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Mortgage Crisis Watch Business and legal issues affecting: loan repurchases | mortgage-backed securities | mortgage insurance

Category Archives: Too Big to Fail

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Regulators Increase Scrutiny of Wall Street Lending

Federal bank regulatory agencies are significantly increasing their scrutiny of Wall Street bank lending, moving from annual reviews to a system of monthly audits in a major effort to curtail aggressive underwriting practices. Until recently, the Federal Reserve, the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency (OCC) have monitored… Continue Reading

Protecting Your Company Against CFPB Investigations & Investors’ Mortgage Buyback Claims

What are the boundaries of the Consumer Financial Protection Bureau’s authority? How might those boundaries continue to expand in the future? Are there ways that the CFPB can take action against a company even if it does not have true supervisory authority? These are just some of the questions that frustrated and concerned financial institutions… Continue Reading

Banks May Be Required to Increase Reserves

The Federal Reserve is expected to require the biggest U.S. banks to increase reserves in an effort to prevent the possibility of another financial crisis. Federal Reserve Governor Daniel K. Tarullo is scheduled to testify before the U.S. Senate Committee on Banking, Housing and Urban Affairs on Tuesday to introduce new rules, which would impose… Continue Reading

Former Analyst Claims Moody’s Falsely Inflated Ratings

Former Moody’s analyst, Ilya Kolchinsky, has accused the credit rating powerhouse of overstating its ratings for countless toxic mortgage-backed securities that caused the financial meltdown in 2008, misleading investors and costing the U.S. billions in funds spent bailing out Wall Street’s too-big-to-fail banks. Kolchinsky’s 107-page False Claims Act complaint, filed in 2012, was recently unsealed… Continue Reading

Citigroup Settles with DOJ for $7 Billion

Citigroup announced last week that it will pay $7 billion to end an investigation by the U.S Department of Justice into misconduct related to its mortgage securitization practices. The blockbuster settlement came days before DOJ lawyers were expected to file a lawsuit. $4.5 billion will go towards settling civil claims related to the DOJ probe,… Continue Reading

Buyback and Indemnifications: The New Dangers

On Thursday, July 31, I will be speaking as part of a panel of business professionals during a live webinar about the continuing repurchase and indemnification risk surrounding mortgage buybacks. This panel will assist mortgage professionals in determining where the greatest exposure of risk lies, and will offer some insightful tips on how best to… Continue Reading

Suntrust Reaches $320 Million Settlement

SunTrust Banks (“SunTrust”) reached a settlement with Federal prosecutors last week in which it agreed to a $320 million settlement for a combination of consumer relief and housing counseling services. SunTrust issued a press release this past weekend outlining the agreement. Specifically, it has agreed to pay $179 million in consumer remediation, $20 million to… Continue Reading

Main Street Cashes $3.1 Billion in Checks from Wall Street

With the mortgage crisis almost a decade in the rear-view mirror, some harmed homeowners are just now starting to see reparations for the transgressions of the country’s largest financial institutions. Beginning in January 2013, thirteen banks—including Bank of America, Citigroup, Goldman Sachs, JPMorgan Chase, Morgan Stanley and Wells Fargo—settled 2011 and 2012 actions instituted by… Continue Reading

Big Banks Argue that Shorter Limitations Period Should Apply to MBS Claims

Recently, the defendants in FDIC as Receiver for Colonial Bank v. Chase Mortgage Finance Group, et al (Civ No. 1:12-cv-06166) filed a motion for judgment on the pleadings, asking the court to dismiss as time-barred the securities violations alleged against them by the FDIC.  In light of the Supreme Court’s holding in CTS Corp. v…. Continue Reading

Miami Hits JPMorgan with Lawsuit over Discriminatory Lending Practices

The city of Miami recently sued JPMorgan Chase & Co. in Florida federal court alleging that JPMorgan violated the Federal Fair Housing Act (“FHA”) by engaging in a “continuing pattern” of discriminatory mortgage lending practices in Miami, resulting in a disproportionate number of foreclosures in minority neighborhoods. Ironically, the suit was filed on Friday the… Continue Reading

L.A. Sues JPMorgan Over Discriminatory Mortgage Lending Practices

On Friday, May 30, 2014, asserting that “[i]t is axiomatic that banks should not make discriminatory loans”, the City of Los Angeles filed a two-count complaint against JPMorgan Chase & Co. in Federal Court for the Central District of California. Count one of the complaint is brought under the Federal Fair Housing Act, 42 U.S.C…. Continue Reading

Robo-Signing Still Making Headlines As Wells Fargo Settles Another Lawsuit

“Robo-signing,” the term coined to refer to bank officials who quickly approved mortgage foreclosure documents without actual knowledge of the validity of the grounds for foreclosure, has been spurring lawsuits and making headlines since as far back as 2010. It was in the news again with the recent settlement by Wells Fargo of another robo-signing… Continue Reading

Aurora Resolves Mortgage Modification Class-Action Lawsuit for $5.3 Million

A former goliath of the non-prime lending market, Aurora Loan Services, LLC (“ALS”), recently resolved a class-action lawsuit alleging that it fraudulently induced distressed California borrowers to enter into purported “workout” agreements to extract unearned payments. ALS was one of many servicing affiliates of big banks that created, and profited off of, various reduced documentation… Continue Reading

Justice Department Keeps its Distance From Szymoniak Mortgage Fraud Lawsuit

As detailed in an August 2013 Salon article by David Dayen and a September 2013 Bloomberg Businessweek article by Karen Weise, West Palm Beach, Florida homeowner and attorney Lynn Szymoniak helped blow the whistle on widespread fraud in the mortgage industry. Over the past few years, Szymoniak has helped the U.S. government recover millions of dollars from… Continue Reading

SEC “Fearful” of Wall Street Banks

Following the financial crisis, the U.S. Securities and Exchange Commission has received sharp criticism from the public for its seemingly weak enforcement of Wall Street’s too big to fail banks. Surprisingly, this sentiment was recently echoed from within the SEC. James A. Kidney, a retiring SEC trial attorney, no longer muffled by his employment with… Continue Reading

Judge Denied Bank of America’s Motion to Dismiss $850M Mortgage Fraud Case

Last week, Magistrate Judge David S. Cayer of the U.S. District Court for the Western District of North Carolina denied Bank of America’s motion to dismiss the Security and Exchange Commission’s claims against it in SEC v. Bank of America Corporation, et al. The SEC’s complaint is founded upon allegations that “[t]he Bank of America … Continue Reading

Ninth Circuit Rules National Banks are Residents Only of Their Home State

The United States Court of Appeals for the Ninth Circuit (encompassing nine Western states and two Pacific islands) has held that for purposes of diversity jurisdiction a national bank is a citizen only of the state in which its main office is located, and not of every state where it does business, or even the… Continue Reading

Wells Fargo Employee Admits Role in $40.8 Million Straw Buyer Scheme

Last Friday, a former Wells Fargo branch manager, sales manager and loan officer, Robert Serao, pled guilty to conspiracy to commit wire fraud. The charge stems from Serao’s involvement in a $40.8 million mortgage fraud scheme during his time at Wells Fargo. Allegedly working in concert with at least nine others, Serao used “straw buyers”… Continue Reading

Bank of America’s $8.5 Billion Settlement Will Not Be Delayed by AIG

Late last month, a New York state judge denied AIG’s request to delay approval of Bank of America’s $8.5 billion settlement with private investors in connection with certain mortgage-backed securities that had soured. Bank of America agreed to the settlement in June 2011 in order to resolve claims brought by institutional investors such as Black… Continue Reading

Wells Fargo Gives Subprime Borrowers Another Chance

Wells Fargo has announced that it plans to begin originating FHA-backed loans for borrowers with credit scores as low as 600. This new cut-off is 40 points below Wells Fargo’s current floor, and 20 points below what has traditionally been considered to constitute a “subprime” borrower. After the collapse of the housing market, faced with… Continue Reading

Derivative Suit Filed Against JPMorgan Alleges Culture of Risk

Adding to JPMorgan Chase’s widely publicized recent legal woes, shareholder Bradley P. Miller filed a derivative suit against the bank and its directors in California federal court on January 23, 2014, as a result of the $20 billion in fines the bank paid last year for nearly a decade’s worth of alleged wrongdoing. “Defendants put… Continue Reading

Mortgage Crisis Penalty for the Real Wolves of Wall Street Could Top $50 Billion

The real wolves of Wall Street–sixteen of America’s largest banks–could end up shelling out more than $50 billion to secure settlements from the federal government in connection with their alleged roles in the mortgage crisis. Of this amount, up to $15 billion would go directly to affected homeowners in the form of cash payments and/or… Continue Reading

Bank of America and Freddie Mac Settle Mortgage Loan Claims

Add yet another major settlement to the still-growing list of huge payouts by the nation’s largest banks to settle claims over toxic mortgage-backed securities. Bank of America has now agreed to pay $404 million to Freddie Mac to resolve all repurchase liabilities on home loans that it sold to the government-controlled mortgage company from 2000… Continue Reading

JPMorgan Chase Agrees to $13 Billion Settlement with the U.S. Justice Department for Knowingly Selling Toxic Mortgage-Backed Securities

On Tuesday, the United States Justice Department announced that it finalized a settlement agreement with JPMorgan Chase for $13 billion. This settlement will resolve a multitude of state and federal investigations into JPMorgan Chase’s sale of residential mortgage-backed securities to investors between 2005 and 2008. In addition to paying fines for securities violations, the proceeds… Continue Reading