Posts Tagged ‘mortgage news’

Crime Paid Well – Until He Got Caught

Tuesday, October 19th, 2010

The $67.5 million settlement by Angelo R. Mozilo in a civil fraud case brought by the Securities and Exchange Commission should send a clear signal.

If you know the company is going under, hiding risks from investors while engaging in insider stock sales will eventually catch up with you.

Angelo Mozilo, founder and former chief executive of Countrywide Financial Corporation, is the first financial executive to be personally penalized for excesses leading to the mortgage boom and bust. However, securities regulators are investigating former senior executives at Merrill Lynch for possible securities fraud.

Goldman Sachs has already paid a $550 million fine to settle similar charges against their company.

We don’t need to worry about Mr. Mozilo being forced to join the ranks of the homeless because of these fines.

Countrywide has been paying his legal fees and will pay $20 million of the $67.5 million fine. And, considering that his compensation during the period from 2000 through 2008 was $521.5 million, he should be able to continue his present lifestyle. He also profited by $140 million in gains on stock that he sold from November 2006 through October 2007.

One thing he cannot do in the future is serve as an officer or director of any public company.

It does seem a shame. Mr. Mozilo and his friend David Loeb started Countrywide in 1969. Together they built the company into the nation’s largest mortgage lender. They continued to thrive until they went into subprime lending.

Was this decision to grant “bad loans” a matter of greed – or of government dictates?

This case is also a clear example of a lesson some parents are trying to impress upon their children these days: “Don’t say anything on line or in an email that you don’t want the whole world to see.”

Part of the case against Mr. Mozilo stems from e-mails he sent starting in 2006. While Countrywide was boasting to investors about its high-quality loans, he and others in Countrywide were discussing the poor quality of those loans.

When discussing no-money-down loans to borrowers with poor credit , he said he had “Never seen a more toxic product.” He also decried the sloppy documentation practices within their organization and warned his colleagues about the adjustable rate mortgages that let buyers qualify at low, introductory “teaser” interest rates.

When the S.E.C. charged him with deliberately concealing the dangers from his investors, his e-mails were proof positive that he did know the risks they were taking, even as Countrywide assured investors that all was well.

Because of the complexity of the case and the possible consequences, both sides were willing to reach a settlement without going to trial. The S.E.C. knew that it in spite of the e-mails, it would not be a simple case to prove. A loss would have hurt their credibility going forward.

Had Mr. Mozilo lost, a criminal prosecution might have followed the civil case.

Will the Banks be Held Accountable?

Thursday, October 7th, 2010

We can hope so, but we’ll have to wait and see.

A few days ago we reported on GMAC and JPMorgan Chase – that they were temporarily suspending all foreclosures in 23 states while they investigated claims of “robo-signing” of foreclosure documents.

The next day Bank of America also suspended foreclosures in those 23 states.

Why 23 states? Because those states are the ones that require court approval for foreclosures. In lieu of actually going to court, they are allowed to present signed affidavits swearing that they have reviewed the files and the documents are in order.

The trouble was, they didn’t review the files and in some cases the documents were not in order. In some cases, even the monetary figures were “off.”

Their excuse for this sloppiness was that with 8 to 10 thousand forms to sign each month, they just “didn’t have time” to do it according to the legal requirements. Statements by banking officials carry a tone that suggests that since they are so busy, they are justified in cutting these corners – in spite of the potential damage to individual homeowners.

Now key lawmakers are demanding that more than 100 mortgage companies halt foreclosures while they determine whether foreclosure documents they approved might have contained errors.

The 23 states involved in this action are Connecticut, Delaware, Florida, Hawaii, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Nebraska, New Jersey, New Mexico, New York, North Dakota, Ohio, Oklahoma, Pennsylvania, South Carolina, South Dakota, Vermont and Wisconsin.

But now, other states are weighing in.

The Texas Attorney General’s office has called for a halt on all foreclosures. They’re also asking for a halt on sales of all properties already under bank ownership as well as all evictions of persons residing in those foreclosed homes. They’re giving the banks until October 15 to reply to the demand letters.

Maryland Governor Martin O’Malley has done the same.

In Oregon, Senator Jeff Merkley has urged the Treasury Department and the Department of Housing and Urban Development to launch investigations, while Massachusetts Attorney General Martha Coakley said her office is already investigating an “Apparent failure of major creditors to follow state foreclosure law.”

In California, Attorney General Jerry Brown called on J.P. Morgan Chase & Co. and Ally Financial Inc. to suspend foreclosures unless they can prove that they are in compliance with state law.

Real estate professionals dealing with Short Sales have long been frustrated by the sloppy paperwork, lost documents, and delays that they and their clients have endured at the hands of the banking giants. At times, homes that were in the midst of short sale transactions or even loan modifications were suddenly foreclosed upon – despite assurances that the foreclosure had been halted.

Now we realize why this has happened. Employees in the Foreclosure departments simply did not read the files and thus were not aware of the loan modifications or short sales in progress.

Will the banks be punished for their fraudulent behavior? Will they owe monetary damages to homeowners who were harmed? Or will this sloppy behavior be forgiven and swept under the rug?

We’ll all be watching to see the outcome.

Could This Banking Fraud Stabilize the Housing Market?

Friday, October 1st, 2010

Fraud, greed, and government regulations led to the crash of the housing market. Now banking fraud, greed and general carelessness could lead to a stabilization in the housing market.


Because the expected glut of foreclosed homes is not going to hit the market soon. Thousands of foreclosures are being delayed and could even be cancelled.

As of now, JPMorgan Chase and GMAC have suspended all foreclosures in 23 states. GMAC didn’t provide a number, but Chase is suspending 56,000.

Home sales have been undermined these past months by the expectation that large numbers of foreclosures were about to be released – causing housing prices to slide further. That expectation has caused many consumers to put off buying a home.

If the flood stops or slows considerably, housing prices may stabilize.

How did this happen?

In their quest to speed up the foreclosure process, banks have been cutting procedural corners. Both GMAC and Chase have admitted to filing affidavits for summary judgment without knowing if the facts stated in those affidavits are true.

By signing the document, the signer indicates that he or she has personal knowledge that those facts are true. That means the signer is saying that he or she has reviewed the cases and knows the documents are correct. And that hasn’t been the truth.

It appears that banks have been taking their procedural cues from our Senators and Representatives – stating in their own defense that since they have so many foreclosures to process, they simply didn’t have time to review the cases before signing the affidavits and other documents.

The term “robo signers” has been coined to describe the way banks have handled the signing of legal documents.

Unfortunately for them, those lawmakers who sign bills into law without reading them aren’t stepping up to say its OK to file affidavits without reviewing the cases.

Shifting the blame is nothing new, and apparently banks are shifting the blame to the legal firms who supply the documents for signing. According to the South Florida Sun-Sentinel, Florida’s four largest foreclosure law firms are now under investigation for fraud.

Flordia is one of the 23 states where Chase and GMAC have suspended foreclosure activity for the time being.

Consumers are “lawyering up”

Lawsuits are already being filed, and according to lawyers representing homeowners, the lenders will likely be defeated in court due to their own carelessness. Many of the necessary documents have been misplaced or otherwise disappeared.

This will come as no surprise to real estate professionals who deal with short sales. They have been struggling with the lenders’ “lost document syndrome” for the past couple of years.

Although no others have admitted wrong-doing, Chase and GMAC are not the only banks affected. Experts predict that all banks will now take a closer look at procedures in an effort to avoid lawsuits from homeowners who feel they have been wronged.

The expectation is that banks will make a greater effort to keep people in their homes rather than rushing to foreclose. That, of course, would be good for homeowners, neighborhoods and housing prices.

Exposing and halting fraudulent activity is always a good thing. But there is one “fly in the ointment” in this situation.

Homeowners whose foreclosures are final and whose previous homes have been sold may be stepping forward to file lawsuits. If the courts find that the completed foreclosures were in fact done improperly, families who bought those foreclosed homes could find themselves entangled in a legal mess not of their own making.

Could this possibility at least temporarily slow the popularity of buying banks’ REO properties?

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