, its $5.1 billion capital draw included $2.3 billion in dividends paid to Treasury. The dividend grows each quarter, and Fannie will never be able to dig out of its hole as a result.

Still Fighting for Taxpayers?

But Fannie isn’t simply shrugging as it endures these losses. It appears to be more aggressively pushing banks to cover losses that the firm believes they should be responsible for. On Friday, Bank of America reported that it faces a wider-than-expected loss on mortgages due to soured loans Fannie is requiring the bank to repurchase.

Hugh Son at Bloomberg explains:

Fannie Mae can request a buyback if a mortgage insurer denies coverage for a Bank of America loan, even when the lender disputes the insurer’s decision, according to yesterday’s filing. Companies currently have three months after being denied coverage to appeal the repurchase demand and will have just 30 days starting in July 2012, Bank of America said.

“This announcement could result in more repurchase requests from Fannie Mae than the assumptions in our estimated liability contemplate,” the company said. The lender may not be able to resolve insurance disputes in time, meaning that “our representations and warranties liability may increase.”

Bank of America is obviously not pleased with this development. In the article, a bank spokesperson gripes about how the firm’s behavior “continues to evolve” regarding its putback policies. In January, the bank stated that its total putback cost would be capped at around $3 billion. We now know that these losses will likely be higher, but it’s unclear how much higher.

Due to its acquisition of Countrywide, the biggest mortgage lender during the housing bubble, Bank of America’s putback problems are likely to dwarf those of other banks. But Fannie probably wouldn’t single out Bank of America, so other banks will presumably also face larger-than-expected losses due to Fannie’s increasingly aggressive putback policy.

Bad for Bank Investors, Good for Taxpayers

Bank of America and its investors won’t welcome this news. The institution’s stock is down 5% as of about 2:45pm on Friday, while the Dow is up nearly 1%. Fannie’s move makes the Bank’s loan losses even more uncertain, as it will likely owe the firm more than its investors had anticipated after its January statement.

But taxpayers should be pleased. Any money lost by Bank of America and its shareholders due to these buybacks is money that taxpayers won’t have to fork over to keep Fannie afloat. Unfortunately, the extra capital that this evolving policy will provide will likely still be far too little to allow Fannie to make taxpayers whole.

Image Credit: REUTERS/Jason Reed

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State accuses Bank of America unit of thousands of illegal foreclosures

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Piggybankblog posted 08/05/11

Piggybankblog posted picture

Cross linked story with seattlepi.com

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State Attorney General Rob McKenna has accused a Bank of America unit of conducting thousands of illegal foreclosures in Washington, in which he said the company had confused homeowners, made it nearly impossible to save their homes, and failed to act as a neutral third party.

McKenna sued ReconTrust, a California-based foreclosure trustee, in King County Superior Court Thursday.

The lawsuit alleges that the Bank of America subsidiary has violated state laws in “each and every foreclosure” in Washington. Since 2008, ReconTrust, which forecloses statewide, has done 9,900 foreclosures in King, Pierce and Snohomish counties alone.

“ReconTrust ignored our warnings, repeatedly broke the law and refused to provide information requested during our investigation,” McKenna said in a statement Friday.

“ReconTrust’s illegal practices make it difficult, if not impossible, for borrowers who might have a shot at saving their homes to stop those foreclosures.”

At a news conference held by McKenna, two women said ReconTrust had improperly foreclosed on their homes. Myra Cola, a single mother from Spanaway who was laid off, said her loan servicer was reviewing her home for a loan modification, when ReconTrust sold it at foreclosure.

“I couldn’t understand how this could have happened,” Cole said in a statement released by the Attorney General’s office.

“I got the run-around. I just can’t believe that the company that’s supposed to be helping me is foreclosing on me. … We are trying to save our homes. We’re doing the steps they tell us. In the end, it’s all for nothing. It’s an injustice.”

McKenna said ReconTrust violated the state’s Deed of Trust law, which requires that a foreclosure trustee maintain an office in Washington. That’s to help homeowners ask questions, make last-minute payments and request a foreclosure postponement.

“ReconTrust’s claim that the company doesn’t have to follow Washington law and procedures because it is a national bank is wrong,” McKenna said.

A spokesperson for Bank of America, based in Charlotte, North Carolina, did not immediately return a call for comment to Bloomberg.

The complaint against ReconTrust stems from a larger investigation into foreclosure mishandlings that McKenna and other state attorneys general began last year.

Washington is a so-called nonjudicial foreclosure state, in which courts don’t review foreclosures. Instead banks hire trustees, who are supposed to act as neutral third parties, to handle home seizures.

In addition to failing to keep am office in Washington, McKenna also accused ReconTrust of:

Failing to identify the actual owner of a promissory note being foreclosed.

Giving confusing information on how borrowers defaulted and how to fix a default.

Holding foreclosues in private, like an Bellevue office park, instead of in a legally required public place.

Allowing documents to be improperly signed and notarized.

Failing to act in good faith toward a borrower.

McKenna is seeking a fine of up to $2,000 per violation.

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Side Deal With Bank Of America Would Cede Liability In Exchange For Homeowner Relief

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Piggybankblog posted 08/03/11

Picture posted by piggybankblog

Cross linked story with huggington post

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WASHINGTON — Federal and state prosecutors are in advanced negotiations with Bank of America in pursuit of a settlement that would forgive the bank for a broad range of past mortgage abuses in exchange for fines that would finance a significantly expanded relief program for struggling homeowners, according to three people with direct knowledge of the matter.

The negotiations are separate from ongoing talks between the nation’s five largest mortgage handlers and the U.S. Department of Justice, the Department of Housing and Urban Development and all 50 state attorneys general. Those talks, led by Justice and involving all five companies, are seeking a settlement to resolve allegations of past wrongdoing like so-called “robo-signing,” in exchange for lower payments and reduced mortgages for potentially millions of troubled borrowers.

But the options under discussion with Bank of America, the largest U.S. bank by assets, go beyond what’s on the table in the larger group talks. Justice, along with a small band of state legal officers, is pursuing an agreement that would have the bank forgive what participants described as a significant amount of mortgage principal owed by distressed borrowers in exchange for receiving an effective grant of immunity from government prosecution related to alleged mortgage and foreclosure wrongdoing.

Only a small, select group of states are involved in pursuing the side deal with Bank of America, sources said. The other banks targeted by the government — JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial — are engaged in similar individual negotiations with prosecutors. None of those talks are at such an advanced stage, though.

The agreement, if reached, could be used as a template for the other four banks. The state and federal prosecutors are operating on the assumption that if they could strike a deal with Bank of America — the nation’s largest mortgage servicer — that would compel the other large banks to go along or risk prosecution.

Participants described the talks as fluid. Remaining issues include the scope of the release and the breadth of borrower relief, sources said.

For example, it could involve a release from liability for alleged lending abuses; alleged failure to properly securitize home loans in accordance with state laws; alleged abuses of distressed borrowers who fell behind on their payments; alleged illegal behavior when foreclosing on those homeowners; immunity from suits involving a combination of those claims, or from all of them — an effective grant of immunity from prosecution.

Prosecutors are contemplating giving Bank of America this kind of a broad release — something not yet on the table for the other institutions, sources said — but in exchange for more money to be used to finance mortgage modifications for a targeted set of borrowers.

The bigger the release, the more money banks like BofA would be willing to shell out to lower payments, reduce outstanding amounts owed, and provide for borrowers to transition out of their homes and into rentals.

Of course, the flip side of that is the banks could largely escape prosecution of alleged widespread wrongdoing.

Other outstanding issues include whether government-controlled mortgage firms Fannie Mae and Freddie Mac are involved. The twin giants own or guarantee more than half of all outstanding home loans. But their federal regulator, the Federal Housing Finance Agency, has been reluctant to allow loans from Fannie or Freddie to be part of the deal, sources said. The two companies employed law firms that used robo-signers.

If an accord were reached, which participants stress is a ways away, borrowers that met the following criteria would be eligible for some kind of assistance:

•Their mortgages would have to either be owned by Bank of America or be serviced by the bank on behalf of private investors. Fannie or Freddie loans would not be eligible;

•A current principal balance of 1 million or less;

•The homes would have to be occupied by the owner, so no investor-owned properties;

•And the borrowers’ monthly mortgage obligation would have to comprise at least 25 percent of their monthly income.

Participants believe such a pool would lessen the risk posed by moral hazard, a scenario in which people escape consequences for destructive activity, thus encouraging more destructive activity in the future, sources said. Eligibility would also be limited to homeowners in distress, which can be defined by the number of days late a borrower is on his mortgage payments or whether their income is too low to support their payment obligations.

The program would in part build upon a deal reached earlier this year between Justice and Bank of America to settle allegations that the lender wrongfully foreclosed on active-duty members of the military, sources said.

An accord would provide a sense of finality to BofA’s shareholders, who have seen the value of their holdings erode over the past year as the bank’s mortgage-related losses have mounted. Shares are down 34 percent over the past year. By comparison, the 24-company KBW Bank Index, which tracks large banks like BofA, is down just 11 percent over the same time period.

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Bank of America reacts to complaints from residents who lost homes

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Posted by piggybankblog on 08/01/11

Picture posted by piggybankblog

Cross linked story with joplinglobe.com

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JOPLIN, Mo. — After a series of complaints from victims of the May 22 tornado, Bank of America has announced what it calls “improvements” in the way it handles those customers.

Dozens of homeowners filed complaints with the Missouri attorney general’s office after the storm, citing repeated delays in the processing of property insurance checks. The attorney general’s office says a week is a reasonable amount of time for storm victims to get their money; some victims waited much longer.

The Globe on July 10 reported the case of Cindy Atteberry, who wrangled with Bank of America for several weeks, then contacted her state senator and the attorney general’s office out of frustration.

Bank of America said that “after hearing some of the complaints from our customers,” it has set up a toll-free, dedicated number for Joplin homeowners who have questions or issues with the processing of their insurance checks.

The number — 866-808-7018 — is operational.

“In the meantime, Joplin homeowners are receiving top priority in the insurance claims area,” said Jumana Bauwens, spokeswoman for Bank of America.

“We have already put a number of back-end improvements in place. This effort goes a step further to emphasize how important this issue is to us and how we want to help our customers in Joplin.”

‘THE EASY PART’

Tornado survivor Julie Hunt, 34, said she didn’t believe anyone at Bank of America cared until she became so desperate that she “just begged” for help via email from Brian Moynihan, the company’s CEO and president.

On May 22, Hunt and her husband, Jason, clung to their three young children as their house at 23rd Street and Pearl Avenue “just exploded” above them. Shouts of “I love you” and “I’ll see you soon” were ripped away by the wind.

“We thought we were going to die,” she said.

When it was over, the Hunts were alive, but their home was a complete loss.

They got a settlement from their homeowners insurance company, Travelers, in three days, Julie Hunt said. One insurance check — for the contents of the house — was made out to her. The other — for the house itself, including paying off what remained of the mortgage — was made out to both Hunt and Bank of America.

After several frustrating weeks of trying to get that check processed by Bank of America, Hunt said: “Surviving the tornado was the easy part.”

‘bidding war’

The Hunts had equity in their home — Julie Hunt didn’t want to disclose the amount — which meant Bank of America would get part of the insurance money to pay off the remainder of the mortgage, and the Hunts were to get the rest.

They were told at a local Bank of America office that they would have to endorse the check and send it to bank offices in California for processing. Julie Hunt said she initially was hesitant, but she sent the check and the required paperwork by UPS overnight after being assured that she would have her share of the money in seven business days.

That gave her and her husband the confidence to make an offer on a house. Re-establishing a stable home life for their children — an 8-year-old, a 5-year-old and a newborn — was their top priority, she said.

Hunt said that as they searched for a new home, she was shocked to see people waving checkbooks and trying to scare other buyers away. “It was a crazy bidding war,” she said.

To secure the house they wanted, the couple put “substantial cash down,” she said. “We thought we’d be moving in days.”

And the insurance money was supposed to arrive soon.

Hunt said she called the toll-free number she had been given just to check with Bank of America.

“The lady told me it would take seven business days,” she said. “I said: ‘You’ve had it three days! Why is it seven days from now?’”

Hearing that the Fourth of July holiday had slowed things down didn’t make her happy, she said.

Hunt said she called back and was told that it would be 14 days before she would get the money. She also was told that she would have to call back and get a vendor identification number, which didn’t make any sense to her.

She wasn’t a vendor, she said; she was a customer.

She asked to speak to a manager, refused to take the initial “no” for an answer — and got angry, she said.

“‘We have nothing. We have lost everything,’” she recalls telling bank officials. “I felt like they just didn’t care, like I was the one who had taken a crazy pill. I said, ‘All right, I’ll be on hold all day.’ … Someone finally took my number and promised to call back.”

Hunt said she eventually had Bank of America on speed dial, “and would get a different answer depending on who I would get.”

At one point, Hunt said, she was told that the bank’s processing office didn’t have the required letter of intent stating that she wanted to pay off the mortgage. Then she was told that the office didn’t have the insurance check.

She said she had made photocopies before putting those documents in the UPS envelope, and she had proof of delivery. Ultimately, the “missing” documents were found.

Employees at the local bank office who heard of the Hunts’ plight could only call the same 800 number, she said.

Days and then weeks were passing.

“We were about to lose everything,” Julie Hunt said.

going To the top

Deciding that she had nothing more to lose, she sent an email to the president and CEO of Bank of America and asked for help.

“I was just falling apart,” Hunt said.

She didn’t really expect a reply: “I just figured it was worth a shot.”

A flurry of emails and phone calls ensued, including some from a top bank executive, Tony Meola, said Hunt.

“He was incredibly kind, very compassionate,” she said of Meola, who got the procedure moving. “I’m incredibly grateful.”

She said the procedure that was supposed to take a week took nearly three weeks, and that was only because Meola intervened and had the money wired directly into the Hunts’ account.

“Then he called back to check on me,” Hunt said.

“We got the money just under the wire. We closed just on time.”

Bank of America would neither confirm nor deny that Moynihan and Meola intervened on the Hunts’ behalf, and requests for interviews about the case were unanswered.

Hunt shared her story after reading about — and identifying with — frustrated Bank of America customer Cindy Atteberry.

Atteberry’s case bumped along in 14-day increments, prompting her to contact the newspaper, the attorney general and state Sen. Ron Richard, R-Joplin, chairman of the Senate Interim Committee on Natural Disaster Recovery. All three contacted Bank of America. Atteberry still got conflicting information about when her money would be sent, but ultimately, the bank issued a press release to the newspaper: “The actual check should be sent as early as Monday (July 11).”

It arrived via FedEx and was left on her porch Tuesday, July 12, Atteberry said.

“So what was going to hold it up for 14 days, and the same day, you can release it?” Atteberry wonders.

BETTER SERVICE

Atteberry was among more than 50 Joplin storm survivors who filed mortgage fraud complaints with the attorney general’s office by mid-July; about 30 involved Bank of America.

Spokesmen for the attorney general’s office and the bank noted that the number of mortgages held by Bank of America could be a factor in the number of complaints. Bank of America is the nation’s largest mortgage service company — as well as the largest consumer bank, the largest credit card provider, and the largest wealth management firm in the country.

Regardless, the attorney general’s office considers no more than seven days to be “reasonable processing” time, according to spokeswoman Nanci Gonder.

Anything beyond that, she said, and residents are encouraged to call the attorney general’s office. “We will intervene.”

Bauwens, the Bank of America spokeswoman, said, “When we learn that there is room for improvement with our customers’ experience, we make those improvements.”

In addition to the toll-free help line, other changes have been made, said Bauwens.

Some have taken place behind the scenes, such as establishing an internal tracking procedure for FedEx packages, Bauwens said. (One of Atteberry’s concerns was a discrepancy in the date a packet was signed for and the date Bank of America said it was received.)

Bank of America said it also has sent an associate to the Joplin banking center for at least two weeks “until we feel our customers have been helped.”

For her part, Julie Hunt remains skeptical.

The battle she went through to get her money, she said, added “insult to injury.”

“It was so unnecessary,” she said.

‘Poor’ rating

IN THE 2011 MSN Money-Zogby survey of customer service, Bank of America’s “poor” rating was 41.4 percent, earning it the No. 1 spot in the fifth annual Customer Service Hall of Shame. In 2010, it ranked No. 2.

Complaints

TO FILE A COMPLAINT with the Missouri attorney general’s office, residents may go to: http://ago.mo.gov/consumercomplaint.htm.

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Posted by piggynankblog on 07/30/11:

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Mass AG Martha Coakley will not Join in Giving MERS and Banks a Deal

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Piggybankblog posted on 07/29/11

Picture posted by piggybankblog

Cross linked story with Huffington Post

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There are some rumblings that the Department of Justice is putting the pressure on state attorneys general to sign onto the controversial $20 billion mortgage settlement deal this week that could release banks from legal claims in state investigations and law suits.

Monday, Massachusetts Attorney General Martha Coakley joined a handful of dissenters in announcing that she will oppose the inclusion of the issues surrounding MERS in any deal.

MERS (Mortgage Electronic Registration System) as pointed out by Abigail Field in a recent post on Reality Check:

… was set up thoughtlessly, without regard to its basic legality, and designed with only two objectives: lowering the mortgage industry’s costs and maximizing its convenience. As a result, MERS has none of the advantages of the centuries-old system it was intend to replace, and largely has. MERS is not accurate, not transparent, and not accountable to the public. To let MERS continue simply allows it to continue wreaking havoc on property records and the legal morass it’s created to continue tangling foreclosure and bankruptcy cases nationwide.

Homeowner advocates and activists have long argued that mortgages transferred via the MERS system but not recorded with local registries of deeds are invalid and that land titles on thousands of homes are “clouded”. Homeowners with clouded titles could find it impossible to sell or refinance their properties without going to court to clean up problems.

Register John O’Brien, of the Southern Essex County Registry of Deeds has been pushing Coakley to investigate these issues and asked that she not agree to settle with the big banks.

Once again I am asking Attorney General Martha Coakley and the other state Attorney’s General to follow the lead of New York Attorney General Eric Schneiderman and stop any settlement talks with the banks. The results of this report are only for my registry, but I can assure you that this type of criminal fraud is rampant across the nation. This leaves me to question why anyone would consider settling with these banks until we know the full extent of the damage that they have caused to the homeowners chain of title across this country and the amount of money they have bilked the taxpayers for their failure to pay recording fees.

New York Attorney General Eric Schneiderman launched his own investigation in April. He said he was “stunned” to find the multi-state probe so lacking that no documents or witness depositions had been obtained.

“We have no leverage,” Schneiderman said in an interview with the Democrat and Chronicle.

Elizabeth Warren, a senior adviser to President Barack Obama agrees. She recently told a congressional panel that government agencies may not have fully investigated claims that borrowers’ homes were illegally seized by banks.

“I think there’s a real question about whether there’s been adequate investigation,” said Warren, also the temporary custodian of the Bureau of Consumer Financial Protection at the time – a new federal agency created to protect borrowers from abusive lenders.

In addition to O’Brien’s communications with Coakley, Massachusetts residents have also been active in voicing their concerns. In a letter, signed by 24 Massachusetts homeowners, Senka Huskic, a Peabody MA resident and a blogger at Home Preservation Network wrote on behalf of Massachusetts homeowners:

The results of Wall Street’s fraud are numerous foreclosures, topped with the ignorance that works well for those who committed the biggest financial crime in the history of the world. Nothing will change until those responsible for this scam are prosecuted! We must do that, and we should not rest until the truth is out and the correct people are held responsible. We have had enough of being robbed blind, of paying inflated mortgages, of rescuing criminals with our tax money! We have to stand up for our kids, and Register O’Brien is there to stand up for us and with us!

Monday, we finally decided to stop being a statistic, to stop being just a number in the books of the rich and powerful. Monday, we stood up and realized that the future of our lives lies in our hands and no one else’s. Our search for American Dream is becoming an all-out battle for our basic needs. The big dream is dispersing before our eyes and we’re left to face the biggest financial disaster ever.

We would like to use this opportunity to ask you to join Register O’Brien, New York Attorney General Eric Schneiderman, and many others who stood up to the “too big to fail,” realizing that only the American people are too big to fail. We would like to ask you to immediately cease negotiations with the perpetrators of the mortgage fraud securitization who are not able to prove that they own the houses on which they are foreclosing upon. The only way for a homeowner to prove that is to sue the bank. We all know that this means if you don’t have money, very soon you won’t have your house either.

You, as the state’s chief legal prosecutor, must stand up for us and demand answers, demand justice. The very word NEGOTIATION describes communication between at least two sides with the intent to achieve an agreement among everyone involved. So how can we expect that the side which created, implemented, and is still proceeding with the biggest financial crime in the history of this country could have anyone’s best interest in mind, other than their own?

Fortunately for us, here in Massachusetts, Martha Coakley has no problem going after banks and mortgage servicers.

Coakley slammed MERS in a Boston Herald interview on Tuesday.

“From predatory loans to ‘robo-signing’ to servicing fraud, the banks continue to go merrily on their way while consumers, the real estate industry and the commonwealth of Massachusetts are being cheated,” Coakley said.

“The inability to get a handle on the instability in the real estate market continues to affect Massachusetts and the entire national economy,” she said.

Massachusetts, once again is leading the charge and forging ahead into uncharted waters. From the Supreme Judicial Court having handed down an important decision in the Ibanez case to O’Brien relentlessly advocating for homeowners, the securitization industry’s argument that the pooling and servicing agreement was sufficient grounds to transfer of the mortgages to the trust has suffered some significant blows in Massachusetts.

Taking into consideration that the Massachusetts Supreme Court is widely considered one of the best courts in the country, these are not insignificant acts.

Coakley promised to exclude the MERS issue from any deal until she fully investigates the problem’s scope.

“Massachusetts will not sign on to any global agreement with the banks if it includes a comprehensive liability release regarding securitization and the MERS conduct,” she wrote in a letter Monday to all 21 Massachusetts county registers of deeds.

O’Brien, who spearheaded the drive against the paperwork flaws, was pleased with the announcement.

“I think this sends a message loud and clear to MERS and their shareholder banks that Massachusetts will hold them accountable,” O’Brien said.

In the wake of the scandal in Florida (one of the hardest hit areas in the country), whose Attorney General, Pam Bondi, fired two investigators for actually doing their job and going after foreclosure mills, it gives me hope to live in a state where public officials take their job of protecting and defending the public seriously.

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Exclusive: Facing criticism, MERS cuts role in foreclosures

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Piggybankblog posted 07/28/11

Picture posted by piggybankblog

Cross linked story with yahoo.com

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NEW YORK (Reuters) – MERS, the electronic mortgage registry that faces multiple investigations for its role in thousands of problematic foreclosure cases, changed its rules to lower its profile in court-supervised foreclosures.

MERS, a unit of Merscorp Inc. of Reston, Virginia, owns the computerized registry, Mortgage Electronic Registration Systems. Mortgage loan giants Fannie Mae and Freddie Mac and several of the largest U.S. banks established MERS in 1995 to circumvent the costly and cumbersome process of transferring ownership of mortgages and recording the changes with county clerks.

In rule changes announced to MERS members on July 21, the company forbade members to file any more foreclosure actions in MERS’s name.

It also required mortgage servicers to obtain mortgage assignments and record them with county clerks before beginning foreclosures.

Mortgage-loan servicers perform routine duties for the investment trusts that own pools of mortgages, including collecting mortgage payments and, when necessary, filing foreclosures.

Although these trusts are legally required to own the mortgages when they file to foreclose, the servicers in many cases did not obtain documents known as assignments on their behalf until weeks or months after launching a foreclosure action in court, a recent Reuters Special Report found. (http://link.reuters.com/kyb72s)

Since the collapse of the housing boom, many foreclosure cases were filed in MERS’s name, even though the registry doesn’t really own either the mortgage or the promissory note, the document which states the terms of the mortgage loan.

MERS’s role in foreclosure cases has made it a lightning rod in recent months in court decisions which have held that loan servicers’ use of the registry violates basic real estate and mortgage laws.

In the last week, state attorneys general in Massachusetts and Delaware have announced investigations of MERS, and several other states have broader inquiries into foreclosure practices that include MERS.

It is unclear how much the rule changes will help MERS with its legal problems.

Under the new rules, servicers are required to stop filing foreclosures in MERS’s name, but MERS’s role in foreclosures won’t actually be eliminated. The servicers will continue to obtain the needed mortgage assignments from MERS. In past cases examined by Reuters, such assignments have included ones of questionable legitimacy, such as mortgages owned by now-defunct lenders.

O. Max Gardner III, a North Carolina lawyer who is specialist in foreclosure actions in bankruptcy courts, said the change will have the effect of making MERS’s role in assigning mortgages invisible in court.

The assignments will still come from MERS, but “they just won’t be in the court files any more,” he said.

MERS spokeswoman Janice Smith said the new rules make mandatory a trend that already was under way.

She noted that Fannie Mae, Freddie Mac and several large banks already had stopped filing foreclosures in MERS name. Smith said the change would avoid confusing homeowners facing foreclosure by eliminating MERS, a company they had never heard of, from court documents.

She also said that MERS’ s original purpose was to keep track of changes in servicers and mortgage ownership. “Foreclosure really was not central to MERS’s core business,” she said, adding that MERS received no income from foreclosures.

Mortgage-law specialists say that lenders and servicers for a long time relied heavily on bringing foreclosures in MERS’s name. This helped make possible foreclosures that otherwise might not have taken place because the necessary original documents were missing.

MERS says that it is the holder of record of 32 million, or 60 per cent, of U.S. mortgages. But it has only a handful of employees. Instead, it has designated some 20,000 employees of banks and other servicers as MERS “officers.”

Some courts and homeowners’ lawyers have criticized this system because in effect it enables servicers to assign mortgages to themselves whenever they needed one to foreclose.

The rule change also comes amid a growing movement against MERS among county clerks around the U.S. They have been pressing state attorneys general and local prosecutors to investigate MERS for allegedly failing to record documents with them and pay the associated filing fees. The rule change, by requiring servicers to record mortgage assignments sooner and pay recording fees, will partly address the clerks’ concerns.

(Editing by Michael Williams)

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BofA Donates Then Demolishes Houses to Cut Foreclosures

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Piggybankblog posted on 07/28/11

Picture posted by piggybankblog

Cross linked story with bloomberg businessweek

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By Lindsey Rupp

 

(Adds chairman’s title to Warren Buffett in the 18th paragraph.)

July 27 (Bloomberg) — Bank of America Corp., faced with a glut of foreclosed and abandoned houses it can’t sell, has a new tool to get rid of the most decrepit ones: a bulldozer.

The biggest U.S. mortgage servicer will donate 100 foreclosed houses in the Cleveland area and in some cases contribute to their demolition in partnership with a local agency that manages blighted property. The bank has similar plans in Detroit and Chicago, with more cities to come, and Wells Fargo & Co., Citigroup Inc., JPMorgan Chase & Co. and Fannie Mae are conducting or considering their own programs.

Disposing of repossessed homes is one of the biggest headaches for lenders in the U.S., where 1,679,125 houses, or one in every 77, were in some stage of foreclosure as of June, according to research firm RealtyTrac Inc. of Irvine, California. The prospect of those properties flooding the market has depressed prices and driven off buyers concerned that housing values will keep dropping.

“There is way too much supply,” said Gus Frangos, president of the Cleveland-based Cuyahoga County Land Reutilization Corp., which works with lenders, government officials and homeowners to salvage vacant homes. “The best thing we can do to stabilize the market is to get the garbage off.”

BofA’s 40,000

Bank of America had 40,000 foreclosures in the first quarter, saddling the Charlotte, North Carolina-based lender with taxes and maintenance costs. The bank announced the Cleveland program last month, has committed as many as 100 properties in Detroit and 150 in Chicago, and may add as many as nine cities by the end of the year, said Rick Simon, a company spokesman.

The lender will pay as much as $7,500 for demolition or $3,500 in areas eligible to receive funds through the federal Neighborhood Stabilization Program. Uses for the land include development, open space and urban farming, according to the statement. Simon declined to say how many foreclosed properties Bank of America holds.

Ohio ranked among the top 10 states with the most foreclosure filings in June, according to RealtyTrac. The state has 71,617 foreclosed homes, Cuyahoga County 9,797 and Cleveland 6,778, RealtyTrac said.

The tear-downs are in varying states of disrepair, from uninhabitable to badly damaged. Simon said some are worth less than $10,000, and it would cost too much to make them livable.

Unwanted Homes

“No one needs these homes, no one is going to buy them,” said Christopher Thornberg, founding partner at the Los Angeles office of Beacon Economics LLC, a forecasting firm. “Bank of America is not going to be able to cover its losses, so it might as well give them away and get a little write-off and some nice public relations.”

Donating a house may create an income-tax deduction, said Robert Willens, an independent accounting analyst based in New York. A bank might deduct as much as the fair market value if a home wasn’t acquired with the explicit intent of knocking it down, he said.

Wells Fargo and Fannie Mae already started donating houses and demolition funds in Ohio. San Francisco-based Wells Fargo, the biggest U.S. home lender, gave 26 properties and $127,000 to the Cuyahoga land bank, said Russ Cross, Midwest regional servicing director for Wells Fargo Home Mortgage. Since 2009, Wells Fargo made more than 800 donations, the bank said.

Fannie Mae

Fannie Mae, the mortgage-finance company operating under U.S. conservatorship, made its first deal with the Cuyahoga land bank in 2009, and sells houses to the organization at a “very nominal value,” or about $1 and an additional $200 in closing costs, said P.J. McCarthy, who heads alternative disposition programs.

Fannie Mae sold 200 foreclosures to the Cuyahoga organization in 2010 and has similar programs in Detroit and Chicago. Cleveland is the only city where Washington-based Fannie Mae contributes $3,500 toward demolition, McCarthy said.

“It’s an economically justifiable transaction,” McCarthy said. “Holding on to a property that might sell for $1,000 or $2,000 or $5,000 for several hundred days is not in anybody’s best interest.”

JPMorgan, the second-biggest U.S. bank, has donated or sold at a discount almost 1,900 properties valued at more than $100 million in more than 37 states since late 2008, including 22 in Cleveland, said Jim O’Donnell, manager of community revitalization. The majority aren’t demolished, he said.

Nonprofit Role

Citigroup has been donating foreclosures since 2008 through the National Community Stabilization Trust, according to an e- mailed statement from Natalie Abatemarco, managing director for the bank’s office of homeownership preservation. The New York- based company, ranked third among U.S. lenders, is part of the Washington-based nonprofit trust’s pilot program that starts in late August to provide funds for purchases in distressed neighborhoods, and the money can be used toward demolition, Abatemarco said.

Demolishing all of Cleveland’s foreclosed and abandoned properties might cost $250 million, Frangos said. There are as many as 13,000, according to Case Western Reserve University in Cleveland and Neighborhood Progress Inc., a nonprofit organization working to counter the effects of foreclosures in six Cleveland areas, according to its website. The Cuyahoga County land bank owns about 899 properties and will demolish about 700 in the next six to seven months, Frangos said.

Blow Them Up

The oversupply of homes once prompted Warren Buffett, chairman and chief executive officer of Berkshire Hathaway Inc., to quip in February 2010 that one solution was to “blow up a lot of houses — a tactic similar to the destruction of autos that occurred with the ‘cash-for-clunkers’ program.’”

Still, the knockdowns aren’t likely to outpace foreclosures, said Rick Sharga, RealtyTrac’s senior vice president. Foreclosures may accelerate as banks clear a backlog caused by soft real estate markets and legal disputes over tactics used to seize homes.

“These sorts of programs will basically only be nibbling on the edges,” Sharga said.

–Editors: Rick Green, William Ahearn

To contact the reporter on this story: Lindsey Rupp in New York at Lrupp1@bloomberg.net

To contact the editors responsible for this story: David Scheer at dscheer@bloomberg.net; Rick Green in New York at rgreen18@bloomberg.net.

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And the Beat Goes On… Yeah, the Beat Goes On…

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Piggybankblog posted 07/27/11

Cross linked with Mandelman Matters

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You know, both Reuters and AP have reported that even though the mortgage servicers promised to stop the “robo-signing” of documents crucial to the foreclosure process, the banksters have actually continued robo-signing, so basically nothing has changed.

And call me crazy, but I found the news oddly reassuring… you know… like a peanut butter and jelly sandwich and an ice cold glass of milk. Ever since Maine attorney Tom Cox exposed robo-signing while deposing a GMAC employee last fall, and then the OCC/OTS/ Federal Reserve investigation concluded with the issuance of the consent orders just a few months ago, I’ve been feeling kind of uncomfortable about things.

I mean, for one thing we haven’t heard too much from the banksters, they’ve been getting kicked around quite a bit, but that’s about it and when they’re too quiet it makes me nervous.

I kept waiting for the other shoe to fall. Like, what new type of criminal forgery crap would they attempt to pass off in court in order to foreclose next? Would they invest millions in some new printing technology and be able to recreate the notes flawlessly?

Or was the relative quiet just the sound of them lobbying congress with untold billions hoping for another Get Out Of Fail Free card? Like maybe a new law that just says… “All assignments of notes must be now signed by Linda Green.”

So, when I saw the stories about their continued robo-signing, I was actually relieved. I guess, as far as I’m concerned, robo-signing has become like comfort food.

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And the beat goes on… Yes the beat goes on…

Robo-signing docs, they can’t refrain

Robo, Robo Ree… Robo, Robo Raa…

Robo, robo Ree… Robo, robo Raa…

Owning homes was once the rage, uh huh

MERS has blurred the title page, uh huh

Lost note affidavits the thing, uh huh

Robo-signer the newborn king, uh huh

And the beat goes on… Yes the beat goes on…

Robo-signing docs, they can’t refrain

Robo, Robo Ree… Robo, Robo Raa…

Robo, robo Ree… Robo, robo Raa…

Notes not signed except in blank, uh huh

Screw the rules cause we’re a bank, uh huh

Homeowner keeps on begging for loan mod

Essentially we are the kings of fraud

And the beat goes on… Yes the beat goes on…

Robo-signing docs, they can’t refrain

Robo, Robo Ree… Robo, Robo Raa…

Robo, robo Ree… Robo, robo Raa…

People sit in chairs and sign their names

Boys and girls don’t try to play these games

Our bonuses are way beyond obscene

Come work for us we’ll name you Linda Green

And the beat goes on… Yes the beat goes on…

Robo-signing docs, they can’t refrain

Robo, Robo Ree… Robo, Robo Raa…

Robo, robo Ree… Robo, robo Raa…

Judges we know they don’t have a clue

Like the trusts our cases pass right through

You’ll never win this game of cat and mouse

We’ll tell the judge you’re here for a free house

The beat goes on… and the beat goes on…

And beat goes on… the beat goes on…

The beat goes on… and the beat goes on…

And beat goes on… the beat goes on…

See, quite a few people were really upset over this revelation, and I guess I understand why… it is sort of like saying… f#@k you to the courts and the federal regulators. And I get that.

But, on the other hand, do you know how this ongoing robo-signing was uncovered? It was the county recorders that caught it, how funny is that? It didn’t require any sort of investigation or anything like that… they just did it and sent it in like it was just another day in the life. Can you imagine?

And what would you like to bet that it was probably Linda Green or another famous name like that too? If they’re this un-original, they’re certainly that un-original. And besides that, why would they have stopped? It’s not like they were punished for it last time, right?

Think about it… the major banks in this country all got caught forging and fraudulently signing affidavits to be used in courts and they didn’t even get fined! If you or I would have done the same things, we’d be in so much trouble we’d never be able to get a job at the Post Office.

It’s nice to know that some things don’t change…

And think about this benefit… the more they robo-sign, the more homeowners can use it as a defense to stop foreclosure, and the courts have a tendency to frown on fraudulent documents, even if you are delinquent on your payments. And it’s easy to catch… I’ve got a list of robo-signers… you can access it below.

So you see… while it’s true on one hand it shows the banks have absolutely no respect for our laws, our government, or our society as a whole… and it’s clear that they have no fear of anything happening when they do as they please… on the other hand they’re getting sloppy. And sloppy bankers are easy to catch.

See, there’s a bright side to everything!

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Bill Buckler Puts Things Back Into Perspective: “Of The Total US $15 Trillion Market Capitalization, The Fed Provided About Half Of That”

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Piggybankblog posted 07/26/11

Cross linked story with zerohedge.com

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On a surprisingly quiet night, during which many, chief among them the President of the US, were expecting some fireworks, it is easy to get lost in all in your face political farce, while ignoring, and even blissfully forgetting, the real financial details behind the scenes. Luckily we have Bill Buckler, whose latest edition of “The Privateer” puts everything right back in perspective, and reminds us that “in the period between December 2007 and July 2010, the Fed parcelled out $US 16.1 TRILLION in emergency loans to financial entities all over the world. Almost half of this – a total of $US 7.75 TRILLION – was loaned to four US banks. They were Citigroup, Morgan Stanley, Merrill Lynch and the Bank of America. In July 2010 (the cut off date for this “audit”), total US stock market capitalisation was $US 15 TRILLION. The Fed provided about half of that.” And here we are, haggling over $30 billion here, and $50 billion there…

The Last Remission

According to the official figures put out by the US government, the economic “recovery” in the US celebrated its second anniversary on June 30, 2011. The “fuel” burned in this “recovery” is immense. Mr Obama’s presidency has ushered in the era of $US 1 TRILLION plus annual deficits riding on top of 0.00 percent controlling interest rates from the Fed. It has also ushered in the era in which almost nothing istraded on the paper markets which is not – explicitly or implicitly – guaranteed by the government.

The fuel to keep the global financial system functioning does not stop at the borders of the US. The “Dodd-Frank Wall Street Reform and Consumer Protection Act” has just produced the first ever “audit” of the US central bank. It reveals that in the period between December 2007 and July 2010, the Fed parcelled out $US 16.1 TRILLION in emergency loans to financial entities all over the world. Almost half of this – a total of $US 7.75 TRILLION – was loaned to four US banks. They were Citigroup, Morgan Stanley, Merrill Lynch and the Bank of America. In July 2010 (the cut off date for this “audit”), total US stock market capitalisation was $US 15 TRILLION. The Fed provided about half of that.

This inflationary explosion is unprecedented in any era. It represents the biggest ever effort to rescue a debt-based system from the ravages caused by its own debt issuing excesses. It has, at best, provided a “remission” for global paper markets. The cost has been devastating for REAL economies everywhere.

A cancer patient who goes under the knife gets the malignant disease physically removed. If all traces of the malignancy are removed, the patient will recover. If all goes well, the recovery will be permanent with no “remissions”. A life-threatening malignancy is NOT fought or cured by doing everything possible to increase its power and potency. Yet that is what financial authorities in the US and everywhere else have been doing in regard to the life blood of their economies. As this stark fact becomes ever clearer, Washington DC and Wall Street stand helpless before the fact that they can only cure the economy at the cost of killing the financial system which is feeding on it. It’s that simple.

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Coakley steps up foreclosure investigation

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Piggybankblog posted on 07/25/11

Picture posted by piggybankblog.com

Cross linked story with boston.com

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By Jenifer B. McKim, Globe Staff

Massachusetts Attorney General Martha Coakley said today she is beefing up her investigation into foreclosure fraud, specifically looking into an embattled lender-created company that claims to be the official owner of millions of mortgages nationwide.

“We are currently investigating creditor misconduct in connection with unlawful foreclosures, including failure to establish the right to start a foreclosure as well as filing false or misleading documents with registries in the Commonwealth,’’ Coakley said in a letter to the Massachusetts Register of Deeds Association.

Coakley was responding to a request by the association for a meeting to discuss concerns about foreclosure-related issues. She said he is focusing on creditors use of the Mortgage Electronic Registration Systems, Inc., a Virginia company that oversees a database of 32 million active mortgages, about 60 percent of the loans in the United States. She said she is focusing on whether the company “conforms to the requirements of Massachusetts law, in the context of foreclosures and otherwise.”

Coakley was responding to a request by the association for a meeting to discuss concerns about foreclosure-related issues. She said he is focusing on creditors use of the Mortgage Electronic Registration Systems, Inc., a Virginia company that oversees a database of 32 million active mortgages, about 60 percent of the loans in the United States. She said she is focusing on whether the company “conforms to the requirements of Massachusetts law, in the context of foreclosures and otherwise.”

related articles:

http://online.wsj.com/article/SB10001424053111903591104576468363725094984.html

http://www.bostonherald.com/business/real_estate/view/2011_0725mass_

 

 

 

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The Banks Still Want a Waiver

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Piggybankblog posted on 07/24/11

Picture posted by piggybankblog

Cross linked story with New York Times

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HOW should banks atone for those foreclosure abuses — all the robo-signing and shoddy recordkeeping that jettisoned so many people from their homes?

It has been four months since a deal to remedy this mess was floated. Not much has happened since — at least not publicly.

Last week, banking executives and state attorneys general met in Washington to try to settle their differences. At issue was how much banks should pay, and how and to whom, to make this all go away. The initial terms, which emerged in March, were said to carry a $20 billion price tag.

But here is a crucial question: to what extent would such a settlement protect banks from future liability? Will the attorneys general strike a deal that effectively prevents them from bringing new, unrelated lawsuits against the banks?

If the releases in any settlement are broad, there will be joy in Bankville. If they are narrow, the banks will probably face more litigation, something they would rather avoid.

A looming issue relates to the potential liability stemming from the Mortgage Electronic Registry Systems, or MERS. This company, owned by the major banks, was set up in the mid-1990s by the Mortgage Bankers Association, Fannie Mae and Freddie Mac. Its goal was to expedite the home loan process.

By eliminating the need to record changes in property ownership in local land records, MERS ramped up profits for lenders. In 2007, MERS calculated that it had saved the industry $1 billion over 10 years. An estimated 60 percent of all home loans were registered to MERS.

But the MERS machine started to sputter during the foreclosure crisis. Lawyers challenged MERS’s ability to bring foreclosure proceedings because the system does not technically own the security or note underlying properties, as required. While some courts have not objected to MERS’s foreclosing in place of banks, others have.

New York courts, for instance, have been increasingly hostile to MERS. In a February 2011 opinion, Robert E. Grossman, a federal judge on in Long Island, wrote: “This court does not accept the argument that because MERS may be involved with 50 percent of all residential mortgages in the country, that is reason enough for this court to turn a blind eye to the fact that this process does not comply with the law.”

Equally troubling for MERS is the fact that its officials have filed questionable documents with courts attesting to ownership of the notes and other significant matters.

These practices have consequences, as described by R. K. Arnold, MERS’s former president, in a 2006 deposition. “We are heavily at risk as far as, you know, having to follow the rules of the court and enforcing our rules that our members must go by,” he said. “We also have jeopardy as far as if we were to fail in the foreclosure realm.”

David Pelligrinelli, president of AFX Title, a title search company, said MERS contributed to the problem of thousands of mortgages lacking a complete ownership chain.

“You can’t go back and redocument all these things, because some of the companies aren’t around anymore,” he said. “Even if they are, the charters for these companies don’t allow for backdating of assignments.”

How MERS and its bank owners will fare with the attorneys general is unclear. The early term sheet for the possible settlement said only this: “Issues relating to the use and performance of MERS are reserved for further discussion.” Those further discussions may be taking place now. It’s a good bet that the banks want a comprehensive release from liability relating to MERS.

Officials at the nation’s top four banks declined to comment on the private talks. A spokeswoman for MERS said it was not participating in the discussions and could not speculate on them.

Lawyers who have examined this issue say it would be unprecedented to grant a broad release from liability to the banks that own MERS from claims that have not been investigated.

WHILE some states are scrutinizing MERS, most have declined to investigate its operations. That might seem surprising, given the apparent conflicts of interest in its business. Employees of law firms representing banks in foreclosures, for instance, are also officers of MERS. They can assign mortgages even though they represent a party with an interest in the outcome.

A broad release would vastly diminish the possibility of an in-depth investigation. Such a release might also make it harder for borrowers to argue that MERS has no right, or standing, to foreclose on them. The United States Trustee has supported this view in a number of recent cases, but exempting banks from future lawsuits on this issue would send a message that questioning MERS’s standing is of no interest to top state officials.

And if the banks are insulated from future state lawsuits, responsibility for any abusive acts by MERS would be pushed onto law firms that did the system’s work. With few assets, these law firms are virtually judgment-proof. The unit of MERS that held title to the mortgages also has few assets and was set up in such a way that lawsuits against it would probably reap little for plaintiffs.

MERS has begun to clean up its practices and paperwork. Officials are furiously assigning mortgages out of MERS’s name and into the banks’ names. One borrower in Pierce County, Wash., combed through records from April 1, 2011, to July 18, and found 1,956 assignments of deeds of trust executed from MERS to banks that service the loans or trustees that oversee mortgage pools.

Sure, the issues surrounding MERS seem mind-numbing. Some officials might want to wash their hands of the whole thing in a settlement. But at least one legal professional is offering to educate attorneys general — at no cost. She is April Charney, a lawyer at Jacksonville Area Legal Aid in Florida and one of the first to question MERS’s standing in foreclosures.

“You need lawyers in each state to be legal consultants to the A.G.’s so they’re on equal footing with the huge industry they are up against,” she said. “It would be an honor to consult on these highly complex, layered and nuanced state-based legal issues. Call it pro bono with bells on.”

It would be telling if no one takes her up on that offer.

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Curse the Geniuses Who Gave Us Bank of America: Jonathan Weil

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Piggybankblog posted on 07/22/11

Picture posted by piggybankblog

Cross linked with bloomberg.com

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Ask anyone what the most immediate threats to the global financial system are, and the obvious answers would be the European sovereign-debt crisis and the off chance that the U.S. won’t raise its debt ceiling in time to avoid a default. Here’s one to add to the list: the frightening plunge in Bank of America Corp. (BAC)’s stock price.

At $9.85 a share, down 26 percent this year, Bank of America finished yesterday with a market capitalization of $99.8 billion. That’s an astonishingly low 49 percent of the company’s $205.6 billion book value, or common shareholder equity, as of June 30. As far as the market is concerned, more than half of the company’s book value is bogus, due to overstated assets, understated liabilities, or some combination of the two.

That perception presents a dangerous situation for the world at large, not just the company’s direct stakeholders. The risk is that with the stock price this low, a further decline could feed on itself and spread contagion to other companies, regardless of the bank’s statement this week that it is “creating a fortress balance sheet.”

It isn’t only the company’s intangible assets, such as goodwill, that investors are discounting. (Goodwill is the ledger entry a company records when it pays a premium to buy another.) Consider Bank of America’s calculations of tangible common equity, a bare-bones capital measure showing its ability to absorb future losses. The company said it ended the second quarter with tangible common equity of $128.2 billion, or 5.87 percent of tangible assets.

Investor Doubts

That’s about $28 billion more than the Charlotte, North Carolina-based company’s market cap. Put another way, investors doubt Bank of America’s loan values and other numbers, too, not just its intangibles, the vast majority of which the company doesn’t count toward regulatory capital or tangible common equity anyway.

So here we have the largest U.S. bank by assets, fresh off an $8.8 billion quarterly loss, which was its biggest ever. And the people in charge of running it have a monstrous credibility gap, largely of their own making. Once again, we’re all on the hook.

As recently as late 2010, Bank of America still clung to the position that none of the $4.4 billion of goodwill from its 2008 purchase of Countrywide Financial Corp. had lost a dollar of value. Chief Executive Officer Brian Moynihan also was telling investors the bank would boost its penny-a-share quarterly dividend “as fast as we can” and that he didn’t “see anything that would stop us.” Both notions proved to be nonsense.

Acquisition Disaster

The goodwill from Countrywide, one of the most disastrous corporate acquisitions in U.S. history, now has been written off entirely, via impairment charges that were long overdue. And, thankfully, Bank of America’s regulators in March rejected the company’s dividend plans, in an outburst of common sense.

Last fall, Bank of America also was telling investors it probably would incur $4.4 billion of costs from repurchasing defective mortgages that were sold to investors, though it did say more were possible. Since then the company has recognized an additional $19.2 billion of such expenses, with no end in sight.

The crucial question today is whether Bank of America needs fresh capital to strengthen its balance sheet. Moynihan emphatically says it doesn’t, pointing to regulatory-capital measures that would have us believe it’s doing fine. The market is screaming otherwise, judging by the mammoth discount to book value. Then again, for all we know, the equity markets might not be receptive to a massive offering of new shares anyway, even if the bank’s executives were inclined to try for one.

No Worries

We can only hope Bank of America’s regulators are tracking the market’s fears closely, and have contingency plans in place should matters get worse. Yet to believe Moynihan, there’s nary a worry from them. When asked by one analyst during the company’s earnings conference call this week whether there was any “pressure to raise capital from a regulatory side of things,” Moynihan replied, simply, “no.”

If that’s true, the banking regulators should share blame with Moynihan for the current mess. It would be impossible for any lender to have too much capital in the event that Europe’s debt problems, for example, morph into another global banking crisis. It’s also hard to believe Bank of America has enough capital now, given that the market doesn’t believe it.

There undoubtedly are plenty of brave investors eyeing Bank of America’s stock price who trust the numbers on the company’s books and see a buying opportunity. Perhaps they’ll even be proven right. We should hope so, for our own sakes. There’s more at stake here, however, than whether Bank of America’s shares are a “buy” or a “sell.”

The main thing the rest of us care about is the continuing menace this company and others like it pose to the financial system, knowing we never should have let ourselves be put in the position where a collapse in confidence at a single bank could wreak havoc on the world’s economy. Here we are again, though. Curse the geniuses who brought us this madness.

(Jonathan Weil is a Bloomberg View columnist. The opinions expressed are his own.)

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House GOP And Elizabeth Warren Can’t Even Agree Over Meeting Time

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Posted by piggybankblog on 07/22/11

Older Story

Youtube posted by piggybankblog

Cross linked article with TMP

House Republicans and Elizabeth Warren don’t agree on much, including whether they had an arrangement allowing Warren to leave a subcommittee hearing where she was testifying Tuesday at a set time so she could make her other obligations.

Warren was testifying before a House Oversight subcommittee hearing held by Rep. Patrick McHenry (R-NC) on the Consumer Financial Protection Bureau, an agency created by the Wall Street reform law that Warren has been tasked with standing up for.

The title of the hearing was “Who’s Watching the Watchmen? Oversight of the Consumer Financial Protection Bureau,” but Rep. Carolyn B. Maloney (D-NY) said that the title of the Republican’s hearing should be “Let’s Pretend the Financial Crisis Never Happened.”

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Republicans have moved to weaken the CFBP and threatened to filibuster any nominee to head the Bureau unless changes are made.

Maloney said the CFBP “fills a gaping hole in our regulatory framework,” and said the GOP was “holding the entire government hostage to their demands on dismantling this program.”

But much of the hearing was dedicated to a squabble between Warren and McHenry over an agreement about time constraints on her testimony. Warren contended that McHenry’s staff agreed to allow her to leave by 2:15 p.m. so she could make a meeting at 2:30 p.m., but McHenry said he agreed to nothing of the sort.

“Congressman, you told us one thing,” Warren said. “I have other obligations I committed to based on the representations of your staff, and our efforts to try to accommodate you and rearrange our schedule to accommodate you.”

“You had no agreement… you’re making this up, this is not the case,” McHenry said. “She accusing me of making an agreement that I never made.”

Eventually McHenry agreed to allow Warren to answer questions from the members who weren’t in attendance.

Rep. Elijah Cummings (D-MD), ranking member of the House Oversight Committee, strongly backed Warren at the hearing. Democrats have been encouraging President Barack Obama to give Warren a recess appointment to the CFBP.

“I don’t care what happens in this hearing today, I don’t care what is said, I’m begging you — I’m begging you — to keep the fire. I’ve got constituents who’ve lost so much, and they don’t even know how they’ve lost it. And we need you, we really desperately need your passion, your concern. Thank you for synchronizing your conscience with your conduct,” Cummings said. “May God bless you, stay on the battlefield.” – read more

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Investors Impatient with BofA CEO Brian Moynihan

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Piggybankblog posted 07/21/11

Picture posted by piggybankblog

Cross linked story wiht wallstreetpit.com

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FOX Business Network Senior Correspondent Charlie Gasparino reports that “investors are growing impatient” with Bank of America (BAC) CEO Brian Moynihan but “the board of Bank of America is standing firmly behind Moynihan, at least for now.” Additionally, sources inside the company tell Gasparino “BAC has no plans to spin of Merrill Lynch.” Excerpts from the report can be found below, courtesy of Fox Business Network.

On Bank of America CEO Brian Moynihan’s future with the company:

“Senior people inside of Bank of America tell FOX Business investors are growing impatient with Brian Moynihan the CEO, but the board of Bank of America is standing firmly behind Moynihan, at least for now.”

On whether Bank of America will spin of Merrill Lynch:

“BAC has no plans to spin of Merrill Lynch. It is impossible to ‘unscramble the egg’ as a person there told me. They are so fully integrated that Merrill Lynch is going to stay.”

On when a settlement on the robo signing issue will be reached:

“They see light at the end of the tunnel on that. They think that thing is going to be settled at least by the third quarter of this year.”

Youtube posted by piggybankblog

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Bad Mortgages Still Haunt Bank of America

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Piggybankblog posted on 07/21/11

Piggybankblog posted picture

Cross linked story with bloomberg.com

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Under Chief Executive Officer Brian T. Moynihan, Bank of America (BAC) is spending billions of dollars to deal with the aftermath of the housing bust, reaching settlements with mortgage bond investors and insurers and setting aside funds for future claims. The cleanup effort hasn’t yet convinced analysts and investors that the bank is ready to put the mortgage mess behind it.

Charlotte (N.C.)-based Bank of America, the nation’s largest bank by assets, announced a quarterly loss of $8.83 billion on July 19, the biggest in its history. The mortgage unit’s loss widened to $14.5 billion, from $1.5 billion a year earlier. Moynihan has called his company a “tale of two cities,” because its non-mortgage operations are making money. Global commercial banking reported the highest net income since the second quarter of 2009, according to the bank.

Yet Moynihan still finds himself writing checks to settle disputes inherited from the 2008 takeover of subprime lender Countrywide Financial, where lax underwriting led to soaring defaults on mortgages and claims from investors who bought or insured them. Overall, Moynihan has booked about $30 billion in settlements and writedowns to clean up mortgage liabilities since succeeding Kenneth D. Lewis last year.

Earlier this year the Federal Reserve rejected Bank of America’s request to raise its quarterly dividend, now 1¢ a share, and analysts say a significant dividend boost may be years away. “The charges have had the effect of reducing mortgage uncertainty but have pushed dividend increases further into the future,” Richard Staite, an analyst with Atlantic Equities, wrote in a June 30 note.

Another challenge: Staite and Jason Goldberg, a Barclays Capital analyst, both estimate that Bank of America needs to raise $50 billion to comply with the new international capital standards that will take effect over several years. “It’s phased in over time, so there’s time to meet the requirement,” says Jerry Dubrowski, a Bank of America spokesman. Banks can meet capital requirements by selling stock, retaining earnings, or reducing assets.

Investors remain skeptical. On the day of the earnings announcement, the stock sank to $9.40, the lowest level since May 2009, before closing at $9.57. It has fallen 28 percent this year, making it the worst performer of the 24 stocks in the KBW Bank Index. Paul Miller at FBR Capital Markets (FBCM) says doubts about the bank’s earnings power may prompt more selling. “We need more confidence in the numbers,” Miller said on July 19. “A lot of analysts are going to lower their ratings.”

The bottom line: Investors have knocked about $38 billion off Bank of America’s market value this year as mortgage costs continue to dent earnings.

Son is a reporter for Bloomberg News in New York.

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UPDATE 2-450,000 Countrywide borrowers get refund checks-FTC.

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Piggybankblog posted on 07/21/11

Picture posted by piggybankblog

Cross linked story with reuters.com

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* FTC chairman calls Countrywide behavior “unconscionable” (Adds details on Countrywide borrowers, paragraphs 11-12)

By Jonathan Stempel

NEW YORK, July 20 (Reuters) – More than 450,000 borrowers overcharged by the Countrywide mortgage lender when they fell behind or defaulted on their home loans are receiving refund checks under last year’s $108 million settlement with the Federal Trade Commission.

Refunds will average about $240 per borrower, comprising the entire sums they were overcharged, and more than 15,000 borrowers should receive more than $1,000 each, the FTC said.

The settlement reached in June 2010 is one of the largest in FTC history, both in dollars and the number of consumers recovering money — roughly 1 percent of all U.S. mortgage holders, it added. FTC Chairman Jon Leibowitz called Countrywide’s behavior “unconscionable.”

According to the FTC, two Countrywide units routinely overcharged customers, including some in bankruptcy, between Jan. 1, 2005, and July 1, 2008, when the largest U.S. mortgage lender and servicer was bought by Bank of America Corp (BAC.N) for $2.5 billion.

“What really struck me is the massive breadth of the harm,” Leibowitz said in an interview. “Countrywide’s loan servicing division was absolutely a business model based on deceit…. The more we investigated, the worse it looked.”

Leibowitz attributed the delay in sending out checks to Countrywide’s “abysmal” record-keeping.

Rick Simon, a Bank of America spokesman, said the largest U.S. bank settled to avoid the cost and distraction of litigation, and did not admit wrongdoing.

He also said the accord covers only Countrywide transactions that predated the 2008 takeover. Countrywide serviced roughly $1.4 trillion of loans at the time.

The settlement is separate from Bank of America’s $8.5 billion agreement last month to end much of the litigation by investors who bought securities backed by risky Countrywide home loans. Some of those investors have complained that this agreement may be unfair. [ID:nN1E76C1XV]

The FTC has no jurisdiction over banks, but can act against deceptive practices by non-bank financial services firms.

$300 LAWN MOWING

According to the FTC, in an effort to profit during bad economic times, Countrywide charged 347,846 borrowers whose loans were in default excessive fees on property inspections, lawn mowing, title searches and other services it arranged.

Countrywide often marked up the cost by more than 100 percent, and sometimes more than 400 percent, the FTC said.

In addition, in servicing loans for 102,331 bankrupt borrowers, Countrywide made false or unsupported claims about the amounts owed or status of the loans, and added fees and escrow charges without notice, the FTC said.

“If customers were charged $300 for mowing a lawn and it cost Countrywide $75, they’re getting $225,” Leibowitz said.

Leibowitz declined to speculate on the extent to which other mortgage servicers engaged in similar practices.

“You see cases like this, you wonder whether some of the problems were endemic, and you see why there is value in the new Consumer Financial Protection Bureau,” he said. (Editing by Matthew Lewis and Robert MacMillan; Editing by Gary Hill)

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OLDER STORY – CHICAGO-TODAY A CIVIL SUIT WAS FILED AGAINST A NATIONAL LAW FIRM OPERATING OUT OF CHICAGO BRYANT CAVE LLP

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Piggybankblog posted 07/20/11

Story cross linked with rentamark.net

CHARGING THEM WITH CONSPIRACY, AIDING AND ABETTING, FRAUD AND CIVIL RACKETEERING “RICO”. The complaint also charges Bryan Cave partner Steven R. Smith http://www.bryancave.com/srsmith/and his “bagman” assistant, attorney Michael Werich http://www.bryancave.com/michaelwerich/ who invited and encouraged the suit to be filed against Bryan Cave because they love litigation, they have over 1000 super lawyers ready to fight. The complaint also names the Robert P. Kelly CEO of Bank of New York Mellon and amount other defendants, Brian T. Moynihan. The new CEO of Bank of America. Calls were not returned from any of the defendants. Steven R. Smith a partner with Bryant Cave was asked whether he would waive service of summons and accept service on behalf of the Defendants. Mr. Smith has not responded. Damages sought exceed 500 million dollars, which according to one insider is chump change to Bank of New York which has a Trillion dollars and Bryan Cave were there partners make over $1 million a year each according to one source.- original story

LEGAL DISCLAIMER: All defendants are considered innocent until proven guilty beyond a reasonable doubt.

Perversion and obstruction of justice were alleged in Wright Vs. Bank of America Case below:

Washington DC, June 19- Human Rights Alert, Los Angeles county based NGO, and Dr Joseph Zernik filed request with the Hon Vaughn R Walker, Chief Judge, US District Court, Northern District of California, to initiate investigation and corrective actions relative to conduct of Bank of America Corporation and its subsidiaries and affiliates in the case of Wright v Bank of America et al(5-10-cv-01723), where perversion and obstruction of justice were alleged, following a pattern of conduct in courts across the US, established by Countrywide Financial Corporation, and adopted by Brian Moynihan starting with his appointment as General Counsel of Bank of America on December 10, 2008- See the rest of original story

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Bank of America’s Lawyer Plays Dirty, Suit Charges

Homeowners’ lawyer alleges improper tactics by bank’s attorney

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Stuart Price Bio: Click here

Piggybankblog posted on 07/19/11

Picture of Stuart Price posted by piggybankblog

Cross linked story with consumeraffairs.com

An attorney who represents victims of foreclosures and mortgage fraud claims a senior partner with the law firm Bryan Cave LLP who represents Bank of America and Countrywide Mortgage is using underhanded tactics to try to put him out of business.

In the case filed in Orange County, Calif., Superior Court, attorney Gary Lane says the bank’s lawyers have used intentional and malicious tactics to prevent him from representing underprivileged defendants.

Lane operates a non-profit legal clinic, the Consumer Protection Assistance Coalition, in Irvine.

Lane, who has been in practice for 39 years, says that over the last three years his clinic began to handle a large number of cases involving homeowners wrongfully threatened by banks and mortgage lenders and has filed a number of suits against Bank of America and Countrywide.

Stuart Price, a senior partner at Bryan Cave, is responsible for handling Bank of America’s mortgage and foreclosure cases, the suit says and it alleges that in every case filed by Lane, Price files responses that include untrue and defamatory statements about Lane.

Lane’s suit lists actions that he alleges were taken solely to undermine his reputation and damage his business, including:

  • failure to file a stipulation delaying a hearing, causing Lane to be sanctioned for not appearing;
  • directed a witness to perjure herself, causing Lane to be sanctioned by the court;
  • filed a motion asking that Lane be ordered to seek a judge’s approval before filing any additional actions against Bank of America; and filed a complaint with the State Bar taking issue with 78 lawsuits Lane had filed against Bank of America, causing Lane to be required to respond separately to each and every complaint;

Lane says that as a result of the law firm’s tactics, he has been required to spend “countless hours” responding to the tactical roadblocks.

In the case of the 78 complaints, Lane notes that the State Bar normally allows an attorney one month to respond to a complaint, anticipating that it will take that long to assemble a proper response. But since Price filed 78 complaints in a single document, Lane is being given only one or two months to respond.

Lane cites provisions in California’s civil procedure rules noting “a disturbing increase in lawsuits brought primarily to chill the valid exercise of the constitutional rights of free speech,” and alleges that the purpose of Price’s actions is to block Lane from bringing further lawsuits against Bank of America on behalf of troubled homeowners.

The suit seeks injunctive relief, legal fees and dismissal of the State Bar complaint.- read article

Gary Lane vs. Bryan Cave’s Stuart Price: Click here

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Well, well, well! Your time has come Stuart Price! Think he needs a witness Stuart?

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This almost sounds like how he might have played a trick on me when he got my first case dismissed! What goes around comes around my friend (wink).

I am just telling you right now Stuart, I am going to have so much fun with this one!

You can run, but you cannot hide Stuart Price!

(Not to be take as a threat)

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My name is John Wright AND I AM FIGHTING BACK!

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In Richard Cordray, Consumer Agency Would Be Led By Financial Cop Known For Toughness

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Piggybankblog posted 07/19/11

Picture poste by piggybankblog

Cross linked story with Huffington Post

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In nominating Richard Cordray to lead the fledgling consumer protection agency, President Barack Obama has chosen a man with a reputation as a defender of consumers’ rights, someone willing to take on the nation’s most powerful financial firms.

Sunday’s announcement that the president would name Cordray to head the Consumer Financial Protection Bureau, which was created under last year’s financial reform law and is set to officially launch this week, came as a disappointment to some consumer advocates. Elizabeth Warren, the Harvard law professor who conceived of the agency, was seen as the natural choice to lead it, and the fierce opposition she met from congressional Republicans intensified her supporters’ fervor.

But Cordray, who still must be confirmed by the Senate, is no pushover when it comes to defending the customers of the financial services industry against abuses. As Ohio’s attorney general during the years following the financial crisis, he sued the major mortgage company GMAC Mortgage and wrote letters to big banks, following revelations that banks employed people who signed thousands of crucial foreclosure documents without reading them. The banks then temporarily halted foreclosures in Ohio.

Currently the chief enforcer at the CFPB, Cordray has done battle against institutions in high finance, such as rating agencies, and in low, such as payday lenders. Cordray’s friends cite his no-nonsense approach to consumer protection, saying his vigilance is based on data and research, rather than mere ideology. But whatever his motive, one thing seems clear: He is known to be tough.

“He will definitely be tougher than the bank supervisors,” said Ernest Patrikis, a former general counsel at the New York Federal Reserve, and now a partner at the law firm White & Case.

“When people do wrong, they should be spanked. That’s nature’s way,” Patrikis continued. The CFPB, he said, “was envisioned as having a strong enforcement arm, and with him in charge of the agency, that will certainly be the case.”

Cordray, who was an Ohio state representative in the early 90s, and who served as Ohio state treasurer before becoming state attorney general in 2008, got national attention for his hard-line stance in the mortgage crisis that exploded last autumn. He was one of the first attorneys general to act in an investigation that soon involved the top legal enforcers from all 50 states, in addition to a collection of federal agencies.

He also took on the giant insurer AIG, accusing it of fraud, and he sued the major ratings agencies, saying they bestowed top ratings on securities doomed to fail. All told, he has won settlements worth more than $2 billion.

His zeal is founded on experience with working families in Ohio, say those who know him. Like states across the nation, Ohio has been hit hard by the foreclosure crisis. Last month, one out of every 587 housing units in the state received a foreclosure filing, according to data provider RealtyTrac. That’s about in line with the country as a whole, with one in 583 housing units nationwide receiving filings in June.

Cordray’s observations in his state have informed his strong stance against mortgage abuses, said David Rothstein, a fellow at the New America Foundation and a researcher at Policy Matters Ohio, two non-partisan think tanks. Rothstein has worked with Cordray on a variety of issues.

“He wants to be convinced by statistics,” Rothstein said. “He’s not an ideological consumer protector, in the sense that he doesn’t think all banks are bad, and he doesn’t think that all financial products are bad.”

“But if he sees a problem and identifies it through research,” Rothstein continued, “he’s going to pursue it.”

Cordray is also a five-time winner of the game show “Jeopardy!” and those who know him say his memorization skills are impressive. Bill Faith, executive director of the Coalition on Homelessness and Housing in Ohio, who says he has known Cordray for 20 years, recalled one of Cordray’s birthday parties, where friends set up a makeshift version of the popular game show/

“Initially he was having fun with it, everybody was joking around. And after the first round, he was losing,” Faith said.

“And then he kicked in that mind,” he continued. “It’s like you could see the change. When he needed to, he ramped it up, and just slaughtered us.”

Some supporters of Warren expressed frustration that she had not been the president’s nominee to head the CFPB. Dean Baker, co-director of the Center for Economic and Policy Research in Washington, lauded Warren’s ability to put complicated issues in clear terms, and worried about Cordray’s ability to do the same.

“You’re going up against very powerful institutions, who could put out tons of garbage saying how x, y and z is going to lead to the loss of a million jobs,” Baker said. “You need someone who can in two or three sentences say why that’s garbage.”

Warren endorsed Cordray in a blog post on The Huffington Post.

Faith spoke of Cordray’s fair approach in dealings with the financial industry.

“I do think that everybody can be well served by this guy,” Faith said. “People from the industry who think he’s just on a mission to attack them, they’re just wrong. Unless they’re involved in bad acts, they have nothing to worry about.”

“For those involved in bad acts,” Faith said, “he’ll be their worst nightmare.”

Piggybankblog says let’s give a round of applause to Richard Cordray!

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Lock them up Richard! Lock them up for what they did to our country!

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Bank Of America Posts $8.8 Billion Second-Quarter Loss After Mortgage Settlement

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Piggybankblog posted on 07/19/11

Picture posted by piggybankblog

Cross linked story with Huffington post

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Bank of America Corp posted a second-quarter net loss after an $8.5 billion settlement with mortgage bond investors.

The largest U.S. bank by assets on Tuesday reported a net loss of $8.8 billion, or 90 cents per share, compared with net income of $3.1 billion, or 27 cents per share, a year earlier.

Analysts on average expected a loss of 90 cents per share, according to Thomson Reuters I/B/E/S.

On June 29, the bank announced it would take a series of big one-time charges in the quarter related to a settlement with private investors who demanded the bank repurchase toxic home loans held in mortgage-backed securities.

Excluding the charges, the bank reported net income of $3.7 billion, or 33 cents per share, for the second quarter.

Revenue tumbled 54 percent to $13.5 billion, due to a $14 billion provision taken as part of the mortgage settlement. Excluding that provision, revenue totaled $26.5 billion

BofA shares fell 2.8 percent to $9.72 on Monday and have declined 27 percent this year, compared with a 12 percent drop in the KBW Banks Index.

Piggybankblog states “Looks like they are not too big to fail to me!

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(Reporting by Joe Rauch; editing by John Wallace)

 

 

BofA looks to clear up cloudy mortgage outlook

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Pigybankblog posted on 07/19/11

Picture posted by piggybankblog

Cross linked story wtih reuters.com

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* Analysts expect net loss of $0.90 vs EPS of $0.27

* Analysts hoping for clarity on home loan repurchases

By Joe Rauch

CHARLOTTE, N.C., July 19 (Reuters) – For Bank of America Corp, the mortgage issues never seem to end, which is the chief worry for investors and analysts.

The largest U.S. bank is due to post second-quarter earnings on Tuesday, and is expected to record more than $20 billion of charges linked to home loans.

If that were the last of the bank’s mortgage issues, investors would look past the charges. But investors are not confident the bank’s housing-related issues are ending.

So far this year, BofA has entered into three major settlements totaling $13 billion with outside investors who claimed the bank needed to repurchase toxic home loans that were part of mortgage-backed securities.

But after the settlement agreements, the bank is still on the hook for buying back billions in bad mortgages.

That signals to some analysts that the bank is limiting some of its possible liabilities from bad mortgages, only to find new ones cropping up.

“They have to make clear they’re moving past these issues,” said Marty Mosby, bank analyst with Guggenheim Securities LLC.

Earlier this year, the bank estimated it may have to repurchase between $7 billion and $10 billion in soured mortgages out of securities held by private investors.

The bank then entered a settlement with U.S. government-backed mortgage investors Fannie Mae and Freddie Mac, and another with insurer Assured Guaranty.

But when the bank reported first-quarter results in April, its estimate of buybacks did not shrink. Then-CFO Charles Noski attributed the lack of shrinking to the continued decline in U.S. home prices, which offset any gains the bank made in resolving claims.

The bank has said to expect a second-quarter loss of up to $9.1 billion due to settlement-related charges.

Excluding the charges, Bank of America said it expected to report net income of up to $3.7 billion.

Analysts project the bank will lose 90 cents per share in the second quarter, reversing a 27 cents per share profit from a year earlier.

Beyond its mortgage issues, BofA’s other operations will have to show they’re keeping pace with second-quarter results at the lender’s chief rivals.

BofA reports results less than a week after JPMorgan Chase & Co and Citigroup Inc posted better-than-expected second-quarter profits.

Both showed fewer problem loans, and had uneven investment banking results. BofA is expected to largely follow in those banks’ footsteps.

On June 29, BofA said sales and trading results should be above a year ago, but lag first quarter 2011.

BofA’s global banking and markets unit — which includes its Bank of America Merrill Lynch investment bank — earned $2.1 billion in the first quarter.

On Thursday, JPMorgan Chase’s investment bank’s results mirrored those of BofA’s outlook. JPMorgan’s investment bank posted net income of $2.06 billion, above second quarter 2010′s $1.38 billion, but below the $2.37 billion in first quarter.

BofA, like its peers, is also expected to benefit from releasing money that had been previously set aside to cover bad loans.

At Citigroup, the third largest U.S. bank by assets released $1.9 billion in loan loss reserves, a 31 percent jump from a year prior. The release contributed to the bank’s $3.3 billion in second-quarter net income. (Reporting by Joe Rauch, editing by Bernard Orr)

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Neighbors Are Mad At Guy Who Got $300K House For $16.

 

Piggybankblog posted 07/19/11

Cross linked story with consumerist.com

That unappealing smell could be the stench of jealousy, after a man uses the law to his advantage and snags a $300,000 house in Texas for a mere $16. Now his high-falutin’ neighbors are all cranky that he might get away with such a steal.

KHOU.com out of Texas brings us the story of the man who moved into a foreclosed home and filed some paperwork, along with a $16 fee, in the town of Flower Mound, and could end up with his McMansion if he lives in it for three years.

Kenneth Robinson’s new neighbors say he’s a squatter, but he says he is just using the law to his advantage. After the previous owners walked away from the house when it was in foreclosure, the mortgage company went out of business. So Robinson moved in after researching “adverse possession,” a little-known Texas law.

He printed out an online form and filed it at Denton County courthouse for $16 and was granted rights to the house. The home has no electricity or running water, but Robinson just set up camp anyway. The law says he gets exclusive negotiating rights with the original owner. If they want him out, they have to pay off the mortgage debt and the bank would have to file a lawsuit.

Robinson doesn’t think that’s likely, and after three years, he can ask the court for the title to the home. In the meantime, he posted “No Trespassing” signs after his neighbors tried to get him arrested for squatting. Cops can’t remove him because home ownership is a civil, not criminal matter.

“If he wants the house, buy the house like everyone else had to,” says one neighbor. “Get the money, buy the house.”

Or, just pay $16 and still get the house.

Stranger moves into foreclosed home, citing little-known Texas law [KHOU.com]

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Special report: Banks continue robo-signing

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Piggybankblog posted on 07/18/11

Picture posted by piggybankblog

Cross linked story with reuters.com

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(Reuters) – America’s leading mortgage lenders vowed in March to end the dubious foreclosure practices that caused a bruising scandal last year.

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But a Reuters investigation finds that many are still taking the same shortcuts they promised to shun, from sketchy paperwork to the use of “robo-signers.”

In its effort to seize the two-bedroom ranch house of 87-year-old Margery Gunter in this down-on-its-luck Florida town, OneWest Bank recently filed a court document that appears riddled with discrepancies. Mrs. Gunter, who has lived in the house for 40 years and gets around with the aid of a walker, stopped paying her loan back in 2009, her lawyer concedes. To foreclose, the bank submitted to the Collier County clerk’s office on March 3 a “mortgage assignment,” a document essential to proving who owns a mortgage once the original lender sells it off.

But OneWest’s paperwork is problematic. Among the snags: state law permits lenders to file to foreclose only if they already legally own a mortgage. Yet the key document establishing ownership wasn’t signed and officially recorded until months after OneWest filed to foreclose on Mrs. Gunter. OneWest declined to comment on the case.

Reuters has found that some of the biggest U.S. banks and other “loan servicers” continue to file questionable foreclosure documents with courts and county clerks. They are using tactics that late last year triggered an outcry, multiple investigations and temporary moratoriums on foreclosures.

In recent months, servicers have filed thousands of documents that appear to have been fabricated or improperly altered, or have sworn to false facts.

Reuters also identified at least six “robo-signers,” individuals who in recent months have each signed thousands of mortgage assignments — legal documents which pinpoint ownership of a property. These same individuals have been identified — in depositions, court testimony or court rulings — as previously having signed vast numbers of foreclosure documents that they never read or checked.

Among them: Christina Carter, an employee of Ocwen Loan Servicing of West Palm Beach, Florida, a “sub-servicer” which handles routine mortgage tasks for banks. Her signature — just two “C”s — has appeared on thousands of mortgage assignments and other documents this year.

In a case involving a foreclosure by HSBC Bank USA, a New York state court judge this month called Carter a “known robo-signer” and said he’d found multiple variations of her two-letter signature on documents, raising questions about whether others were using her name. That and other red flags prompted the judge to take the extraordinary step of threatening to sanction HSBC’s chief executive officer.

In a phone interview, Carter acknowledged signing large numbers of mortgage assignments this year, but said they all were legally done. To her knowledge, she added, no one else used her name.

‘CUTTING CORNERS’

One of the industry’s top representatives admits that the federal settlements haven’t put a stop to questionable practices.

Some loan servicers “continue to cut corners,” said David Stevens, president of the Mortgage Bankers Association. Nearly all borrowers facing foreclosure are delinquent, he said, but “the real question is whether the servicer complied with all legal requirements.” The loss of a home is “the most critical time in a family’s life,” and if foreclosure paperwork is faulty homeowners should contest it. “Families should be using every opportunity they can to protect their rights.”

Federal bank regulators signed settlements in March with 14 loan servicers — banks and other companies that perform tasks for mortgage investors such as collecting payments from homeowners and when necessary, filing to foreclose. The 14 firms promised further internal investigations, remediation for some who were harmed and a halt to the filing of false documents. All such behavior had stopped by the end of 2010, they said.

Of these companies, Reuters has found at least five that in recent months have filed foreclosure documents of questionable validity: OneWest, Bank of America, HSBC Bank USA, Wells Fargo and GMAC Mortgage.

So have half a dozen large servicers that weren’t party to the agreements, including Ocwen Financial Corp and units of Credit Suisse Group AG.

Spokesmen for the banks and servicers named in this article said that they halted any wrongdoing after disclosures last autumn of robo-signing led them to revise their practices, and they denied filing false documents since then.

In general, they said their foreclosure cases were legitimate, but for a small number of exceptions, and that criticism by defense lawyers and judges of some types of documentation is based on misinterpretation of the law.

The persistence of the paperwork mess poses a dilemma for American policymakers and society at large.

The vast majority of homeowners in foreclosure are in fact delinquent on their mortgage payments. Many bankers and judges view the issue as a technicality. Regardless of legal niceties, they say, people should pay up or lose the collateral on the loans — their houses and condos.

Increasingly, though, courts are holding that the trusts suing to foreclose don’t actually own the mortgages. Judges have ruled that foreclosing based on flawed or missing evidence violates longstanding laws meant to protect all Americans’ property rights.

In a landmark decision in January, the Massachusetts Supreme Judicial Court overturned a foreclosure because of a lack of proper documentation.

“The holder of an assigned mortgage needs to take care to ensure that his legal paperwork is in order,” wrote Justice Robert Cordry in a concurring opinion. “Although there was no apparent actual unfairness here to the (homeowners), that is not the point. Foreclosure is a powerful act with significant consequences, and Massachusetts law has always required that it proceed strictly in accord with the statutes that govern it.”

(U.S. Bank National Association, trustee, vs. Antonio Ibanez, 458 Mass. 637.)

A THOUSAND QUESTIONS

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.

The settlements included the four largest banks in the United States — Bank of America Corp, Wells Fargo, JP Morgan Chase & Co, and Citigroup Inc. The other parties were lending units of Ally Financial Inc, HSBC Holdings PLC, MetLife Inc, PNC Financial Services Group Inc, SunTrust Banks Inc, U.S. Bancorp, Aurora Bank, EverBank, OneWest Bank and Sovereign Bank.

The pacts were struck with the Office of the Comptroller of the Currency, the main regulator of national banks, as well as with the Federal Reserve, the Federal Deposit Insurance Corp. and the Office of Thrift Supervision.

Some state and federal officials have called the settlements weak. Authorities are still working out financial penalties to be imposed on the 14 firms. The banks didn’t admit or deny wrongdoing, and many of the practices banned were previously illegal anyway, such as filing false affidavits and making false notarizations. And regulators left it to the banks to oversee their own internal investigations.

The OCC confirmed it has received complaints that questionable practices continue. But spokesman Bryan Hubbard said the settlements “are intended to address many of the root causes of improper foreclosure actions,” thus preventing future harm.

WAVE OF FORECLOSURES

The collapse of the housing boom in late 2006 led to a wave of foreclosures. Federal Reserve data show that some 4.5 percent of U.S. mortgages are in foreclosure. In 2010, 2.5 million foreclosures were initiated, with a similar number expected this year.

In the housing boom, lenders created millions of new mortgages, packaged them into pools, and securitized them rapidly for sale to investors in so-called mortgage-securities trusts.

The agreements setting up the trusts, called “pooling and servicing agreements,” require that key documents, properly executed and endorsed, be turned over immediately for each mortgage when a trust is established. The two most important ones are a promissory note and mortgage assignment.

A mortgage really has two parts. One is the actual mortgage (in some states called a “deed of trust”). Its purpose is to pledge the home as collateral for the loan. To transfer ownership of this collateral pledge, the seller must issue a document called a mortgage assignment. The other is the promissory note, which is the loan agreement itself. The homeowner signs it, promising to pay principal and interest.

The Reuters examination turned up thousands of instances –more than 2,000 in Florida alone — involving recently filed mortgage assignments which ostensibly transferred mortgages to these trusts years after they were formed.

The problem, according to Georgetown University law professor Adam Levitin, an expert on securitization: About 80 percent of all trust agreements provide that New York State law applies, and under New York law, any mortgage assignments made later than specified in the agreements would be void.

Reuters has also uncovered problems with the other key document used in foreclosure cases, the promissory note.

To foreclose, a trust, bank or mortgage finance giant such as Fannie Mae or Freddie Mac must possess the original “blue ink” signed promissory note. The crucial parts of the note are at the bottom — the endorsements, somewhat like those on the back of a check. The agreements establishing trusts require a proper chain of endorsements showing legal transfers of a note from the original lender, through any intermediary owners, and finally to the trust itself.

Attorneys defending homeowners contend that improper endorsements are rife. Reuters obtained from public court records and defense attorneys more than 100 examples of notes that for various reasons appear to be improper.

MYSTERY OF MARY ARTHUR

One example: The attempt by Credit Suisse unit DLJ Mortgage Capital to foreclose on Mary Arthur of Dobbs Ferry, New York. Mrs. Arthur, 63 and legally blind, works part time as an assistant in a doctor’s office. Originally from Trinidad, Mrs. Arthur became delinquent on her $427,500 loan after her parents and sister died and she ran up debts traveling home for the funerals, according to her attorney, Linda Tirelli.

The loan servicers, Select Portfolio Servicing of Salt Lake City, threatened to foreclose on DLJ’s behalf. Mrs. Arthur arranged with Select Portfolio a trial mortgage modification to see if she could keep up with the reduced payments. She made the payments but, Tirelli said, Select Portfolio filed to foreclose.

DLJ filed in two separate court cases what it said were authentic copies of Mrs. Arthur’s promissory note. Because they were supposed to be copies of the same document, the endorsements filed with both courts should be identical.

But a look at the documents shows that the version filed in state court and the one filed in bankruptcy court had completely different endorsements on them — naming different owner banks and signed by different people. Tirelli said she has brought this to the attention of the bankruptcy judge and is awaiting a ruling.

Credit Suisse, which owns both DLJ Mortgage Capital and Select Portfolio Servicing, declined to comment, as did Casey Howard, the lawyer representing DLJ in the bankruptcy case.

Bank of America, meanwhile, is coming under fire from a New York federal bankruptcy judge.

Last Tuesday, Judge Robert Drain ordered an investigation involving a foreclosure case brought by the bank. Two earlier copies of a promissory note filed in court had lacked any endorsement, but then one appeared on the note when bank lawyers produced the original.

The judge said the sudden appearance of an endorsement, and his own close look at it, raised questions about whether it had been added illegally to make the note look legitimate.

It “raises a sufficiently serious issue as to when and more importantly by whom this note was endorsed,” the judge said.

A Bank of America spokesman said the bank will produce evidence that “will demonstrate to the court’s satisfaction that the endorsement is proper.”

(In re: Priscilla C. Taylor, Debtor, United States Bankruptcy Court, Southern District of New York, Case # 10-22652.)

MISSING SIGNATURES

These banks aren’t alone in filing doubtful documents. Reuters found cases in which Wells Fargo didn’t obtain mortgage assignments — and hence the right to foreclose — until well after it had filed foreclosure cases.

Wells Fargo, as a trustee, has moved to foreclose on homeowners who have mortgages from now-defunct Option One Mortgage Corp. In June, a bankruptcy appellate panel of the federal Ninth Circuit Court of Appeals overturned a decision to allow Wells Fargo to foreclose on an Option One mortgage. It said that there was no evidence that the note and mortgage had ever been turned over to Wells Fargo as trustee.

In court files of Florida foreclosure cases by Wells Fargo on Option One mortgages, none of the promissory notes filed as exhibits in 10 cases found by Reuters had any endorsements on them.

A Wells Fargo spokeswoman said it is possible that proper endorsements exist but were omitted from the copies of the promissory notes filed in court.

In other cases reviewed by Reuters, Wells Fargo and GMAC Mortgage, a unit of Ally Financial, this year assigned mortgages from defunct lender New Century Mortgage Corp., which went under in 2007. Securitization lawyers say it is technically impossible for a defunct company to directly assign a mortgage over to another owner.

Documents and statements made to courts that are found to be false can amount to crimes under state and federal laws. Daniel Richman, a Columbia University law professor and former federal prosecutor, said such acts can be perjury, and preparing fraudulent documents can be prosecuted under federal mail and wire fraud statutes. The Sarbanes-Oxley Act makes it a crime punishable by up to 20 years in jail to file false documents in a bankruptcy case, including foreclosures.

ROBO-SIGNERS RETURN

Reuters also found that loan servicers are still using the corner-cutting tactic that most captured the public imagination last year: robo-signing.

The investigation identified six known robo-signers who have continued to churn out large numbers of mortgage assignments since the beginning of 2011 – months after the industry vowed to stop the practice.

Among them is Bryan Bly, an employee of Nationwide Title Clearing of Palm Harbor, Florida.

Bly testified in a July 2010 foreclosure case in Florida that he signed up to 5,000 mortgage assignments per day at the loan-servicing company. Although he is an employee of Nationwide, he signed the documents as a “vice president” of Option One Mortgage, Deutsche Bank, CitiBank and other institutions. (Case # 2009-CA-1920, Circuit Court of the Fourth Judicial District, Clay County, FL)

In his deposition, Bly said Nationwide multiplied his output by electronically stamping his signature on additional mortgage assignments that Bly said he never saw. He testified, too, that all the documents then were falsely notarized. Nationwide’s notaries were given stacks of the already-signed documents, he said, and attested falsely that Bly had signed the legal papers in front of them. Bly said he didn’t verify the information in the papers he signed, and that he didn’t understand key words and expressions in them.

Despite these disclosures, a Reuters search of county clerk records in Florida, New York and Massachusetts shows that Bly continued to sign thousands of mortgage assignments this year.

A Nationwide spokeswoman said there is nothing illegal about signing large numbers of mortgage assignments. After Reuters inquired about Bly, however, she later said that because of recent questions raised about him by Nationwide customers, Bly has been moved to a job at the firm that doesn’t involve signing documents.

R. Christopher Rodems, a lawyer for Bly, said there is nothing improper about signing large numbers of mortgage assignments. Rodems said Bly had received death threats after a videotaped deposition Bly gave in November 2010 was posted briefly on YouTube, in which he testified about signing massive numbers of mortgage assignments.

A LAWYER’S NAME

Robo-signing isn’t limited to low-level employees at loan servicers.

Lawrence Buckley is a lawyer who manages the Dallas, Texas law firm Brice, Vander Linden and Wernick. In March, he testified that he had allowed his electronic signature to be affixed to sworn court documents that he had never seen. The documents, known as “proofs of claim,” included one filed with the federal bankruptcy court in New York. It sought permission for Deutsche Bank to seize the Bronx, New York, house of 59-year-old Virginia Obasi. (United States Bankruptcy Court, Southern District of New York, Case # 10-10494 MG)

Buckley said he had never seen the document, and that another lawyer at his firm had filed it using Buckley’s electronic signature. The signature appears on the document as “/s/ Lawrence J. Buckley.”

Buckley said that other lawyers at his firm were permitted to use his signature to file documents electronically with bankruptcy courts. He testified that it was standard practice at the firm not to review any of the original documents the claim was supposed to be based on, such as the original promissory note and mortgage.

Luke Madole, a lawyer for Buckley, said he saw nothing wrong with Buckley letting lawyers he directly managed use his electronic signature. Later, in an e-mailed statement, Madole added that what occurred “is nothing like ‘robo-signing’” and to use “that loaded term would be unfair in the extreme.”

A JUDGE INVESTIGATES

Robo-signer Christina Carter resurfaced in a ruling earlier this month, when Arthur Schack, a New York State court judge in Brooklyn, threw out an attempt by HSBC to foreclose on a Brooklyn house.

Schack said he had instructed HSBC’s chief lawyer in the case, Frank Cassara, to confirm key facts directly with HSBC officials. The judge said Cassara subsequently “affirmed ‘under the penalties of perjury’” that he had done so. But the judge said it turned out that Cassara had never checked with anyone at HSBC, and that the employees Cassara had said he spoke with at HSBC actually worked for a loan servicer.

The judge also said signatures on documents in the case were filed by known robo-signers, three of whom he identified by name, including Carter of Ocwen Loan Servicing. He personally had examined multiple examples of their signatures, the judge said, and found wide variations, raising the possibility that other people had been signing their names.

Judge Schack then took an unusual step: He formally threatened HSBC’s CEO, Irene Dorner, as well as lawyers for the firm, with sanctions for relying on known robo-signers, filing false documents and making false representations to the court. The possible sanctions could range from an oral reprimand to financial and other penalties.

“If HSBC has a duty to make money for its stockholders,” Schack wrote, “why is it purchasing nonperforming loans, and wasting the Court’s time with defective paperwork and the use of robo-signers?” [ID:nN1E76612C]

HSBC spokesman Neil Brazil said that the servicer, Ocwen, was responsible for what occurred in the case, and that HSBC had had no role in it.

Paul Koches, Ocwen’s general counsel, said in an e-mail: “To our knowledge, there was nothing submitted by our legal counsel to the court that was in any way misleading as to who is the owner of this mortgage and note, nor was there any conduct of any kind that would justify sanctions.”

Carter says she did nothing improper, and left Ocwen voluntarily in May for another job.

DOWN IN FLORIDA

The bank now trying to foreclose on Marjorie Gunter has produced a troubled paper trail. OneWest submitted a document signed this February to prove that the original lender for her mortgage, a company called MortgageIT, had signed over ownership to OneWest. But MortgageIT, owned by Deutsche Bank, wasn’t in business in February. It had ceased operations three years earlier, in 2008.

A Deutsche Bank spokesman declined to comment.

Even if the February document were authentic, it wasn’t recorded until nearly 10 months after OneWest had launched its foreclosure action, which began in May 2010. Real estate law throughout the United States requires that before moving to foreclose, a trust or bank must already own the mortgage and related promissory note. Otherwise, courts have ruled, a forecloser has no right to seize a house.

OneWest also filed two separate copies of what it said was the 87-year-old homeowner’s original promissory note. The first had an endorsement only from MortgageIT to now-defunct IndyMac Bank. Weeks later, OneWest filed a second copy of the note, with the addition of a “blank” endorsement — an endorsement by IndyMac, but with the name of the payee left empty. OneWest has filed no evidence in the case that the note was subsequently transferred to Fannie Mae.

OneWest declined to explain the multiple apparent discrepancies in the Gunter foreclosure documents. A spokesman said in an e-mail: “OneWest is dedicated to ensuring that it meets the needs of its customers, acts in accordance with applicable laws, and complies with its contractual mortgage servicing duties to the highest standards.”

A Fannie Mae spokeswoman said Fannie does own the Gunter note, but declined to explain how the mortgage finance giant obtained it, “due to it being in active litigation.”

The judge in the Gunter case hasn’t ruled yet on OneWest’s documents. (20th Judicial Circuit Court in Collier County, FL, Case number 10-2982-CA).

Mrs. Gunter lives in Immokalee, a scrubby town 34 miles inland from Fort Myers on Florida’s Gulf coast. About 40 per cent of the townspeople live below the poverty line, census data show. She shares her home with her three dogs; her one surviving son lives in a nursing home.

In an interview at her house, on a dusty road off the main highway, Mrs. Gunter said she doesn’t understand why the bank is foreclosing.

OneWest says that Mrs. Gunter now is delinquent by more than $160,000. Her lawyer, Joseph Klein of the Legal Aid Service of Collier County, argues there are extenuating circumstances.

Copies of her mortgage application forms show that in December 2006, an agent for Deutsche Bank’s MortgageIT unit signed up Mrs. Gunter for a $149,900 mortgage. The forms, listing her income, show that the agent knew that the monthly payments — $1,151, including insurance — were more than her monthly income of $800 from Social Security plus about $200 in food stamps.

In an affidavit filed in court, Mrs. Gunter said she had asked the salesman for a “reverse mortgage,” which allows senior citizens to remain in their homes without making mortgage payments, with the value of the house going to the bank when they die. But the documents the salesman gave her to sign were for an ordinary 30-year mortgage.

Losing her place would be a devastating blow, Mrs. Gunter said. “If they take the house,” she said, “they’ll take me, too.”

(Scot Paltrow reported from New York and Washington, Tom Brown from Immokalee; editing by Michael Williams and Claudia Parsons)

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Foreclosures Down In First Half Of 2011 Due To Processing Delays

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Piggybankblog posted on 07/17/11

Picture posted by piggybankblog

Cross linked story with Huffington Post

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LOS ANGELES — The number of homes taken back by lenders in the first half of this year fell 30 percent compared with the same 2010 period, the result of delays in foreclosure processing that threaten to stall a U.S. housing recovery.

Banks seized 421,212 homes in the first six months of the year, down from 529,633 between January and June last year, foreclosure listing firm RealtyTrac Inc. said Thursday.

The decline reflects lenders taking longer to move against homeowners who have fallen behind on their mortgage payments. The banks are working through foreclosure documentation problems that first surfaced last fall and an ensuing logjam in some state courts. Lenders also have put off on taking action against delinquent borrowers as U.S. home sales have slowed this year.

As the processing delays mount, however, so has the backlog of potential foreclosures – homes that otherwise would have been repossessed by lenders this year.

RealtyTrac estimates that 1 million foreclosure-related notices that should have been filed by banks this year will be pushed to next year. The filings include notices for defaults, scheduled home auctions and home repossessions – warnings that can lead to a home eventually being lost to foreclosure.

The delayed filings buys more time for many borrowers behind in payments to remain in their homes, perhaps giving them time to catch up or simply to stall their inevitable eviction. But it also means any eventual foreclosures will happen next year, extending the shadow of distressed properties that hovers over the market.

“The best-case scenario is we don’t get back to normal levels of foreclosure activity until 2015, which means the housing market recovery gets delayed by at least a year,” said Rick Sharga, a senior vice president at RealtyTrac.

And given delays in the time it’s taking lenders to move a home from default to foreclosure and then sell the property, the housing turnaround could conceivably be pushed out to as late as 2016, Sharga said.

“It could be the new reality is we’re going to have to accept the fact that home prices in most markets aren’t going to budge much for the next several years while this overhang gradually, painfully makes its way into the market and gets purchased,” he said.

In all, some 1.2 million U.S. homes received a foreclosure-related notice in the first six months of this year, RealtyTrac said.

That’s down 29 percent from the same period last year and down 25 percent versus the second half of 2010.

Put another way, one in every 111 U.S. households received a foreclosure filing between January and June.

In addition to repossessing fewer homes, banks also fired off 36 percent fewer initial notices of default in the first half of this year than in the same period last year. The notices are the first step in the foreclosure process.

Foreclosure activity did pick up slightly between May and June, although lenders repossessed fewer homes than they did in June last year.

At the current pace, banks are on track to take back between 800,000 and 900,000 homes this year, down from a record of 1 million lost to foreclosures last year, Sharga said.

The firm had originally anticipated some 1.2 million homes would be repossessed by lenders this year.

Foreclosures typically sell at a discount to other types of homes, weighing down home values. As a result, housing experts say U.S. home prices are unlikely to recover until the glut of foreclosed homes on the market is cleared out.

Lenders have been careful not to unload all of their foreclosures on the market at once, and have financial incentives to continue doing so. But the prospect of more foreclosures hitting the market for years to come makes it difficult to predict when home values will stabilize. And that keeps many would-be homebuyers on the sidelines.

Between April and June, it took an average of 318 days for a home to go from the first stage of foreclosure to the point where it was sold at auction or taken back by the lender, RealtyTrac said. That’s up from 298 days in the first three months of the year and up from 277 days in the second quarter of last year.

The foreclosure process took longest to play out in New York at an average of 966 days, or 2.6 years, during the second quarter. New Jersey was second-slowest at an average of 944 days, RealtyTrac said.

Homes were on a relative foreclosure fast-track in Texas, taking an average of 92 days to go through the process, the fastest turnaround time in the nation.

Despite slowdown in foreclosure activity, several states continue to have outsized foreclosure rates.

Nevada continued to lead the nation, with one in every 21 households receiving a foreclosure notice in the first half of this year.

Rounding out the top 10 states with the highest foreclosure rate in the first half of this year are Arizona, California, Utah, Georgia, Idaho, Michigan, Florida, Colorado and Illinois.

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Bank of America spends $930,000 on lobbying in 1Q

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Piggybankblog posted on 07/16/11

Picture posted by piggybankblog

Cross linked story with Forbes.com

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WASHINGTON — Bank of America Corp. spent $930,000 in the first quarter to lobby the federal government on legislation involving debit card fees and other issues.

That’s about even with the $940,000 that the company spent in the year-ago period, and slightly less than the $1.14 million spent in the fourth quarter of 2010. The company also lobbied the federal government on legislation involving consumer financial protection, credit card reform, changes in the mortgage finance market, and corporate tax reform, according to the disclosure report filed on April 19.

Revenue and income at the nation’s largest bank by assets has been badly hurt by a host of new legislation from the last two years that has reduced its ability to charge credit and debit card fees, among other limitations. In 2010, the bank took a charge of $10.4 billion in its card division due to new regulations.

The Charlotte, N.C.-based bank has already warned that its third-quarter revenue will be hurt by regulation that reduces fees it collects from debit card swipe fees it charges retailers. It lobbied on all these issues.

Congress ended up voting to keep the amendment that reduces income that all large banks collect on debit card swipe fees from merchants. However, the Federal Reserve on Wednesday said the new cap won’t be as severe as it originally proposed and it will go into effect three months later than planned.

In the January-to-March period, Bank of America ( BAC – news – people ) lobbied Congress, the Federal Reserve, Department of Labor, and the Department of Treasury, according to the report filed with the House clerk’s office.

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Bank of America shares dip below $10

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Piggybankblog posted 07/15/11

Picture posted by piggybankblog

Cross linked story with Lasvegassun.com

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The Associated Press

Friday, July 15, 2011 | 1:06 p.m.

Bank of America shares fell below $10 for the first time since May 2009.

The stock price hit a low of $9.88 Friday, making it the only one of the four largest banks with a share price in the single digits. Most large bank stocks fell on Friday on fears of the fallout of the European debt crisis and the results of stress tests on the European banks’ ability to withstand economic stress.

Investors have ben bailing out of Bank of America stock for several months, driving the price. In the past 12 months, Bank of America Corp.’s stock has fallen 35 percent, making it the third worst performing stock in the Standard & Poor’s 500 index. On Friday, the stock closed at $10, down 0.7 percent for the day.

The stock decline is a setback for the nation’s largest bank and its CEO Brian Moynihan, who has had to deal with multiple crises in the last year, mostly related to mortgage problems stemming from the bank’s 2008 purchase of Countrywide Financial.

On June 29, Bank of America announced its latest settlement with investors who claim they were knowingly sold poorly written mortgage bonds. At $8.5 billion, it was the largest bank settlement ever announced. The amount eclipsed the last three years of earnings at the Charlotte, N.C. bank.

The stock also reflects investors’ anxieties over how deep Bank of America’s problems might be, says Cassandra Toroian, president and chief investment officer at Bell Rock Capital.

“(If) investors feel like there’s no end to the losses and the settlements…why own it?” Toroian says.

The uncertainties are numerous. The latest settlement is already being challenged in court by one investor group and the New York attorney general is investigating how the deal was reached. Since the beginning of the year, the bank has agreed to pay $12.7 billion in settlements to multiple investors. The bank increased its litigation reserves by $940 million in the first quarter and is expected to add to that when it announces second quarter results next Tuesday. Experts say the move makes it clear company officials believe there’s more to come.

In March, the Federal Reserve didn’t allow Bank of America to increase its dividend, citing uncertainty about the depth of its mortgage problems. It was the only denial issued to any of the four largest U.S. banks. And it raised questions with investors about whether the bank was strong enough to withstand another economic downturn.

Bank of America is in worse shape than other major banks like JPMorgan Chase & Co. and Wells Fargo & Co. because of its purchase of Countrywide for $4 billion in 2008. That seemed like a bargain price for the country’s largest mortgage lender. But the purchase has cost the bank tens of billions more in mortgage losses, regulatory fines, repurchases of poorly-written loans and expensive litigation. All told, the bank services one out of every five U.S. mortgages.

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Elizabeth Warren: Government Hasn’t Sufficiently Probed Foreclosure Abuses (VIDEO)

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Piggybankblog posted 07/15/11

Picture posted by Piggybankblog

Cross linked with story with huffingtonpost.com

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WASHINGTON — A top Obama administration official on Thursday questioned the scope of the state and federal investigations into alleged mortgage abuses and “illegal” foreclosures perpetrated by the nation’s largest mortgage companies, marking the first time a senior White House official publicly broke ranks with the administration over the issue and raising fresh questions about the wisdom of the government’s rush to settle with the firms.

Elizabeth Warren, a senior adviser to President Barack Obama and Treasury Secretary Timothy Geithner, told a congressional panel that government agencies may not have sufficiently investigated claims that borrowers’ homes were illegally seized by banks such as JPMorgan Chase, Bank of America, Wells Fargo, Citigroup and Ally Financial.

“I think there’s a real question about whether there’s been adequate investigation,” said Warren, the temporary custodian of the Bureau of Consumer Financial Protection, a new federal agency charged with protecting borrowers from abusive lenders. Her statement came in response to questions from Rep. Trey Gowdy (R-S.C.), a former federal prosecutor who asked Warren why her agency needed to oversee such abuses when the U.S. Department of Justice is already probing such matters.

Warren, a passionate consumer advocate, has long questioned whether the state and federal probes have been comprehensive, according to people familiar with her views. The investigations were launched last year amid news reports that the lenders were at times improperly repossessing borrowers’ homes and breaking state laws and federal rules in the process.

But she had not publicly shared that view, which is widelyspread among individuals with direct knowledge of the probes, until the Thursday appearance before the House Oversight and Government Reform Committee.

She’s the first senior administration official to publicly question the thoroughness of the investigations led by the Justice Department, the Department of Housing and Urban Development, the Treasury Department, Federal Trade Commission, all 50 state attorneys general and more than 30 state bank regulators.

The nation’s five largest mortgage firms have saved more than $20 billion since the housing crisis began in 2007 by taking shortcuts in processing troubled borrowers’ home loans, according to a confidential presentation prepared for state attorneys general by Warren’s agency. That estimate suggests large banks have reaped tremendous benefits from under-serving distressed homeowners, a complaint frequent enough among borrowers that federal regulators have acknowledged the industry has fundamental shortcomings, including a penchant to abuse borrowers, and is in need of reform.

Warren’s claim lends further credence to the view that the various government agencies are being reckless by negotiating an agreement with the five banks — the largest mortgage servicers in the country — that would settle accusations they abused homeowners and broke various laws in exchange for penalties and mortgage relief for struggling borrowers that could reach up to $30 billion.

State and federal prosecutors are pressing to complete a proposed settlement with the five companies even though they’ve only initiated a limited investigation that hasn’t examined the full extent of the alleged wrongdoing, The Huffington Post reported Monday, citing interviews with more than two dozen officials and others familiar with the state and federal probes.

 

Representatives of Justice, HUD and Treasury all declined to comment.

Some officials, as well as others with experience sitting across the negotiating table with major banks, say the government is making a critical mistake that jeopardizes the public interest by seeking a deal before amassing a credible threat of successful prosecution by way of a comprehensive probe: In essence, they say, the government would give servicers a blanket pass for widespread alleged acts of fraud and extract too little in return, all while operating from a relative position of weakness.

Though those working towards a quick settlement say the eventual agreement with the banks will only cover mortgage servicing deficiencies that harmed borrowers and foreclosure abuses like so-called “robo-signing,” many fear that the fines will be extracted in return for a broad release from mortgage-related liability.

The banks are willing to pay higher fines in return for a comprehensive release from such claims, people involved in the talks said.

“It’s got to be done right. We’re not going to do it and be subject to double and triple jeopardy,” said Jamie Dimon, the chief executive of JPMorgan Chase, the second-largest U.S. bank by assets, about a proposed settlement agreement with state attorneys general during a conference call Thursday with analysts. “We’d rather litigate it.”

Eric Schneiderman, New York’s attorney general, is probing whether mortgages bundled into securities were done in accordance with state laws, people familiar with the probe said. He’s also pursuing a variety of investigations to determine whether Wall Street firms cheated investors when selling them these securities, sources said.

Schneiderman doesn’t want a proposed settlement agreement to interfere with his ongoing investigations, people familiar with his views said.

People involved in the talks said they’re aware of his probes and would not construct a settlement agreement that would constrain his investigations.

The government’s desire to settle rather than conduct comprehensive probes is due to a variety of factors, people with direct knowledge of the ongoing talks said.

For one, the state legal officers are hindered by federal laws that restrict their ability to investigate national banks. Of the five companies being targeted, all but Ally are national banks.

These institutions are overseen by federal bank regulators, particularly the Federal Reserve and the Office of the Comptroller of the Currency.

The two bank watchdogs issued their own reports earlier this year, castigating the companies’ faulty mortgage practices, but have said they can’t share specifics for individual firms, supervisory reports or any underlying documentation that formed the basis of their findings, citing federal rules prohibiting their disclosure.

The federal bank regulators’ review examined just 2,800 loan files, or 0.1 percent of the nearly 2.9 million homes that received a foreclosure filing last year, according to calculations made using data from the OCC and RealtyTrac, a data provider. Only about 200 loans each were examined at banking behemoths JPMorgan, Bank of America, Citi and Wells, Julie L. Williams, the No. 2 official at the OCC and the agency’s chief counsel, told a House panel last week. Those four firms collectively service $5.7 trillion in home loans, or more than half of all outstanding residential mortgages, according to Inside Mortgage Finance.

Some regulators have criticized their review. With near-exclusive oversight authority, the Fed and OCC have access to the most sensitive bank documents, but they said they were prevented from sharing them.

Meanwhile, the state officials, who are charged with protecting their constituents, could push for expanded investigative powers, but they would likely face a hard slog in court.

A 2009 U.S. Supreme Court case, Cuomo v. Clearing House, restricts state attorneys general from subpoenaing documents from national banks until they’ve filed lawsuits.

The process of requesting documents prior to such action, known as pre-trial discovery, typically yields valuable information that can strengthen a prosecutor’s case.

But thanks to that Supreme Court’s decision and another from 2007 — Watters v. Wachovia, which determined that state officials lack the authority to regulate subsidiaries of national banks, based on a policy known as preemption — the state prosecutors as a group are reluctant to pick a fight in court with the banks.

It’s unclear whether they’d succeed. Also, their request for documentation would probably draw opposition from the OCC, people involved in the talks said. The OCC has intervened in several lawsuits launched by state officials in recent years on behalf of the banks it oversees.

Other factors include the state of the housing market and the states’ financial resources.

A thorough probe would likely take more than a year. Meanwhile, the housing market remains depressed as foreclosures continue to pile up, borrowers are falling behind at elevated rates and the so-called “shadow inventory” of distressed homes being kept off the market grows.

If the state and federal officials wish to use the settlement talks as a vehicle to prevent foreclosures by using levies on banks to reduce monthly mortgage payments for troubled borrowers, time is slipping, people familiar with the matter said. Home prices are sliding and won’t begin to improve until next year, forecasts show.

In addition, state officials are hobbled by their budgets.

States had a cumulative budget deficit of nearly $84 billion in the 2011 fiscal year, according to an April report by the National Conference of State Legislatures. That gap is expected to swell to $86 billion for the 2012 fiscal year.

Kamala Harris, California’s attorney general, recently announced that her office would be forced to curtail its housing-related probes due to budget cutbacks.

Despite those headwinds, government officials are poised to extract as much as $30 billion from the five mortgage companies for their alleged abuses.

Warren’s admission, which came in response to questions asking why her agency initially advised state and federal officials on mortgage issues, was overshadowed by an otherwise partisan and combative congressional hearing during which Republicans attacked the consumer advocate and longtime Harvard Law professor for trying to protect consumers from unscrupulous lenders.

Separately, Democrats and Republicans on the committee agreed to request documents from major mortgage firms regarding improper foreclosures of borrowers in the military. The requests weren’t subpoenas, though.

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Utah lawsuit claims illegal foreclosures by Bank of America companies

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Piggybankblog posted 07/15/11

Picture posted by piggybankblog

Cross linked story with therepublic.com

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SALT LAKE CITY — A Utah attorney has filed a proposed class action lawsuit against Bank of America and its subsidiaries for allegedly executing tens of thousands of illegal foreclosures statewide.

Filed last month in Salt Lake City’s 3rd District Court, the lawsuit was brought on behalf of three Utah couples who lost their homes to foreclosure in May and June.

The lawsuit contends the companies have failed to operate within Utah foreclosure law. That includes allegedly hiding critical documents and information so that homeowners can’t resolve their situations short of losing their homes.

Named as defendants are Bank of America, ReconTrust, BAC Home Loans Servicing and a Utah law firm.

Bank of America spokeswoman Jumana Bauwens declined to comment on the lawsuit Friday.

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BofA, Deutsche Bank-Dexia, News Corp., UBS in Court News.

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Piggybankblog posted 07/15/11

Picture posted by piggybankblog

Cross linked story with buisnessweek.com

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By Elizabeth Amon

(Adds BofA in top section, Tiger Asia and Union Bank in Lawsuits and Allen & Overy in Litigation Departments.)

July 15 (Bloomberg) — Bank of America Corp., the biggest U.S. lender, has made a preliminary offer to bond insurer MBIA Inc. aimed at settling a legal dispute tied to defective mortgages, according to two people briefed on the discussions.

The two companies remain split on how much the Charlotte, North Carolina-based bank would have to pay to resolve the disagreement and it is unclear when an agreement can be reached, said the people, who declined to be identified because the talks are private. Bill Halldin, a spokesman for Bank of America, and Kevin Brown of Armonk, New York-based MBIA declined to comment.

A settlement would help revive the fortunes of MBIA, the biggest bond insurer before the financial crisis, which has posted cumulative losses of more than $5 billion since the end of 2006. Bank of America Chief Executive Officer Brian T. Moynihan is working to resolve demands from bond buyers and insurers over defective mortgages created by Countrywide Financial Corp., acquired by his predecessor in 2008.

“We will fight and represent your interest to the point where we got the interests represented,” Moynihan said in a June 1 conference. “There is a point where fighting doesn’t have any value.”

The lawsuit is among several between Bank of America and MBIA, which guaranteed Wall Street’s toxic mortgage debt. Bank of America bought Countrywide in 2008 and Merrill Lynch & Co. in 2009, two of the largest participants in the market for subprime home mortgages.

An eventual settlement may cost Bank of America “in the higher end” of a $2 billion to $3 billion range, Robert Haines, an analyst at CreditSights Inc., said this week in an interview.

New Suits

Dexia Sues Deutsche Bank Over $1 Billion Securities Purchase

Dexia SA, the lender to local governments rescued by France and Belgium in 2008, sued Deutsche Bank AG claiming fraud in connection with more than $1 billion in residential mortgage- backed securities.

Germany’s biggest bank played a “ubiquitous role” in the mortgage origination and securitization process while betting against the U.S. housing market as far back as 2005, according to the complaint. By the end of 2007, Deutsche Bank had amassed a $10 billion short position that paid off when the loans backing the securities failed, Brussels-based Dexia said.

“Deutsche Bank originated, purchased, financed and securitized exceptionally high-risk loans into these RMBS, all while internally disparaging the poor quality of these loans and the RMBS they backed as ‘pigs’ and ‘crap,’” Dexia said in the complaint.

Pools of home loans securitized into bonds were a central part of the housing bubble that helped send the U.S. into the biggest recession since the 1930s. The housing market collapsed, and the crisis swept up lenders and investment banks as the market for the securities evaporated.

Renee Calabro, a spokeswoman for Frankfurt-based Deutsche Bank, said yesterday by e-mail that the company would fight the lawsuit, which she said was “without merit.”

The case is Dexia SA/NV v. Deutsche Bank AG, 651918/2011, New York State Supreme Court, New York County (Manhattan).

Ex-News of the World Editor Arrested in Phone-Hacking Probe

London police arrested a former News of the World editor as part of the investigation into phone hacking at the News Corp. tabloid, a day after the company dropped a bid for full ownership of British Sky Broadcasting Plc.

Neil Wallis, 60, was arrested yesterday on suspicion of conspiring to intercept phone calls. He had also worked as a paid communications consultant for the police in 2009 and 2010, the Metropolitan Police Service said in a statement.

The arrest is at least the seventh of a reporter or editor with ties to News of the World this year. Police are investigating allegations reporters at the now-defunct tabloid hacked into the mobile phones of politicians, celebrities, and murder and terror victims, and bribed police officers for information. The scandal forced Rupert Murdoch-led News Corp. to shut the newspaper.

Wallis had a contract to provide communication advice, including advice on speech writing and public relations activity while the agency’s deputy director of public affairs was on sick leave, the police said. - read more

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Registrar vs. robosigners

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Piggybankblog posted on 07/14/11

Picture posted by piggybankblog

Cross linked with Boston.com

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A county registrar doesn’t usually take on major US lenders, send out rapid fire press releases, and investigate the home loans of celebrities such as Sarah Palin.

But John O’Brien Jr., head of the Southern Essex District Registry of Deeds in Salem, says he’s on a mission to protect the integrity of property records.

O’Brien, 59, is gaining national recognition among housing advocates, and rankling local real estate attorneys, for his aggressive actions – which most recently included the rejection of property documents signed by alleged “robosigners.’’

He also has called his registry a “crime scene’’ riddled with fraudulent paperwork, and last month O’Brien alleged that Palin unknowingly bought an Arizona home whose paperwork was signed by robosigners – bank representatives who didn’t properly review mortgage documents. (Palin did not respond to a request for comment.)

“Banks have participated in a national epidemic of fraud that has clouded or damaged the chain of title of hundreds of thousands of American homeowners all across the country,’’ O’Brien said in one of his many press releases. “It would be a dereliction of my duties as the keeper of the records to record these documents and any other documents that contain questionable signatures.’’

To some, O’Brien – who was first sworn in to his elected post in 1977 – is the champion of homeowners battling lenders who act as if they are above the law. But others say he has gone too far, using flawed analysis to overstep his authority as an official recorder of property documents. His tactics have left local real estate attorneys, and even colleagues, scrambling for guidance from state authorities.

“The real estate bar is very upset about what is going on,’’ said Edward Bloom, president of the Real Estate Bar Association for Massachusetts. Bloom said O’Brien is creating a “media circus’’ over alleged robosigners, something he doesn’t have authority to police.

“That’s a matter to be determined in court, whether something is a forgery or not a forgery,’’ Bloom said. He called O’Brien’s antifraud campaign unprecedented.

“We are all wondering what is going on and what we can do about it,’’ Bloom said.

O’Brien said he finds his new activism invigorating, citing collaborations with county recorders across the country and correspondence with homeowners thanking him for his support.

The registry’s website, www.salemdeeds.com, looks more like a political blog, with links to media coverage and tips on how to demand mortgage documents from lenders.

Concerned about what kind of role registers should play in the foreclosure debacle, the Massachusetts Registers of Deeds Association last week sent a letter to Attorney General Martha Coakley seeking advice. Barry Amaral, the association’s newly elected president, said county recorders want information on what to do about alleged robosigners, as well as other issues related to possible mortgage fraud. Coakley’s office said it is agreeable to a meeting. – Continued….

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Massachusetts County Claims 75% Of Mortgages Assignments Are Invalid And Ineligible For Foreclosure

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Piggybankblog posted 07/14/11

Cross linked story with businessinsider.com

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The Register of Deeds of South Essex County, Mass. is waging war on the banks over predatory lending and mortgage fraud (via Total Mortgage).

John O’Brien’s case hinges on the fact that the MERS system set up to expedite the bundling of mortgage backed securities skirted numerous local transaction fees.

O’Brien figures his town lost as much as $22 million in revenue since 1998. To get some of it back he commissioned an audit of 2010 mortgage assignments.

16% of the assignments were valid, 75% were invalid, and 9% were deemed questionable.

Of those that are invalid, 27% were fraudulent, 35% showed evidence of robo-signing, and 10% violated the Massachusetts Mortgage Fraud Statute.

The proper owner of the mortgages could only be determined 60% of the time.

In a release by his office O’Brien said:

“This evidence has made it clear to me that the only way we can ever determine the total economic loss and the amount damage done to the taxpayers is by conducting a full forensic audit of all registry of deeds in Massachusetts. I suspect that at the end of the day we are going to find that the taxpayers have been bilked in this state alone of over 400 million dollars not including the accrued interest plus costs and penalties. The Audit makes the finding that this was not only a MERS problem, but a scheme also perpetuated by MERS shareholder banks such Bank of America, Wells Fargo, JP Morgan and others. I am stunned and appalled by the fact that America’s biggest banks have played fast and loose with people’s biggest asset – their homes. This is disgusting, and this is criminal.”

Please follow Business Insider on Twitter and Facebook.

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New York AG: Settling Toxic Mortgages? Not So Fast, Bank Of America

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Piggybankblog posted 07/14/11

Picture posted by piggybankblog

Cross linked story with gothamist.com

Bank of America really just wants to move past the whole toxic mortgage misunderstanding, and is hoping that by shelling out $20 billion to clean up the mess, their investors and the public will let bygones be bygones. $8.5 billion of that money is for a settlement specifically tied to large investment firms, including BlackRock, MetLife, and Goldman Sachs, who invested in BOA’s worthless mortgages (thanks, Countrywide!) and the terms are extremely favorable to the bank: they’re paying 5 cents on the dollar and the investors waive their right to sue. Every thing was going according to plan until that meddling New York Attorney General had to get involved.

The Times obtained letters sent by Eric Schneiderman to the 22 firms that are part of the settlement noting that other investors may have been left out, and request information “regarding participation by both your firm and clients” as part of a “broad investigation that he has begun into all aspects of the mortgage bundling process.” It’s not just smaller investors that have been left out of the settlement’s purview: 275,000 borrowers will be affected, with some having their foreclosures sped up depending on how much they currently owe.”

BOA claims that the deal will give some homeowners more flexibility with their payments thanks to their mortgages being handled by smaller, more efficient subservicers. But a former Treasury employee and law professor says, “The mortgage services have repeatedly promised to do things and then not done them. An attorney in Florida, the country’s most foreclosure-ridden state, says, “It’s like giving aspirin to someone with cancer.”

One investor, Walnut Place LLC, has protested the settlement and is suing BOA because they claim the bank had secret negotiations with the settlement’s negotiator, Bank of New York Mellon, and BOA is covering all their liabilities and costs related to the settlement. If the agreement is approved in November, the lawsuit will disappear. If Schneiderman can succeed in throwing light on the sausage making of cutting up people’s debt into tiny pieces for profit, perhaps we’ll come to learn that $8.5 billion is just a start.

Contact the author of this article or email tips@gothamist.com with further questions, comments or tips

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Home loan banks seek voice in Bank of America mortgage settlement

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Piggybankblog posted on 07/14/11

Piggybankblog posted picture

Cross linked story with boston.com

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NEW YORK – Six federal home loan banks are seeking to join a case in which a judge will decide whether to approve an $8.5 billion settlement by Bank of America Corp. with Bank of New York Mellon Corp. over mortgage-securitization trusts.

The six banks “have not made decisions whether to oppose the settlement,’’ the Federal Home Loan Banks of Boston, Chicago, Indianapolis, Pittsburgh, San Francisco, and Seattle said in court documents. They seek to intervene because “the proposed settlement will not provide them enough information on which to make careful and informed decisions.’’

BNY Mellon, as trustee of the 530 trusts, sought approval of the settlement. The agreement requires Bank of America, its Countrywide Financial unit, or both, to pay $8.5 billion.

The request by the home loan banks came a day after it was revealed that New York Attorney General Eric Schneiderman is seeking client information from more than 20 companies as part of an investigation “into certain matters related to securitization of residential mortgages.’’

Investors have claimed that units of Countrywide failed to honor contracts, saying they needed to repurchase loans that never matched their promised quality.

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Can Brian Moynihan fix America’s biggest bank?

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Piggybankblog Posted on 07/13/11

Picture posted by piggybankblog

Cross linked story with CNNMoney.com

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With its damaged reputation and huge mortgage losses, Bank of America is still reeling from the financial crisis. But CEO Brian Moynihan may be the right guy to turn things around.

.FORTUNE — It’s hard to think of a company that emerged from the financial crisis more despised than Bank of America. Sure, Goldman Sachs gets pilloried as a symbol of Wall Street greed and excess. But when you count up the various constituencies that have a beef with BofA — homeowners, consumers, investors, regulators — it’s really no contest. The infamous 2008 acquisition of mortgage giant Countrywide saddled America’s biggest bank with the largest, most toxic portfolio of home loans in the business, as well as an ongoing public relations nightmare. Due in large part to its mortgage woes, Bank of America’s (BAC) stock remains some 80% off its pre-crisis high of $55. In the minds of many, BofA epitomizes the sorry state of the whole damaged U.S. economy.

In his first 17 months on the job, Bank of America CEO Brian Moynihan did little to dispel that image — or to win the confidence of Wall Street. Since Moynihan replaced the much-criticized Ken Lewis at the beginning of 2010, BofA’s mortgage losses have ballooned, and nervous shareholders have bailed en masse. A few embarrassing public gaffes only made things worse. The 51-year-old Moynihan was widely seen as a charisma-challenged plodder, fumbling the biggest salvage operation in financial services.

Then, in late June, Moynihan rocked Wall Street by unveiling a landmark settlement that takes a giant step toward finally putting the home loan mess behind Bank of America. Moynihan announced that BofA will pay $8.5 billion to 22 big investors — from BlackRock (BLK) (to the Federal Reserve Bank of New York — which claimed that Countrywide had misrepresented the quality of loans it sold them. In a single stroke, he effectively removed the biggest cloud over the company’s future. The deal is so comprehensive, covering all of Countrywide’s disputed mortgages sold to private investors, that it should serve as a model for the rest of the industry and a bullish sign for the broader economy. It may be the single best headline in financial services since the credit crisis began. “It’s a win on the board that Brian Moynihan needed,” says Credit Agricole analyst Mike Mayo, a famously tough critic of the big banks. “The challenge is to ensure that the momentum continues.”

The victory shows that Moynihan has been vastly underrated. In part, that’s because of his rough-around-the-edges personality. The workaholic Providence lawyer turned hard-core banking brainiac won’t win any awards for public speaking, and he isn’t inclined toward public relations. But a close look at his career reveals that he’s proven his mettle for two decades as a dealmaker, team builder, and crisis manager. And he is perhaps uniquely suited for the job of chief executive in today’s banking world. The business is now so complicated and so fraught with hidden dangers lodged in such esoteric products, that the best leaders are those who are totally immersed in the data and details — the ones who serve as their own risk managers. That’s Moynihan.

Best of all, Moynihan is the architect of a radical blueprint his rivals would be wise to follow. In effect, he wants to turn back the clock, to run Bank of America the way banks were managed before the industry — led by BofA — embraced a strategy of growth at all costs. His goal is to avoid the chronic cycle of making lots of money in good times, then handing it all back in a downturn. It’s something few banks have ever accomplished. “He’s dead right,” says Gene Lockhart, former chief of retail banking at BofA and now a senior adviser at Berenson & Co. “His strategy is the polar opposite of the way BofA was run for many years.”

Moynihan is pledging that this approach will make Bank of America into one of the most profitable companies on the planet. In March, at a presentation to investors in the baroque ballroom of New York’s Plaza Hotel, Moynihan unveiled his audacious goal of earning as much as $40 billion before taxes by the middle of the decade. That translates into $25 billion in net income, far more than any non-oil company in America made in 2010. One of America’s best value investors is betting big that Moynihan will deliver. Bruce Berkowitz, whose $15 billion Fairholme Fund (FAIRX) has returned more than 11% annually over the past 10 years, owns a $1.2 billion stake in BofA. That position has hurt his recent performance, but he believes the stock will be a long-term winner. “Moynihan has the right strategy of staying away from consumer loans that blow up in a bad market,” Berkowitz tells Fortune. “Bank of America will show tremendous earnings power.”

There’s a lot to like about BofA. It ranks as the largest U.S. bank, with nearly $2.3 trillion in assets. And it boasts more market-leading franchises than any player in financial services. BofA has the biggest retail business, with $410 billion in deposits and 5,800 branches from California to Maine; it owns the premier wealth management platform in Merrill Lynch and U.S. Trust; and it stands just behind J.P. Morgan Chase (JPM) as the world’s second-largest investment bank.

Those healthy businesses show so much muscle that they should be able to propel Bank of America past the mortgage crisis, especially since we now know the approximate size of it. The losses so far have been staggering: From the beginning of 2008 through the first quarter of 2011, Bank of America’s home loan business lost a stupendous $46 billion. It will lose another $20.6 billion in the second quarter of this year, chiefly because of the settlement. That gargantuan hit will leave the bank with an overall loss of around $2 billion for 2011. But analysts now predict it could earn as much as $15 billion next year. (It booked $20 billion in profits at its peak in 2007.)

The mortgage settlement has two huge effects for BofA. The first is that it allays fears that BofA will need to raise fresh capital in the future by selling new stock at very low share prices and dilute its shareholders — just the problem that soured investors on the stock during the crisis. Second, putting a firm number on the losses makes it far more likely that Moynihan can deliver on his promise to deliver truly epic earnings. If he can pull it off, it will go down as one of the great turnarounds in banking history.

“His mind is always outracing his mouth”

At a height of 1,200 feet, the Bank of America Tower on 42nd Street in Midtown Manhattan is the second-tallest skyscraper in New York, after the Empire State Building. Completed in 2009 at a cost of around $1 billion, it has been widely recognized as one of the world’s most environmentally friendly buildings, with state-of-the-art features that include a system to capture rainwater, purify it, and reuse it. Moynihan typically spends a day or two each week working in the building, splitting the rest of his time between BofA’s heaquarters in Charlotte and its office in Boston, where he lives.

During a wide-ranging interview recently in his 50th-floor office, which has slanted, floor-to-ceiling windows with breathtaking views of lower Manhattan, Moynihan explained his plan to remake the bank. He detailed his two-part strategy for first building a bulwark of capital, then delivering all earnings to shareholders. He also addressed the most embarrassing incident of his tenure so far.

Last December, Moynihan began telling Wall Street that his company would apply to the Federal Reserve — which is still closely monitoring the capital levels of the big banks — for permission to increase its dividend in the second half of 2011. On March 23, however, BofA disclosed that the Fed had rejected the proposal. Analysts speculated that the Fed said no because BofA’s mortgage losses could leave it short of capital. Chuck Noski, who’d been CFO for less than a year, announced he would step down in June. Moynihan explained that Noski was reassigned because of a relative’s ill health, not because of the dividend mix-up. Still, the incident made Moynihan look bad. Moynihan calls the episode a temporary setback and says the Fed’s rejection had nothing to do with mortgages. “It happened because we hadn’t fully integrated the risk systems of Merrill Lynch and BofA,” he told Fortune. “Once that work is finished, we will apply again for the dividend increase.”

Conversing with Moynihan is no easy task. He tends to fire off sentences in machine-gun-like bursts, without anything resembling a pause for punctuation. Words like “litigation” and “putback risk” run together into a verbal blur. For an executive with such clear ideas, he can be almost impossible to understand at times. “His mind is always outracing his mouth,” says Jay Sarles, a former top executive at Fleet and BofA.

In appearance, the redheaded Moynihan recalls a shorter, stockier, and less mirthful version of Conan O’Brien. At work, he practically radiates intensity. “He’s not the cuddliest guy in the world,” says BofA director and former Fleet CEO Chad Gifford. On trips, the perpetually disheveled executive carries two canvas shoulder bags packed with papers. In meetings, if an underling starts to defend an investment that Moynihan has decided to exit, he’ll snap dismissively, “I’ve heard enough stories.” About the only time he engages in small talk is if the topic is the Boston Red Sox or the virtues of Irish executives. “In their own minds, the Irish always think they’re in charge,” he quips, before resuming his just-the-facts demeanor.

Moynihan landed the CEO job during a secret interview at the Four Seasons hotel in New York City in November 2009 by promising the board’s search committee that he would follow a rigid set of principles: Sell virtually every asset unrelated to bedrock banking. Forget all acquisitions, now and forever. Don’t grow total loans, but do change the mix so BofA won’t be overexposed to risky consumer credit in a bad cycle.

In effect, Moynihan was repudiating the go-for-growth culture that reigned under Lewis. “We got in trouble trying to grow far faster than GDP,” he warned the directors. “Our goal should be to grow with the economy and the customers we have now, not take a lot of risk chasing new ones.” Never again, he swore, would BofA need to sell stock in a downturn to survive. To the board, Moynihan’s plan was far more than a knee-jerk reaction to the crisis. It struck them as a better way to run a bank, period. “Brian wants to level out the peaks and valleys, so that we won’t get hit in a downturn as in the past,” says director Thomas Ryan, the retired chairman of CVS Caremark (CVS).

In explaining his current strategy, Moynihan divides the future into two main periods. Over the next two years, he says, Bank of America will retain virtually all its earnings to build the funds necessary to comply with the new Basel III international standards of capital requirements for financial institutions, which are anticipated to be stringent. He adamantly insists that during this period, BofA’s earnings power makes the crunch scenarios that critics fear impossible. “To say we have to raise capital is wrong,” he says. “We’ll generate all we need from our own earnings.”

When BofA has built up a sufficient capital cushion, probably two to three years from now, Moynihan plans to return all earnings to investors in dividends or share buybacks — we’re talking about $25 billion a year, all stuffing shareholders’ pockets. “We need to get back most of the shares we issued in the crisis, that caused all the dilution,” says Moynihan. It’s a classic value strategy of growing modestly without plowing profits back into the business.

Moynihan’s goal is to expand revenues just one percentage point faster than GDP. The total lending book will remain at around $1 trillion, but the CEO is radically reducing exposure to risky areas, especially credit cards. “In the boom we pushed cards through the branches and in mass mailings,” he says. “To drive growth we gave cards to people who couldn’t afford them.” Moynihan has already shrunk the card loan portfolio from $250 billion to $170 billion, and it’s going still lower.

The new mantra is to grow by providing more services to today’s customers. Indeed, BofA hasn’t stopped lending. It’s using the money freed from lowering the credit card portfolio, and selling billions of dollars in auto loans bought from GMAC as an investment, to make carefully underwritten mortgages to loyal customers and provide more safe, lucrative lines of credit to corporate clients.

Moynihan also aims to make the retail experience more customer-friendly, free of hidden “gotcha” fees that make people hate their banks. A crucial move is his decision on debit card fees. For years the big banks have been reaping billions of dollars by charging overdraft fees to customers who buy a cup of coffee or a dress with their debit card without a sufficient balance to cover the charge. Last year Congress enacted legislation requiring banks to ask customers if they’d accept or decline being allowed to overdraw their accounts. If customers chose to “opt in,” banks could keep charging the fat fees.

Virtually all of the big banks, including J.P. Morgan Chase and Wells Fargo (WFC), gave customers the choice to opt in, and are still charging overdraft fees for folks who said yes. BofA is the rebel. Moynihan eliminated debit card overdrafts on purchases. That gambit erased $1 billion a year in revenues and astounded the competition. It’s all part of a campaign to nurture long-lasting relationships with customers. “We can’t be the biggest bank in America and have people thinking we’re taking advantage of them,” he says.

From busboy to banker

Moynihan grew up in Marietta, Ohio, a town of 14,000 in the southeastern part of the state, the sixth of eight children in a middle-class Irish Catholic clan. His father was a chemist for DuPont (DD) and his mother sold insurance. Brian wore all the Christmas sweaters passed down from his three older brothers. As a teenager he worked as a busboy at a Ponderosa steakhouse, dug ditches for sewer projects, and manned the afternoon shift at a plant that made industrial magnets.

At Brown University, Moynihan majored in history and met his future wife, Susan; the couple have three children. He also played rugby, a sport that allows for no helmets or padding. As the fly-half, the player who directs the attack, Moynihan proved skilled at picking in a nanosecond just the play to flummox the defense. “He was a fiery, physical player, a real guy’s guy,” his coach, Jay Fluck, remembers. At Notre Dame Law School, Moynihan ran the snack bar, stirring the spaghetti pot and serving coffee.

Returning to Providence, Moynihan joined the law firm Edwards & Angell in 1984. He soon began working on mergers for a Providence bank called Fleet Financial, a midget that harbored gigantic ambitions. Its CEO, Terry Murray, would eventually create FleetBoston by buying most of the major banks in the region, with Moynihan as his chief dealmaker. Moynihan, still a lawyer, first impressed Murray during the purchase of the failed Bank of New England from the FDIC in 1991. It was the deal that made Fleet a major force. Moynihan’s creativity, and work ethic, astounded Murray. “At 11 p.m., I’d tell the investment bankers to model the effect on earnings if we paid different prices, with Brian in the room,” says Murray. “The next morning at 8 a.m., he’d have the entire model ready showing the dilution or accretion, depending on the price, before the bankers even arrived.”

In 1993, Murray hired Moynihan, and the pair formed a mentor-student relationship, reminiscent of the rapport between the creators of Citigroup (C), Sandy Weill and Jamie Dimon. Murray reveled in his rugged upbringing in a “triple decker” — a three story, working-class apartment house. He prided himself on playing the underdog from a tiny bank in a tiny state, with the guts to steal the mantle of banking from the aristocrats in Boston. A consummate storyteller, the flamboyant Murray couldn’t have been more different from his slogging protégé.

But Murray and Moynihan shared the same philosophy on making deals. They concentrated on extremely complex transactions, and they liked to pay cash. The reason was simple: The tangled deals scared off other potential bidders, allowing Fleet to buy on the cheap. Mike Lyons, who now heads strategy at BofA, worked on Moynihan’s team for two years in the mid-1990s. “Brian would use a strategy we called ‘hanging around the hoop,’ ” says Lyons. He’d make a low-ball offer on a complex deal and wait while all the other bidders dropped out, then low-ball again. That strategy worked brilliantly with the purchase of NatWest’s U.S. business in late 1995. The ailing British bank’s investment bankers, Goldman Sachs (GS), handed Moynihan a letter with the asking price. Moynihan whipped out a pen, crossed it out, and wrote in a drastically lower number. He got his price.

After completing an acquisition, Moynihan and his team would swoop down on the credit card unit or broker, analyze the business, then decide which parts of it to sell, grow, and fix. Recalls Lyons: “Brian would examine every asset, including securities, land, buildings. He’d do an assessment of what it’s worth and what we should do with it.”

The crowning deal for Murray and Moynihan was Fleet’s $16 billion acquisition of BankBoston in 1999. It was a landmark moment in New England. BankBoston, founded in 1784, had dominated banking in the region for decades. Once again, it was Moynihan who turned a complex twist to Fleet’s advantage. The Justice Department required that Fleet sell 280 branches in New England. Strong buyers lined up, including Chase and RBS Citizens. But Murray and Moynihan wanted to keep powerful rivals out of their territory. “The point was to find absolutely the worst operator possible,” says an investment banker whose client wanted to buy the Fleet branches. Moynihan arranged to sell them to a weakling, Sovereign Bank. FleetBoston quickly won back old customers from Sovereign.

Surviving shakeups

Fleet’s run came to an abrupt end in 2004 when it was acquired by Ken Lewis and Bank of America. Moynihan was one of the few top executives to make the transition to BofA. But Lewis was slow to give him major responsibility. Moynihan’s break came in late 2007, when the investment bank suffered big trading losses, and Lewis picked him as the fixer. He restored profits by cutting 18% of the workforce and selling an underperforming unit. But any chance that Moynihan might succeed Lewis — clearly his ambition — seemed to disappear when BofA signed the Merrill Lynch deal in mid-September of 2008. Lewis announced that Merrill CEO John Thain would head both investment banking and brokerage.

Lewis offered Moynihan a job running the credit card division in Wilmington. Moynihan refused. For Lewis — who declined to be interviewed for this story — shunning an assignment at BofA was a fatal breach. When his old boss Hugh McColl would order Lewis to Texas or Florida, Lewis would famously hop on a plane that day. On Dec. 8, 2008, Lewis informed the board that Moynihan was departing. The headline on the prewritten press release stated, “Brian Moynihan Leaving the Company.”

But the three directors from FleetBoston demanded that Lewis reverse his decision and keep Moynihan. Lewis, already weakened by big losses at Merrill, relented. Lewis named Moynihan, who hadn’t practiced law in 15 years, as general counsel, a job he held for less than a month.

On Jan. 4, 2009, with Merrill Lynch in serious trouble, Lewis abruptly fired Thain and once again installed Moynihan to lead investment banking and brokerage. “We were getting horrible press, and lot of key people were leaving,” recalls Michael Rubinoff, a top executive in BofA’s investment bank. The stock had collapsed to $3 a share. Merrill bankers were scared that BofA wouldn’t pay large bonuses, the lifeblood of Wall Street. Moynihan assured the troops that BofA was determined to build a great investment bank and would pay competitive bonuses for 2009. He also ordered generous payments to retain Merrill brokers. The exodus slowed, and by the second quarter the investment bank was solidly profitable.

On Sept. 28, 2009, Lewis announced he would resign by year-end. As a successor, Lewis initially backed not Moynihan but his own chief dealmaker, Greg Curl. “He found Brian useful but not CEO material,” says a former top executive. But the former FleetBoston directors threw their support behind Moynihan. They got an assist from his mentor, Terry Murray, who called big institutional investors to champion Moynihan. “I called as a large shareholder,” says Murray, now 72. “I said he was by far the best choice. He understood this large and complicated company where it would have taken an outsider a year to get a grip on the problems.”

The Countrywide hangover

Moynihan will ultimately be judged on his success at quickly and decisively resolving the gigantic burden in mortgages. Though the settlement in June was expensive, it demonstrated that future home loan losses should prove far lower than many on Wall Street feared. Most of all, it clears a dense fog of uncertainty. “This is the first time investors have been able to fully grasp the extent of the future losses since the issue surfaced last year,” says analyst John McDonald of Sanford C. Bernstein.

Here’s why fraudulently underwritten loans posed such a towering, and until now unpredictable, problem. From 2004 to 2008, Countrywide originated $424 billion in mortgages that it sold to private investors, usually after packaging the loans into securities. Those mortgages ranked among the riskiest exotic products sold in the housing bubble. Countrywide clearly figured that it would never see those loans again. But Countrywide’s contracts with its investors made it clear that if Countrywide misrepresented facts about properties or the owners, the investors could force the lender to take the loans back at full value. When BofA bought Countrywide, it took on that liability.

The issue of these boomeranging mortgages, or “put-backs,” arose last October when a Texas law firm wrote to BofA on behalf of a dozen large investors, alleging that loans they had bought from Countrywide were in breach of contract. Moynihan recognized that the group accounted for just a fraction of the loans that Countrywide had sold to private funds. He didn’t want to negotiate settlement agreements one at a time that would leave shareholders uncertain of the total cost. Instead he sought a comprehensive deal that would resolve all of the Countrywide private-label put-back liability in one agreement.

To reach that universal deal, Moynihan needed the approval of both the investors and the trustees responsible for ensuring that the bondholders received their payments. Fortunately for BofA, a single trustee, Bank of New York Mellon, represented virtually all of the Countrywide investors. That presented an opportunity for the seasoned dealmaker. Moynihan recognized that the sole trustee made a broad settlement reachable. After months of pressing, he got Bank of New York Mellon to recommend the terms of a settlement for all the investors in those securities.

BofA still faces two problem areas in home loans. First, BofA holds $408 billion in mortgages on its balance sheet. That’s 19% of all home loans owned by America’s banks. Fortunately, the rate of defaults has been declining since it peaked in late 2008. McDonald of Sanford C. Bernstein projects that if that figure keeps falling, as he expects, BofA is about three-fourths of the way through its total losses. The second issue is that Bank of America is the largest mortgage servicer in the country, with 14 million loans outstanding. Today, 1.5 million of those mortgages are over 60 days past due. To deal with this avalanche of defaults, BofA has hired an additional 20,000 employees to arrange short sales, file legal documents, or sell houses the bank owns through foreclosure. Moynihan pledges to dispatch half the delinquent loans within two years. It’s another big goal Wall Street will be watching. If he succeeds, BofA will substantially lower its operating costs, a crucial part of Moynihan’s recovery plan.

For those who despise it, Bank of America is a symbol of unfulfilled promise and promises. No one is promising bigger than Moynihan. But don’t underestimate his chances of delivering.

This article is from the July 25, 2011 issue of Fortune.

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As Government Nears Accord With Banks, Questions Swirl Over Scope Of Investigation

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Piggybankblog posted 07/12/11

Piggybankblog posted picture

Cross linked story with Huffington Post

WASHINGTON — State and federal prosecutors are pressing to complete a proposed settlement with the nation’s five largest home loan companies over alleged mortgage abuses, even though they’ve only initiated a limited investigation that hasn’t examined the full extent of the alleged wrongdoing, according to interviews with more than two dozen officials and others familiar with the state and federal probes.

The deal with the mortgage companies would broadly absolve the firms of wrongdoing in exchange for penalties reaching $30 billion and assurances that the firms will adhere to better practices going forward, these sources told The Huffington Post. Negotiators met in Washington last week to hash out the settlement.

For federal and some state officials, expedience now appears to be trumping other considerations in settlement talks with major mortgage servicers. Despite failing to marshal a strong case proving misconduct during the foreclosure crisis, the government is seeking to craft a settlement quickly, in the hopes that this will inject greater certainty into the financial system, stabilize home prices and add vigor to a flagging economy.

But some officials with experience sitting across the negotiating table with major banks say the government is making a critical miscalculation that jeopardizes the public interest by seeking a deal before amassing a credible threat of successful prosecution: In essence, they say, the government would give servicers a blanket pass for widespread alleged acts of fraud while extracting too little in return and operating from a relative position of weakness.

“I would never want to go into a negotiation without solid evidence of actual misconduct to hold as leverage over my counterpart,” said Neil M. Barofsky, the former special inspector general for the Troubled Asset Relief Program, which was crafted to bail out teetering banks. “It would also be very dangerous from a public policy perspective to waive all future claims as part of such a settlement if you do not have a good sense of the size, scope and severity of the underlying misconduct.”

According to sources familiar with the ongoing state and federal probes, state and federal officials have wasted months not digging into the details of the foreclosure crisis, yielding little of value in court and undercutting the lenders’ incentive to strike a settlement of greater benefit to homeowners and taxpayers.

The investigators have yet to gather many documents, conduct depositions or assemble tallies of aggrieved homeowners. They don’t yet have a good handle on the number of wrongful foreclosures, the amount of fraudulent documents filed in local courts or the volume of legal instruments processed by so-called “robo-signers,” the agents that lenders employed to process foreclosure filings en masse without examining the underlying paperwork. – read more

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Is Bank of America a Racketeering Enterprise? You decide.

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July 11th, 2011

Written by: Isabel Santamaria

For over a year now, I have been very aware of Bank of America’s practices and I now know how they relate to RICO. I have researched this for many months now. I became aware of it when a fellow blogger asked: “Why isn’t Bank of America being charged under RICO, they are clearly racketeering?” This opened my eyes and answered many of my questions regarding their practices. Of course, to better understand this topic, first we must know what racketeering is. That said, what is racketeering? Racketeering is the act of operating an “illegal business” or “scheme” in order to make a profit, perpetrated by a structured group. It is a broad category of criminal acts. Racketeering is closely associated with organized crime, since both are conducted by groups.

Racketeering encompasses many criminal acts. It includes theft, embezzlement and fraud against businesses or individuals. Governments can also be victimized by racketeering; examples include counterfeiting money and trading in untaxed alcohol. Racketeering can also take the form of providing illegal services, such as prostitution or drug trafficking. Racketeering also takes place among legitimate businesses or labor unions, where it is sometimes referred to as white-collar crimes. Examples include extortion and money laundering.

Under the Racketeer Influenced and Corrupt Organizations Act (commonly referred to as the RICO Act or RICO) there is extensive criminal penalties and a civil cause of action for acts performed as part of an ongoing criminal organization. The RICO Act focuses specifically on racketeering, and it allows for the leaders of a syndicate to be tried for the crimes which they ordered others to do or assisted them, closing a perceived loophole that allowed someone who told a man to, for example, murder, to be exempt from the trial because they didn’t actually do it. Those found guilty of racketeering can be fined up to $25,000 and sentenced to 20 years in prison per racketeering count. In addition, the racketeer must forfeit all ill-gotten gains and interest in any business gained through a pattern of “racketeering activity.” RICO also permits a private individual harmed by the actions of such an enterprise to file a civil suit; if successful, the individual can collect triple damages.

What are the 35 crimes under RICO? Of the 35 crimes that form the body of RICO law, eight are state crimes and 27 are federal. Bribery, gambling, murder, arson, extortion, prostitution, counterfeiting, drug dealing, obstruction of justice, money laundering, acts of terrorism and kidnapping are among the 35 crimes. It also is possible to prosecute white-collar crimes under RICO law. Embezzlement and obstruction of justice appear on the list, as do mail fraud, wire fraud, bankruptcy and securities fraud and many others.

In order for a business to be found guilty of racketeering activity there must be a “pattern” of racketeering activity and requires at least two acts of racketeering activity, one of which occurred after the effective date of the chapter and the last of which occurred within ten years (excluding any period of imprisonment) after the commission of a prior act of racketeering activity. The U.S. Supreme Court has instructed federal courts to follow the continuity-plus-relationship test in order to determine whether the facts of a specific case give rise to an established pattern. Predicate acts are related if they “have the same or similar purposes, results, participants, victims, or methods of commission, or otherwise are interrelated by distinguishing characteristics and are not isolated events.” (H.J. Inc. v. Northwestern Bell Telephone Co.).

Now that we understand a little more about racketeering and the crimes that define it, let’s see how Bank of America and other banking and lending giants can be defined as a “criminal organization” for committing at least two acts of racketeering activities. Of course, I will not talk about only two crimes that they have “allegedly” committed but in fact much more. Here they go:

Mail fraud- an offense under United States federal law, in which fraudulent misrepresentations and schemes to defraud which use the United States Mail to further that fraudulent conduct and can be prosecuted as “mail fraud.” How is Bank of America allegedly guilty of “mail fraud”? What is a misrepresentation or fraud? A false statement stated as a fact. http://en.wikipedia.org/wiki/Fraud. Bank of America sends via US mail misrepresentations. How? Well, many homeowners are advised in the mail false statements regarding their loan modifications. They are told- 1) their paperwork was lost or never received, 2) they do not qualify due to income, 3) their documents were not received on time, 4) their trial modifications payments were not received on time and therefore they cannot qualify for a permanent loan modification, and many other misrepresentations and excuses. Homeowners are also victims of “loan servicing fraud” and the misrepresentations of such are sent by Bank of America via US Mail.

Wire Fraud- is any criminally fraudulent activity that has been determined to have involved electronic communications of any kind, at any phase of the event. The alleged misrepresentation to support a conviction under 18 U.S.C. § 1343 must be a material misrepresentation; a misrepresentation is material if it is capable of influencing, or has a “natural tendency” of influencing.

To commit wire fraud, one must (1) devise, or intend to devise, a scheme or artifice to defraud another person on the basis of a material representation, and (2) do it with the intent to defraud, and (3) do it through the use of interstate wire facilities (i.e. telecommunications of any kind). How is Bank of America allegedly committing wire fraud? During recent months it has become very clear that Bank of America and others have participated in submitting fraudulent foreclosure documents and mortgage assignment via wire or electronically. This is wire fraud! This has been a well-planned scheme. These are not mistakes of any kind. Many are left homeless because of this fraudulent activity. There might be many more alleged misrepresentations submitted via wire by Bank of America for other purposes as well.

The mail and wire fraud statutes are very, very broad. Before RICO, the mail and wire fraud statutes could be enforced only by U.S. Attorneys, who didn’t have time to prosecute everyone engaged in conduct that potentially violated the statutes.

When Congress included mail and wire fraud as predicate acts under RICO, however, it allowed every attorney in the country to use the mail and wire fraud statutes to the advantage of their clients. Many, many courts have noted that RICO’s inclusion of mail and wire fraud basically federalized state common law claims of fraud in the business context i.e.,: every business uses the mails or wires, so if a business engages in fraud, it has arguably and automatically violated the mail and wire fraud statutes as well.

http://www.ricoact.com/ricoact/faq.asp#remedies

Embezzlement- the act of dishonestly appropriating or secreting assets by one or more individuals to whom such assets have been entrusted. Embezzlement may range from the very minor in nature, involving only small amounts, to the immense, involving large sums and sophisticated schemes. More often than not, embezzlement is performed in a manner that is premeditated, systematic and/or methodical, with the explicit intent to conceal the activities from other individuals, usually because it is being done without their knowledge or consent. Embezzlement statutes do not limit the scope of the crime to conversions of personal property. Statutes generally include conversion of tangible personal property, intangible personal property and choses in action.

How is Bank of America allegedly committing embezzlement? Many Bank of America employees have been found guilty of embezzling money from customer’s bank accounts. Beyond that, many homeowners have complained that Bank of America has made money “disappear” from their escrow accounts and mortgage payment account.

 

Theft- In criminal law, theft is the illegal taking of another person’s property without that person’s freely-given consent. The word is also used as an informal shorthand term for some crimes against property, such as burglary, embezzlement, larceny, looting, robbery, shoplifting, fraud and sometimes criminal conversion. In some jurisdictions, theft is considered to be synonymous with larceny; in others, theft has replaced larceny. The actus reus of theft is usually defined as an unauthorized taking, keeping or using of another’s property which must be accompanied by a mens rea of dishonesty and/or the intent to permanently deprive the owner or the person with rightful possession of that property or its use.

How is Bank of America allegedly guilty of theft? When they take someone’s property or home “illegally” with fraudulent documents. Sometimes Bank of America does not even own the Note to the property and they kick out the homeowners into the street. Bank of America has also foreclosed or stolen homes that do not even belong to them on many occasions. Most recently, a Florida couple found out the hard way: Do not do business with Bank of America! The Naples, Florida couple purchased a home in cash from Bank of America and did not have a mortgage with them or anyone else. Nevertheless, Bank of America foreclosed on them. This is not the only time this has happened. Many are actually afraid to buy any home related to Bank of America for the fear of getting burned. We can spend hours speaking about Bank of America’s alleged antics which involves theft. All you have to do is scour the internet and thousands of complaints of frustrated homeowners or customers will become available. The vast majority are believed to be legitimate complaints. A “pattern” is clearly evident.

Securities Fraud- Securities fraud, also known as stock fraud and investment fraud, is a practice that induces investors to make purchase or sale decisions on the basis of false information, frequently resulting in losses, in violation of the securities laws. Securities fraud includes outright theft from investors and misstatements on a public company’s financial reports. The term also encompasses a wide range of other actions, including insider trading, front running and other illegal acts on the trading floor of a stock or commodity exchange.

How is this allegedly applicable to Bank of America? I am sure many of you already know about Bank of America’s investors squirming in their seats regarding this matter. Investors want answers and want them now because they feel deceived. In 2009, Bank of America was flooded with lawsuits alleging securities fraud. Bank of America CEO at the time, Ken Lewis, became so overwhelmed that he resigned. Speculation still exists as to why this all happened. Currently, many have pulled out and want nothing to do with Bank of America’s Circus of events. Some investors have already accused Bank of America of Securities Fraud. The lawsuit was filed in New York in January of this year. The plaintiffs wanted compensatory and punitive damages. The case is Dexia Holdings Inc. et al v. Countrywide Financial Corp. et al, New York State Supreme Court, New York County, No. 650185/2011. In due time, this securities fraud will become more evident as investigations continue.

UPDATE: Before completing this article, it just so happened that Bank of America and its Countrywide unit will pay $8.5 billion to settle claims that the lenders sold poor-quality mortgage-backed securities that went sour when the housing market collapsed. Yes, this is securities fraud that they have obviously admitted to. Sometimes I wonder if I have a crystal ball in regards to Bank of America because it has become more and more evident over time that Bank of America has repeatedly violated RICO laws as I have said so many times but sadly no one is going to prison.

Forgery- Forgery, which is considered a white-collar crime, is a non-violent crime committed for financial gain or deceit. It is similar to fraud, which is also a crime of deceit. For forgery to be a criminal act, the person must have committed forgery with the intent to deceive or defraud another. Forgery is considered a felony crime by the federal government and all fifty states. A person convicted of forgery can face heavy penalties including incarceration, heavy fines, probation, community service, the loss of some civil privileges and more. The Modern Penal Code (MPC sec. 224.1) states that a person is guilty of forgery if: a) an actor or person alters any writing of any person, b) makes, completes, executes, authenticates, issues, or transfers any writing so that it purports to be an act of another who did not authorize the act or to have been at the time or place or in a numbered sequence other than was in fact the case, or to be a copy of an original when no such original existed; or c) utters any writing which he knows to be forged. Forgery can also involve significant material alteration of a genuine document. This can include forgery involving false signatures or improperly filling out forms. A document is considered forgery if it looks authentic enough to deceive a reasonable person. It must also have some legal significance in order to be considered unlawful. Forgery also includes the possession of any forged document or forgery device with knowledge of its purpose.

Therefore, how is Bank of America allegedly responsible for committing forgery? This is not a shocker, especially with all of the recent developments. On April 3, 2011, CBS’ 60 MINUTES aired a segment called “The Next Housing Shock” showing massive fraud by banks and mortgage-backed trusts in foreclosures. The segment focused on one particular document mill, Docx, LLC, a company that works for over 51 banks. One former employee confessed to forging 4,000 documents each day! These “forged” documents would then be notarized as a legitimate document. Bank of America has consistently used Docx LLC for their “fraud-closure” practices. As with the robo-signers, forged signatures have resulted in the dismissal of foreclosure lawsuits in courts across the country.

Bank of America has been committing this crime for years and have continued to do so with complete disregard for the law because of their “too big to fail” attitude. In addition to this ongoing horror story, there are actually “machines” that can facilitate this type of fraud by scanning any signature and re-signing it exactly as it is on any other document. http://stopforeclosurefraud.com/2010/11/17/signature-scanner-forgetaboutit-meet-a-unique-robo-signer/. Yes, it may look exactly like “your” signature but did “you” actually sign this document? Fraudulent practices are widespread in the mortgage industry. With technology like this available to these large banks, nothing is sacred anymore, not even our signatures. A machine can now sign your life away.

Counterfeiting- A counterfeit is an imitation, usually one that is made with the intent of fraudulently passing it off as genuine. Counterfeit products are often produced with the intent to take advantage of the superior value of the imitated product. The word counterfeit frequently describes both the forgeries of currency and documents, as well as the imitations of works of art, clothing, software, pharmaceuticals, watches, electronics and company logos and brands.

Forgery is the process of making or adapting documents with the intention to deceive. It is a form of fraud, and is often a key technique in the execution of identity theft. Uttering and publishing is a term in United States law for the forgery of non-official documents, such as a trucking company’s time and weight logs.

Questioned document examination is a scientific process for investigating many aspects of various documents, and is often used to examine the provenance and verity of a suspected forgery. Security printing is a printing industry specialty, focused on creating illegal documents which are difficult to forge.

 

Surprise, surprise……. Forgery of documents is considered as counterfeiting? Well, we all know that Bank of America has forged many documents pertaining to Assignments of Mortgage, Notes and other documents related to the origination or transfer of a loan that they service or own. They have fabricated numerous documents and pass them off as authentic in order to illegally foreclose on homes. These documents are filed in court with the knowledge of Bank of America and their attorneys. Bank of America fabricates and approves the document and then gives orders to their attorneys so that they can proceed with the foreclosure process.

Extortion- In a court of law, extortion refers to the act of obtaining property, services or money from a person or company through intimidation. Mostly regarded as a characteristic of large organized groups of crime, extortion is both a large and small scale crime.

On many levels, gaining a possession by threatening an individual through an abuse of power is often referred to as blackmail as well. In addition, extortion is similar to robbery. The main difference between extortion and robbery is that with extortion, there needs to be a verbal or written threat, whereas robbery just requires theft.

Extortion can be a Federal Crime. To be charged with extortion, you don’t necessarily have to achieve the goods or money that you set out to take. Knowingly and willingly sending a threat, which refers to the requirement of payments, is enough to be charged with the offense. For instance, if you send a letter threatening to expose a company unless it pays you, the letter never actually has to reach the intended recipient in order for it to be considered extortion.

If you are charged with extortion, it can be considered a federal crime, which means the possibility of having to serve jail time. And, remember, even if you didn’t physically harm anyone or gain any money or possessions, but rather, just made the threat, you can still be charged. If the latter sounds like a scenario that you may be facing, it is important to call a lawyer. Just because you didn’t go through with the theft doesn’t mean that you can’t still be convicted.

For example, can sending a homeowner a “Letter of Intent to Accelerate” which often demands money that is sometimes really not owed and threatens with foreclosure or illegally obtaining such property if that money is not paid in full an act of extortion? I will let you decide.

Obstruction of Justice- The crime of obstruction of justice, in United States jurisdictions, refers to the crime of “interfering” with the work of police, investigators, regulatory agencies, prosecutors, or other (usually government) officials. Common law jurisdictions other than the United States tend to use the wider offense of Perverting the course of justice.

Generally, obstruction charges are laid when it is discovered that a person questioned in an investigation, other than a suspect, has lied to the investigating officers.

The Attorney General, Congress, Senate are “government officials”. The Office of the Comptroller of the Currency (OCC) is a “regulatory agency” and HUD is also a “federal agency”. These government officials, regulatory and federal agencies have initiated investigations against Bank of America. What does Bank of America do? Well for one thing, they provide “false” information to these government officials and regulatory agencies such as the OCC. For example, in a prepared Congressional testimony, Bank of America’s top mortgage official, Barbara Desoer, says that it’s Wall Street investors, not the bank, that are making it hard to help homeowners. “Bank of America is constrained by our duties to investors,” she says . “Many investors limit Bank of America’s discretion to take certain actions.” This has been proven to be false. The investors do not decide on loan modifications. Nevertheless, Mrs. Desoer did indeed say this statement under “oath”. The full statement is available here: http://mediaroom.bankofamerica.com/phoenix.zhtml?c=234503&p=RssLanding&cat=news&id=1497054.

In addition, Bank of America’s executives and customer advocates provide false and misleading information to the OCC when an investigation is being reviewed on behalf of a homeowner or what I like to call “victim”. It is heart-wrenching that a homeowner has to have their complaint with the OCC dismissed because Bank of America denies all the allegations brought upon by the homeowner. Most of these allegations brought by the homeowner or victim are true and Bank of America denies, denies, denies. I know these facts from my own personal experience. This is a federal crime, no doubt about it. No sugar-coating it.

Most recently, Bank of America significantly “hindered” investigations by HUD who was reviewing Bank of America’s foreclosure practices. Did Bank of America cooperate with HUD? The answer is clearly “no”. As per Departmental Auditor William Nixon, Bank of America threw up “roadblocks” to the investigation and “prevented” his team from conducting a “walkthrough” of the bank’s document unit. Nixon also states that the bank withheld key documents and data, prevented investigators from interviewing employees or asking them certain questions, and was “slow” to provide information. When I think of Bank of America’s “slow” response it reminds me of how “slow” they are to offer help to homeowners who request a loan modification among other things but are very “quick” to restart foreclosures after supposedly investigating thousands of foreclosure documents after they were forced to stall foreclosures in October 2010. Think about it, it only took Bank of America “two weeks” to conduct their “internal” investigation of thousands of documents and reinitiated foreclosures immediately after. However, it takes “months” and in some cases “years” for Bank of America to conduct a loan modification review. This is truly deceitful.

Nonetheless, their “slow” responses and malicious behavior has eventually backfired. Mr. William Nixon has also said that when interviews were permitted, the presence or involvement of the bank’s attorneys limited the effectiveness of those interviews. According to court documents, Bank of America also failed to fully comply with subpoenas issued by Nixon’s team. HUD’s internal watchdog issued two subpoenas requesting documents and information but Bank of America provided incomplete, conflicting information in return. In some cases, Bank of America provided “excerpts” of documents rather than the complete record. Bank of America only provided one third of what was requested. Not a surprise, they do it all the time.

This reminds me of my case. Bank of America only provided “some” of the documents that my attorneys at the time requested regarding the origination of my loan and stated that my attorney’s request “goes beyond that which is available through a Qualified Written Request made under 12 U.S.C. §2605(B)”. Yes, Bank of America “refused” to provide all of the documents of my loan. To this very day I have not seen the Assignment of Mortgage with Bank of America in which the transfer took place almost 2 years ago and until this very day it has never been recorded with the Clerk of Courts. I have no idea who signed my mortgage assignment. For all I know it can be “Linda Green” or any of the fake characters signing mortgage assignments and foreclosure documents. This is a clear indication of fraudulent documents, if you ask me. Who knows, they might be fabricating a new Assignment of Mortgage for me at this very moment.

Due to Bank of America’s “obstruction of justice”, a lawsuit was filed against them by the State of Nevada (case no. CV2010-033580). All of this evidence and much more is a violation of CHAPTER 73—OBSTRUCTION OF JUSTICE, § 1510 Obstruction of criminal investigations, § 1517 Obstructing examination of financial institution, § 1519 Destruction, alteration, or falsification of records in Federal investigations and bankruptcy, § 1505 Obstruction of proceedings before departments, agencies, and committees. Any one of these can apply at any given time (Wikipedia). Again, “Obstruction of Justice” is a RICO crime along with the other crimes that I have listed here.

My husband and I have personally filed a lawsuit against Bank of America (BAC) in December 2010. The case is Abdiel Echeverria & Isabel Santamaria vs BAC Home Loans Servicing, L.P. and Bank of America, N.A., case no 6:10-cv-01933-JA-DAB. One of the counts includes, you guessed it, RICO. Bank of America’s premature and unnecessary threats, fraud, harassment, and deceit has severely affected me emotionally and physically. My family is also greatly affected. All I do is eat, breathe and think about Bank of America and what they have intentionally done to me and my family. I find it comforting to “write” about my experience to help others and my psychologist says that it is good therapy for me to put it on paper. However, I find it hard to “speak” of my experience with Bank of America and become very agitated. I now know what it is to be suicidal, something that I never thought I would experience. I now know what it is to develop Fibromyalgia due to the extreme emotional stress that I was subjected to by Bank of America. I also know that many others have been seriously affected by them as well.

I hope that this article can help many Bank of America victims better understand the true severity of Bank of America’s alleged “illegal” actions and that they should be held accountable under RICO. Hopefully, more of these attorneys and “foreclosure mills” who are hired by Bank of America and other fraudulent banks can also be held accountable for filing these illegal documents through our court systems and therefore causing many families to become homeless. Remember, these acts are “widespread” and are not rare occurrences which would further confirm that Bank of America is a racketeering enterprise. Every Bank of America “victim” will agree that they have experience at least two of these offenses in Bank of America’s mortgage practices. It is our obligation as individuals to fight back when a crime is committed against us and Bank of America has allegedly committed many crimes against humanity and they need to be stopped before further lives are ruined.

Some legal information provided in this article can be found in:

www.benzinga.com

www.wikipedia.com

www.articlesbase.com

http://www.law.cornell.edu/

http://www.ricoact.com/ricoact/faq.asp

Written by a piggybankblogger

Written by: Isabel Santamaria (Isabel-1229@hotmail.com)

 

 

 

 

 

 

 

 

Fraudclosure Watch: Firefighter to Demolish Home Before Bank of America Forecloses After Deceptive Scheme

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Piggybankblog posted 07/10/11

Picture posted by piggybankblog

Cross linked story ampedstatus.com

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Entire Cobb Mtn. Estate to be demolished by couple with dueling dozers rather than allow Bank of America to auction it off in the fraudulent foreclosure Ponzi scheme, bogus modification scam now sweeping our nation! An estimated 15 Million homes/families’ lives hang in the balance! We’re all in this together – How are you fighting back?

This was originally posted and flagged down within an hour the first time I posted two nights ago on Craigslist under: real estate and in just 18 minutes the second time I posted it under: free stuff. Please leave this up as it a serious commentary about the very real, current state of our nation!

Hello readers, we are Ana & Robert Somerton from Cobb, CA. We recently received from Bank of America a “NOTICE OF INTENT TO ACCELERATE” and “Options to Avoid Foreclosure”. We’ve been advised by our legal representative that we’re out of legal options/remedies to Bank of America selling at auction our beautiful hand built home of 15 years. Won’t go into great depth or detail here, suffice to say we’ve been run through the Bank of America Hope/Harp/Hamp wringer and hung out to dry. If you’ve been through this, you already know what it means, if not, do us all a favor and educate yourself before responding to this, thanks.

So unless some kind sole comes up with the 24k we are now behind on our mortgage payments, we will most certainly, within the next few months lose our home to the Banksters of America. We have decided that when/if it comes to that we’ll offer our home (BofA once appraised at $350k, Zillow now shows at $133k!) and anything, anyone cares to remove from it, including some very nice expensive Pella doors/windows, kitchen and bath fixtures, appliances and all it’s contents to anyone who can use them.

We’ve also decided that rather than allow BofA the satisfaction of selling/taking our home intact, once everything of value is stripped from it, with DUELING DOZERS my wife an I will take it down to the concrete slab my father built it on back in the early 1990s. Leaving nothing but a smoldering pile of debris in the driveway for BofA to attempt to sell, like an episode of Extreme Makeover Home Edition with no plan to rebuild!

Wish us luck, once it’s done look for the full demolition video under the heading “CA homeowners respond to fraudulent Bank of America foreclosure with Dueling Dozers”. We plan on shooting it from at least three fixed angles with additional cams mounted inside each DOZER for full effect.

Any media outlets interested in an interview prior to and/or covering the day of the demolition can contact us directly. Ana & Robert Somerton 707-245-7541

Anyone who’d like to drive-by, meet the owners, view the home/contents prior to the demolition, our address is: 11784 Gifford Springs Rd. Cobb, CA 95426

This is not a short sale, as we’ll not do Bank of America that favor, also we have no interest in a Deed in Lieu or the few thousand dollars they’d like to give us for the keys to the only home we’ve ever known/owned!

We are extremely hostile to any “BofA tools” trespassing on our property as long as we still own it, violators will be dealt with accordingly!

Editor’s Note: Good luck to the Somerton family! We will report on this story as it develops. To follow this story and many other fraudclosure news reports, here is our new Fraudclosure Watch news wire: read more

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JPMorgan Close To Overtaking Bank Of America As Biggest U.S. Bank

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Piggybankblog posted on 07/08/11

Picture posted by piggybankblog

Cross linked story with huffingtongpost.com.

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NEW YORK (David Henry) – JPMorgan Chase & Co is close to vaulting past Bank of America Corp to become the biggest bank in the United States, but it will likely get there in an odd way — by shrinking less than its rival.

Both JPMorgan Chase and Bank of America are getting smaller as they shake off the excesses of the years leading up to the financial crisis.

If JPMorgan becomes the biggest, chief executive Jamie Dimon could see the validation of his cautious management before and during the crisis. Bank of America’s drop to second would illustrate how former Chief Executive Ken Lewis saddled the bank with bad acquisitions that are hampering current CEO Brian Moynihan.

But bigger might not be better. Being the largest does not necessarily translate to higher profitability, or a higher market value. Global banking regulators are imposing higher capital requirements on the largest banks and threatening even higher capital charges if they grow.

“Big is more a burden than it is a bragging right,” said Gary Townsend, chief executive of asset manager Hill-Townsend Capital, a Chevy Chase, Maryland-based money manager that specializes in financial stocks and owns shares of both banks.

That is a switch from the years when Bank of America was buying up banks to cater to the American appetite for more and more borrowing, said Ray Soifer, a long-time bank analyst and now industry consultant at Soifer Consultant in Green Valley, Arizona.

“Bigger was better and banks were happy to be at the top,” said Soifer.

JPMorgan has been gaining ground on Bank of America for three straight quarters. At the end of March, JPMorgan’s $2.20 trillion of assets were just 3.4 percent short of Bank of America’s $2.27 trillion. JPMorgan already is the most valuable bank in the stock market, with its equity worth nearly 50 percent more than Bank of America’s.

Analysts differ as to how soon the switch could happen. Deutsche Bank’s Matt O’Connor sees JPMorgan becoming the largest by year end. FBR Capital Markets’ Paul Miller says it will be the next 12 to 18 months.

But however long it takes, analysts agree neither bank is going to be stretching.

“It is really going to be who shrinks the least,” said Gerard Cassidy, an analyst at RBC Capital Markets.

Even if JPMorgan becomes the largest U.S. bank by assets, it would not be the biggest in the world. The bank is about $600 billion short of that title and there are six other banks between it and the biggest. That honor at last count went to BNP Paribas SA. (For a list of the biggest banks in the world, please double click: r.reuters.com/zyq52s )

JPMorgan spokesman Joseph Evangelisti declined to comment.

COUNTRYWIDE A BIG MISTAKE

The trend down in the U.S. might not follow a straight line. Banks sometimes temporarily pump up balance sheets to manage their interest rate risk, said Soifer. And there may be lending upturns along the way in borrowing by businesses, as just happened.

Federal Reserve data show the combined assets of 25 large U.S. banks grew by one-half of one percent in the second quarter, largely because of more lending to companies.

But in general, analysts said, banks are no more likely to grow now than their customers are to try to borrow their way to happiness on the strength of higher home prices.

Bank of America and JPMorgan have particular reasons to shrink. To start, they have portfolios of bad assets acquired just before or during the financial crisis. JPMorgan Chase still has more than $80 billion of low-credit quality mortgage and credit card loans, largely acquired when it took over failed lender Washington Mutual in 2008.

As of March 31, Bank of America had more than $100 billion of loans in runoff, mainly in a shrinking portfolio known as the legacy asset servicing division formed in January. Many of the assets are mortgages or home equity loans acquired from Countrywide Financial, which it bought in 2008.

Both banks are likely to let those loans mature without making new ones to replace them, a process known as “running off” assets.

The Countrywide acquisition was a particularly big mistake for Bank of America, FBR’s Miller said. The deal has already cost the bank more than $20 billion of its capital, he said. Some of that money is going out the door in the bank’s recent $8.5 billion settlement of warranty claims by more than 22 institutional investors over allegedly faulty mortgage-backed securities Countrywide sold.

Bank of America is selling assets and even closing some bank branches as it tries to strengthen its balance sheet by getting smaller.

The bank’s goal is “to balance the appropriate amount of assets and risk,” said Jerry Dubrowski, a Bank of America spokesman. “Having the largest amount of assets does not make you the best financial services provider and, right now, we’re focused on that.”

(Additional reporting by Joe Rauch in Charlotte, North Carolina; Editing by Andre Grenon)

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Bank of America Plans Bond Offering Amid Foreclosure Deal Talks

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Piggybankblog posted 07/07/11

Picture posted by piggybankblog

Cross linked story with bloomberg Businessweek

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July 7 (Bloomberg) — Bank of America Corp. may sell five- year bonds today as it nears a settlement on state and federal claims over faulty foreclosures that’s increasing investor confidence in credit of the biggest U.S. bank.

The notes for the Charlotte, North Carolina-based bank may be issued in benchmark size, according to a person with knowledge of the transaction who declined to be identified because terms aren’t set. Benchmark offerings are typically at least $500 million.

The cost to protect the debt of Bank of America from losses decreased today as the lender, JPMorgan Chase & Co., Citigroup Inc. and two other firms are in advanced talks that may result in a settlement, which may exceed $20 billion, according to two people briefed on the matter who declined to be identified because the talks are private.

Credit-default swaps on Bank of America fell 4.5 basis points to 154 basis points as of 10:10 a.m. in New York, according to data provider CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in the privately negotiated market.

The contracts have dropped 27 basis points since June 27, the day before the lender agreed to pay $8.5 billion to resolve claims over sour mortgages made my investors including BlackRock Inc.

Credit-default swaps pay the buyer face value if a borrower fails to meet its obligations, less the value of the defaulted debt. A basis point equals $1,000 annually on a contract protecting $10 million of debt.

In March, in its last offering of five-year, fixed-rate notes, Bank of America issued $1.5 billion of 3.625 percent debt that paid 172 basis points, or 1.72 percentage points, more than similar-maturity Treasuries, according to data compiled by Bloomberg.

The notes traded yesterday at 100.7 cents on the dollar to yield 3.45 percent, or 181 basis points more than similar- maturity Treasuries, according to Trace, the bond price reporting system of the Financial Industry Regulatory Authority.

–With assistance from Mary Childs in New York. Editors: Pierre Paulden, Mitchell Martin

To contact the reporter on this story: Tim Catts in New York at tcatts1@bloomberg.net.

To contact the editor responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net.

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(Reuters) – Bank of America Corp lost its bid to dismiss a lawsuit accusing it of reneging on promises to help borrowers modify their mortgage loans under a much-criticized federal program.

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Piggybankblog posted 07/06/11

Cross linked with Reuters.com

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The bank, however, claimed a partial victory, citing District Judge Rya Zobel’s decision to dismiss claims by borrowers who sought to participate in the two-year-old Home Affordable Modification Program, or HAMP.

Zobel nonetheless ruled that homeowners who contend they did not get modifications for which they qualified under HAMP, to avoid foreclosures, could pursue claims against Bank of America.

The complaint “meticulously” detailed each of these plaintiffs’ compliance with loan modification conditions, but said the bank “willfully failed” to modify the loans, either in bad faith or for its own economic benefit, Zobel wrote. Such allegations are “sufficient” to let the lawsuit go forward, she added.

Zobel rejected claims by borrowers who claimed they were “intended beneficiaries” of HAMP but never entered the program, saying they had no contractual right to relief.

She also rejected a request to block Bank of America while the lawsuit is pending from foreclosing on 37 borrowers said to be in “imminent danger” of losing their homes.

In a statement, Bank of America spokeswoman Shirley Norton said the company is pleased that four of the eight counts in the complaint were dismissed.

The lawsuit combines 26 cases that had been brought in 19 states, and sought class-action status for various plaintiffs.

“The Court’s conclusions will likely help hundreds of thousands of families to convert temporary mortgage modification plans into permanently lower monthly payments. Tens of thousands of foreclosures are likely to be prevented,” said Gary Klein, a lawyer for the plaintiffs, adding that he expects the case to get class certification quickly.

Last week, Bank of America said it would take $20 billion of charges for various mortgage matters, including over its 2008 purchase of Countrywide Financial Corp.

Like several rivals, the Charlotte, North Carolina-based bank has also been in talks with state and federal regulators to resolve claims over alleged foreclosure abuses.

HAMP was created in 2009 as a centerpiece of efforts by the Obama administration to boost the nation’s housing sector.

While it provides incentives to loan servicers to encourage modifications, HAMP has been widely derided as ineffective.

Through May, 731,451 borrowers had received permanent loan modifications, far below the original goal of 3 million to 4 million.

The Republican-controlled House of Representatives voted in March to wind down the program, though the Democrat-controlled Senate is not expected to follow.

Bank of America, JPMorgan Chase and Wells Fargo & Co are the largest servicers participating in HAMP.

The case is In re: Bank of America Home Affordable Modification Program (HAMP) Contract Litigation, U.S. District Court, District of Massachusetts, No. 10-md-02193.

(Reporting by Jonathan Stempel; editing by Carol Bishopric)

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Bank of America Subsidiary Ordered To Pay Rosen Hedge Funds $63.7M

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Piggybankblog posted 07/06/11

Cross linked story with onwallstreet.com

Bank of America subsidiary Merrill Lynch Professional Clearing Corp. has been ordered to pay hedge fund clients Rosen Capital Partners and Rosen Capital Institutional $63.7 million plus interest for an arbitration case dating back to the height of the financial crisis.

The total award for compensatory damages amounts to about $79 million including interest, said Hal Barza, partner at Quinn Emanuel Urquhart & Sullivan LLP, the Los Angeles law firm representing Rosen Capital in the case. That includes about $15.5 million in interest, which the Financial Industry Regulatory Authority panel set at 9% annual interest from Oct. 7, 2008 until the award’s payment.

The award decision comes after Rosen Capital first filed the arbitration claim against Merrill Lynch in May 2009. In that claim, Rosen Capital alleged “unexpected margin calls which caused losses in two hedge funds,” the FINRA document said. In connection with those allegations, Rosen Capital accused Merrill Lynch of fraud, negligence and breach of contract.

In the dispute, Rosen Capital asserted that Merrill Lynch had fraudulently encouraged them to transfer prime brokerage accounts to Merrill Lynch in September 2008. Merrill Lynch subsequently breached the required margin, Rosen Capital also alleged, and froze and interfered with the accounts in October 2008.

Rosen Capital initially requested at least $90 million in actual damages, plus punitive damages and applicable fees. At the close of the hearing, Rosen Capital requested $77.7 million in damages. In the end, the FINRA panel awarded compensatory damages, but denied other requests for punitive damages and other relief.

More details about the arbitration proceedings and decision were not provided in the FINRA documents.

The FINRA panel’s decision was a source of happiness for Rosen Capital, Barza said.

“This has been a long and difficult struggle for my investors and for me,” Rosen Capital portfolio manager Kyle Rosen said in a statement provided by Barza. “We are relieved and grateful that we were able to obtain a just outcome.”

Bank of America, on the other hand, said in a statement provided by a spokesperson that it disagrees with the decision and may fight it.

“We strongly disagree with the arbitration panel’s award, which is contrary to the facts presented,” Bank of America’s statement said. “At all times, we met the contractual requirements of our relationship with this sophisticated hedge fund, which sought to blame us for losses during a period of extreme market volatility in October 2008 … We are considering additional action in this matter, including asking a court to overturn this award.”

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3 Hitches in Bank of America’s Big Mortgage Settlement

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Piggybankblog posted 07/06/11

Picture posted by piggybankblog

Cross linked story with blogs.wsj.com

 

Last week, investors were excited that Bank of America had finally put its big mortgage headaches behind it. Today, we have a monkey wrench in those plans.

As first reported by The Wall Street Journal, a group of bond investors said it plans to challenge BofA’s proposed $8.5 billion settlement with some investors who lost money on fizzled mortgage-backed securities.

(Click HERE to read the mortgage-bond challenge to Bank of America’s settlement.)

The group of bond investors challenging the settlement — we don’t know their identities — may not succeed in the courts, of course. But at the very least their potential challenge shows BofA’s path out of mortgage hell may not be smooth.

The investor group, called Walnut Place, has at least three main objections to the BofA mortgage settlement reached last week:

1) Not Enough Money: Walnut Place said BofA is getting off too easy in only agreeing to dole out $8.5 billion — which is more than the bank’s collective profits since the financial crisis. According to the investor group’s court filing:

“[BofA unit] Countrywide may be liable to repurchase loans with unpaid principal balances of as much as $242 billion. The $8.5 billion that Countrywide and Bank of America have agreed to pay is therefore only a small fraction of the potential liability that they would have faced in litigation on behalf of the trusts.”

2) Settlement Investors Are Conflicted: Walnut Place sees conflicts-of-interest in the investors — including Pimco, BlackRock and the Federal Reserve Bank of New York — that negotiated the $8.5 billion settlement with BofA deal. Walnut Place said in its filing:

“[M]any of these 22 investors have substantial ongoing business relationships with Bank of America other than their ownership of certificates in Countrywide-sponsored trusts. For example, BlackRock Financial Management, Inc., is one of the 22 investors. During the time in which the Settlement Agreement was being negotiated, Bank of America owned up to 34 percent of BlackRock….Many other of the 22 investors also have substantial business dealings with Bank of America or its subsidiaries other than their ownership of certificates in Countrywide-sponsored trusts.”

3) Settlement Process Was Secret and Unfair: The Walnut Place group reserves much of its vitriol for Bank of New York Mellon, the trustee for the BofA bondholders. According to the filing:

“Walnut Place has serious concerns about the secret, non-adversarial, and conflicted way in which the proposed settlement was negotiated and about the fairness of the terms of the proposed settlement….In short, despite the fact that BNYM owes at least the same duties to Walnut Place that it owes to every other certificateholder in the 530 Countrywide-sponsored trusts, BNYM is asking this Court to approve a settlement that it negotiated in secret and that would release Walnut Place’s claims without its consent while it is in the middle of an active litigation…”

 

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Donald Trump Schools Bank Of America In A Super-Luxury Foreclosure Deal

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Piggybankblog posted 07/04/11

Cross linked withbusinessindsider.com

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Last summer Patricia Kluge listed her giant Virginia estate for $48 million, but no one was interested.

Bank of America foreclosed on the home in February, alleging Kluge had defaulted on a $23 million loan.

In April Donald Trump swooped in to buy the winery and vineyard. He also bought 200 acres of land near the house for less than $500,000.

Trump now owns the front yard, the driveway and the backyard. And he’s doing his best to make sure BoA can’t sell the property to anyone but him, with a huge discount, according to the Journal.

 

Bank of America owns the house after foreclosing and is trying to sell it for $16 million. One thing the house doesn’t have, however, is a front yard. Mr. Trump owns that, having purchased it with his 200 acres. He also owns most of the driveway and the backyard, making a sale to any other buyer difficult. Mr. Trump said he would buy it from Bank of America for $3.6 million.

To make his point, he has erected signs on the front lawn of the mansion that read, “No Trespassing. This Land is Owned by Trump Virginia Acquisitions LLC,” aimed at warding off possible buyers. He has also let the lawn go to seed.

“Maybe someone is stupid enough to buy the house,” Mr. Trump said. “I wish them luck.”

The broker for the house, Joseph Marchetti III, responded: “We believe the house is a salable asset as it is.”

More at WSJ.

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Bank Of America CEO Brian Moynihan Subpoenaed By New York

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Piggybankblog posted 07/02/11

Picture posted by piggybankblog

Cross linked story with huffingtonpost.coml

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NEW YORK — New York Attorney General Eric Schneiderman is not backing off a civil fraud probe into whether Bank of America deliberately misled shareholders about the massive losses on Merrill Lynch’s books before its 2008 purchase of the investment bank.

The NY AG, who took over from Andrew Cuomo this year, has subpoenaed Bank of America Corp. CEO Brian Moynihan and other executives of the Charlotte, N.C.-based bank seeking new depositions, The Wall Street Journal reported online late Friday, citing unidentified people familiar with the matter.

A spokeswoman for the New York AG’s office declined to comment.

A Bank of America spokesman was not immediately able to be reached for comment. The bank has said that the charges are unfounded.

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Bank of America: Too Big to Follow the Law.

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Piggybankblog posted 07/01/11

Picture posted by piggybankblog

Cross linked story with Huffington post

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In many respects, it’s not suprising that Bank of America just got stung for a $8.5 billion settlement…

The Wall Street Journal notes that the bank is close to an $8.5 billion settlement with a bunch of high powered investors who were burned by BOA in the mortgage backed securities market.

Bank of America was deemed a bank that was “too big too fail.” When President Bush, Hank Paulson, and Ben Bernanke put together the first Wall Street bailout of $700 billion, it was a move designed to reward bad behavior among big banks.

BOA has the money in their pockets to pay for bad behavior. If a Main Street company, without taxpayer bailout money, had behaved as badly, they wouldn’t be getting off for $8.5 billion, they would be shutting down.

Instead Bank of America rolls on, picking up Merrill Lynch along the way.

A small story from last year tells me that Bank of America is never going to “get it.” Billion dollar settlement or not.

Last year, a Bank of America call center “tantalized” their employees. They offered Burger King Whoppers to workers as a reward for hitting a quota, while peddling Bank of America products.

The people were employed in a “customer service” call-in center. They were supposed to be helping people with problems, not giving a sales pitch.

This incident sums up everything that is wrong with the financial system in America.

Bank of America is a “too big to fail” Wall Street bank that received bailout money from the American taxpayers. They hit the jackpot twice as they got more bailout money when they purchased Merrill Lynch.

It then used bailout money to “encourage” their employees to sell products to people who were looking for assistance.

People who work their way through a Wall Street bank’s “customer service” maze aren’t looking for a sales pitch, they are looking for help.

Note that Bank of America didn’t offer incentives for employees helping customers solve their problems. They only offered the Whoppers to people pushing products.

If you want food, make a sale.

Actually, the entire sales team had to make their quota in order to get food.

According to the Huffington Post, “a flier provided by a former employee of the call center, which only takes incoming calls, says that if ‘each person on your team gets 2 Sales, everyone on the team will get to choose 1 item from the Dollar menu at Burger King and receive next day.’ ”

If one of the team didn’t think that cramming products was part of their job description, they knocked all their fellow employees out of Whopper world.

Talk about peer pressure. How would you like to be the one “customer service” representative who kept the rest of the crew from their free Whopper.

I’m sure the “customer service” representatives were pitching like the characters in Glengarry Glen Ross. And rewarded by the worst kind of junk food there is.

More than anything, it shows an arrogant example of how Bank of America doesn’t think that the law applies to them.

Which explains how they can stay in business after getting dinged for $8.5 billion.

I’ve been avidly pushing the concept of Move Your Money. Take from your money from places like Bank of America and move them banks and credit unions in your community.

To my knowledge, none of them have paid a $8.5 billion settlement.

When I see a “too big to fail” bank handing out Whoppers for pushing products, it tells me that the bank does not hold the same values or belief systems that I do.

I’ve moved my money elsewhere. And encourage everyone to do the same.

It could be that the Whoppers are part of a master plan by Bank of America. You might remember that Wal Mart got in trouble a few years ago for purchasing life insurance on employees and profiting when they are dead.

I have not seen any evidence that Bank of America is buying insurance on its employees and plying them with Whoppers. I guess it is possible.

It would be cruel and heartless, but a lot of stuff that happens on Wall Street is cruel and heartless.

I’m not going to be banking at Bank of America. I’ll do my best to stay away from the Whoppers too.

Don McNay, CLU, ChFC, MSFS, CSSC is an award-winning financial columnist and Huffington Post Contributor.

You can read more about Don at www.donmcnay.com

McNay founded McNay Settlement Group, a structured settlement and financial consulting firm, in 1983, and Kentucky Guardianship Administrators LLC in 2000. You can read more about both at www.mcnay.com

McNay has Master’s Degrees from Vanderbilt and the American College and is in the Hall of Distinguished Alumni of Eastern Kentucky University.

McNay has written two books. Most recent is Son of a Son of a Gambler: Winners, Losers and What to Do When You Win The Lottery

McNay is a lifetime member of the Million Dollar Round Table and has four professional designations in the financial services field.

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Bank of America reaches $8.5 billion settlement with investors. But what about the homeowners?

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Piggybankblog posted 07/01/11

Picture posted by piggybankblog

Cross linked story newbottomline.com

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Reports are coming in that Bank of America has reached an $8.5 billion settlement with a group of investors who had purchased what they thought were AAA grade investments, but were actually near worthless mortgage-backed securities. This proposed settlement proves yet again that Wall Street banks knowingly made and sold millions of loans that they knew would fail in the interest of serving their own bottom line.

While this is big news for Bank of America and the wealthy investors involved, it brings no relief for homeowners and communities, who are still suffering from the economic mess that Bank of America and other Wall Street banks created.

Investors deserve compensation for the damage caused by the big financial institutions, which ignited the economic crisis by using the homes of millions of American families as Wall Street gambling chips. Yet the worst pain is still being felt by families who continue to lose their homes in this fraudulent system and many more who continue to see their housing values plummet. Entire communities are being hit-hard by foreclosures, unemployment, and economic stagnation caused by Wall Street banks’ crashing the economy. Where is their compensation?

The housing market is at the center of our economy – and it won’t recover until the big banks are held accountable for the devastation they’ve wrought to the whole nation, not just investors. Families are looking to bank regulators and prosecutors to take action. In particular, they are calling on the state Attorneys General from all 50 states to demand a strong settlement from the banks, including measures to stabilize the housing market and keep families in their homes. A strong settlement will:

  • Provide fair, affordable and permanent loan modifications for all responsible homeowners.
  • Restore fairness to the housing market by charging homeowners what their house is really worth, not the inflated figures bankers invented to make record profits.
  • Halt banks from seizing homes without investigating all other options, including loan modification and opportunities to appeal any loan denial.
  • Provide full financial restitution for homeowners that have been forced from their home due to fraudulent and criminal behavior
  • Push for criminal penalties against bankers and servicers who broke the law.

Bank of America may settle with investors, but it and other Wall Street financial institutions still owe a major debt to homeowners, communities, and the country as a whole.

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$8.5 Billion Deal Near in Suit on Bank Mortgage Debt.

Piggybankblog posted 06/29/11

Picture posted by piggybankblog

Cross linked story with New York Times

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Bank of America is completing an agreement to pay $8.5 billion to settle claims by investors that purchased mortgage securities that soured when the housing bubble burst, according to people briefed on the deal. It represents what is likely to be the single biggest settlement tied to the subprime mortgage boom and the subsequent financial crisis of 2008.

The settlement would wipe out all of the company’s earnings in the first half of this year, and it could also provide a template for deals with other big banks that face tens of billions in similar claims.

“I think this is huge,” said Michael Mayo, a bank analyst with Crédit Agricole in New York. “It’s about time the industry resolves issues from the financial crisis and focuses more on righting their companies and improving the economy. This is the most significant step since the financial crisis that helps do that.”

The proposed settlement is with a group of more than 20 investors that include the asset managers Pimco, Metropolitan Life and BlackRock, as well as the Federal Reserve Bank of New York. Together they hold mortgage-backed securities that represent more than $100 billion in home loans from Bank of America, the nation’s biggest bank by assets.

The securities affected by the deal come from Countrywide Financial, the subprime mortgage lender whose practices have come to symbolize the excesses of the housing boom. Bank of America bought Countrywide in 2008.

The settlement goes beyond just the securities owned by these investors, however.

It covers nearly all of $424 billion in mortgages that Countrywide issued, which were then packaged into mortgage bonds. That means that a broader group of investors will share in the proceeds, according to the people who were briefed on the proposed settlement, but were not allowed to speak publicly.

In addition, the deal will require Bank of America to improve its payment collection process by hiring specialists to focus on high-risk loans, and do a better job of tracking whether the bank is adhering to its own internal loan-servicing standards.

The negotiations began last fall but picked up speed in recent weeks as the end of the second quarter approached. For the investors, settling avoids a costly, multi-year legal fight, while Bank of America can clear away one of the biggest clouds hanging over the company.

Bank of America, JPMorgan Chase, Citigroup and Wells Fargo have the greatest exposure to the legal claims that they bundled troubled home loans and sold them as sound investments. Together, they are likely to absorb roughly 40 percent of the industry’s mortgage-related losses.

In a research note, Paul Miller of FBR Capital Markets projected that Bank of America could face a total of $25 billion of losses from the soured mortgages, the most of any of the major banks.

Bank of America has already paid out or set aside about $17 billion. So the settlement would bring the bank’s losses in line with those projections.

On Wednesday, the bank is expected to announce plans to set aside even more money, in addition to the $8.5 billion. Those funds will be earmarked to cover future losses on mortgage securities as well as other mortgage-related expenses not covered by the deal disclosed Tuesday. Some of that will be offset by one-time revenue gains.

Other big banks face sizable risks, too. Mr. Miller predicted that Chase could expect losses reaching as much as $11.2 billion. Wells Fargo has potential losses of up to $5.2 billion, while Citigroup could see losses top $3.3 billion.

Once it is approved by Bank of America’s board, which met Tuesday, the settlement will require court approval in New York. Bank of America is expected to take a $5 billion after-tax charge in the second quarter to cover the payout.

While the board has yet to approve the settlement, both sides are aiming to have it done as soon as Wednesday, said the people who were briefed on the deal. If successful, the bank hopes to turn investor attention away from the huge payout and to the bank’s performance in the second half of the year.

Under the terms of the accord, Bank of America would deliver the money to the trustee for the securities, Bank of New York Mellon, which would distribute it to the institutional investors.

The issue of how much Bank of America will have to compensate investors in mortgage securities it assembled has been hanging over the bank’s shares since last fall. But the bank does not anticipate having to raise capital or sell stock to find the money for the settlement.

Still, other huge risks loom from the fallout of the subprime mortgage crisis. All 50 state attorneys general are in the final stages of settling an investigation into abuses by the biggest mortgage servicers, and are pressing the big banks to pay up to $30 billion in fines and penalties.

What’s more, insurance companies that backed many of the soured mortgage-backed securities are also pressing for reimbursement, arguing that the original mortgages were underwritten with false information and did not conform to normal standards.

In an interview on Tuesday, before reports of the Bank of America settlement, Sheila C. Bair, the chairwoman of the Federal Deposit Insurance Corporation, worried that the unresolved mortgage claims continued to hurt the broader economy.

“Unresolved legal claims could serve as a drag on the recovery of the housing market,” Ms. Bair said. “The healing of the housing market is essential to the recovery of the broader economy.”

The huge settlement represents a sharp move away from the position that Bank of America’s chief executive, Brian T. Moynihan, initially adopted last fall when the legal effort by the investors began.

Mr. Moynihan said in October, “We’d love never to talk about this again and put it behind us, but the right answer is to fight for it.”

Not long after that, however, the bank started negotiations with the investor group, led by a Houston lawyer, Kathy Patrick. And in January, it reached a settlement with Fannie Mae and Freddie Mac, the government-controlled housing finance giants, to buy back $2.5 billion in troubled mortgages, settling potential claims from them.

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Retired Floridian Returns Home To Find His Home Foreclosed Upon, By Mistake

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Piggybankblog posted on 06/28/11

Picture posted by piggybankblog

Cross linked story with Huffingtonpost.com

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Here’s a friendly reminder to everyone who has summer vacation plans: Before your departure date, it’s a good idea to solicit the help of a trusted friend or neighbor to look after your domicile while you are away on holiday. It’s a good way to ensure that pets get fed, plants get watered and mail doesn’t pile up outside your house. Oh, and because it’s 2011, it could also keep your home from being wrongly seized in a foreclosure and all of your worldly possessions from being taken away! Here’s Eric P. Newcomer of the St. Petersburg Times:

After going out of town, an 82-year-old man returned home to find his house emptied out. Even the trash was gone.He found a padlocked door and a sign for a company that cleans out properties in foreclosure.

But Benito Santiago Sr.’s home wasn’t in foreclosure, public records show.

 

It seems that Bank Of America, an institution known for the mass-manufacture of foreclosure errors that also occasionally dabbles in a little personal banking, sent a foreclosure “clean-out crew” out to a condominium at 4255 W. Humphrey St. in Hillsborough County, Florida. They ended up cleaning out Santiago’s home by mistake. Apparently, something about Santiago’s mailbox royally confused them:

On one side, it displayed the number “4205.” But on the other side, the “0″ was missing.The land formerly known as “4255 W Humphrey St.” does not exist in Hillsborough County Property Appraiser records. Santiago’s property is surrounded on three sides by Grand Reserve, a condominium complex that once used that address. Others have arrived in error to 4205.

 

You can see why an experienced clean-out crew would be flummoxed by this two-sided mailbox, right? (Actually, you can’t, because remember, they were sent to a condominium.) Yes, “others have arrived in error to 4205,” but you’d imagine that foreclosure proceedings would be carried out with a high-degree of professionalism. You’d be wrong, of course!

Charlie and Maria Cardoso are among the millions of Americans who have experienced the misery and embarrassment that come with home foreclosure.Just one problem: The Massachusetts couple paid for their future retirement home in Spring Hill with cash in 2005, five years before agents for Bank of America seized the house, removed belongings and changed the locks on the doors, according to a lawsuit the couple have filed in federal court.

Early last month, Charlie Cardoso had to drive to Florida to get his home back, the complaint filed in Massachusetts on Jan. 20 states.

The bank had an incorrect address on foreclosure documents — the house it meant to seize is across the street and about 10 doors down — but the Cardosos and a realtor employed by Bank of America were unable to convince the company that it had the wrong house, the suit states.

That’s from a February 12, 2010 piece, also in the St. Petersburg Times. Bank Of America was actually tipped off to their mistake before the property was seized, but the eviction proceeded anyway.

As with this most recent story, the Cardoso’s possessions were removed. So, you might be wondering: what’s the outlook on whether Santiago will get his wrongly seized possessions returned to him? A foreclosure lawyer gives the Times the bottom line: “We have never gotten one piece of property back.” (Santiago’s possessions are, after all, probably worth much more than many of the toxic assets the Bank is currently holding on its balance sheet, after all. The “antique wagon wheel” he once owned is probably triple-A rated and underpinning a credit derivative even as we speak.)

At any rate, it’s wonderful to hear about the great care that major banks are taking with the lives of the people who saved them from extinction, with their bailout money.

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Florida attorney Timothy W. Schultz emerges as lead counsel in author’s lawsuit against Bank of America.

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T.J. Fisher claims banking irregularites triggered a lawsuit against her by a former Baltimore Ravens football player.

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Piggybankblog posted on 06/27/11

Picture posted by piggybankblog

Cross linked story with prnewschannel.com

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(PR NewsChannel) / June 27, 2011 / PALM BEACH, Fla.

An award-winning author added to the legal drama facing Bank of America (NYSE:BAC) today when she announced a new lawyer who will lead a multi-million-dollar filing against the banking giant.

The new legal team, spearheaded by Timothy W. Schulz, is working on an amended complaint against Bank of America that is expected to be filed within 15 days.

In court papers filed in the Circuit Court of Palm Beach County, Florida, T.J. Fisher alleges banking irregularities and improprieties caused a domino effect that ultimately led ex-NFL Ravens football player Michael McCrary to file a $60-million lawsuit against her in 2007.

Schultz is a former Roy Black protégé and Greenberg Traurig litigation associate. He became lead counsel in this case on June 15th.

Schulz is also a former Atlantic City, New Jersey police officer. Schulz participated as co-counsel in a number of high profile trials including the live Court TV broadcast of the murder trial of Victor Brancaccio, which was dubbed the “Zoloft murder trial.”

Schulz previously represented Fisher in Florida litigation that involved McCrary. He successfully blocked McCrary’s $24 million worth of liens against Fisher and her Palm Beach home.

“I intend to present a clear, concise, and simple case, and will establish that BofA was asleep at the wheel which resulted in devastation to Ms. Fisher,” Schulz said.

Fisher, who lives in Palm Beach and the French Quarter, listed her company Market Street Properties Palm Beach LLC as co-plaintiff in the BofA action.

The entity holds a pivotal stake in the much-ballyhooed Market Street redevelopment of the iconic New Orleans riverfront Entergy Power Plant property.

A documentarist and social critic with a Bourbon Street house, hat affinity and ‘59 pink Cadillac convertible, the media previously anointed Fisher “suitably outrageous and eccentric to represent New Orleans.”

“I’ve been silent for too long,” swore Fisher, “no more. There’s a story to tell that rocks ‘conspiracy’ theories, litigation and banking practices.”

McCrary sued Fisher, her husband and others for $60-million in Baltimore over post-Katrina Crescent City Estates LLC transactions involving the Plaza Tower, a downtown New Orleans 60s-era skyscraper.

The Baltimore state court rendered a $33.3-million civil default judgment against Fisher and the others in the McCrary litigation. Fisher says the judgment was draconian because she and legal counsel were precluded from speaking or participating in the damages hearing.

Fisher says she met McCrary once at a post-Hurricane Katrina surprise birthday party thrown in her honor when her husband hosted a New Orleans celebration of triumph over sorrow and invited McCrary as the guest of honor.

“I was never McCrary’s partner or associate,” Fisher says.

Fisher’s Bourbon Street house and personal possessions were seized in 2009 when she could not post a $33.3-million-dollar bond for the McCrary-Fisher litigation; a court order returned Fisher’s property and McCrary’s default judgment was later overturned.

The McCrary case spawned court-case proceedings in 13 separate state, federal and appellate courts in Maryland, Louisiana, Florida and Washington, DC. The core case is ongoing.

In filing suit against BofA, Fisher says she intends to establish how the alleged bank account irregularities and unauthorized transactions snared her into the McCrary legal quagmire, with devastating consequences and far-reaching ramifications.

Innovative “law without borders” entertainment law firm SmithDehn LLP of New York, London, Los Angeles and India owns and manages the international legal assistance firm of SDD Global Solutions; SDD will assist Schulz in Fisher’s BofA action.

American Lawyer dubbed SmithDehn co-founder Russell Smith, Esq. “The Maharaja of Media.” As acclaimed legal counsel for Hollywood heavyweights and the television and film industry, Smith leads the paradigm shift of how international law is practiced, breaking new ground with transatlantic and transpacific legal support. Harvard Law School alumni Frank Dehn, Esq. joins Smith in heading up SmithDehn operations and overseeing SDD’s dedicated legal team.

Schulz’s legal team includes Fisher’s longtime attorneys Richard Winelander, Esq. of Baltimore, who overturned McCrary’s $33.3-million dollar default judgment against Fisher and filed a US Supreme Court writ of certiorari, and Al M. Thompson, Jr., Esq. of New Orleans.

Fisher is a member of the Writers Guild of America (WGA), Directors Guild of America (DGA), Producers Guild of America (PGA), Dramatists Guild of America (DG), Authors Guild (AG), National Academy of Television Arts and Sciences (ATAS), Screen Actors Guild (SAG), Actors’ Equity Association (AEA), and other professional guilds and organizations.

DOWNLOAD LEGAL DOCUMENTS

www.prnewschannel.com/pdf/April13OriginalComplaint.pdf

www.prnewschannel.com/pdf/June13AmendComplaint.pdf

For more information on TJ Fisher, please visit:

http://www.tjfisher.com/

http://www.tjfisher.net/

MEDIA CONTACT:

Name: Glenn Selig

PR firm: The Publicity Agency

Email: glenn@thepublicityagency.com

Phone: (813) 708-1220

Permalink: http://www.prnewschannel.com/2011/06/27/florida-attorney-timothy-w-schultz-emerges-as-lead-counsel-in-authors-lawsuit-against-bank-of-america/

SOURCE: T.J. Fisher

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False Statements

Bank of America

Bank of New York Mellon

CoreLogic

CWABS

CWALT

MERS

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Posted by piggybankblog 06/27/11

Picture posted by piggybankblog

Cross linked story with 4closurefraud.org

Action Date: June 27, 2011

Location: Simi Valley, CA

Who are Bank of America’s newest robo-signers? For several years, BOA turned to its subsidiary, BAC Home Loans Servicing, in Collin County, Texas, whenever mortgage assignments were needed in foreclosures. This office, formerly Countrywide Home Loans Servicing, produced hundreds of thousands of assignments, including most all of the assignments to Countrywide CWABS and CWALT trusts. In recent months, however, BOA has turned to its office in Ventura County, California, as the Collin County, TX, signers have become too well known. These assignments are made primarily for CWALT and CWABS trusts that closed in 2005, 2006 and 2007.

These assignments claim to assign both the mortgages and the notes to the trusts.

On each of these assignments, MERS is stated to be the HOLDER of the mortgage.

Who are the newest signers – who use MERS titles to assign mortgages TO BAC while actually working FOR BAC – signing as if they were MERS officers for dozens of different companies? The names appearing most often include:

Ricki Aguilar

Malik Basurto

Youda Crain

Diana DeAvila

Edward Gallegos

Christopher Herrara

Bud Kamyabi

Tina LeRaybaud

Jane Martorana

Martha Munoz

Srbui Muradyan

Debbie Nieblas

Yomari Quintanilla

Luis Roldan

Miguel Romero

Cynthia Santos

Swarupa Slee

These individuals, in 2011, have signed as MERS officers for the following mortgage companies and banks, including many that no longer existed in 2011:

Aegis Wholesale Corporation

American Brokers Conduit

America’s Wholesale Lender

Amnet Mortgage

Ampro Mortgage

Countrywide Bank, FSB

Decision One Mortgage Company

First Choice Funding, Inc.

First Interstate Financial Corp.

First National Bank of Arizona

Market Street Mortgage Corp.

M/I Financial Corp.

Millenia Funding Corporation

MortgageIt

One Mortgage Company, LLC

Pinnacle Direct Funding Corp.

Pulte Mortgage

Quicken Loans

Universal American Mortgage Company

Service Mortgage Underwriters, Inc.

Wilmington Finance, Inc.

CoreLogic in Chapin, South Carolina, is the keeper of these documents.

Bank of New York Mellon is the trustee for most of the CWABS and CWALT trusts that use these BAC documents.

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Foreclosures

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Piggybankblog posted 06/26/11

Picture posted by piggybankblog

Cross linked story with New York times

When the housing boom began to cool in 2006, a chain of events was set in motion that was a disaster for millions of homeowners whose property has been seized by lenders, and for the lenders themselves. Millions of Americans have received foreclosure notices and tens of billions in real-estate assets have been written off as losses by banks.

What followed was a vicious circle. Foreclosures helped accelerate the fall of property values, helping to spur more foreclosures. The losses they created brought the financial system to the brink of collapse in the fall of 2008. The steep recession that followed led to even greater homeowner delinquencies, as homeowners who lost their jobs often lost their homes. The program designed by the Obama administration to prevent foreclosures has helped only a small percentage of those it was designed for, particularly the unemployed.

In June 2011, evidence emerged of the first break homeowners have caught since the crisis began: a sharp slowdown in the rate of foreclosure filings and of repossessions.

The large number of cases nationally — about two million, plus another two million waiting in the wings — have overwhelmed many lenders and the courts. But the slowdown also stems from the evidence that emerged in the fall of 2010 of sloppy recordkeeping, cut corners and possible fraud.

Revelations that mortgage servicers failed to accurately document the seizure and sale of tens of thousands of homes caused a public uproar and prompted lenders like Bank of America, JPMorgan Chase and GMAC Mortgage to temporarily halt foreclosures in many states. In October 2010, all 50 state attorneys general announced that they would investigate foreclosure practices. The nation’s largest electronic mortgage tracking system, MERS, has been criticized for losing documents and other sloppy practices and JPMorgan Chase announced that it no longer used the service.

Mortgage documents of all sorts were treated in an almost lackadaisical way during the dizzying mortgage lending spree from 2005 through 2007, according to court documents, analysts and interviews. Now those missing and possibly fraudulent documents are at the center of a potentially seismic legal clash that pits big lenders against homeowners and their advocates concerned that the lenders’ rush to foreclose flouts private property rights.

In early 2011, the attorneys general and the newly created Consumer Financial Protection Bureau began pressing for a settlement that would involve banks paying penalties of up to $20 billion, and for steps drastically alter the foreclosure process and give the government sweeping authority over how mortgage servicers deal with millions of Americans in danger of losing their homes.

The banks have resisted the proposed settlement, and the attorneys general group began to fracture in 2011, with some in Republican states dropping out, and others, including the attorneys general of New York and Delaware, launching new investigations into how banks handled the bundling of mortgages into the securities that led to billions in losses.

The courts have also become more aggressive about challenging foreclosures. In January 2011, Massachusetts’s top court voided the seizure of two homes by Wells Fargo & Company and US Bancorp after the banks failed to show that they held the mortgages at the time of the foreclosures, and courts in several states are considering similar cases.-Read More…

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How Banks Continue To Blindside Homeowners With Foreclosures

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Piggybankblog posted 06/25/11

Picture posted by piggybankblog

Cross linked story with Businessinsider.com

Four years into the foreclosure crisis, banks say they’ve made major improvements in how they handle struggling homeowners.

They’ve promised, for example, not to foreclose on homeowners who are being considered for mortgage modifications.

But that’s still happening.

Consider the cases of Laurie Pinkerton and Lisa Peterson.

The two women, both Californians and Bank of America customers, had been assured by the bank that they wouldn’t lose their homes before they’d been evaluated for a possible modification. Both had their homes sold last month.

Such cases are particularly senseless, because simply modifying the mortgage by reducing the monthly payment might be in the interest not only of the homeowner, but also of the investor who owns the mortgage. Both Pinkerton and Peterson said their homes were sold after foreclosure for far less than they’re worth.

Regulators have done little to stop the practice, and the “problem appears to be getting worse,” said Kevin Stein, associate director of the nonprofit California Reinvestment Coalition.

Last month, the coalition surveyed 55 foreclosure-avoidance counselors throughout the state. Collectively they serve thousands of borrowers every month. Almost all of the counselors, 94 percent, reported having worked with clients who’d lost their homes while under review for a modification. About half of the counselors reported this happened “often.” This year’s totals, which are due to be publicly released next week, are higher than those in the group’s survey last year.

Regulators have acknowledged the problem but have so far stopped short of solving it, say borrower advocates. More than a year ago, ProPublica reported extensively on how the banks’ inadequate systems were causing wrongful foreclosures.

This past April, the federal banking regulators released “consent orders” with 14 of the largest banks requiring various improvements in their handling of mortgages and foreclosures. Prior to the orders, the regulators had not had clear rules on how the banks should handle modification applications.

Among the new requirements, banks will now be forbidden from actually selling a home before a final decision is made on a modification. Also, if a homeowner is approved for a modification, the foreclosure process is supposed to stop. The new requirements will go into effect later this summer.

While those are necessary requirements, regulators took a “huge step backward” by not explicitly forbidding banks from pursuing foreclosure at all until a final decision has been made on a mortgage modification application, said Alys Cohen of the National Consumer Law Center.

The administration’s mortgage modification program, which offers incentives to encourage modifications, has that requirement. But that program is voluntary for the banks and has been hobbled by lax oversight. What’s more, over two-thirds of modifications occur outside of the program.

Federal regulators have the power to require all banks to make a decision on a modification application before moving to foreclose, but they’ve simply chosen not to.

Allowing the banks to pursue foreclosure while the modification process plays out hurts homeowners in multiple ways. First and foremost, there’s the hazard of actually losing the home to foreclosure because of bank error. The two homeowners featured in this story show that this continues to be a real danger, especially in states like California where the bank doesn’t need to go to court to foreclose.

It’s also just confusing and unnecessarily stressful for homeowners. Finally, in a foreclosure homeowners actually get billed for bank costs, such as paying for a bank’s lawyers.

Instead of outright forbidding banks from pursuing foreclosure while they’re considering homeowners for a modification, regulators have asked the banks to explore whether it’s a problem. The orders ask the banks to “conduct a review to determine whether processes involving past due mortgage loans or foreclosures overlap in such a way that they may impair or impede a borrower’s efforts to effectively pursue a loan modification.”

The primary regulator for the biggest banks is the Office of the Comptroller of the Currency, which has been much criticized for failing to crack down on banks’ foreclosure failures. Bryan Hubbard, a spokesman for the OCC, said that the orders addressed the “situations that were most confusing to the borrower” and that the issue would be revisited at a later time when regulators draft new, comprehensive standards for the industry. When asked whether regulators were deferring to the banks on the issue, he said they were not deferring, because regulators would have to approve whatever conclusion the banks came to.

Two Homeowner’s Tales

Although Pinkerton and Peterson live about 450 miles apart, they’ve had strikingly similar experiences with Bank of America.

Both contacted the bank before even missing a payment to see what steps to take, because they’d taken a hit to their income. Both say Bank of America employees told them they’d have to fall at least three months behind to be considered for a modification (advice that is both inaccurate and frequently given). Reluctantly, both did so.

As a result of missing payments, both soon found themselves facing foreclosure. But at least the modification process had begun, too.

Of course, it went slowly. Like millions of other homeowners, they waited months and months for an answer on their modification applications and sent in the same documents over and over again. Despite sending in those documents, both were told at one point that they’d been denied because they hadn’t sent in the required documents (another extremely common problem).

Finally, last month, both had their homes sold at a foreclosure auction, despite the assurances of Bank of America employees that that wouldn’t happen until they’d received a final answer on their application for a modification.

“The next thing I know, a guy is knocking on my door saying his boss is at the courthouse buying our house,” said Peterson.

What makes foreclosure particularly unnecessary in both cases is that Pinkerton and Peterson had made a point of telling the bank they had the means to bring the loan current even if they didn’t get a modification. And unlike many Californians, both had the option of selling the home to pay off the mortgage because their homes are worth more than they owe on their mortgage.

“I never received any letter saying you’re denied,” said Pinkerton. “If that would have been the case, I would have borrowed the money and went and paid it current.” Her family had offered to help, she said.

Both errors are particularly hard to undo because Bank of America can’t simply give the houses back: The bank sold both homes to others. In order to get the homes back, the bank would have to essentially convince the new owner to sell the home back. In a case we reported on last year, JPMorgan Chase paid about $20,000 above the purchase price to the buyer of a property the bank had mistakenly sold.

At this point in the two stories, the homeowners’ paths diverge.

After complaining to everyone she could think of, Pinkerton was contacted by a Bank of America employee who said he worked in the bank’s office of the president. He told her he’d work to get the sale reversed. Regardless, Pinkerton was evicted from her home last week.

“I’ve spent thousands of dollars moving that I didn’t have,” she said.

As recently as Wednesday, the Bank of America employee told her he’s still working on her case.

Bank of America spokesman Rick Simon said the bank was researching whether a mistake had been made. “To the extent it is determined that mistakes in the process contributed to the mortgage reaching foreclosure, the bank will work with Ms. Pinkerton to explore viable and appropriate considerations, which may include rescission.”

Simon also noted that Pinkerton had been sent letters in March and April saying that she’d canceled her application for a modification.

Pinkerton said she’d never asked to cancel her application, and when she called Bank of America to ask about the letters, she was told to disregard them. She did once reject a modification offer, but that was because it would have significantly raised her monthly payments. She says a Bank of America employee told her to appeal the offer because it had erroneously calculated her income at twice its actual level.

Peterson has been more successful. After the foreclosure sale, she made a number of frantic calls and finally got a bank employee to admit there’d been a mistake, she says. But nothing could be done about it, she was told.

After being contacted by various employees who said they’d been assigned to help resolve the matter, but who then couldn’t be reached, she eventually hired an attorney.

Earlier this month, Bank of America rescinded the sale and returned the title to Peterson.

It’s unclear whether the bank paid a premium to the buyer of Peterson’s property in order to get it back. Bank of America’s Simon said, “We continue to work on resolution of remaining third-party issues.”

In general, Simon said such mistaken foreclosures “have been relatively rare, compared to the volume of defaults and foreclosure activity in today’s economy.” Across the country, about 4 million mortgages are currently more than three months delinquent.

“Any problem in this regard is of tremendous concern, and we have put additional checks and practices in place to further limit the possibilities,” he added.

To Peterson, the lesson from her experience is clear. “This system is broken,” she said. “You can’t trust what the bank tells you.”

This post originally appeared at ProPublica.

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Bank of America Forecloses on Santa Clara Woman After Telling Her to Miss Her Payments

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Piggybankblog posted 06/24/11

Cross linked story with stgnews.com

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Annette Lake lost her home after Bank of America told her to miss three payments so she would qualify for a remodification. Lake needed to remodify her loan after being diagnosed with breast cancer. | Photo by Tracie McFarlin, St. George News

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SANTA CLARA – Bank of America foreclosed on a Santa Clara woman’s home, despite her doing everything she was instructed to do in order to prevent it.

Annette Lake resided in her house in Santa Clara from 1986 until May 24, 2011, when Bank of America foreclosed on her home.

Just after her divorce from her husband was finalized in 2008, Lake was diagnosed with breast cancer. She was laid off from her job during chemotherapy treatments. She began having a hard time paying her mortgage, though she never missed a mortgage payment.

In 2009 Lake learned that the government had given banks money to assist people experiencing hardships. She called Bank of America, the holder of her home loan, to learn if she could refinance her loan so that her payments would be more affordable.

“They told me they couldn’t assist me because I was paid up to date,” Lake said. “I had to be behind on my payments before they would give me assistance.”

Bank of America representatives told Lake she needed to miss three mortgage payments in order to be eligible for assistance. Lake then missed three mortgage payments, as Bank of America instructed her to do.

After missing three payments, Lake’s home loan was remodified and her mortgage payments were lowered to $728.50 per month, which she paid on time each month. But in late June 2010, the day after her mother died, Lake came home to find a foreclosure notice posted on her house.

She called Bank of America and asked why her house was being foreclosed. The Bank of America representative told Lake her house was being foreclosed because Lake hadn’t been making her mortgage payments.

Lake told the representative that she had been making her payments every month.

The representative did some research and found that Lake’s payments had been received but not handled properly. However, her checks were being cashed and clearing her bank, she said.

“The payments had been on someone’s desk and not been processed,” Lake said.

The representative told Lake that her mortgage payments would be processed immediately, her account would be credited, and an extension would be put on the foreclosure of her home.

“They said they would reinvestigate my loan but that I need to call every one to two weeks to make sure they’re still doing their job,” Lake said.

Bank of America credited Lake’s account for the payments she’d already made.

In December 2010, Lake received a letter in the mail telling her she was declined for Bank of America’s home loan remodification program. Lake didn’t understand how this could happen, since, as far as she knew, her home loan had already been remodified several months previously.

Lake continued calling Bank of America every week to try to straighten out the issues with her home loan. She said she was rarely able to talk to the same Bank of America employee twice, which added to the frustration.

“Every time I call in I get a different person and we have to go through the total complete thing all over again,” Lake said. “How can anything be accomplished if nobody’s paying attention to what’s going on?”

Though Lake continued paying her mortgage payments, Bank of America attempted to foreclose on Lake’s house again, and on May 24, the efforts were successful. Lake and her 19-year-old daughter moved out of her house, which has now been sold by Bank of America. Lake and her daughter moved into Lake’s father’s basement, where they share a bedroom.

Most of Lake’s possessions are in three storage units. Lake’s ex-husband has her dogs, she said.

The entire experience has given Lake a different outlook on life.

“I honestly understand how people become homeless and how they give up and say they don’t care,” Lake said. “You get to the point where you don’t care. I get it. You just feel like saying, ‘Fine, you win.’”

Though she’s already lost her home, Lake is hoping to participate in a class action lawsuit against Bank of America.

“I know I’ll never get my home back,” Lake said. “But hopefully there’ll be some repercussions, some reciprocation.”

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Bank of America Alert!.

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Piggybankblog posted on 06/23/11

Picture posted by piggybankblog

Cross linked story with usspost.com

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Alert Bank Of America, Wells Fargo & Co. (WFC) and at the request of the County of a comment Name servicers said they were those who failed to give tribute to millions of dollars in the translation in our foreclosure

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Banks and other labor on the part of the thing “inappropriately” of the city claim the County of tax exemptions on “defeat filed” Curtis

Hertel Jr., Ingham County made white, in the cause of day it is said in the court of the state of Lansing and the city.

This feature also shop the National Hertel (FNMA) A selection of Home Federal (FMCC) that handle the law with due regard for the two Foreclosures, short.

“But it is not proper to amend, but I believe for millions in the county and is in the city tens of millions” Hertel said in what now needs you. “We wish it for her.”

The County of Fannie Mae Freddie Mac by transferring to note that he says on the banks of Foreclosures, short or not in the translation page, Hertel said.

“Fannie And Freddie foreclose and claim that the exemption” on the government to transfer said although census beings.

Attention: Customer elit government, Freddie Mac Fannie Mae for exemptions of your first, and said.

And there is no need to transfer tax rate for Counties in every $ 1,000 of value transferred to 1:10, $ he said. “I will, which belongs to the translation of a tax to pay.”

“Here we’re getting reviewing the ‘Jason Menke, and from the representative of my Wells Fargo-San Francisco E-mail said.” While the review is not complete nor that it was untimely provided for us on this issue. ”

Rick Simon, son of the ambassador from the Bank of America-North Carolina-Charlotte ambassador for E-mail it is said, “there was no time nor your complaint, however, not to be ministered to.”

Becomes v. Hertel Bank of America NA, CZ-687-11, Circuit Court, Ingham County, artists, songs (Lansing).

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Bank of America CFO calls for tax reform

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Geithner says tax deal could come in the autumn

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Piggybankblog posted on 06/22/11

Picture posted by piggybankblog

Cross linked story withmarketwatch.com

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WASHINGTON (MarketWatch) — U.S. companies and the government should work out a broad-based tax reform deal to make American business more competitive, the chief financial officer of Bank of America said in an interview with MarketWatch Tuesday.

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Speaking on the sidelines of the Wall Street Journal CFO network conference, Bank of America /quotes/zigman/190927/quotes/nls/bac BAC -0.46% CFO Charles Noski said talks between the Treasury Department and corporations are continuing at the staff level since a January meeting with Secretary Timothy Geithner about corporate tax reform.

Bank of America’s view, said Noski, is: “It’s not just corporate tax reform, it’s business tax reform because there are a lot of companies that engage in business activities in this country that are not corporations.

“So we think that that’s a wider circle and probably more appropriate for a broad-based reform effort.”

Speaking at the same conference, Geithner said Tuesday morning that the administration could offer a corporate tax reform proposal as soon as this fall. But first the White House and Congress should finish work on a deficit deal, Geithner said.“Our hope is, and our expectation is, that once we get this broader deficit reduction agreement done, then we can move to laying the foundation for comprehensive tax reform. It should be possible to do,” he said. Vice President Joe Biden leads the latest round of those talks on Tuesday afternoon.Geithner didn’t detail what the administration would propose and didn’t comment on a proposal for a so-called repatriation holiday, which would allow companies to pay lower taxes on profits brought home from overseas. Big U.S. corporations are pushing for the holiday, saying it would amount to a stimulus for the economy.Gil Borok, chief financial officer of global real-estate services company CB Richard Ellis /quotes/zigman/341739/quotes/nls/cbg CBG +3.86% , told MarketWatch at the same conference that he supports repatriation and that it would reduce the amount of planning his company needs to do. He said even a temporary break would be helpful, but political uncertainty about a holiday makes planning tough.

“The problem is, you can’t predict it,” Borok said. Overall, Noski said, it’s “a good thing competitively for the U.S.” if the corporate tax rate goes down. Making the tax code simpler and easier to understand could also increase the amount of the money that gets taxed, he said. House Majority Leader Eric Cantor, representing House Republicans in the talks with Biden, is a supporter of the repatriation holiday. The group is aiming to finish a deal by July 1, according to Sen. Jon Kyl of Arizona, representing Senate Republicans. .

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More bad news for HAMP

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Piggybankblog posted 06/21/11

Cross linked story with firsttuesdayjournal.com

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The Administration’s Housing Scorecard for May 2011 was recently released, giving detailed assessments of the ten largest lenders participating in the Making Home Affordable Program, which includes the Administration’s own Home Affordable Modification Program (HAMP).

The Housing Scorecard rates the performance of lenders in three categories:

  • identifying and contacting homeowners;
  • homeowner evaluation and assistance; and
  • program reporting, management and governance.

Based on the May 2011 assessment of these objectives, the lenders who need “substantial improvement” are:

  • Bank of America, NA (BofA);
  • JP Morgan Chase Bank, NC;
  • Ocwen Loan Servicing, LLC; and
  • Wells Fargo Bank, NA.

The Department of the Treasury (Treasury) is withholding financial incentives for BofA, JP Morgan Chase and Wells Fargo while they address all areas in need of improvement. The Treasury is not withholding incentives from Ocwen since their results were negatively affected by a large portfolio acquired during the compliance testing period.

first tuesday take: Be assured, dear reader, a slap on the wrist from the government will do little (if anything) to whip these Fed-fed lending behemoths into shape. HAMP has been a colossal failure in California, all owing to the government’s refusal to make participation in the program by lenders mandatory. Here, it is nearly impossible to find a negative equity property with a loan-to-value (LTV) ratio under 125% (the limit for consideration for a mod), making lenders all the more hesitant.

The government is very conflicted as it does not want lenders to fail, and the biggest of them surely would if they were forced to do what the government tells the public they’d like to see them do. [For more information regarding HAMP, see the February 2011 first tuesday article, HAMP loan modifications remain scarce.]

The Housing Scorecard does point fingers at specific offenders — the worthless blame game — but offers no resolution for homeowners caught between the hope of a modification promised by HAMP and the noncompliance of their lender. What are they supposed to do in the mean time?

 

first tuesday’s suggestion will always revert back to the only alternative when there is no cramdown in sight: strategic default. The strategy of defaulting and forcing the lender to buy the property for the amount of the loan is objectively simple. However, it is very emotional for the homeowner and seemingly immoral — an ideology fiercely encouraged by lenders.

Until the government shifts the power to mandate judicial cramdowns back to bankruptcy judges and forces lenders to empty out their shadow inventory by foreclosing and declaring their losses, loan modifications will remain scarce. [For more information regarding judicial cramdowns, see the November 2010 first tuesday article, Lenders unwilling to reduce principal balances under California’s ‘Keep Your Home’ program and the January 2010 first tuesday article, Cramdowns, cramdowns, cramdowns!]

Re: “Obama Administration releases May housing scorecard featuring new Making Home Affordable Servicer Assessments, regional spotlight on phoenix housing data” from the Department of the Treasury

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Countrywide Financial Corporation

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Piggybankblog posted on 06/20/11

Picture posted by piggybankblog

Cross linked story with New york Times

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Founded in New York four decades ago by Angelo R. Mozilo, a butcher’s son from the Bronx, and David Loeb, a founder of a mortgage banking firm in New York who died in 2003, Countrywide Financial Corporation became a $500 billion home loan machine with 62,000 employees, 900 offices and assets of $200 billion. As the mortgage market boomed beginning in 2000, no company pursued growth in home loans more aggressively than Countrywide.

Countrywide’s fall was as spectacular as its rise. After nearly collapsing into bankruptcy as its financing dried up, the company was acquired by Bank of America in 2008. When Bank of America took over the company in July 2008, Mr. Mozilo left. The value of the acquisition, because shares of both companies had dropped, was only $2.8 billion.

In June 2009, the Securities and Exchange Commission filed civil fraud and insider trading charges against Mr. Mozilo and his top lieutenants: David Sambol, the company’s former president, and Eric Sieracki, the former chief financial officer.

The case has attracted widespread attention because it is one of the only securities enforcement actions to emerge from the mortgage crisis that has resulted in charges against top executives at a company at the heart of the mortgage mania.

In October, Mr. Mozilo agreed to repay $45 million in ill-gotten profits and $22.5 million in civil penalties as part of a settlement with the SEC in which he admits no wrongdoing.

In June 2010, Countrywide Home Loans and its mortgage servicing unit, which are now part of Bank of America, agreed to pay $108 million to settle federal charges that the company overcharged customers who were struggling to hang onto their homes.- read more

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BofA Offers to Help Fix Mortgages…If You’re a State Legislator

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Piggybankblog posted bon 06/19/11

Picture posted by piggybankblog

Cross linked story with dailyfinance.com

While nonjudicial foreclosure laws are not known for their excessive generosity, Hawaii’s is particularly draconian. In the Aloha State, it’s possible for homeowners to have their houses foreclosed on and sold for much less than their full value worth, without ever realizing the foreclosure is underway.

The law dates to 1874 and its abusiveness is rooted in effort to take land from native Hawaiians. Legislators have repeatedly tried to get the law changed, but they never seem to succeed.

Banks Versus Legislation

One reason for this legislative inaction might be the effectiveness of the bank lobby. According to Netra Halperin, who works for a Hawaii legislator, and herself ran unsuccessfully for office last year, two representatives of Bank of America (BAC) recently met with her. In her account of the meeting, which I’ve excerpted below, BoA’s workers offered a state legislator special access to its mortgage department. I’m omitting the legislator’s name because only Ms. Halperin was present at the conversation and she is speaking for herself, not for the legislator.

The quotes are to the best of Halperin’s recollection, and represent only the relevant part of a longer conversation:

On about 5:30 p.m., Wednesday, March, Marvin Dang, Attorney for Hawaii Financial Services Association and David Swartley, Senior V.P., Regional Manager, Pacific Northwest, State and Local Government Relations, Bank of America, walked into our office in the capitol.

Swartley: “Bank of America is offering a special hot line to the Bank President for legislators, their staff, their families and constituents who need help with their Bank of America mortgages. It is the same number that we give to congresspeople and their families and aides. The line goes directly to the president’s office, though they wouldn’t be speaking directly with the president.”

Halperin: “I also work for an attorney, James Fosbinder, who defends homeowners from mortgage foreclosure. Can I also give our clients this hot line number?

Swartley: “No, it is only for legislators and their staff, and family — and constituents.”

Halperin “Is that ethical?”

Swartley: “I think it’s transparent. It is what it is.”

Dang: “Let me explain it to you this way: I used to be a legislator. Constituents would call me about things like potholes. Even though it wasn’t my responsibility I would send them to someone who could help them. People only call legislators if their problem is very serious. Our goal is to help legislators, to take the heat from constituents off of them.”

Halperin later told me that Swartley claimed that he was visiting Hawaii because of a proposed law, which she assumed was HB894, a bill that would place a five-month moratorium on non-judicial foreclosures. She gave me a copy of the letter that BofA gave her with its special phone number, a copy of the letter announcing the lobbying visit, and later told me that Representative Robert Herkes, Chair of Commerce and Consumer Protection Committee, told the House that BoA spoke to all 76 of Hawaii’s state legislators.

BoA’s Explanation

To get a better understanding of the situation, I contacted BoA and discussed the letter with spokeswoman Jumana Bauwens, who acknowledged that Swartley had, indeed, visited Hawaii. Noting the bank’s “outreach efforts,” she also sent a pair of press releases outlining BoA’s attempts to work with borrowers.

According to Bauwens, Swartley’s visit was intended to “enhance the communication channels with the legislators and other public officials,” provide an “update on Bank of America’s focus on distressed borrowers and outreach initiatives” and generate “feedback on the geographical areas that we need to focus on during our outreach efforts in April.” She also said the phone number “is not unique to Hawaii, it is simply a line designed to help public officials better handle constituent complaints that come their way.”

In short, Bank of America confirmed Halperin’s story: It is empowering legislators with the seemingly godlike power to get BofA to fix a homeowner’s mortgage modification. But in order to preserve the godlike nature of that power, no one else can have access to the number, not even people who most need it — like lawyers representing people struggling to get modification problems with the bank solved. It’s worth noting BoA’s press releases didn’t say anything about the special hot line number.

Fixing Problems or Currying Favor?

If BofA was really concerned about modifying mortgages, it wouldn’t give legislators a special hot line to the president’s office. To make it easier for people to modify mortgages, BofA could overhaul its current process. One model would be a process in the settlement the state attorneys general and others recently offered the banks to resolve their illegal and abusive mortgage and foreclosure practices. The proposal would require servicers to set up an easy way for borrowers to submit their documentation electronically, short-circuiting the seemingly endless resubmit documents loop, and mandate responsive time frames to get the borrowers consistent, reliable answers quickly.

Indeed, the initiatives in the settlement proposal far surpass the PR-heavy, questionable outreach efforts in the press release Bauwens sent. Consider the experience of Martin Galvan at a JPMorgan Chase outreach effort at the Los Angeles airport. According to Galvan, the Chase counselor told him that, with all the modification programs, “We don’t know what we’re doing right now.” Obviously, this isn’t quite as useful as a hot line to the president’s office.

 

Not For The Public

 

Indeed, the letter that BofA sent to the legislators was very explicit that the line of communication had to come through the legislators’ offices, not directly from the homeowners, emphasizing that “In order to maintain our service commitment to you, it is critically important that the e-mail and phone contacts that are being provided to your staff not be provided to the general public.” [bold and italics in the original.]

In her explanation of the Hawaii visit, Bauwens noted that BofA also has phone lines dedicated to “housing counselors, private attorneys and community groups.” But if the lines were a priority, one might have expected Swartley to say something like: “Ms. Halperin, while you can’t give this number to the foreclosure defense attorney you work for, here’s the dedicated line for them.” Or even, “While you can’t give this number to the attorney, we do have a special line for them, and I’ll have some one call you back with it.” Similarly, if numbers for housing counselors were so well established and distributed, it’s worth asking why the proposed mortgage mess settlement had to explicitly say: “Servicer shall not discourage borrowers from working or communicating with legitimate non-profit housing counseling services.”

Perhaps housing counselors, private attorneys and community groups that have received the hot line phone numbers Bauwens mentions could tell me of their experience using them. Did you get a one-business day response, a high-level review of the issues, and an expedited response? And if you’re a housing counselor, private attorney or community group working with BofA borrowers on modifications and foreclosures, and you didn’t get such a number, let me know that too. Be sure to let me know how to connect with you to confirm your story. If I get sufficient responses, I’ll do a follow-up story reporting them.

The Difference Between Help and Lobbying

Why is this phone number such a big deal? Because at its core, this hotline and email address is about defeating borrower-friendly legislation. It’s lobbying, not customer service.

By limiting access to the number, BofA is, effectively, offering to help Hawaii’s legislators get re-elected, whether because they publicly offer to help constituents or because they use the special access in a targeted way, perhaps to reward campaign contributors or particularly persistent, media-savvy constituents. It’s worth noting a legislator’s offer to use the unpublished number to help any constituent who calls doesn’t change the problematic nature of this lobbying effort. Homeowners shouldn’t need their legislators to intervene in order to get their banks to play ball.

By giving this power to legislators, BofA seems to be trying to buy their gratitude. (The link is to research on the impact of small pharmaceutical company gifts to doctors on doctors’ decision-making and behavior.) While it will never be known if the hot line affects a legislator’s vote on important legislation, it’s clear that such influence is the motivation behind the massive resources that have been dedicated to setting this number and service up for every legislator and member of Congress in the country. Or, in BofA’s more delicate wording, this hot line may help to “enhance the communication channels with the legislators and other public officials.”

BofA’s letter to legislators concludes: “Your constituents, our customers, deserve a direct response to their concerns regarding their mortgage needs. This communication is just another effort on our part to ensure that we service their needs in an appropriate and timely fashion.”

I couldn’t agree more. With that in mind, here’s the special hot line number and e-mail address that the company reserved for legislators (and specifically requested I not publish): 888-655-7622, poinquiry@bankofamerica.com.

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Bank of America says Wikileaks threat details still unknown

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Piggybankblog psoted on 06/17/11

Picture posted by piggybankblog

Cross linked story with mound.net

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By Maria Aspan

NEW YORK (Reuters) – Bank of America Corp still doesn’t know exactly what damaging documents Wikileaks could have about it, the largest U.S. bank’s chief information officer said on Thursday.

“We don’t know what it is,” Bank of America’s Marc Gordon said during a panel discussion about cyberterrorism moderated by Reuters Editor-in-Chief Stephen Adler on Thursday evening.

Gordon added that the bank has “done the diligence we think we need to do” to protect itself.

Wikileaks founder Julian Assange has hinted that his website has information that will hurt the reputation of Bank of America. Last year, he said it would be released early in 2011, but the site has yet to publish such data.

The bank and its biggest competitors are facing more immediate threats to their data security. Citigroup Inc, the third-largest U.S. bank by assets, this week said that over 360,000 of its credit card customers’ accounts were accessed in a data breach in May that the bank first disclosed last week.

That attack and one last week at the International Monetary Fund have highlighted the new, direct threats that financial institutions are increasingly vulnerable to.

“There are points of vulnerability,” former National Security Agency director Mike McConnell told the panel. He singled out clearinghouses as “probably the biggest point of vulnerability” for the banking system.

Even if the banks are able to prevent the majority of cyberattacks, those that occur can do real damage, especially to public confidence in the financial system, the panelists said.

“If people aren’t confident in banking online … it’s something we have to worry about,” said Frank Cilluffo, associate vice president at George Washington University and director of the Homeland Security Policy Institute.

“It’s not a black swan we can discount,” he added.

(Reporting by Maria Aspan; Editing by Gary Hill)

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Merrill Lynch Investigated for CDO Deal Involving Magnetar

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Piggybankblog posted on 06/16/11.

Picture posted by piggybankblog

Cross linked story with Publica.org posted

by Marian Wang

The Securities and Exchange Commission is investigating whether Merrill Lynch short-changed investors and gave undue influence to the hedge fund Magnetar in the creation of a $1.5-billion mortgage-backed security deal.

The investigation, which was first reported [1] by the Financial Times ($), appears to be the agency’s first probe of Merrill Lynch’s CDO business since the financial crisis. (Check our bank investigations cheat sheet [2] for which other firms are being probed.) Here’s the FT:

The investigation is one of several SEC probes into banks that helped underwrite billions of dollars of collateralised debt obligations, securities comprised of mortgages or derivatives linked to them.

It also marks a broadening of the SEC’s investigation into the role of collateral managers, institutions that help select the assets included in CDOs.

The deal that the SEC is investigating—a collateralized debt obligation, or CDO, called Norma—was detailed both in our reporting last year [3] and in a report [4] by the Financial Crisis Inquiry Commission released in January. Norma was one of more than two dozen CDO deals [5] done by Magnetar, whose bets against a number of CDOs earned it billions in the waning days of the housing boom.

As the FCIC detailed, Magnetar helped select the assets that went into Norma even though it had a $600 million bet that would pay off substantially if the CDO failed. As we reported [6], Magnetar often invested in the portion of the CDO that was riskiest and hardest for the banks to sell. Banks typically gave such investors—equity investors—more say in how the deal was structured. (Magnetar isn’t named as a target of the investigation and had no responsibility to investors. It has also maintained that it did not have a strategy to bet against the housing market.)

In the offering documents for Norma, there’s no mention of Magnetar’s role in asset selection, according to the FCIC. Investors were told that an independent collateral manager, NIR Capital Management, would be selecting the assets with their best interest in mind. The report concluded: “NIR abdicated its asset selection duties… with Merrill’s knowledge.”

Bank of America, which took over Merrill Lynch in 2008, declined our request for comment. The firm’s general counsel told [4] the Financial Crisis Inquiry Commission that it was “common industry practice” for equity investors to have input during the asset selection process, though the collateral manager had final say.

NIR Capital Management is also being investigated by the SEC, according to the FT. The firm did not immediately respond to our request for comment. (The Wall Street Journal did an impressively detailed story in 2007 on how NIR came to be manager [7] of the Norma deal.)

Magnetar declined our earlier requests for comment on Norma, but FT reports it has denied claims [1] that it selected the assets for Norma.

As we reported, the SEC had launched a probe of Merrill’s CDO business 2007, but that investigation petered out without resulting any charges.

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Bank of America Accused of Obstructing Foreclosure Probe

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Piggybankblog psoted on 06/15/11

Piggybankblog posted picture

Cross linked story with yahoo.com

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A lawsuit filed by the state of Arizona is turning ugly for Bank of America. Back in December, Bank of America was sued by Arizona over mortgage modification programs intended to keep Countrywide borrowers out of foreclosure. Arizona accused the bank of pursuing foreclosures even while requests for modifications were pending. Now a damning accusation by a U.S. Department of Housing and Urban Development’s inspector general has been filed as an exhibit in that lawsuit. The report says that Bank of America “significantly hindered” a federal review of its foreclosure practices.”Our review was significantly hindered by Bank of America’s (NYSE: bac) reluctance to allow us to interview employees or provide data and information in a timely manner,” said William Nixon, an assistant regional inspector general for HUD. The declaration was dated June 1 and reportedly filed on June 8. (Read the filings here.)

The inspector general for HUD has been investigating Bank of America’s foreclosure practices on what may be billions of dollars worth of taxpayer-backed loans. From October 2008 to September 2010, Bank of America submitted 40,219 claims on loans backed by Federal Housing Authority. The bank said it was owed $5.7 billion in taxpayer cash.Nixon’s team was assigned to investigate the bank’s claims.News of the confidential investigation into FHA claims was first broken by Shahein Nasiripour of the Huffington Post way back in May. JPMorgan Chase (NYSE: jpm), Wells Fargo (NYSE: wfc), Citigroup (NYSE: c) and Ally Financial were also investigated, according to the Huffington Post. It’s not clear why the results of these investigations remain confidential. If HUD’s inspectors are finding fraud on taxpayers by the banks, the public needs to know..

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Roof’s caving on BofA

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Posted by piggybankblog on 06/14/11

Picture posted by piggybankblog

Cross linked story with New York Post

By MARK DeCAMBRE

Last Updated: 2:22 AM, June 14, 2011

The country’s No. 1 lender is in for a world of pain.

Bank of America could be facing as much as $27 billion in mortgage-related losses over the next three years — on top of the $46 billion the bank has already booked, a total that has crippled its shares over the past year said one of two gloomy reports on the Charlotte, NC bank.

“The problem of addressing legacy mortgage issues will be long and arduous,” said John McDonald, an analyst at Sanford Bernstein, in one of the updates on BofA, highlighting the bank’s major trouble spot — its 2008 acquisition of Countrywide Financial, just as the economy was in free-fall.

“Recent declines in home prices and an uptick in unemployment trends create an upward bias to our loss estimates,” McDonald wrote.

In addition to the massive overhang from bad mortgages, BofA CEO Brian Moynihan is also facing the possibility of paying $7 billion to settle complaints over toxic home loans, according to Mike Mayo, an analyst with Calcyon Securities. Investors are demanding that Moynihan OK the repurchasing of those bad mortgages.

Facing stiff headwinds from housing as home values decline and the pace of recovery isn’t spurring a significant spate of fresh hiring, BofA has seen its shares fall 29.5 percent over the past year. Its shares closed yesterday at $10.97, up 17 cents, after falling about 18 percent this year.

Indeed, according to a recent Case-Shiller report, home prices nationally slid 4.3 percent since in the first quarter.

Mayo also suggest that Moynihan may have to make some hard decisions in order to raise capital, if the market deteriorates further, including offloading Merrill Lynch.

FBR Capital Markets analyst Paul Miller also told Bloomberg Television yesterday that BofA might have to turn hat in hand to the public markets if the housing markets continue to swoon.

Meanwhile, BofA isn’t garnering any goodwill from regulators of late.

The US Department of Housing and Urban Development accuses the big bank of “significantly hindering” an investigation into its mortgage practices and providing incomplete data, according to Bloomberg.

“Our review was significantly hindered by Bank or America’s reluctance to allow us to interview employees or provide data and information in a timely manner,” William Nixon, with HUD’s regional inspector general, told Bloomberg.

The HUD statement was filed as part of a lawsuit by Arizona against BofA. In addition, the Attorneys General from all 50 states are probing actions by all banks, including BofA, regarding foreclosure practices. mark.decambre@ypost.com

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Bank Of America Faces New Probe; New York Attorney General Launches Investigation Into Mortgage Securitization [EXCLUSIVE]

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Piggybankblog posted 06/13/11

Picture posted by piggybankblog

Cross linked story with Huffington Post.

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New York Attorney General Eric Schneiderman has targeted Bank of America, the biggest U.S. bank by assets, in a new probe that questions the validity of potentially thousands of mortgage securities and their associated foreclosures, two people familiar with the matter said.

The investigation, which began quietly in recent weeks, is part of a larger inquiry that is scrutinizing whether mortgage companies and Wall Street firms took the necessary steps under New York state law when creating mortgage-backed securities, these people said, who requested anonymity because they weren’t authorized to speak publicly about the probe.

Court testimony and independent studies have raised questions over whether banks and other financial firms passed along the required documents to trusts, the independent entities that oversee securities for investors. In some cases where trusts moved to seize borrowers’ homes, judges have determined the trusts lacked legal standing due to faulty documentation.

The inquiry could prove explosive: Wall Street’s great mortgage securitization machine took millions of home loans and bundled them into securities for sale to investors. If the legal steps that guide securitization — like taking mortgage documents from one party to another, a critical step under New York law — were not undertaken, then the investors who bought the bundled loans could force the companies to buy them back, compelling them to eat enormous losses.

New York state investigators could also find that those securities aren’t valid financial instruments at all and take action under state law.

The probe is part of a comprehensive investigation into Wall Street’s activities before and after the credit crisis undertaken by New York’s top cop. Schneiderman, a Democrat who rode to office by pointing out Wall Street’s misdeeds, requested documents earlier this year from Bank of America, the largest lender and mortgage servicer, Goldman Sachs and Morgan Stanley regarding their mortgage operations.

But an investigation into whether the securities these companies created are even valid represents a new front in his ongoing probe and raises fresh questions into the potential liability sellers of these mortgage instruments face.

Last November, the Congressional Oversight Panel, a federal watchdog created to keep tabs on the bailout, said widespread paperwork problems involving mortgage securities could cause the largest U.S. banks to swallow unknown billions in losses, threatening the stability of the financial system.

“If mortgages were not properly transferred in the securitization process, then mortgage-backed securities would in fact not be backed by any mortgages whatsoever,” Adam J. Levitin, a bankruptcy expert and professor at Georgetown University Law Center, said at a House panel last November. Levitin said the problem could “cloud title to nearly every property in the United States” and could lead to trillions of dollars in losses.

The six largest U.S. banks, including Bank of America, Goldman and Morgan, currently hold nearly $668 billion in so-called Tier 1 capital, cash banks are required to hold as a backstop against unforeseen losses, Federal Reserve data as of March 31 show. All six companies are defined as “well capitalized” by federal bank regulators.

Schneiderman’s inquiry also raises questions about the speed the Obama administration and a coalition of state attorneys general and bank regulators are moving towards a settlement agreement to resolve claims of widespread foreclosure abuse.

The states’ top cops and representatives of the Department of Justice, Federal Trade Commission, Department of Housing and Urban Development and the Treasury Department are pushing the nation’s largest mortgage companies to pay about $20 billion in a deal to end the months-long probes into shoddy and possibly illegal practices employed by Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial.

While several investigations remain ongoing at the state and federal level, no agency has systematically examined loan-level documents to ensure the creation of mortgage securities complied with state laws or to examine the scope of sloppy paperwork in foreclosure proceedings, like the so-called “robo-signing” fiasco.

In its November report, the bailout watchdog said that the “robo-signing of affidavits served to cover up the fact that loan servicers cannot demonstrate the facts required to conduct a lawful foreclosure.”

“In essence, banks may be unable to prove that they own the mortgage loans they claim to own,” the panel said.

Sheila Bair, the chairman of the Federal Deposit Insurance Corporation, said at a Senate panel last month that “flawed mortgage banking processes have potentially infected millions of foreclosures.”

“The extent of the loss cannot be determined until there is a comprehensive review of the loan files and documentation of the process dealing with problem loans,” she added.

Despite that appraisal, Bair, along with Treasury Secretary Timothy Geithner and Shaun Donovan, secretary of Housing and Urban Development, have said they want a quick settlement.

Schneiderman’s investigation of defective mortgage practices comes on the heels of public reports that Bank of America systematically failed to transfer essential documents to other entities in the daisy chain that turned home loans into securities to be sold on Wall Street.

A review of 104 New York foreclosure cases between 2006 and 2010 where Countrywide Financial made the original loan found that the nation’s once-biggest home lender did not follow proper procedures in securitizing the mortgages, according to Abigail C. Field, a New York-based attorney who wrote a column about her findings for Fortune. Bank of America purchased Countrywide in 2008.

The review “calls into question the securitization of these loans,” Field wrote. She added that the findings also raise questions over the right of investors to foreclose on the borrowers who defaulted on their loans since the mortgage securities may be invalid.

In a New Jersey bankruptcy case last November, a Bank of America executive, Linda DeMartini, testified that Countrywide routinely did not convey crucial documents for loans sold to investors.

The judge cited the testimony in dismissing the bank’s claim against the borrower. Bank of America later said DeMartini essentially did not know what she was talking about.

The case caused an uproar in mortgage banking and securitization circles because if Countrywide held onto essential documents — rather than pass them onto the entity representing investors who bought their securities — then investors could question whether the security was legal and force Bank of America to buy the investments back.

Investors in mortgage securities, which include pension funds and insurance companies, are currently embroiled in numerous lawsuits and private actions to compel banks to repurchase faulty mortgages. Some of the lawsuits raise questions over such paperwork problems.

Danny Kanner, a spokesman for Schneiderman, declined to comment.

* * * * *

Shahien Nasiripour is a senior business reporter for The Huffington Post. You can send him an email; bookmark his page; subscribe to his RSS feed; follow him on Twitter; friend him on Facebook; become a fan; and/or get e-mail alerts when he reports the latest news. He can be reached at 917-267-2335.

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Too Big to Fail, or Too Trifling for Oversight?

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Piggybankblog posted 06/12/11

Cross linked story withNew York Times

By ERIC DASH and JULIE CRESWELL

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It is not very often that business people head to Washington to explain how unimportant they are.

But over the last several months, executives from more than two dozen financial companies and their trade groups have paraded into the Treasury Department, the Federal Reserve and other government agencies to try to persuade top regulators that they are not large or risky enough to threaten the financial system if they should ever collapse.

Big insurers like the Mass Mutual Financial Group and Zurich Financial Services; hedge funds like Citadel and Paulson & Company; and mutual-fund companies like BlackRock, Fidelity Investments and Pacific Investment Management Company have all been making the rounds, according to documents filed by the regulatory agencies.

What they are all hoping to avoid is being designated “systemically important” by a council of financial regulators. That would require them to face stricter federal oversight and keep more cash on hand, which they fear would erode profits.

Jeffrey A. Goldstein, the Treasury undersecretary for domestic finance, finds the arguments so familiar that he has opened some meetings by asking the firms if they would like to designate themselves as systemically important. “I can’t recall a firm that came in and said yes,” he said.

Hedge fund managers, for example, normally pride themselves on being Masters of the Universe. But armed with PowerPoint presentations and financial studies, representatives from some of Wall Street’s most powerful funds, including D.E. Shaw and Company, Elliott Management and Caxton Associates, met with Federal Reserve staff members earlier this year to make one point: We’re too small to matter.

The hedge funds insisted their activities would not threaten the financial system because they control $1.7 trillion in assets, a drop in the bucket next to the $21.4 trillion overseen by the global mutual fund industry, according to documents they filed with regulators that cited figures from 2010.

Two insurance giants took even stronger steps. They unloaded savings banks they owned as a preemptive strike against tougher federal supervision.

Regulators involved in the determination process say they are skeptical. “It is as if they are the Sisters of the Charity,” said one government official who has participated in meetings with financial companies. “They present themselves as if they don’t do anything complicated. They are playing a very interesting strategy game that nobody believes.”

It’s no secret that big banks with more than $50 billion in assets — Bank of America, Goldman Sachs, Citigroup, Wells Fargo, among others — are automatically part of the club. But a wide variety of financial companies that are not banks are trying to avoid membership — or at least reduce their burdens. Besides the big insurers, hedge funds and mutual fund companies, major commercial lenders like General Electric have revved up their lobbying efforts.

There have also been a few surprises, like Boeing, I.B.M. and Caterpillar, which operate large finance businesses for their customers. Student lenders like Sallie Mae, auto finance companies like Ford Motor Credit and even quasi-government enterprises like the Federal Home Loan Banks have raised concerns about the designation process.

Deciding which firms should be deemed “systemically important” is at the heart of a package of new financial rules that aim to prevent a repeat of the recent financial crisis. But the lack of specific criteria from regulators so far has created uncertainty about who will get tagged.

More clarity may come later this summer when regulators are expected to put out a more detailed proposal. Criteria like size, how connected the firms are to each other, and overall risk levels will be more carefully defined.

Then, after regulators analyze the data, the designated companies will be notified and given a chance to argue why they do not pose a major financial threat. This means final determinations will not be made until the middle of 2012, at the earliest. That, of course, is just fine with many of the companies involved.

Insurers are feeling the most heat right now. In meetings, they go to great lengths to distance themselves from the speculative activities of the American International Group, whose losses from insuring troubled mortgages were so huge that it needed to be rescued by the government in the fall of 2008.

Instead, the insurers insist they are already well supervised by state authorities, and express concern about being shoehorned into a regulatory regime that they claim is designed mainly for banks. Some have hired consulting firms to buttress their arguments with 100-plus page reports featuring their own (favorable) criteria for determining what poses a serious financial threat.

“We don’t want to be lumped into the same box with banks,” said Robert Gordon of the Property Casualty Insurers Association of America.

A few big insurers have sheared off businesses that would land them under the Federal Reserve’s thumb.

In May, the Hartford Financial Services Group sold off a thrift it bought in 2009 to secure billions of dollars of bailout funds designated for banks. In February, the Allstate Corporation sold a similar bank that had made it eligible for aid, though it decided not to accept the cash.

Now, both Hartford and Allstate are arguing that they should not be deemed systemically important — a claim raising eyebrows in financial policymaking circles.

“You would want to be particularly attentive to firms that got themselves into trouble during the crisis, needed government assistance, and now that they are subject to real supervision at the federal level, are hoping to escape additional regulation,” said Michael S. Barr, who recently stepped down as the assistant Treasury secretary for financial institutions to return to the University of Michigan law school.

A Hartford Financial spokesman, David Snowden, said the sale was part of a broader strategy of “focusing our resources on our core business and insurance operations.” Allstate, in a statement, said its decision was partly due to concerns that the new financial legislation would impose rules that the company “did not consider beneficial given the limited role of the Allstate Bank in our overall strategic plans.”

Other financial giants have made their own arguments to regulators. In their comment letters, big asset managers like BlackRock and Fidelity claim that since they manage money on behalf of individual investors, the firms pose little risk to the system. General Electric, a huge lender to businesses and consumers, told Treasury officials that it should not be put in the same category as Goldman Sachs since it does not engage in risky derivatives trading or make other speculative bets with its own money, according to a person close to the discussions.

Meanwhile, several large financial companies are finding sympathetic ears in Washington. Barney Frank, the ranking member of the House Financial Services Committee and one of the chief architects of the new rules, said he did not believe life insurers and mutual-fund companies were risky enough to require heightened supervision.

“If you look at it, they weren’t the causes of the problems,” said Mr. Frank, the Massachusetts Democrat whose political region is home to many mutual fund and insurance companies.

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Treasury To Temporarily Penalize Mortgage Companies, Making Good On Old Threat.

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Piggybankblog posted 06/11/11

Cross linked story withHuffington Post

WASHINGTON — The Treasury Department will temporarily withhold payments to the nation’s three largest mortgage companies for failing to comply with the Obama administration’s signature foreclosure-prevention effort, perhaps finally making good on a 19-month-old threat, officials announced Thursday.

Bank of America, Wells Fargo and JPMorgan Chase, which collectively service about half of all home loans, abused homeowners and violated the rules of the Making Home Affordable (MHA) program, Treasury said. The initiative aims to lower monthly payments, reduce loan balances or enable distressed borrowers to sell their homes before they’re seized by awarding a series of incentive payments to banks, investors and homeowners when foreclosures are averted. Treasury is only withholding pay to the three banks.

The three were found to need “substantial improvement,” the agency said in a statement. Cumulatively, they received $24 million in government incentive payments last month. Last quarter, the three financial behemoths collectively reported about $11.4 billion in net income. (Another firm came in for criticism, but it was spared the momentary financial penalty because its results were skewed due to an acquisition.)

The remaining six of the 10 largest mortgage companies that were audited were found to need “moderate improvement.” None passed with flying colors.

Bank of America, the worst performer, was found to have poor internal controls for identifying and contacting homeowners. Its error rates were also more than four times Treasury’s benchmark when calculating borrowers’ income. JPMorgan improperly calculated the incomes of nearly a third of borrowers when it was trying to determine their eligibility for the program — more than six times the limit. And Wells Fargo had poor processes for determining borrowers’ eligibility. Its income error rates were also more than five times Treasury’s max.

Treasury first identified potential mass non-compliance in November 2009, warning the participating companies that those failing to meet their obligations to homeowners under their contracts with the federal government “will be subject to consequences which could include monetary penalties and sanctions.” The Obama administration spent the next year and a half defending itself against accusations levied by federal auditors, members of Congress and consumer groups that it was soft on the big banks’ abusive behavior due to its reluctance to follow through on that threat.

But the punishment that has been so long in coming may prove to be short-lived: Treasury will return the money they’re withholding from the three banks once they make the needed improvements.

“If they fix the problem, they will get the money,” said Tim Massad, Treasury’s acting assistant secretary for financial stability, during a conference call with reporters. He added that Treasury had conducted 400 compliance reviews. Massad declined to answer questions over why the administration waited 19 months to make good on its threat.

News that Treasury would temporarily withhold payments to the three companies was first reported by the Washington Post.

More homeowners have been kicked out of the program than are receiving assistance, Treasury data show. Nearly half of them either face foreclosure proceedings, are in foreclosure, or have lost their homes. The initiative will fail to keep President Barack Obama’s promise of helping 3 million to 4 million homeowners avoid foreclosure, auditors have concluded.

Potentially “thousands” of troubled homeowners were denied opportunities to lower their monthly mortgage payments under the administration’s program due to servicer errors and inadequate oversight by Treasury, according to a June 2010 audit by the Government Accountability Office (GAO).

“All this appears to be is that, after the servicers seemingly violated their agreements with Treasury with impunity, Treasury’s sole response is to give them a temporary time-out before paying them in full,” said Neil M. Barofsky, the former special inspector general for the Troubled Asset Relief Program. His critical reports on the bailout earned him plaudits in Congress for looking out for taxpayers, but enemies at Treasury, which administered the TARP.

“It further reaffirms Treasury’s long-running toothless response to the servicers’ disregard of their contract with Treasury, and by extension, the American taxpayer,” added Barofsky, who now serves as a senior research scholar and fellow at New York University School of Law.

In statements, Bank of America said it’s working to improve its results while JPMorgan said it disagrees with Treasury’s conclusions. Wells Fargo went a step further, and said it is “formally disputing” the government’s findings.

Like other companies, Wells has been in constant communication with Treasury and its auditors. Massad said government watchdogs have long been inside the companies’ offices, keeping tabs on their activities. But Wells Fargo said Thursday’s report “contradicts previous written assessments shared with us by the Treasury.”

The withholding of incentives “mean very little to this company,” said Teri A. Schrettenbrunner, a senior vice president at Wells Fargo’s mortgage unit in Des Moines, Iowa. “We’re really in this to get the housing market stabilized. It’s in the best interest of everyone.”

Most experts in and out of government agree that the MHA program has been a dismal failure. Home prices today are lower than when the initiative was launched. Home repossessions continue at a near-record pace. And Americans’ equity in their homes is at a two-year low, Federal Reserve data show.

A substantial portion of them blame the Obama administration — rather than the mortgage industry — for its failure to police the mortgage companies, structure a program that dealt with the biggest drivers of default like negative equity and commit enough money.

Indeed, government auditors have long faulted Treasury for its lack of oversight.

An October 2009 report by the Congressional Oversight Panel, another federal watchdog created to keep tabs on the bailout, recommended that the administration develop “strong, appropriate sanctions to ensure that all participants follow program guidelines.”

In its last report before disbanding, the panel noted that Treasury had yet to take any action.

“There’s no way to help those who have already been harmed by this program,” Barofsky said. “The damage has been done.”

More than three of every four housing counselors surveyed by the GAO said borrowers had either a “negative” or “very negative” experience with the administration’s primary initiative, the Home Affordable Modification Program, better known as HAMP. Just 9 percent described borrowers’ overall experience as “positive” or “very positive,” according to the May report.

The counselors’ most popular recommendation to improve HAMP was for Treasury to enforce sanctions on mortgage companies for noncompliance.

“In many ways, Treasury’s shameful enablement of servicer misconduct has contributed to this program’s abysmal failure,” Barofsky said.

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Sarah Palin Victim of Mortgage Fraud?

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Piggybankblog posted on 06/09/11

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Massachusetts Register of Deeds John O’Brien and Forensic Mortgage Fraud Examiner Marie McDonnell find former Vice-Presidential candidate Sarah Palin is victim of potential mortgage fraud; expert says chain of title to new Arizona home clouded by robo-signers.

In what is an ironic twist of fate today Register of Deeds John O’Brien and nationally renowned mortgage fraud examiner Marie McDonnell, President of McDonnell Property Analytics, Inc., announce that former Alaska Governor and Vice-Presidential nominee Sarah Palin is an unwitting victim of mortgage fraud and has purchased a home in Arizona that contains flaws in the chain of title.

Register O’Brien said, “If fundamental property principles still matter in this country, Sarah Palin may have legal issues that could affect the ownership of her home. Through no fault of her own, Sarah Palin has become a victim like thousands of others across the country that have the same problem with their chain of title. I feel bad for Governor Palin and all the homeowners who have been victimized by this scheme, it just goes to show you that no one is immune from this type of fraud and irresponsible behavior that these banks participated in.”

Marie McDonnell added, “Sarah Palin’s chain of title has been swept up into the eye of the ‘perfect storm’ where robo-signer Linda Green’s fraudulent Deed of Release on behalf of Wells Fargo Bank, N.A. is eclipsed by robo-signer Deborah Brignac’s fraudulent foreclosure documents. Brignac, a Vice President of California Reconveyance Company (a subsidiary of JPMorgan Chase Bank), assigned the homeowner’s Deed of Trust to JPMorgan Chase Bank in her capacity as a Vice President of Mortgage Electronic Registration Systems, Inc. (“MERS”); in the same breath, Brignac executed a document appointing California Reconveyance Company (her real employer) as Substitute Trustee in her alleged capacity as a Vice President of JPMorgan Chase.”

Sound confusing? McDonnell explained, “This is a shell game where Brignac purports to be Vice President of three (3) different entities so that she can manufacture the paperwork necessary for JPMorgan Chase Bank to hijack the mortgage and then foreclose on the property. This is an excellent example of how MERS is being used by its Members to perpetrate a fraud. I have laid out a timeline that illustrates the defects in Sara Palin’s chain of title which shows that it is seriously, if not fatally impaired.” McDonnell whose firm performed the extensive forensic analysis. (See McDonnell’s Mortgage Map)

O’Brien, who recently announced that he found 6047 fraudulent Linda Green documents recorded in the Essex Southern District Registry of Deeds which had 22 different variations of a Linda Green signature has been the National Leader in blowing the whistle on banks such as Bank of America, J.P. Morgan Chase, Wells Fargo for their business practices. O’Brien said “These banks have participated in a national epidemic of fraud that has clouded or damaged the chain of title of hundreds of thousands of American homeowners all across the country”. O’Brien further said “Sadly, Sarah Palin’s misfortune will however, hopefully shine the national spotlight on this issue. Given her position in the country, I am sure that she will use her influence to stand up for homeowners and their property rights”.

Contact:

Kevin Harvey, 1st Assistant Register

978-542-1724

kevin.harvey@sec.state.ma.us

Marie McDonnell, President McDonnell Property Analytics, Inc.

508-694-6866

marie@mcdonnellanalytics.com

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At Bank of America, more incomplete mortgage docs raise more questions

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Fortune examined hundreds of foreclosure documents to determine the validity of mortgage securitizations after Bank of America debunked testimony about them last fall. The results raise more questions than they answer.

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Piggybankblog posted 06/08/11

Picture posted by piggybankblog

Cross linked story with finance.fortune.cnn.com.

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By Abigail Field, contributor

FORTUNE — Are Countrywide mortgage-backed securities really mortgage-backed? Do banks even have the legal right to foreclose on certain homes?

These are just a few of the questions raised since the foreclosure crisis revealed shoddy mortgage servicing practices at many of the big banks – practices that have led to countless investigations and lawsuits. Court testimony by a former Countrywide employee added to the intrigue last fall, because she confessed that many loans there weren’t properly handled, bringing into doubt the validity of Countrywide’s securitization process. Bank of America, which owns Countrywide, quickly silenced the discussion with firm denials.

But Fortune has examined dozens of court records that corroborate the employee’s testimony. And if Countrywide’s mortgage securitizations systematically failed as it appears they did, Bank of America’s potential liability dwarfs its shareholder equity, as the Congressional Oversight Panel points out.

Last November, a decision in a New Jersey bankruptcy case brought to light the testimony of Linda DeMartini, operational team leader for the litigation management department for Bank of America, which intended to prove the bank had the right to foreclose on a debtor’s mortgage. Instead, her testimony was key to the judge’s ruling that Bank of America (BAC) couldn’t foreclose, and along the way DeMartini made two statements that called into question the securitization of Countrywide loans. She testified that Countrywide didn’t deliver the notes to the securitization trustee, and that Countrywide notes weren’t endorsed except on a case-by-case basis generally long after securitization ostensibly occurred. Both steps are required, in one form or another, under all securitization contracts.

Only the delivery issue was really scrutinized at the time, because without a doubt the failure to deliver the notes would invalidate the securitization. The other issue, failure to endorse the notes, sparked a debate: the American Securitization Forum argues the notes would still have been securitized without endorsement, while Adam Levitin, associate professor of law at Georgetown Law, convincingly argues that they would not have been.

If the securitization failed, a variety of securities fraud charges could follow. Indeed, one investor lawsuit based in part on DeMartini’s testimony about endorsements and delivery has already been filed. And investors aren’t the only possible pursuers of securities fraud — New York Attorney General Eric Schneiderman is investigating mortgage securitizations by three banks, including Bank of America.

Bank of America vigorously denied DeMartini’s testimony, insisting that as a member of Countrywide’s mortgage servicing department, she didn’t know what was happening during securitization. Besides, BofA insisted, its policy was and always has been to comply with the securitization contracts.

No endorsements

Although law enforcement should be able to answer the delivery question easily — DeMartini indicated that Bank of America has FedEx tracking records for each note — it’s impossible for the public to check. But the endorsement of notes is easy to test. In every foreclosure, the bank must give the court the note or an accurate copy of it. And those notes are either properly endorsed or they’re not.

To check DeMartini’s testimony, Fortune examined the foreclosures filed in two New York counties (Westchester and the Bronx) between 2006 and 2010. There were 130 cases where the Bank of New York (BK) was foreclosing on behalf of a Countrywide mortgage-backed security. In 104 of those cases, the loan was originally made by Countrywide; the other 26 were made by other banks and sold to Countrywide for securitization.

None of the 104 Countrywide loans were endorsed by Countrywide – they included only the original borrower’s signature. Two-thirds of the loans made by other banks also lacked bank endorsements. The other third were endorsed either directly on the note or on an allonge, or a rider, accompanying the note.

The lack of Countrywide endorsements, combined with the bank’s representation to the court that these documents are accurate copies of the original notes, calls into question the securitization of these loans, as well as Bank of New York’s right, as trustee, to foreclose on them. These notes ostensibly belong to over 100 different Countrywide securities and worse, they were originally made as long ago as 2002. If the lack of endorsement on these notes is typical — and 104 out of 104 suggests it is — the problem occurs across Countrywide securities and for loans that pre-date the peak-bubble mortgage frenzy.

The lack of Countrywide endorsements also corroborates DeMartini, who said that in her 10 years at Countrywide she had never seen a note with an endorsement, and that as foreclosures had been increasingly litigated, she had been handling the original notes, not just the copies scanned into the bank’s database.

Bank of New York maintains that it had the right to foreclose on the notes. “The assignment language included in the pooling and servicing agreements that govern the trusts, along with the actual transfer of the mortgage note to the trustee and/or custodian, provide the trustee with the proper legal standing,” Bank of New York spokesman Kevin Heine said in a statement. But even if true, the right to foreclose must be demonstrated in every case, and it doesn’t seem to have been in any of these cases from New York.

As for the endorsements, foreclosure defense attorneys say a troubling phenomenon has been happening: “magically” appearing endorsements. That is, the note originally given the court has no endorsement, but after the defense points out the problem, an endorsed note is submitted. Here are several examples from Florida cases, all involving loans serviced by Countrywide, half of which were also made by Countrywide. Here is an example from a California bankruptcy case.

Todd Allen, the Florida attorney who shared the Florida examples, says the problem occurred with all the banks, not just Countrywide: “Magically appearing endorsements happen so often in Florida that I expect the banks’ explanation to begin with: ‘Once upon a time, in a land far, far away.’ Unfortunately, the courts often turn a blind eye to the banks’ shell game and homeowners are left with the empty shell.”

Bank of America continues to deny that it failed to endorse mortgages as DeMartini claimed, even after seeing the cases Fortune uncovered from New York. It issued this statement in response: “Bank of America’s policy is to conduct foreclosures in accordance with all applicable laws. After halting foreclosures last year, we reviewed our process with regulators and continue to do so as we incorporate improvements. Reviews have shown that foreclosed loans were seriously delinquent and that we could support our legal standing to foreclose. We believe the files referenced contain appropriate documentation. We offer home retention options and foreclosure avoidance programs to our distressed customers. Foreclosure is our last resort.”

It will be left to the investigators – and possibly ultimately the courts – to decide whether the applicable laws were indeed followed. Meanwhile, Countrywide managers have given interviews to Moody’s Investor Service, which led Moody’s to reassure investors that notes were systematically endorsed, either in blank on the note or via allonge.

But if that’s accurate, why don’t the sampled court records reflect it?

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