Instances of financial abuse and fraud against the elderly increased from November 2010 to January 2011, according to a recent report from MetLife, which found overall investment fraud targeted towards older Americans is on the rise.
Americans over the age of 65 lost nearly $3 billion to financial abuse from April to June 2010, up 12 percent from the same period in 2008, according to the report. During that time, 51 percent of the fraud cases reported were perpetrated by strangers, 34 percent by family, friends, and neighbors and 12 percent by businesses. In a separate look at the holidays, MetLife reports fraud by family and friends increased to 45 percent.
Wednesday, December 28, 2011
Wednesday, December 21, 2011
Justice Department Reaches $335 Million Settlement to Resolve Allegations of Lending Discrimination by Countrywide Financial Corporation
More than 200,000 African-American and Hispanic Borrowers who Qualified for Loans were Charged Higher Fees or Placed into Subprime Loans
“Countrywide’s actions contributed to the housing crisis, hurt entire communities, and denied families access to the American dream,” said Thomas E. Perez, Assistant Attorney General for the Civil Rights Division. “We are using every tool in our law enforcement arsenal, including some that were dormant for years, to go after institutions of all sizes that discriminated against families solely because of their race or national origin.”
The Department of Justice today filed its largest residential fair lending settlement in history to resolve allegations that Countrywide Financial Corporation and its subsidiaries engaged in a widespread pattern or practice of discrimination against qualified African-American and Hispanic borrowers in their mortgage lending from 2004 through 2008.
The settlement provides $335 million in compensation for victims of Countrywide’s discrimination during a period when Countrywide originated millions of residential mortgage loans as one of the nation’s largest single-family mortgage lenders.
The settlement, which is subject to court approval, was filed today in the U.S. District Court for the Central District of California in conjunction with the department’s complaint which alleges that Countrywide discriminated by charging more than 200,000 African-American and Hispanic borrowers higher fees and interest rates than non-Hispanic white borrowers in both its retail and wholesale lending. The complaint alleges that these borrowers were charged higher fees and interest rates because of their race or national origin, and not because of the borrowers’ creditworthiness or other objective criteria related to borrower risk.
The United States also alleges that Countrywide discriminated by steering thousands of African-American and Hispanic borrowers into subprime mortgages when non-Hispanic white borrowers with similar credit profiles received prime loans. All the borrowers who were discriminated against were qualified for Countrywide mortgage loans according to Countrywide’s own underwriting criteria.
“The department’s action against Countrywide makes clear that we will not hesitate to hold financial institutions accountable, including one of the nation’s largest, for lending discrimination,” said Attorney General Eric Holder. “These institutions should make judgments based on applicants’ creditworthiness, not on the color of their skin. With today’s settlement, the federal government will ensure that the more than 200,000 African-American and Hispanic borrowers who were discriminated against by Countrywide will be entitled to compensation.”
The settlement resolves the United States’ pricing and steering claims against Countrywide for its discrimination against African Americans and Hispanics.
The United States’ complaint alleges that African-American and Hispanic borrowers paid more than non-Hispanic white borrowers, not based on borrower risk, but because of their race or national origin. Countrywide’s business practice allowed its loan officers and mortgage brokers to vary a loan’s interest rate and other fees from the price it set based on the borrower’s objective credit-related factors . This subjective and unguided pricing discretion resulted in African American and Hispanic borrowers paying more. The complaint further alleges that Countrywide was aware the fees and interest rates it was charging discriminated against African-American and Hispanic borrowers, but failed to impose meaningful limits or guidelines to stop it.
The United States’ complaint also alleges that, as a result of Countrywide’s policies and practices, qualified African-American and Hispanic borrowers were placed in subprime loans rather than prime loans even when similarly-qualified non-Hispanic white borrowers were placed in prime loans. The discriminatory placement of borrowers in subprime loans, also known as “steering,” occurred because it was Countrywide’s business practice to allow mortgage brokers and employees to place a loan applicant in a subprime loan even when the applicant qualified for a prime loan . In addition, Countrywide gave mortgage brokers discretion to request exceptions to the underwriting guidelines, and Countrywide’s employees had discretion to grant these exceptions.
This is the first time that the Justice Department has alleged and obtained relief for borrowers who were steered into loans based on race or national origin, a practice that systematically placed borrowers of color into subprime mortgage loan products while placing non-Hispanic white borrowers with similar creditworthiness in prime loans. By steering borrowers into subprime loans from 2004 to 2007, the complaint alleges, Countrywide harmed those qualified African-American and Hispanic borrowers. Subprime loans generally carried higher-cost terms, such as prepayment penalties and exploding adjustable interest rates that increased suddenly after two or three years, making the payments unaffordable and leaving the borrowers at a much higher risk of foreclosure.
The settlement also resolves the department’s claim that Countrywide violated the Equal Credit Opportunity Act by discriminating on the basis of marital status against non-applicant spouses of borrowers by encouraging them to sign away their home ownership rights . The law allows married individuals to apply for credit either in their own name or jointly with their spouse, even when the property is owned by both spouses. For applications made by married individuals applying solely in their own name between 2004 and 2008, Countrywide encouraged non-applicant spouses to sign quitclaim deeds or other documents transferring their legal rights and interests in jointly-held property to the borrowing spouse. Non-applicant spouses who execute a quitclaim deed risk substantial uncertainty and financial loss by losing all their rights and interests in the property securing the loan.
In addition, the settlement requires Countrywide to implement policies and practices to prevent discrimination if it returns to the lending business during the next four years. Countrywide currently operates as a subsidiary of Bank of America but does not originate new loans.
The department’s investigation into Countrywide’s lending practices began after referrals by the Board of Governors of the Federal Reserve and the Office of Thrift Supervision to the Justice Department’s Civil Rights Division in 2007 and 2008 for potential patterns or practices of discrimination by Countrywide.
Today’s announcement is part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF). President Obama established the interagency FFETF to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes. For more information on the task force, visitwww.StopFraud.gov.
A copy of the complaint and proposed settlement order, as well as additional information about fair lending enforcement by the Justice Department, can be obtained from the Justice Department website at www.justice.gov/fairhousing.
The proposed settlement provides for an independent administrator to contact and distribute payments of compensation at no cost to borrowers whom the Justice Department identifies as victims of Countrywide’s discrimination. The department will make a public announcement and post contact information on its website once an administrator is chosen. Borrowers who are eligible for compensation from the settlement will then be contacted by the administrator. Individuals who believe that they may have been victims of lending discrimination by Countrywide and have questions about the settlement may email the department at countrywide.settlement@usdoj.gov.
Friday, December 16, 2011
SEC Charges Former Fannie Mae And Freddie Mac Executives With Securities Fraud
Companies Agree to Cooperate in SEC Actions
Washington, D.C., Dec. 16, 2011 — The Securities and Exchange Commission today charged six former top executives of the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) with securities fraud, alleging they knew and approved of misleading statements claiming the companies had minimal holdings of higher-risk mortgage loans, including subprime loans.
Fannie Mae and Freddie Mac each entered into a Non-Prosecution Agreement with the Commission in which each company agreed to accept responsibility for its conduct and not dispute, contest, or contradict the contents of an agreed-upon Statement of Facts without admitting nor denying liability. Each also agreed to cooperate with the Commission's litigation against the former executives. In entering into these Agreements, the Commission considered the unique circumstances presented by the companies' current status, including the financial support provided to the companies by the U.S. Treasury, the role of the Federal Housing Finance Agency as conservator of each company, and the costs that may be imposed on U.S. taxpayers.
Three former Fannie Mae executives - former Chief Executive Officer Daniel H. Mudd, former Chief Risk Officer Enrico Dallavecchia, and former Executive Vice President of Fannie Mae's Single Family Mortgage business, Thomas A. Lund - were named in the SEC's complaint filed in U.S. District Court for the Southern District of New York.
The SEC also charged three former Freddie Mac executives — former Chairman of the Board and CEO Richard F. Syron, former Executive Vice President and Chief Business Officer Patricia L. Cook, and former Executive Vice President for the Single Family Guarantee business Donald J. Bisenius — in a separate complaint filed in the same court.
"Fannie Mae and Freddie Mac executives told the world that their subprime exposure was substantially smaller than it really was," said Robert Khuzami, Director of the SEC's Enforcement Division. "These material misstatements occurred during a time of acute investor interest in financial institutions' exposure to subprime loans, and misled the market about the amount of risk on the company's books. All individuals, regardless of their rank or position, will be held accountable for perpetuating half-truths or misrepresentations about matters materially important to the interest of our country's investors."
The SEC is seeking financial penalties, disgorgement of ill-gotten gains with interest, permanent injunctive relief and officer and director bars against Mudd, Dallavecchia, Lund, Syron, Cook, and Bisenius. Both lawsuits allege that the former executives caused the federal mortgage firms to materially misstate their holdings of subprime mortgage loans in periodic and other filings with the Commission, public statements, investor calls, and media interviews. The suit involving the Fannie Mae executives also includes similar allegations regarding Alt-A mortgage loans. The suit against the former Fannie Mae executives alleges they made misleading statements — or aided and abetted others — between December 2006 and August 2008. The former Freddie Mac executives are alleged to have made misleading statements — or aided and abetted others - between March 2007 and August 2008.
The SEC's complaint against the former Fannie Mae executives alleges that, when Fannie Mae began reporting its exposure to subprime loans in 2007, it broadly described the loans as those "made to borrowers with weaker credit histories," and then reported — with the knowledge, support, and approval of Mudd, Dallavecchia, and Lund — less than one-tenth of its loans that met that description. Fannie Mae reported that its 2006 year-end Single Family exposure to subprime loans was just 0.2 percent, or approximately $4.8 billion, of its Single Family loan portfolio. Investors were not told that in calculating the Company's reported exposure to subprime loans, Fannie Mae did not include loan products specifically targeted by Fannie Mae towards borrowers with weaker credit histories, including more than $43 billion of Expanded Approval, or "EA" loans.
Fannie Mae's executives also knew and approved of the decision to underreport Fannie Mae's Alt-A loan exposure, the SEC alleged. Fannie Mae disclosed that its March 31, 2007 exposure to Alt-A loans was 11 percent of its portfolio of Single Family loans. In reality, Fannie Mae's Alt-A exposure at that time was approximately 18 percent of its Single Family loan holdings.
The misleading disclosures were made as Fannie Mae's executives were seeking to increase the Company's market share through increased purchases of subprime and Alt-A loans, and gave false comfort to investors about the extent of Fannie Mae's exposure to high-risk loans, the SEC alleged.
In the complaint against the former Freddie Mac executives, the SEC alleged that they and Freddie Mac led investors to believe that the firm used a broad definition of subprime loans and was disclosing all of its Single-Family subprime loan exposure. Syron and Cook reinforced the misleading perception when they each publicly proclaimed that the Single Family business had "basically no subprime exposure." Unbeknown to investors, as of December 31, 2006, Freddie Mac's Single Family business was exposed to approximately $141 billion of loans internally referred to as "subprime" or "subprime like," accounting for 10 percent of the portfolio, and grew to approximately $244 billion, or 14 percent of the portfolio, as of June 30, 2008.
The SEC's complaint alleges that Mudd violated Section 10(b) of the Securities Exchange Act of 1934 (the "Exchange Act") and Rules 10b-5(b) and 13(a)14(a) thereunder, and Section 17(a)(2) of the Securities Act of 1933 (the "Securities Act"); and that Mudd aided and abetted Fannie Mae's violations of Sections 10(b) and 13(a) of the Exchange Act and Exchange Act Rules 10b-5(b), 12b-20, 13a-1, and 13a-13 thereunder. The SEC complaint also alleges that Dallavecchia violated Section 17(a)(2) of the Securities Act and aided and abetted Fannie Mae's violations of Sections 10(b) and 13(a) of the Exchange Act and Exchange Act Rules 10b-5(b), 12b-20, 13a-1, and 13a-13 thereunder. Finally, the SEC complaint alleges that Lund aided and abetted Fannie Mae's violations of Sections 10(b) and 13(a) of the Exchange Act and Exchange Act Rules 10b-5(b), 12b-20, 13a-1, and 13a-13 thereunder.
The SEC's complaint alleges that Syron and Cook violated Exchange Act Section 10(b) and Rule 10b-5(b) thereunder and Securities Act Section 17(a)(2); that Syron violated Exchange Act Rule 13a-14; and that Syron, Cook and Bisenius aided and abetted violations of Sections 10(b) and 13(a) of the Exchange Act and Rules 10b-5(b), 12b-20 and 13a-13 thereunder.
The SEC's investigation of Fannie Mae was conducted by Senior Attorneys Natasha S. Guinan, Christina M. Marshall, Liban Jama, Mona L. Benach, and Associate Chief Accountant, Peter Rosario, under the supervision of Assistant Director Charles E. Cain, and Associate Director Stephen L. Cohen. Sarah Levine and James Kidney will lead the SEC's litigation efforts.
The SEC's investigation of Freddie Mac was conducted by Senior Attorneys Giles T. Cohen and David S. Karp and Assistant Chief Accountant Avron Elbaum of the SEC's Division of Enforcement under the supervision of Assistant Director Charles E. Cain and Associate Director Stephen L. Cohen. Kevin O'Rourke and Suzanne Romajas will lead the SEC's litigation efforts.
Washington, D.C., Dec. 16, 2011 — The Securities and Exchange Commission today charged six former top executives of the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) with securities fraud, alleging they knew and approved of misleading statements claiming the companies had minimal holdings of higher-risk mortgage loans, including subprime loans.
Additional Materials
- SEC complaint vs. Freddie Mac executives
- SEC complaint vs. Fannie Mae executives
- Non-Prosecution Agreement - Freddie Mac
- Non-Prosecution Agreement - Fannie Mae
Fannie Mae and Freddie Mac each entered into a Non-Prosecution Agreement with the Commission in which each company agreed to accept responsibility for its conduct and not dispute, contest, or contradict the contents of an agreed-upon Statement of Facts without admitting nor denying liability. Each also agreed to cooperate with the Commission's litigation against the former executives. In entering into these Agreements, the Commission considered the unique circumstances presented by the companies' current status, including the financial support provided to the companies by the U.S. Treasury, the role of the Federal Housing Finance Agency as conservator of each company, and the costs that may be imposed on U.S. taxpayers.
Three former Fannie Mae executives - former Chief Executive Officer Daniel H. Mudd, former Chief Risk Officer Enrico Dallavecchia, and former Executive Vice President of Fannie Mae's Single Family Mortgage business, Thomas A. Lund - were named in the SEC's complaint filed in U.S. District Court for the Southern District of New York.
The SEC also charged three former Freddie Mac executives — former Chairman of the Board and CEO Richard F. Syron, former Executive Vice President and Chief Business Officer Patricia L. Cook, and former Executive Vice President for the Single Family Guarantee business Donald J. Bisenius — in a separate complaint filed in the same court.
"Fannie Mae and Freddie Mac executives told the world that their subprime exposure was substantially smaller than it really was," said Robert Khuzami, Director of the SEC's Enforcement Division. "These material misstatements occurred during a time of acute investor interest in financial institutions' exposure to subprime loans, and misled the market about the amount of risk on the company's books. All individuals, regardless of their rank or position, will be held accountable for perpetuating half-truths or misrepresentations about matters materially important to the interest of our country's investors."
The SEC is seeking financial penalties, disgorgement of ill-gotten gains with interest, permanent injunctive relief and officer and director bars against Mudd, Dallavecchia, Lund, Syron, Cook, and Bisenius. Both lawsuits allege that the former executives caused the federal mortgage firms to materially misstate their holdings of subprime mortgage loans in periodic and other filings with the Commission, public statements, investor calls, and media interviews. The suit involving the Fannie Mae executives also includes similar allegations regarding Alt-A mortgage loans. The suit against the former Fannie Mae executives alleges they made misleading statements — or aided and abetted others — between December 2006 and August 2008. The former Freddie Mac executives are alleged to have made misleading statements — or aided and abetted others - between March 2007 and August 2008.
The SEC's complaint against the former Fannie Mae executives alleges that, when Fannie Mae began reporting its exposure to subprime loans in 2007, it broadly described the loans as those "made to borrowers with weaker credit histories," and then reported — with the knowledge, support, and approval of Mudd, Dallavecchia, and Lund — less than one-tenth of its loans that met that description. Fannie Mae reported that its 2006 year-end Single Family exposure to subprime loans was just 0.2 percent, or approximately $4.8 billion, of its Single Family loan portfolio. Investors were not told that in calculating the Company's reported exposure to subprime loans, Fannie Mae did not include loan products specifically targeted by Fannie Mae towards borrowers with weaker credit histories, including more than $43 billion of Expanded Approval, or "EA" loans.
Fannie Mae's executives also knew and approved of the decision to underreport Fannie Mae's Alt-A loan exposure, the SEC alleged. Fannie Mae disclosed that its March 31, 2007 exposure to Alt-A loans was 11 percent of its portfolio of Single Family loans. In reality, Fannie Mae's Alt-A exposure at that time was approximately 18 percent of its Single Family loan holdings.
The misleading disclosures were made as Fannie Mae's executives were seeking to increase the Company's market share through increased purchases of subprime and Alt-A loans, and gave false comfort to investors about the extent of Fannie Mae's exposure to high-risk loans, the SEC alleged.
In the complaint against the former Freddie Mac executives, the SEC alleged that they and Freddie Mac led investors to believe that the firm used a broad definition of subprime loans and was disclosing all of its Single-Family subprime loan exposure. Syron and Cook reinforced the misleading perception when they each publicly proclaimed that the Single Family business had "basically no subprime exposure." Unbeknown to investors, as of December 31, 2006, Freddie Mac's Single Family business was exposed to approximately $141 billion of loans internally referred to as "subprime" or "subprime like," accounting for 10 percent of the portfolio, and grew to approximately $244 billion, or 14 percent of the portfolio, as of June 30, 2008.
The SEC's complaint alleges that Mudd violated Section 10(b) of the Securities Exchange Act of 1934 (the "Exchange Act") and Rules 10b-5(b) and 13(a)14(a) thereunder, and Section 17(a)(2) of the Securities Act of 1933 (the "Securities Act"); and that Mudd aided and abetted Fannie Mae's violations of Sections 10(b) and 13(a) of the Exchange Act and Exchange Act Rules 10b-5(b), 12b-20, 13a-1, and 13a-13 thereunder. The SEC complaint also alleges that Dallavecchia violated Section 17(a)(2) of the Securities Act and aided and abetted Fannie Mae's violations of Sections 10(b) and 13(a) of the Exchange Act and Exchange Act Rules 10b-5(b), 12b-20, 13a-1, and 13a-13 thereunder. Finally, the SEC complaint alleges that Lund aided and abetted Fannie Mae's violations of Sections 10(b) and 13(a) of the Exchange Act and Exchange Act Rules 10b-5(b), 12b-20, 13a-1, and 13a-13 thereunder.
The SEC's complaint alleges that Syron and Cook violated Exchange Act Section 10(b) and Rule 10b-5(b) thereunder and Securities Act Section 17(a)(2); that Syron violated Exchange Act Rule 13a-14; and that Syron, Cook and Bisenius aided and abetted violations of Sections 10(b) and 13(a) of the Exchange Act and Rules 10b-5(b), 12b-20 and 13a-13 thereunder.
The SEC's investigation of Fannie Mae was conducted by Senior Attorneys Natasha S. Guinan, Christina M. Marshall, Liban Jama, Mona L. Benach, and Associate Chief Accountant, Peter Rosario, under the supervision of Assistant Director Charles E. Cain, and Associate Director Stephen L. Cohen. Sarah Levine and James Kidney will lead the SEC's litigation efforts.
The SEC's investigation of Freddie Mac was conducted by Senior Attorneys Giles T. Cohen and David S. Karp and Assistant Chief Accountant Avron Elbaum of the SEC's Division of Enforcement under the supervision of Assistant Director Charles E. Cain and Associate Director Stephen L. Cohen. Kevin O'Rourke and Suzanne Romajas will lead the SEC's litigation efforts.
Thursday, December 1, 2011
Fannie Mae Announces Eviction Moratorium for the Holidays
WASHINGTON, DC – Fannie Mae (FNMA/OTC) announced today that it will suspend evictions of foreclosed single family and 2-4 unit properties from December 19th, 2011 through January 2nd, 2012. During this period, legal and administrative proceedings for evictions may continue, but families living in foreclosed properties will be permitted to remain in the home.
"The holidays are meant for families to spend time together, especially if they’ve gone through the stress of financial challenges and foreclosure,” said Terry Edwards, Executive Vice President of Credit Portfolio Management, Fannie Mae. “No family should have to give up their home during this holiday season. Fannie Mae is committed to helping borrowers avoid foreclosure whenever possible and we encourage any homeowner who is having difficulty making their payment to reach out for help.”
Homeowners with Fannie Mae-backed loans can call 1-800-7FANNIE or visit www.knowyouroptions.com for information and resources on foreclosure prevention options, including contact information for the Fannie Mae Mortgage Help Center or a HUD-approved counseling agency in their area.
"The holidays are meant for families to spend time together, especially if they’ve gone through the stress of financial challenges and foreclosure,” said Terry Edwards, Executive Vice President of Credit Portfolio Management, Fannie Mae. “No family should have to give up their home during this holiday season. Fannie Mae is committed to helping borrowers avoid foreclosure whenever possible and we encourage any homeowner who is having difficulty making their payment to reach out for help.”
Homeowners with Fannie Mae-backed loans can call 1-800-7FANNIE or visit www.knowyouroptions.com for information and resources on foreclosure prevention options, including contact information for the Fannie Mae Mortgage Help Center or a HUD-approved counseling agency in their area.
Monday, November 28, 2011
Judge Rejects Citigroup Settlement With SEC
The Associated Press
A federal judge on Monday struck down a $285 million settlement that
Citigroup reached with the Securities and Exchange Commission, citing a need for
clarity about the financial markets and the SEC's responsibility to ensure the
truth emerges.
U.S. District Judge Jed Rakoff said in a written ruling that "in any case like this that touches on the transparency of financial markets whose gyrations have so depressed our economy and debilitated our lives, there is an overriding public interest in knowing the truth."
The deal would have imposed penalties on Citigroup even as it allowed the company to deny allegations that it misled investors on a complex mortgage investment. The SEC accused the bank of betting against the investment in 2007 and making $160 million, while investors lost millions.
The SEC allowed a consent judgment settling the case to be filed the same day it filed its lawsuit against Citigroup, the judge noted.
"It is harder to discern from the limited information before the court what the SEC is getting from this settlement other than a quick headline," the judge wrote.
"In much of the world, propaganda reigns, and truth is confined to secretive, fearful whispers," Rakoff said. "Even in our nation, apologists for suppressing or obscuring the truth may always be found. But the SEC, of all agencies, has a duty, inherent in its statutory mission, to see that the truth emerges; and if it fails to do so, this court must not, in the name of deference or convenience, grant judicial enforcement to the agency's contrivances."
He set a July 16 trial date for the case.
Messages seeking comment were left with both sides.
November 28, 2011
U.S. District Judge Jed Rakoff said in a written ruling that "in any case like this that touches on the transparency of financial markets whose gyrations have so depressed our economy and debilitated our lives, there is an overriding public interest in knowing the truth."
The deal would have imposed penalties on Citigroup even as it allowed the company to deny allegations that it misled investors on a complex mortgage investment. The SEC accused the bank of betting against the investment in 2007 and making $160 million, while investors lost millions.
The SEC allowed a consent judgment settling the case to be filed the same day it filed its lawsuit against Citigroup, the judge noted.
"It is harder to discern from the limited information before the court what the SEC is getting from this settlement other than a quick headline," the judge wrote.
"In much of the world, propaganda reigns, and truth is confined to secretive, fearful whispers," Rakoff said. "Even in our nation, apologists for suppressing or obscuring the truth may always be found. But the SEC, of all agencies, has a duty, inherent in its statutory mission, to see that the truth emerges; and if it fails to do so, this court must not, in the name of deference or convenience, grant judicial enforcement to the agency's contrivances."
He set a July 16 trial date for the case.
Messages seeking comment were left with both sides.
Tuesday, November 22, 2011
HARP May Be Playing Your Song!
Home Affordable Refinance Program (HARP)
If you are current on your mortgage and have been unable to obtain a
traditional refinance because the value of your home has declined, you may be
eligible to refinance through HARP. HARP is designed to help you refinance into
a new affordable, more stable mortgage. The HARP loan is a new loan and will
require a loan application and underwriting process. Loan refinance fees will
apply.
You may be eligible to apply if you meet all of the following:
The HARP program is offered by many servicers. Homeowners should check with their mortgage servicer (the company to which homeowners make their mortgage payments) to determine if they are participating in HARP. If their mortgage servicer is not participating, the homeowner may contact other lenders that participate in HARP to determine if they are eligible for a refinance.
Eligibility*
You may be eligible to apply if you meet all of the following:
- Your mortgage must be owned or guaranteed by Freddie Mac or Fannie Mae.
- The mortgage must have been sold to Freddie Mac or Fannie Mae on or before May 31, 2009.
- The mortgage cannot have been refinanced under HARP previously unless it is a Fannie Mae loan that was refinanced under HARP from March-May 2009.
- You must be current on your mortgage at the time of the refinance with no late payment in the last six months and no more than one late payment in the past twelve months.
- The current loan-to-value (LTV) ratio must be greater than 80%.
Program Availability
The HARP program is offered by many servicers. Homeowners should check with their mortgage servicer (the company to which homeowners make their mortgage payments) to determine if they are participating in HARP. If their mortgage servicer is not participating, the homeowner may contact other lenders that participate in HARP to determine if they are eligible for a refinance.
Steps to HARP Refinance
- Determine whether your mortgage is owned or guaranteed by Fannie Mae or Freddie Mac by visiting their respective Loan Lookup tools.
- Contact your current mortgage servicer or another that is approved by Fannie Mae or Freddie Mac to inquire about HARP.
- Compare rates and costs with additional mortgage companies to ensure best refinance terms.
For More Information
- Visit FannieMae.com or call (800)7Fannie.
- Visit FreddieMac.com, call (800)Freddie, Option 2
- If you have additional questions about getting mortgage help, contact one of our housing advisors at (888) 995-HOPE begin_of_the_skype_highlighting (888) 995-HOPE end_of_the_skype_highlighting (4673). These HUD-approved housing counselors will help you understand your options, design a plan to suit your individual situation, and prepare your application. Research shows that homeowners who work with housing counselors like these are more successful and have better long-term outcomes. There is no cost to you for this valuable, around-the-clock service. Help is available in more than 160 languages.
Thursday, November 17, 2011
OFFICE OF THE ATTORNEY GENERAL ANNOUNCES INDICTMENT IN MASSIVE CLARK COUNTY ROBO-SIGNING SCHEME
FOR IMMEDIATE RELEASE
DATE: November 16, 2011 702-486-3782
OFFICE OF THE ATTORNEY GENERAL ANNOUNCES INDICTMENT IN MASSIVE
CLARK COUNTY ROBO-SIGNING SCHEME
Defendants to be Held Criminally Accountable for Filing Tens of Thousands of
Fraudulent Foreclosure Documents
Carson City, NV –
The Office of the Nevada Attorney General announced today that the Clark County grand jury has returned a 606 count indictment against two title officers, Gary Trafford and Gerri Sheppard, who directed and supervised a robo-signing scheme which resulted in the filing of tens of thousands of fraudulent documents with the Clark County Recorder’s Office between 2005 and 2008.
According to the indictment, defendant Gary Trafford, a California resident, is charged with 102 counts of offering false instruments for recording (category C felony); false certification on certain instruments (category D felony); and notarization of the signature of a person not in the presence of a notary public (a gross misdemeanor). The indictment charges defendant Gerri Sheppard, also a California resident, with 100 counts of offering false instruments for recording (category C felony); false certification on certain instruments (category D felony); and notarization of the signature of a person not in the presence of a notary public (a gross misdemeanor).
”The grand jury found probable cause that there was a robo-signing scheme which resulted in the filing of tens of thousands of fraudulent documents with the Clark County Recorder’s Office between 2005 and 2008,”said Chief Deputy Attorney General John Kelleher.
The indictment alleges that both defendants directed the fraudulent notarization and filing of documents which were used to initiate foreclosure on local homeowners. The State alleges that these documents, referred to as Notices of Default, or “NODs”, were prepared locally. The State alleges that the defendants directed employees under their supervision, to forge their names on foreclosure documents, then notarize the signatures they just forged, thereby fraudulently attesting that the defendants actually signed the documents, which was untrue and in violation of State law. The defendants then allegedly directed the employees under their supervision to file the fraudulent documents with the Clark County Recorder’s office, to be used to start foreclosures on homes throughout the County.
The indictment alleges that these crimes were done in secret in order to avoid detection. The fraudulent NODs were allegedly forged locally to allow them to be filed at the Clark County Recorder’s office on the same day they were prepared.
District Court Judge Jennifer Togliatti has set bail in the amount of $500,000 for Sheppard and $500,000 for Trafford. The case has been assigned to Department 5 District Court Judge Carolyn Ellsworth who will preside over the case.
Anyone who has information regarding this case is asked to contact the Attorney General’s Office at 702-486-3777 in Las Vegas or 775-684-1180 in Carson City.
Read the indictment by visiting:
http://bit.ly/TraffordSheppardIndictment
Students Swap Dorms for McMansions?
Daily Real Estate News | Thursday, November 17, 2011
Some college students are trading in cramped dorm rooms for ultra-large luxury McMansions, complete with Jacuzzis, grand great rooms, five-bedrooms, chandeliers, and three-car garages.
For example, in Merced, Calif., which has been hard-hit by the foreclosure crisis, college students in the community who are facing a shortage of dorm space are finding housing from the McMansions that had been overbuilt in the area during the housing boom and now stand vacant, The New York Times reports.
College students are finding good deals too. In Merced, which is home to a University of California campus, sharing a McMansion may only cost them about $200 to $350 per month each, and they get more space to spread out and extra amenities compared to a smaller dorm on-campus that may cost about $13,720 per year. What’s more, the McMansions have also become the answer to a shortage of housing on campus: The university only has room for 1,600 students in campus dorms but 5,200 are enrolled.
The college students moving into these homes in the suburbs have helped with Merced’s foreclosure problem (the city ranks third in the nation for foreclosures). Students moving in and sharing these houses that had stood empty have been “a blessing,” Ellie Wooten, a real estate broker in Merced, told The New York Times.
Source: “Animal McMansion: Students Trade Dorm for Suburban Luxury,” The New York Times (Nov. 12, 2011)
For example, in Merced, Calif., which has been hard-hit by the foreclosure crisis, college students in the community who are facing a shortage of dorm space are finding housing from the McMansions that had been overbuilt in the area during the housing boom and now stand vacant, The New York Times reports.
College students are finding good deals too. In Merced, which is home to a University of California campus, sharing a McMansion may only cost them about $200 to $350 per month each, and they get more space to spread out and extra amenities compared to a smaller dorm on-campus that may cost about $13,720 per year. What’s more, the McMansions have also become the answer to a shortage of housing on campus: The university only has room for 1,600 students in campus dorms but 5,200 are enrolled.
The college students moving into these homes in the suburbs have helped with Merced’s foreclosure problem (the city ranks third in the nation for foreclosures). Students moving in and sharing these houses that had stood empty have been “a blessing,” Ellie Wooten, a real estate broker in Merced, told The New York Times.
Source: “Animal McMansion: Students Trade Dorm for Suburban Luxury,” The New York Times (Nov. 12, 2011)
Monday, November 14, 2011
Check Your Checkbook!
November was to be the month that many large banks, such as Bank of America, Wells Fargo and Chase, were to implement debit card fees. After a storm of protests from consumers, the banks backed away from these charges and checking account holders patted themselves on the back for winning the battle against the large banks.
But congratulations may be premature. Banks learned an important lesson from this episode. The lesson was not that they can't get away with charging extra fees; the lesson was that they must do it quietly so as not to create a storm of bad press.
In the coming months, carefully watch your checking account statements for added fees. What sort of fees? Do you do mobile banking? Need to wire funds? Want to replace your lost debit card? Do you have a monthly maintenance fee on your account? You can bet your bank is looking at either implementing or increasing these fees.
What can you do? First, read those "change to account" notices that come in the mail to see if your bank is notifying you about upcoming fee increases. Carefully check your account statements to track what activities incur a charge.
If you find that the bank is charging fees, you may want to switch to another bank or credit union that has lower (or no) fees.
But congratulations may be premature. Banks learned an important lesson from this episode. The lesson was not that they can't get away with charging extra fees; the lesson was that they must do it quietly so as not to create a storm of bad press.
In the coming months, carefully watch your checking account statements for added fees. What sort of fees? Do you do mobile banking? Need to wire funds? Want to replace your lost debit card? Do you have a monthly maintenance fee on your account? You can bet your bank is looking at either implementing or increasing these fees.
What can you do? First, read those "change to account" notices that come in the mail to see if your bank is notifying you about upcoming fee increases. Carefully check your account statements to track what activities incur a charge.
If you find that the bank is charging fees, you may want to switch to another bank or credit union that has lower (or no) fees.
Monday, October 24, 2011
FHFA, Fannie Mae and Freddie Mac Announce HARP Changes to Reach More Borrowers
For Immediate Release October 24, 2011
Washington, DC – The Federal Housing Finance Agency, with Fannie Mae and Freddie Mac (the Enterprises), today announced a series of changes to the Home Affordable Refinance Program (HARP) in an effort to attract more eligible borrowers who can benefit from refinancing their home mortgage. The program enhancements were developed at FHFA’s direction with input from lenders, mortgage insurers and other industry participants.
"We know that there are many homeowners who are eligible to refinance under HARP and those are the borrowers we want to reach," said FHFA Acting Director Edward J. DeMarco. "Building on the industry’s experience with HARP over the last two years, we have identified several changes that will make the program accessible to more borrowers with mortgages owned or guaranteed by the Enterprises. Our goal in pursuing these changes is to create refinancing opportunities for these borrowers, while reducing risk for Fannie Mae and Freddie Mac and bringing a measure of stability to housing markets."
Fannie Mae and Freddie Mac have helped approximately 9 million families refinance into a lower cost or more sustainable mortgage product, approximately 10 percent of those via HARP.
HARP is unique in that it is the only refinance program that enables borrowers who owe more than their home is worth to take advantage of low interest rates and other refinancing benefits. This program will continue to be available to borrowers with loans sold to the Enterprises on or before May 31, 2009 with current loan-t0-value (LTV) ratios above 80 percent.
The new program enhancements address several other key aspects of HARP including:
Eliminating certain risk-based fees for borrowers who refinance into shorter-term mortgages and lowering fees for other borrowers;
Removing the current 125 percent LTV ceiling for fixed-rate mortgages backed by Fannie Mae and Freddie Mac;
Waiving certain representations and warranties that lenders commit to in making loans owned or guaranteed by Fannie Mae and Freddie Mac;
Eliminating the need for a new property appraisal where there is a reliable AVM (automated valuation model) estimate provided by the Enterprises; and
Extending the end date for HARP until Dec. 31, 2013 for loans originally sold to the Enterprises on or before May 31, 2009.
An important element of these changes is the encouragement, through elimination of certain risk-based fees, for borrowers to utilize HARP to refinance into shorter-term mortgages. Borrowers who owe more on their house than the house is worth will be able to reduce the balance owed much faster if they take advantage of today’s low interest rates by shortening the term of their mortgage.
Wednesday, October 19, 2011
Citigroup to Pay $285 Million to Settle SEC Charges for Misleading Investors About CDO Tied to Housing Market
FOR IMMEDIATE RELEASE
2011-214
Washington, D.C., Oct. 19, 2011 – The Securities and Exchange
Commission today charged Citigroup’s principal U.S. broker-dealer subsidiary
with misleading investors about a $1 billion collateralized debt obligation
(CDO) tied to the U.S. housing market in which Citigroup bet against investors
as the housing market showed signs of distress. The CDO defaulted within months,
leaving investors with losses while Citigroup made $160 million in fees and
trading profits.
The SEC alleges that Citigroup Global Markets structured and marketed a CDO called Class V Funding III and exercised significant influence over the selection of $500 million of the assets included in the CDO portfolio. Citigroup then took a proprietary short position against those mortgage-related assets from which it would profit if the assets declined in value. Citigroup did not disclose to investors its role in the asset selection process or that it took a short position against the assets it helped select.
Citigroup has agreed to settle the SEC’s charges by paying a total of $285 million, which will be returned to investors.
The SEC also charged Brian Stoker, the Citigroup employee primarily responsible for structuring the CDO transaction. The agency brought separate settled charges against Credit Suisse’s asset management unit, which served as the collateral manager for the CDO transaction, as well as the Credit Suisse portfolio manager primarily responsible for the transaction, Samir H. Bhatt.
“The securities laws demand that investors receive more care and candor than Citigroup provided to these CDO investors,” said Robert Khuzami, Director of the SEC’s Division of Enforcement. “Investors were not informed that Citgroup had decided to bet against them and had helped choose the assets that would determine who won or lost.”
Kenneth R. Lench, Chief of the Structured and New Products Unit in the SEC Division of Enforcement, added, “As the collateral manager, Credit Suisse also was responsible for the disclosure failures and breached its fiduciary duty to investors when it allowed Citigroup to significantly influence the portfolio selection process.”
According to the SEC’s complaints filed in U.S. District Court for the Southern District of New York, personnel from Citigroup’s CDO trading and structuring desks had discussions around October 2006 about the possibility of establishing a short position in a specific group of assets by using credit default swaps (CDS) to buy protection on those assets from a CDO that Citigroup would structure and market. After discussions began with Credit Suisse Alternative Capital (CSAC) about acting as the collateral manager for a proposed CDO transaction, Stoker sent an e-mail to his supervisor. He wrote that he hoped the transaction would go forward and described it as the Citigroup trading desk head’s “prop trade (don’t tell CSAC). CSAC agreed to terms even though they don’t get to pick the assets.”
The SEC alleges that during the time when the transaction was being structured, CSAC allowed Citigroup to exercise significant influence over the selection of assets included in the Class V III portfolio. The transaction was marketed primarily through a pitch book and an offering circular for which Stoker was chiefly responsible. The pitch book and the offering circular were materially misleading because they failed to disclose that Citigroup had played a substantial role in selecting the assets and had taken a $500 million short position that was comprised of names it had been allowed to select. Citigroup did not short names that it had no role in selecting. Nothing in the disclosures put investors on notice that Citigroup had interests that were adverse to the interests of CDO investors.
According to the SEC’s complaints, the Class V III transaction closed on Feb. 28, 2007. One experienced CDO trader characterized the Class V III portfolio in an e-mail as “dogsh!t” and “possibly the best short EVER!” An experienced collateral manager commented that “the portfolio is horrible.” On Nov. 7, 2007, a credit rating agency downgraded every tranche of Class V III, and on Nov. 19, 2007, Class V III was declared to be in an Event of Default. The approximately 15 investors in the Class V III transaction lost virtually their entire investments while Citigroup received fees of approximately $34 million for structuring and marketing the transaction and additionally realized net profits of at least $126 million from its short position.
The SEC alleges that Citigroup and Stoker each violated Sections 17(a)(2) and (3) of the Securities Act of 1933. While the SEC’s litigation continues against Stoker, Citigroup has consented to settle the SEC’s charges without admitting or denying the SEC’s allegations. The settlement is subject to court approval. Citigroup consented to the entry of a final judgment that enjoins it from violating these provisions. The settlement requires Citigroup to pay $160 million in disgorgement plus $30 million in prejudgment interest and a $95 million penalty for a total of $285 million that will be returned to investors through a Fair Fund distribution. The settlement also requires remedial action by Citigroup in its review and approval of offerings of certain mortgage-related securities.
The SEC instituted related administrative proceedings against CSAC, its successor in interest Credit Suisse Asset Management (CSAM), and Bhatt. The SEC found that as a result of the roles that they played in the asset selection process and the preparation of the pitch book and the offering circular for the Class V III transaction, CSAM and CSAC violated Section 206(2) of the Investment Advisers Act of 1940 (Advisers Act) and Section 17(a)(2) of the Securities Act and that Bhatt violated Section 17(a)(2) of the Securities Act and caused the violations of Section 206(2) of the Advisers Act by CSAC.
Without admitting or denying the SEC’s findings, CSAM and CSAC consented to the issuance of an order directing each of them to cease and desist from committing or causing any violations, or future violations, of Section 206(2) of the Advisers Act and Section 17(a)(2) of the Securities Act and requiring them to pay disgorgement of $1 million in fees that it received from the Class V III transaction plus $250,000 in prejudgment interest, and requiring them to pay a penalty of $1.25 million. Without admitting or denying the SEC’s findings, Bhatt consented to the issuance of an order directing him to cease and desist from committing or causing any violations or future violations of Section 206(2) of the Advisers Act and Section 17(a)(2) of the Securities Act and suspending him from association with any investment adviser for a period of six months.
The SEC’s investigation was conducted by Andrew H. Feller and Thomas D. Silverstein of the Enforcement Division’s Structured and New Products Unit with assistance from Steven Rawlings, Brenda Chang and Elisabeth Goot of the New York Regional Office. The SEC trial attorney who will lead the litigation against Stoker is Jeffrey Infelise.
2011-214
The SEC alleges that Citigroup Global Markets structured and marketed a CDO called Class V Funding III and exercised significant influence over the selection of $500 million of the assets included in the CDO portfolio. Citigroup then took a proprietary short position against those mortgage-related assets from which it would profit if the assets declined in value. Citigroup did not disclose to investors its role in the asset selection process or that it took a short position against the assets it helped select.
Citigroup has agreed to settle the SEC’s charges by paying a total of $285 million, which will be returned to investors.
The SEC also charged Brian Stoker, the Citigroup employee primarily responsible for structuring the CDO transaction. The agency brought separate settled charges against Credit Suisse’s asset management unit, which served as the collateral manager for the CDO transaction, as well as the Credit Suisse portfolio manager primarily responsible for the transaction, Samir H. Bhatt.
“The securities laws demand that investors receive more care and candor than Citigroup provided to these CDO investors,” said Robert Khuzami, Director of the SEC’s Division of Enforcement. “Investors were not informed that Citgroup had decided to bet against them and had helped choose the assets that would determine who won or lost.”
Kenneth R. Lench, Chief of the Structured and New Products Unit in the SEC Division of Enforcement, added, “As the collateral manager, Credit Suisse also was responsible for the disclosure failures and breached its fiduciary duty to investors when it allowed Citigroup to significantly influence the portfolio selection process.”
According to the SEC’s complaints filed in U.S. District Court for the Southern District of New York, personnel from Citigroup’s CDO trading and structuring desks had discussions around October 2006 about the possibility of establishing a short position in a specific group of assets by using credit default swaps (CDS) to buy protection on those assets from a CDO that Citigroup would structure and market. After discussions began with Credit Suisse Alternative Capital (CSAC) about acting as the collateral manager for a proposed CDO transaction, Stoker sent an e-mail to his supervisor. He wrote that he hoped the transaction would go forward and described it as the Citigroup trading desk head’s “prop trade (don’t tell CSAC). CSAC agreed to terms even though they don’t get to pick the assets.”
The SEC alleges that during the time when the transaction was being structured, CSAC allowed Citigroup to exercise significant influence over the selection of assets included in the Class V III portfolio. The transaction was marketed primarily through a pitch book and an offering circular for which Stoker was chiefly responsible. The pitch book and the offering circular were materially misleading because they failed to disclose that Citigroup had played a substantial role in selecting the assets and had taken a $500 million short position that was comprised of names it had been allowed to select. Citigroup did not short names that it had no role in selecting. Nothing in the disclosures put investors on notice that Citigroup had interests that were adverse to the interests of CDO investors.
According to the SEC’s complaints, the Class V III transaction closed on Feb. 28, 2007. One experienced CDO trader characterized the Class V III portfolio in an e-mail as “dogsh!t” and “possibly the best short EVER!” An experienced collateral manager commented that “the portfolio is horrible.” On Nov. 7, 2007, a credit rating agency downgraded every tranche of Class V III, and on Nov. 19, 2007, Class V III was declared to be in an Event of Default. The approximately 15 investors in the Class V III transaction lost virtually their entire investments while Citigroup received fees of approximately $34 million for structuring and marketing the transaction and additionally realized net profits of at least $126 million from its short position.
The SEC alleges that Citigroup and Stoker each violated Sections 17(a)(2) and (3) of the Securities Act of 1933. While the SEC’s litigation continues against Stoker, Citigroup has consented to settle the SEC’s charges without admitting or denying the SEC’s allegations. The settlement is subject to court approval. Citigroup consented to the entry of a final judgment that enjoins it from violating these provisions. The settlement requires Citigroup to pay $160 million in disgorgement plus $30 million in prejudgment interest and a $95 million penalty for a total of $285 million that will be returned to investors through a Fair Fund distribution. The settlement also requires remedial action by Citigroup in its review and approval of offerings of certain mortgage-related securities.
The SEC instituted related administrative proceedings against CSAC, its successor in interest Credit Suisse Asset Management (CSAM), and Bhatt. The SEC found that as a result of the roles that they played in the asset selection process and the preparation of the pitch book and the offering circular for the Class V III transaction, CSAM and CSAC violated Section 206(2) of the Investment Advisers Act of 1940 (Advisers Act) and Section 17(a)(2) of the Securities Act and that Bhatt violated Section 17(a)(2) of the Securities Act and caused the violations of Section 206(2) of the Advisers Act by CSAC.
Without admitting or denying the SEC’s findings, CSAM and CSAC consented to the issuance of an order directing each of them to cease and desist from committing or causing any violations, or future violations, of Section 206(2) of the Advisers Act and Section 17(a)(2) of the Securities Act and requiring them to pay disgorgement of $1 million in fees that it received from the Class V III transaction plus $250,000 in prejudgment interest, and requiring them to pay a penalty of $1.25 million. Without admitting or denying the SEC’s findings, Bhatt consented to the issuance of an order directing him to cease and desist from committing or causing any violations or future violations of Section 206(2) of the Advisers Act and Section 17(a)(2) of the Securities Act and suspending him from association with any investment adviser for a period of six months.
The SEC’s investigation was conducted by Andrew H. Feller and Thomas D. Silverstein of the Enforcement Division’s Structured and New Products Unit with assistance from Steven Rawlings, Brenda Chang and Elisabeth Goot of the New York Regional Office. The SEC trial attorney who will lead the litigation against Stoker is Jeffrey Infelise.
Wednesday, October 12, 2011
SEC Charges Bank Executives With Hiding Millions of Dollars in Losses During 2008 Financial Crisis
FOR IMMEDIATE RELEASE
2011-202
Washington, D.C., Oct. 11, 2011 – The Securities and Exchange Commission today charged former bank executives with misleading investors about mounting loan losses at San Francisco-based United Commercial Bank during the height of the financial crisis in 2008 and 2009.
The SEC alleges that the bank’s former chief executive officer Thomas Wu, chief operating officer Ebrahim Shabudin, and senior officer Thomas Yu concealed losses on loans and other assets from the bank’s auditors, causing the bank’s public holding company UCBH Holdings Inc. (UCBH) to understate 2008 operating losses by at least $65 million (approximately 50 percent). A few months later, continued declines in the value of the bank’s loans led the bank to fail, and the California Department of Financial Institutions closed the bank and appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. United Commercial Bank was one of the 10 largest bank failures of the recent financial crisis, causing a loss of $2.5 billion to the FDIC’s insurance fund.
“Today’s charges reflect an all too familiar pattern – corporate executives once seen as rising stars embrace deception to avoid losses and conceal negative news, with investors and the FDIC insurance fund left to pick up the pieces,” said Robert Khuzami, Director of the SEC’s Division of Enforcement. “But accountability for these executives begins today.”
Marc Fagel, Director of the SEC’s San Francisco Regional Office, added, “This investigation shows how federal regulators can work together to ferret out fraud by the guardians of financial institutions entrusted to deal honestly with public investors.”
According to the SEC’s complaint filed in federal court in San Francisco, UCBH and its subsidiary United Commercial Bank grew rapidly, doubling in size after an initial public offering in 1998. It was the first U.S. bank to acquire a bank in the People’s Republic of China, and Wu was considered a rising star in the banking industry. By 2009, however, Wu found himself at the helm of a bank on the brink of failure.
The SEC alleges that Wu, Shabudin, and Yu deliberately delayed the proper recording of loan losses, and each committed securities fraud by making false and misleading statements to investors and UCBH’s independent auditors. During December 2008 and the first three months of 2009 as the company prepared its 2008 financial statements, Wu, Shabudin, and Yu were aware of significant losses on several large loans. Among other things, these executives allegedly learned about dramatically reduced property appraisals and worthless collateral securing the loans, yet they repeatedly hid this information from UCBH’s auditors and investors.
The SEC’s complaint also alleges that the bank’s former chief financial officer Craig On acted negligently by misleading the company’s outside auditors and aiding the filing of false financial statements. On agreed to settle the SEC charges without admitting or denying the allegations. He will be permanently enjoined from violating certain antifraud, reporting, record-keeping, and internal controls provisions of the federal securities laws and will pay a $150,000 penalty. On also consented to an administrative order suspending him from appearing or practicing before the SEC as an accountant, with a right to apply for reinstatement after five years.
The litigation against the other defendants is ongoing.
Lloyd Farnham, Michael Fortunato, Jason Habermeyer, and Cary Robnett of the SEC’s San Francisco Regional Office conducted the SEC’s investigation. The SEC’s litigation will be handled by Lloyd Farnham and Robert Mitchell.
The U.S. Attorney for the Northern District of California today announced parallel criminal charges against former employees of the bank, and the FDIC announced enforcement actions against 13 individuals for violations of federal banking regulations.
The SEC acknowledges the assistance of the FDIC, U.S. Attorney’s Office for the Northern District of California, Federal Bureau of Investigation, Office of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP), FDIC’s Office of Inspector General, and Office of Inspector General for the Board of Governors of the Federal Reserve System.
2011-202
Washington, D.C., Oct. 11, 2011 – The Securities and Exchange Commission today charged former bank executives with misleading investors about mounting loan losses at San Francisco-based United Commercial Bank during the height of the financial crisis in 2008 and 2009.
The SEC alleges that the bank’s former chief executive officer Thomas Wu, chief operating officer Ebrahim Shabudin, and senior officer Thomas Yu concealed losses on loans and other assets from the bank’s auditors, causing the bank’s public holding company UCBH Holdings Inc. (UCBH) to understate 2008 operating losses by at least $65 million (approximately 50 percent). A few months later, continued declines in the value of the bank’s loans led the bank to fail, and the California Department of Financial Institutions closed the bank and appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. United Commercial Bank was one of the 10 largest bank failures of the recent financial crisis, causing a loss of $2.5 billion to the FDIC’s insurance fund.
“Today’s charges reflect an all too familiar pattern – corporate executives once seen as rising stars embrace deception to avoid losses and conceal negative news, with investors and the FDIC insurance fund left to pick up the pieces,” said Robert Khuzami, Director of the SEC’s Division of Enforcement. “But accountability for these executives begins today.”
Marc Fagel, Director of the SEC’s San Francisco Regional Office, added, “This investigation shows how federal regulators can work together to ferret out fraud by the guardians of financial institutions entrusted to deal honestly with public investors.”
According to the SEC’s complaint filed in federal court in San Francisco, UCBH and its subsidiary United Commercial Bank grew rapidly, doubling in size after an initial public offering in 1998. It was the first U.S. bank to acquire a bank in the People’s Republic of China, and Wu was considered a rising star in the banking industry. By 2009, however, Wu found himself at the helm of a bank on the brink of failure.
The SEC alleges that Wu, Shabudin, and Yu deliberately delayed the proper recording of loan losses, and each committed securities fraud by making false and misleading statements to investors and UCBH’s independent auditors. During December 2008 and the first three months of 2009 as the company prepared its 2008 financial statements, Wu, Shabudin, and Yu were aware of significant losses on several large loans. Among other things, these executives allegedly learned about dramatically reduced property appraisals and worthless collateral securing the loans, yet they repeatedly hid this information from UCBH’s auditors and investors.
The SEC’s complaint also alleges that the bank’s former chief financial officer Craig On acted negligently by misleading the company’s outside auditors and aiding the filing of false financial statements. On agreed to settle the SEC charges without admitting or denying the allegations. He will be permanently enjoined from violating certain antifraud, reporting, record-keeping, and internal controls provisions of the federal securities laws and will pay a $150,000 penalty. On also consented to an administrative order suspending him from appearing or practicing before the SEC as an accountant, with a right to apply for reinstatement after five years.
The litigation against the other defendants is ongoing.
Lloyd Farnham, Michael Fortunato, Jason Habermeyer, and Cary Robnett of the SEC’s San Francisco Regional Office conducted the SEC’s investigation. The SEC’s litigation will be handled by Lloyd Farnham and Robert Mitchell.
The U.S. Attorney for the Northern District of California today announced parallel criminal charges against former employees of the bank, and the FDIC announced enforcement actions against 13 individuals for violations of federal banking regulations.
The SEC acknowledges the assistance of the FDIC, U.S. Attorney’s Office for the Northern District of California, Federal Bureau of Investigation, Office of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP), FDIC’s Office of Inspector General, and Office of Inspector General for the Board of Governors of the Federal Reserve System.
Tuesday, October 11, 2011
Scammers Use Vacant Homes as Bait
Daily Real Estate News | Tuesday, October 11, 2011
Las Vegas police and real estate agents are warning renters of a new scam in the area, which has also been stretching nationwide. Scammers are posting housing ads online, such as on Craig’s List, that promote a vacant home available for rent. The unsuspecting renter pays a security deposit and sends monthly rent checks to who they believe is their landlord.
But the landlord doesn’t really own the property and is pocketing the money, police and agents warn. Scammers are targeting vacant homes and foreclosed properties in the rental scam, they say.
Brenda Crosbie-Jaeger, a real estate agent in Las Vegas, says the scammers are posing as real estate professionals and putting together fake lease agreements and forging the seller’s name. They’re also changing the locks on the house so the new renters can move in.
Police are encouraging renters to work with a licensed real estate professional or property management firms to make sure they’re renting a property that is indeed for rent.
Source: “Police, Realtors Warn of Vacant Home Rental Scam,” KTNV-13 News (Oct. 7. 2011)
But the landlord doesn’t really own the property and is pocketing the money, police and agents warn. Scammers are targeting vacant homes and foreclosed properties in the rental scam, they say.
Brenda Crosbie-Jaeger, a real estate agent in Las Vegas, says the scammers are posing as real estate professionals and putting together fake lease agreements and forging the seller’s name. They’re also changing the locks on the house so the new renters can move in.
Police are encouraging renters to work with a licensed real estate professional or property management firms to make sure they’re renting a property that is indeed for rent.
Source: “Police, Realtors Warn of Vacant Home Rental Scam,” KTNV-13 News (Oct. 7. 2011)
Thursday, October 6, 2011
Lawsuit Accuses Banks of Cheating Veterans
Daily Real Estate News | Thursday, October 06, 2011
A federal lawsuit filed in 2006, but unsealed until this week, accuses 13 large banks and mortgage companies of overcharging military veterans who were applying for home loans guaranteed by the Department of Veterans Affairs.
Federal law does not allow lenders to charge attorney fees and settlement closing costs with certain home loans for military vets. They’re only allowed to charge “reasonable and customary” fees. But the lawsuit claims military veterans were charged attorney fees on thousands of loans, and banks covered up the charges by labeling them as “title examination” or “title search” fees.
Banks named in the lawsuit include lending giants such as Wells Fargo, JPMorgan Chase & Co., and Bank of America. The banks have denied any wrongdoing in court documents, Associated Press reports.
About 90 percent of more than 1.2 million refinance loans that have been made to veterans and their families in the past decade have been found to have alleged fraud, the Associated Press reports in an interview with the plaintiff’s attorney.
"This is a massive fraud on the American taxpayers and American veterans," James E. Butler Jr., one of the attorneys who brought the case, told the Associated Press.
Source: “Federal Lawsuit Claims Banks, Mortgage Companies Cheated Veterans by Hiding Illegal Fees,” Associated Press (Oct. 4, 2011)
Federal law does not allow lenders to charge attorney fees and settlement closing costs with certain home loans for military vets. They’re only allowed to charge “reasonable and customary” fees. But the lawsuit claims military veterans were charged attorney fees on thousands of loans, and banks covered up the charges by labeling them as “title examination” or “title search” fees.
Banks named in the lawsuit include lending giants such as Wells Fargo, JPMorgan Chase & Co., and Bank of America. The banks have denied any wrongdoing in court documents, Associated Press reports.
About 90 percent of more than 1.2 million refinance loans that have been made to veterans and their families in the past decade have been found to have alleged fraud, the Associated Press reports in an interview with the plaintiff’s attorney.
"This is a massive fraud on the American taxpayers and American veterans," James E. Butler Jr., one of the attorneys who brought the case, told the Associated Press.
Source: “Federal Lawsuit Claims Banks, Mortgage Companies Cheated Veterans by Hiding Illegal Fees,” Associated Press (Oct. 4, 2011)
Tuesday, September 27, 2011
Scam Dupes Home Owners into False Loan Audits
Daily Real Estate News | Tuesday, September 27, 2011
More home owners are being tricked into a forensic loan audit, a new scam that targets struggling home owners looking for a loan modification to save their home from foreclosure.
Several organizations, usually linking themselves to attorney and auditor organizations, have popped up in the last two years offering forensic loan audits. The Federal Trade Commission and Better Business Bureau say complaints about these “loan audit” companies have skyrocketed since the beginning of the year.
In the scam, the organizations claim to review a home owner’s mortgage documents to determine whether their lender had complied with state and federal lending laws. They then promise to get the home owner a quick loan modification and possibly a principal reduction on their mortgage too. Home owners pay an upfront fee—usually about $3,000.
However, home owners say that they aren’t getting a loan modification and usually nothing happens after the audit, even when errors in loan documents are revealed.
"They lure consumers to believe that by hiring them for a review of a loan modification package, they can expedite the process and get better results, or they make false promises that they can get a loan mod or principal reduction," Josh Fuhrman, FTC’s senior vice president of community affairs, told AOL Real Estate News. "Home owners are not typically getting any results. [Scammers] are just stringing [home owners] along, or they disappear."
Source: “Home Owners Beware: Forensic Loan Audit Scam,” AOL Real Estate (Sept. 26, 2011)
Several organizations, usually linking themselves to attorney and auditor organizations, have popped up in the last two years offering forensic loan audits. The Federal Trade Commission and Better Business Bureau say complaints about these “loan audit” companies have skyrocketed since the beginning of the year.
In the scam, the organizations claim to review a home owner’s mortgage documents to determine whether their lender had complied with state and federal lending laws. They then promise to get the home owner a quick loan modification and possibly a principal reduction on their mortgage too. Home owners pay an upfront fee—usually about $3,000.
However, home owners say that they aren’t getting a loan modification and usually nothing happens after the audit, even when errors in loan documents are revealed.
"They lure consumers to believe that by hiring them for a review of a loan modification package, they can expedite the process and get better results, or they make false promises that they can get a loan mod or principal reduction," Josh Fuhrman, FTC’s senior vice president of community affairs, told AOL Real Estate News. "Home owners are not typically getting any results. [Scammers] are just stringing [home owners] along, or they disappear."
Source: “Home Owners Beware: Forensic Loan Audit Scam,” AOL Real Estate (Sept. 26, 2011)
Wednesday, September 21, 2011
Twist & Shout!
@CNNMoney September 21, 2011: 2:35 PM ET
NEW YORK (CNNMoney) -- The Federal Reserve announced 'Operation Twist' Wednesday, a widely expected stimulus move reviving a policy from the 1960's.
The policy involves selling $400 billion in short-term Treasuries in exchange for the same amount of longer-term bonds.
While the move does not mean the Fed will pump additional money into the economy, it is designed to lower yields on long-term bonds, while keeping short-term rates little changed.
The intent is to thereby push down interest rates on everything from mortgages to business loans, giving consumers and companies an additional incentive to borrow and spend money.
"This program should put downward pressure on longer-term interest rates and help make broader financial conditions more accomodative" the Fed said in its official statement.
It's controversial to say the least, especially following a high-profile letter from Republicans Monday, urging the central bank not to intervene in the economy more than it already has.
And even within the Fed, three regional bank presidents, Richard Fisher of Dallas, Narayana Kocherlakota of Minneapolis and Charles Plosser of Philadelphia, dissented against the decision.
Interest rates have already been at record lows since 2008, and that has yet to entice consumers to take out loans.
"This is not a situation where people are saying, 'gee, I really want to buy that house but interest rates are too high'," said Frank Sorrentino, CEO of North Jersey Community Bank. "Rates are already at historic lows and over the last six to nine months, we have not seen loan demand go up."
While the launch of Operation Twist was widely expected by both markets and economists, experts still question its effectiveness.
"I don't think it really solves the fundamental problems facing the economy, which are the bad shape of the housing market and that people still have very high debt levels," said Dean Croushore, chair of the economics department at the University of Richmond and former vice-president of the Philadelphia Fed.
Named after the popular 1960's dance, the Twist, the policy was first undertaken as a combined effort by the Federal Reserve and the Treasury Department under the Kennedy administration in 1961.
But economists today largely view the policy as a failure, arguing that it may have been too small to have a significant impact.
Totaling $8.8 billion, the original Operation Twist was roughly equal to 1.7% of the total U.S. economy in the early 1960's.
"It changed rates maybe 0.1% to 0.2% at the time, but that wasn't enough to get much happening in the economy," Croushore said. "That's the only time we've tried it before, and we lack a good amount of empirical data to figure out how much difference a bigger amount might make."
The second rendition, at $400 billion, is equivalent to roughly 2.7% of today's gross domestic product.
The launch of Operation Twist follows the Fed's sixth policymaking meeting of the year, which due to weakness in the economy, was rescheduled to last two days instead of the original one.
Speaking in August, Fed Chairman Ben Bernanke said the meeting had to be extended "to allow a fuller discussion" of what the Fed should do to respond to "disappointing" growth.
At the Fed's last official meeting in August, the policymaking committee decided to keep interest rates low until 2013 -- a move that was widely interpreted as a sign that the central bank is not expecting the economy to improve much for at least another two years.
On Wednesday, the Fed reiterated its gloomy outlook, saying "economic growth remains slow."
NEW YORK (CNNMoney) -- The Federal Reserve announced 'Operation Twist' Wednesday, a widely expected stimulus move reviving a policy from the 1960's.
The policy involves selling $400 billion in short-term Treasuries in exchange for the same amount of longer-term bonds.
While the move does not mean the Fed will pump additional money into the economy, it is designed to lower yields on long-term bonds, while keeping short-term rates little changed.
"This program should put downward pressure on longer-term interest rates and help make broader financial conditions more accomodative" the Fed said in its official statement.
It's controversial to say the least, especially following a high-profile letter from Republicans Monday, urging the central bank not to intervene in the economy more than it already has.
And even within the Fed, three regional bank presidents, Richard Fisher of Dallas, Narayana Kocherlakota of Minneapolis and Charles Plosser of Philadelphia, dissented against the decision.
Interest rates have already been at record lows since 2008, and that has yet to entice consumers to take out loans.
"This is not a situation where people are saying, 'gee, I really want to buy that house but interest rates are too high'," said Frank Sorrentino, CEO of North Jersey Community Bank. "Rates are already at historic lows and over the last six to nine months, we have not seen loan demand go up."
While the launch of Operation Twist was widely expected by both markets and economists, experts still question its effectiveness.
"I don't think it really solves the fundamental problems facing the economy, which are the bad shape of the housing market and that people still have very high debt levels," said Dean Croushore, chair of the economics department at the University of Richmond and former vice-president of the Philadelphia Fed.
Named after the popular 1960's dance, the Twist, the policy was first undertaken as a combined effort by the Federal Reserve and the Treasury Department under the Kennedy administration in 1961.
But economists today largely view the policy as a failure, arguing that it may have been too small to have a significant impact.
Totaling $8.8 billion, the original Operation Twist was roughly equal to 1.7% of the total U.S. economy in the early 1960's.
"It changed rates maybe 0.1% to 0.2% at the time, but that wasn't enough to get much happening in the economy," Croushore said. "That's the only time we've tried it before, and we lack a good amount of empirical data to figure out how much difference a bigger amount might make."
The second rendition, at $400 billion, is equivalent to roughly 2.7% of today's gross domestic product.
The launch of Operation Twist follows the Fed's sixth policymaking meeting of the year, which due to weakness in the economy, was rescheduled to last two days instead of the original one.
Speaking in August, Fed Chairman Ben Bernanke said the meeting had to be extended "to allow a fuller discussion" of what the Fed should do to respond to "disappointing" growth.
At the Fed's last official meeting in August, the policymaking committee decided to keep interest rates low until 2013 -- a move that was widely interpreted as a sign that the central bank is not expecting the economy to improve much for at least another two years.
On Wednesday, the Fed reiterated its gloomy outlook, saying "economic growth remains slow."
Friday, September 16, 2011
U.S. Department of the Treasury, U.S. Department of Housing and Urban Development and the Ad Council Launch New PSAs to Prompt Homeowners Who Are Facing Mortgage Trouble to Reach Out for Help
WASHINGTON, DC, September 14, 2011 - The Ad Council, in partnership with
the U.S. Department of the Treasury and the U.S. Department of Housing and Urban
Development (HUD), have joined together to launch a new phase of their
Foreclosure Prevention Assistance Public Service Advertising (PSA) Campaign. The
campaign aims to increase awareness of the Making Home Affordable® Program’s
free resources and assistance for homeowners who are struggling with their
mortgage payments.
One in 11 homeowners nationwide has missed two or more mortgage payments.
Many struggling homeowners delay conversations about their mortgage concerns and
enter foreclosure without ever reaching out for assistance. The new PSAs notify
homeowners facing mortgage trouble that options other than foreclosure are
available, and the sooner they act, the more options they have for the best
possible outcome.
The Foreclosure Prevention Assistance campaign encourages homeowners to
call 888-995-HOPE
begin_of_the_skype_highlighting 888-995-HOPE end_of_the_skype_highlighting (4673) to speak
one-on-one with a HUD-approved housing expert to discuss the solutions that are
available based on their individual circumstances. In addition, the program
website, MakingHomeAffordable.gov, serves as an online resource for struggling
homeowners to learn about options other than foreclosure.
Created pro bono by Schafer Condon Carter, a Chicago-based advertising
agency, the new television, radio, print, out of home, and online PSAs have been
created in English and Spanish. The PSAs aim to inspire homeowners who are
unsure of where to turn to reach out for help as soon as possible.
“The Making Home Affordable Program has already assisted over a million
homeowners," said HUD Secretary Shaun Donovan. "Housing counselors are ready to
continue their work with homeowners to discuss specific solutions for their
mortgage problems. Struggling homeowners do not need to work through their
concerns alone. The key is encouraging homeowners to pick up the phone now to
explore their options.”
Treasury Secretary Tim Geithner added: “While the housing market is still
distressed, the Administration’s programs have helped establish better standards
for the mortgage industry. As a result, struggling homeowners have more options
today than ever before. We are continuing to do everything we can to help
stabilize the market and to ease the burden on struggling homeowners. And that
includes working to make sure families and individuals know about the resources
available to them.”
“We are proud to continue our partnership with Treasury and HUD on this
critical issue of home foreclosures that affects so many Americans,” said Peggy
Conlon, president and CEO, the Ad Council. “We are confident that these new
PSAs will resonate with homeowners struggling with their mortgages and encourage
them to call 888-995-HOPE
begin_of_the_skype_highlighting 888-995-HOPE end_of_the_skype_highlighting or visit the
website to learn what they can do to prevent foreclosure.”
“All of us at Schafer Condon Carter have been honored to work with the Ad
Council and its sponsors at Treasury and HUD on the Making Home Affordable
campaign,” said David Selby, president of Schafer Condon Carter. “We know that
the financial burdens currently facing many homeowners are paralyzing. We’ve
captured this emotion with a creative treatment that shows people frozen in time
while the world goes on around them. Speaking directly to these homeowners is
key in getting them to get the help they need as soon as possible.”
The Ad Council will distribute the new PSAs to more than 33,000 media
outlets nationwide. The new advertisements build on the successful nationwide
campaign first launched between Treasury, HUD and the Ad Council in the summer
of 2010. The PSAs will air in advertising space donated by the media.
Tuesday, September 6, 2011
U.S. Sues 17 Banks Over Mortgage Losses
Daily Real Estate News | Tuesday, September 06, 2011
The Federal Housing Finance Agency, which oversees mortgage giants Fannie Mae and Freddie Mac, is suing 17 of the nation’s largest lenders over about $200 billion in investment losses that severely battered Fannie and Freddie nearly three years ago.
FHFA is accusing lenders in the lawsuit of misrepresenting the worth of the mortgage securities they arranged and sold.
Bank of America Corp., Citigroup Inc., J.P. Morgan Chase & Co., Deutsche Bank AG, General Electric Co., and others were named in the lawsuit, which was filed Friday in federal and state court in three jurisdictions.
FHFA alleges in the lawsuit that the losses that Fannie Mae and Freddie Mac incurred were from mortgage investments that had riskier characteristics than "the descriptions contained in the marketing and sales materials" provided to the government-sponsored enterprises. They also allege that the banks failed to identify proof that borrowers’ incomes were overstated or fake, and the securities rapidly lost value when borrowers were unable to make their payments.
The lawsuit represents one of the biggest against banks since the housing crisis, as banks continue to face legal trouble in recent months. Some critics say the mounting lawsuits against banks threatens to tighten credit and undermine the housing recovery.
"The government is coming at the banks from every direction — the FHFA lawsuits being the most recent example — at the same time the government is putting enormous pressure on the banks to extend credit to help alleviate the housing crisis," Andrew Sandler, co-chairman of BuckleySandler LLP, a law firm representing banks in litigation and regulatory enforcement actions, told The Wall Street Journal. "It constitutes a completely incoherent government approach to the housing crisis."
Meanwhile, in a separate case, the Financial Times reported Tuesday that several big banks are in talks over a possible settlement with state prosecutors over accusations of improper mortgage practices. The settlement reportedly would limit the banks’ legal liabilities in return for a multibillion dollar payment, the Financial Times reported. The allegations against banks such as Bank of America, JPMorgan Chase, Wells Fargo, Citigroup, and others stem from the robo-signing scandal that surfaced last fall, in which banks were accused of seizing homes from delinquent borrowers without proper reviews of mortgage documents.
Source: “U.S. Sues 17 Banks Over Soured Mortgage Deals,” The Wall Street Journal (Sept. 3, 2011) and “U.S. Banks Offered Deal Over Lawsuits,” Financial Times (Sept. 5, 2011)
FHFA is accusing lenders in the lawsuit of misrepresenting the worth of the mortgage securities they arranged and sold.
Bank of America Corp., Citigroup Inc., J.P. Morgan Chase & Co., Deutsche Bank AG, General Electric Co., and others were named in the lawsuit, which was filed Friday in federal and state court in three jurisdictions.
FHFA alleges in the lawsuit that the losses that Fannie Mae and Freddie Mac incurred were from mortgage investments that had riskier characteristics than "the descriptions contained in the marketing and sales materials" provided to the government-sponsored enterprises. They also allege that the banks failed to identify proof that borrowers’ incomes were overstated or fake, and the securities rapidly lost value when borrowers were unable to make their payments.
The lawsuit represents one of the biggest against banks since the housing crisis, as banks continue to face legal trouble in recent months. Some critics say the mounting lawsuits against banks threatens to tighten credit and undermine the housing recovery.
"The government is coming at the banks from every direction — the FHFA lawsuits being the most recent example — at the same time the government is putting enormous pressure on the banks to extend credit to help alleviate the housing crisis," Andrew Sandler, co-chairman of BuckleySandler LLP, a law firm representing banks in litigation and regulatory enforcement actions, told The Wall Street Journal. "It constitutes a completely incoherent government approach to the housing crisis."
Meanwhile, in a separate case, the Financial Times reported Tuesday that several big banks are in talks over a possible settlement with state prosecutors over accusations of improper mortgage practices. The settlement reportedly would limit the banks’ legal liabilities in return for a multibillion dollar payment, the Financial Times reported. The allegations against banks such as Bank of America, JPMorgan Chase, Wells Fargo, Citigroup, and others stem from the robo-signing scandal that surfaced last fall, in which banks were accused of seizing homes from delinquent borrowers without proper reviews of mortgage documents.
Source: “U.S. Sues 17 Banks Over Soured Mortgage Deals,” The Wall Street Journal (Sept. 3, 2011) and “U.S. Banks Offered Deal Over Lawsuits,” Financial Times (Sept. 5, 2011)
Friday, September 2, 2011
Attorney General Kamala D. Harris Sues Law Firms Engaged in National "Mass Joinder" Mortgage Fraud
State of California
Department of Justice
Office of the Attorney General
News Release
SAN FRANCISCO --- Attorney General Kamala D. Harris 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.
Tuesday, August 16, 2011
Freddie Offers Cash Incentives for Buying Condos
Freddie Mac’s HomeSteps unit is offering cash to buyers willing to purchase one of its foreclosed condos that has been lingering on the market. HomeSteps is hoping to unload some of its high inventory of foreclosed condos through the incentive program, known as HomeSteps Condo Cash.
Through the “Condo Cash” program, condo buyers of HomeSteps properties can get up to $1,500 to help pay for standard home owner association dues.
The offer is only valid to owner-occupant buyers and on HomeStep condos that have been on the market for at least 120 days. To participate, buyers must submit offers between Aug. 15 and Nov. 15, and close escrow by Dec. 30.
Some of the homes also come with a two-year Home Protect home warranty to cover electrical, plumbing, air conditioning, heating, and other major appliances and systems. Home Protect also is offering up to 30 percent discounts on the purchase of new appliances (see www.HomeSteps.com/smartbuy for more information).
Source: “HomeSteps Offers Condo Buyers Up to $1,500 for Future Association Dues for Limited Time,” Freddie Mac (Aug. 15, 2011)
Through the “Condo Cash” program, condo buyers of HomeSteps properties can get up to $1,500 to help pay for standard home owner association dues.
The offer is only valid to owner-occupant buyers and on HomeStep condos that have been on the market for at least 120 days. To participate, buyers must submit offers between Aug. 15 and Nov. 15, and close escrow by Dec. 30.
Some of the homes also come with a two-year Home Protect home warranty to cover electrical, plumbing, air conditioning, heating, and other major appliances and systems. Home Protect also is offering up to 30 percent discounts on the purchase of new appliances (see www.HomeSteps.com/smartbuy for more information).
Source: “HomeSteps Offers Condo Buyers Up to $1,500 for Future Association Dues for Limited Time,” Freddie Mac (Aug. 15, 2011)
Thursday, August 11, 2011
Think Before You Cosign a Loan
Tighter lender standards and an unstable job market have made it tougher for some people,
especially those just starting out, to qualify for a home mortgage on their own. So, some home
buyers are turning to family members or close friends with good credit to co-sign a home loan.
Before you agree to cosign, consider these points.
- While becoming a cosigner may seem like a good solution, money manager and lenders caution against those who are asked to be the cosigner.
- A cosigner, even if not living in the house, is really a coborrower, meaning he or she still is responsible for payments if the occupant is unable to meet his or her obligations. In other words, if the principal party defaults on the loan, the cosigner is on the hook.
- One financial planner suggests potential cosigners take a less risky alternative, such as providing a cash gift for the down payment. Under current tax laws, a person can give as much as $13,000 to a person, free of gift taxes, or $26,000 per person, if a married couple filing jointly is giving the money.
- Those considering cosigning a mortgage must conduct due diligence. First, the cosigner must understand why the family member or friend is asking for help. Potential cosigners shouldn’t be afraid to look into the requestor’s personal finances to help determine whether he or she will be able to repay the loan. Perusing credit reports also will show the track record he or she has for paying off debts.
- A discussion about worst-case scenarios also should take place before signing on the dotted line. Working out a written contract containing an agreement about what would happen in the event of a default, also is recommended.
- Cosigners also should keep in mind that the mortgage will show up on their credit report, and could affect their own ability to borrow money or buy a second home. If the principal borrower makes a late payment, that also will show up on the cosigner’s report.
Tuesday, August 9, 2011
S&P Lowers Fannie, Freddie Credit Rating
Standard & Poor’s downgraded the credit rating of lenders backed by the federal government on the heels of the first-ever lowering of the U.S.’s credit rating.
Fannie Mae, Freddie Mac, and other government-backed lenders were lowered one step from AAA to AA+, S&P reported in a statement issued Monday. Some analysts say the downgrade may force home buyers to pay higher mortgage rates.
"The downgrades of Fannie Mae and Freddie Mac reflect their direct reliance on the U.S. government,” S&P said in a statement. “Fannie Mae and Freddie Mac were placed into conservatorship in September 2008 and their ability to fund operations relies heavily on the U.S. government.”
The GSEs own or guarantee more than half of U.S. mortgage debt.
Freddie Mac said that the lower debt rating will cause “major disruptions” in its home-lending by possibly reducing the supply of mortgages it can purchase. It said in a Securities and Exchange Commission filing that the lower rating could hamper home prices and even lead to more home-loan defaults on mortgages it guarantees.
Meanwhile, the Federal Housing Finance Agency on Monday assured investors that securities issued by GSEs are sound. "The government commitment to ensure Fannie Mae and Freddie Mac have sufficient capital to meet their obligations, as provided for in the Treasury's senior preferred stock purchase agreement with each enterprise, remains unaffected by the Standard & Poor's action," said Edward DeMarco, FHFA acting director.
Some analysts and lenders have said they don’t see the fallout from the S&P downgrade on the U.S. and other banks as having such a widespread affect. "It's likely that once the storm passes, you'll get an increase in mortgage rates because of this, but it won't be significant,” says Anika Khan, a housing economist at Wells Fargo.
S&P also announced on Monday that it had lowered its credit ratings for 10 of 12 federal home loan banks and federal farm credit banks from AAA to AA+.
Source: “S&P Lowers Fannie, Freddie Citing Reliance on Government,” Bloomberg (Aug. 8, 2011); “S&P Downgrades Fannie and Freddie, Farm Lenders and Bank Debt Backed by U.S. Government,” Associated Press (Aug. 8, 2011); “Freddie Mac Reports $4.7B Loss, Says S&P Downgrade Will Disrupt Mortgage Market,” Associated Press (Aug. 8, 2011); and “FHFA Assures Investors After Fannie, Freddie Downgrade,” HousingWire (Aug. 8. 2011)
Reprinted from REALTOR® Magazine Online, August, 2011, with permission of the NATIONAL ASSOCIATION OF REALTORS®. Copyright 2011. All rights reserved. http://realtormag.realtor.org.
Thursday, August 4, 2011
Distressed BofA Homeowners in Calif. Now Have Chance of Principal Reduction
San Diego Union-Tribune
Bank of America has joined the Keep Your Home California principal-reduction program, making it the largest loan servicer involved in lowering loan balances for those with economic hardships.
Keep Your Home California is a program offered through the California Housing Finance Agency to help struggling homeowners avoid foreclosure.
Bank of America, which services more than two million home loans in California, joins others servicers involved in the program, including: California Dept. of Veterans Affairs, the California Housing Finance Agency, Community Trust/Self Help, GMAC, Guild Mortgage Company, and Vericrest Financial. Agency officials hope the list will continue to grow, and that the program will continue to gain momentum.
Under the program, qualified homeowners may be eligible for up to $50,000 in assistance. The program requires the mortgage investor to match dollar-for-dollar the amount provided by the program.
Bank of America borrowers who do not qualify for the principal-reduction program will be evaluated by bank representatives to explore other options, including a loan modification.
To be eligible for the program, applicants must: Own and occupy their homes as their primary residence; not exceed $729,750 in current unpaid principal balances on first mortgages; meet low- and moderate-income limits; complete and sign a hardship affidavit to document reasons for hardships; have mortgage loans that are delinquent or “in imminent default;” and have enough income to pay modified mortgage payments according to guidelines from servicers participating in the programs.
For more information about Keep Your Home California, visit keepyourhomecalifornia.org or call (888) 954-5337(KEEP).
Read the full story
http://www.signonsandiego.com/news/2011/jul/28/distressed-bofa-borrowers-calif-now-havechance-
pr/
Wednesday, August 3, 2011
Rural Buyers Can Get No-Down Payment Loans
Total Mortgage Services, a national mortgage lender, is offering rural home buyers 100 percent financing or closing cost assistance.
Through its new Guaranteed Rural Housing Loan Program, insured by the U.S. Department of Agriculture, the lender will offer low- and moderate-income residents living in rural areas (usually defined by a population of 10,000 or less or, in some cases, 20,000 or less) several affordable housing finance options:
“The USDA home loan program is one of the most compelling mortgage products in today’s challenging mortgage marketplace and offers real solutions for rural borrowers, especially those in need of 100 percent financing or with lower credit scores," John Walsh, president of Total Mortgage, said in a statement.
To read more about eligibility requirements, visit the U.S. Department of Agriculture Rural Development Web site.
By REALTOR® Magazine Online
Through its new Guaranteed Rural Housing Loan Program, insured by the U.S. Department of Agriculture, the lender will offer low- and moderate-income residents living in rural areas (usually defined by a population of 10,000 or less or, in some cases, 20,000 or less) several affordable housing finance options:
- No down payment required.
- Closing costs can come from any source, including gifts.
- Competitive 30-year fixed rates.
- No monthly mortgage insurance premiums.
“The USDA home loan program is one of the most compelling mortgage products in today’s challenging mortgage marketplace and offers real solutions for rural borrowers, especially those in need of 100 percent financing or with lower credit scores," John Walsh, president of Total Mortgage, said in a statement.
To read more about eligibility requirements, visit the U.S. Department of Agriculture Rural Development Web site.
By REALTOR® Magazine Online
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