Incredible “Hustle”: JPM Moves Exec Who Defrauded Fannie and Freddie to Defrauding Borrowers Again

What’s the Next Step? Consult with Neil Garfield

For assistance with presenting a case for wrongful foreclosure, please call 520-405-1688, customer service, who will put you in touch with an attorney in the states of Florida, California, Ohio, and Nevada. (NOTE: Chapter 11 may be easier than you think).

Victims can receive up to $125,000 in cash or, in some cases, get their homes back. But the review has already been marred by evidence that the banks themselves play a major role in identifying the victims of their own abuses, raising the question of whether the review is compromised by a central conflict of interest.”

Editor’s Comment and Analysis: The rules and laws are in place and the banks are flagrantly violated them — again. While the infrastructure is in place to compensate victims of wrongful foreclosure and to stop wrongful foreclosures, the programs are routinely corrupted and ignored.

JPMorgan and the other mega banks actually had a name for the game: the “Hustle.” “Rebecca Mairone, worked at Countrywide and Bank of America from 2006 until earlier this year, when she left for JPMorgan Chase, according to her LinkedIn profile.” (see article below).

Mairone stands accused of a two year “scam” of foisting bad loans onto Fannie and Freddie on behalf of Bank of America. Now she is at JPM supervising the compensation program for wrongful foreclosure victims. Do you think there might be a conflict of interest or two in that structure?

So now she is the head of the “independent Foreclosure Review” process. “The review “never seemed designed to place first the interests of those who were supposed to be helped — victimized homeowners,” said Neil Barofsky, the former federal prosecutor who served as the special inspector general for the Troubled Asset Relief Program, better known as the bank bailout.”

The DOJ lawsuit says “”Countrywide knowingly churned out loans with escalating levels of fraud and other serious material defects and sold them to” Fannie and Freddie.”

Countrywide had a name for its policy of abandoning underwriting standards, lying to borrowers, brokers and closing agents: “The new modus operandi was called the “High Speed Swim Lane”; its motto was “Loans Move Forward, Never Backward,” according to the suit. The company allegedly paid bonuses to its employees based on the number of loans they pushed through, not on whether the loans were sound.

AND THIS is why I am telling you that if you push the banks into a corner by denying all the essential allegations they make about your loan and then demand discovery on the money trail starting with the first dollars that went in or out of a REMIC or that went in or out of the loan you thought you were getting, you will prove your case and the bank will retreat.

The fact is that in most cases the REMIC played no part in the lending process but the investors, who were advancing money THOUGHT they were investing in a REMIC, were actually lending money to the investment bank who took control as if the loans belonged to the banks. Then they traded, insured and contracted as though they were the owners. They claimed losses on federal bailouts when they had no losses.

The lies told to investors were identical to the lies told to borrowers as to the underwriting, the appraisal values, the ability of borrowers to pay on loans where the payments would skyrocket above any known income the borrower ever had, and so many severe defects in the origination of the loans that the investors themselves have come to the conclusion that there is nothing enforceable about those loans -– not the obligation, the note (as evidence of the obligation) nor the mortgage which secured a defective note containing both the wrong payee and the wrong terms of repayment.

As I have repeatedly stated, the investors should join with borrowers in a tactical pincer action, but they don’t. And I can only conclude that the reason they don’t is that the fund managers who bought these bonds knew more than they say they knew and went ahead because of the some benefit they received by buying the bogus mortgage bonds. Things don’t happen on this scale without lots of people knowing.

Red-faced bureaucrats who take their information from banks are going to be explaining for years to come why they gave money to the banks when it was the investors and homeowners who were the ones losing money while the banks were raking in the money on the way up and on the way down the greatest bubble in history.

Exec Who Allegedly Enabled Fraud Runs Chase’s Effort to Compensate Foreclosure Victims

by Paul Kiel
ProPublica,

An executive who the Justice Department says facilitated a scheme to defraud Fannie Mae and Freddie Mac is now spearheading JPMorgan Chase’s role in the government’s program to compensate victims of the big banks’ abusive foreclosure practices.

The executive, Rebecca Mairone, worked at Countrywide and Bank of America from 2006 until earlier this year, when she left for JPMorgan Chase, according to her LinkedIn profile.

In a lawsuit filed last month in federal court in New York, Justice Department attorneys allege that Countrywide, which was bought by Bank of America in 2008, perpetrated a two-year scam to foist shoddy home loans on Fannie and Freddie. Neither Mairone nor any other individuals are named as defendants in the civil suit, and no criminal charges have been filed against her or anyone else in connection with the alleged misconduct. But Mairone is one of two bank officials cited in the suit as having repeatedly ignored warnings about the “Hustle,” as the alleged scheme was called inside the company, and she prohibited employees from circulating some of those warnings outside their division.

Mairone was chief operating officer of the Countrywide lending division that allegedly carried out the “Hustle.” She took the helm of JPMorgan Chase’s involvement in the Independent Foreclosure Review this summer, according to a former Chase employee.

The review, overseen by federal banking regulators, requires the nation’s biggest banks to compensate victims for harm they inflicted on borrowers. Victims can receive up to $125,000 in cash or, in some cases, get their homes back. But the review has already been marred by evidence that the banks themselves play a major role in identifying the victims of their own abuses, raising the question of whether the review is compromised by a central conflict of interest.

Mairone’s role raises additional questions about the Independent Foreclosure Review.

The review “never seemed designed to place first the interests of those who were supposed to be helped — victimized homeowners,” said Neil Barofsky, the former federal prosecutor who served as the special inspector general for the Troubled Asset Relief Program, better known as the bank bailout.

“Finding out that the person running it for JPMorgan Chase is a person whose conduct in the run-up to financial crisis was allegedly so egregious that she somehow managed to be one of the only people actually named in a case brought by the Department of Justice goes beyond irony,” he continued. “It speaks volumes to the banks’ true intent and lack of concern for homeowners when addressing the harm that they caused during the foreclosure crisis.”

In response to ProPublica’s questions about Mairone’s role in the foreclosure review and the suit’s allegations, Chase issued a brief statement confirming that Mairone is a managing director who is “working on the Independent Foreclosure Review process.” The statement added, “It would not be appropriate for us to discuss another firm’s litigation.”

Chase declined to make Mairone available for comment, and she did not return a message left at her home number.

The Suit’s Allegations

Countrywide was the industry leader in subprime loans, which are typically given to borrowers with a troubled credit history. In 2007, the subprime market began to collapse as more and more of those borrowers defaulted on their loans. Countrywide grew desperate to find ways to keep profiting from issuing mortgages.

Fannie and Freddie guarantee home loans, relieving banks of the risk that borrowers will default. So in 2007, the government’s suit alleges, Countrywide began the Hustle to pass a huge number of risky loans, many with phony incomes attributed to the borrowers, on to Fannie and Freddie.

At that time, the two mortgage giants were restricting their underwriting guidelines, making it harder for lenders like Countrywide to find borrowers who qualified for Fannie and Freddie backed loans.

The suit alleges that Countrywide deliberately gutted its system for detecting unqualified borrowers, leading to a flood of flawed and outright fraudulent loans backed by Fannie and Freddie.

The new modus operandi was called the “High Speed Swim Lane”; its motto was “Loans Move Forward, Never Backward,” according to the suit. The company allegedly paid bonuses to its employees based on the number of loans they pushed through, not on whether the loans were sound. According to the suit, the new system created a torrent of loans that often featured inflated borrower incomes, accelerated by employees who had every incentive to fabricate numbers to get the loans into the “High Speed Swim Lane.”

The suit says a number of employees within Countrywide raised alarms about the Hustle before it launched, but that Mairone and the division’s president “ignored” those warnings.

Once the new system was up and running, one concerned executive had underwriters run checks on the loans. Mairone allowed the checks, but said they should be run in parallel to the loan funding process so, according to the suit, they didn’t “‘slow the swim lane down.'”

The tests found a “staggering rate of defects,” the suit says, but Mairone did not “alter or abandon the Hustle model.” Instead, the suit alleges, she “prohibited” underwriters from circulating the results outside of the lending division. “As warnings about the Hustle went unheeded,” the complaint alleges, “Countrywide knowingly churned out loans with escalating levels of fraud and other serious material defects and sold them to” Fannie and Freddie.

The Hustle continued “through 2009,” the Justice Department alleges, well after Bank of America acquired Countrywide. The scheme led to more than $1 billion in losses at Fannie and Freddie as borrowers defaulted, according to the suit.

The government took over Fannie and Freddie in 2008, and since then taxpayers have pumped in $187.5 billion to keep them afloat.

The federal suit was first brought under seal as a qui tam suit under the False Claims Act by a former Countrywide and Bank of America executive, Edward O’Donnell, who says he tried to stop the Hustle. A qui tam suit allows a private citizen to sue on behalf of the government and receive a portion of the settlement or judgment if the suit is successful. The Justice Department joined O’Donnell’s suit in October in Southern District of New York, filing its own complaint and trumpeting it in a press release.

A Bank of America spokesman disputed allegations in the suit that it had refused to repurchase the faulty “Hustle” loans from Fannie Mae after they defaulted in large numbers. “Bank of America has stepped up and acted responsibly to resolve legacy mortgage matters,” said spokesman Lawrence Grayson. “At some point, Bank of America can’t be expected to compensate every entity that claims losses that actually were caused by the economic downturn.”

A Career Spans the Crisis

Mairone’s career has spanned the entire life cycle of the foreclosure crisis.

After working for Countrywide and Bank of America’s lending divisions, Mairone moved to the bank’s servicing division in 2009. There, at the height of the crisis, she was in charge of deciding how to deal with homeowners who could not pay their mortgages and wanted to modify the terms of their loans.

It didn’t go well. The big banks all signed up for the government’s main foreclosure prevention program and agreed to provide modifications for qualified borrowers. But as we’ve reported over the years (we even interviewed Mairone herself in early 2011), the biggest banks often botched loan modifications and regularly subjected customers to errors and abuses, some resulting in mistaken foreclosures. The big banks in general did a poor job, but analyses have shown that Bank of America performed the worst of all. Homeowners had less of a chance of getting a modification from Bank of America than any other major mortgage servicer, studies show.

Such failings eventually led to government efforts to compensate homeowners for the banks’ errors and abuses. The Federal Reserve and the Office of the Comptroller of the Currency launched the Independent Foreclosure Review in late 2011. About 4.4 million homeowners are eligible for the review, and those who are determined to have been harmed can receive up to $125,000 in cash compensation.

Regulators required each of the banks to hire an outside consultant to independently conduct the review, but as ProPublica has reported, there is abundant evidence that the banks themselves are playing a large role. The program has also been marked by low participation by borrowers and a lack of transparency.

Regulators have said the banks are only playing a supporting role in the review, and that the consultants are entirely responsible for deciding how borrowers are compensated.

Mairone’s current employment at Chase was first reported by The Street, an online news service that covers finance, but the story did not say Mairone was working on the bank’s Independent Foreclosure Review. She oversees hundreds of Chase employees who gather documents for the reviews, according to the former Chase employee. Chase declined to say how many employees Mairone oversees or detail her job responsibilities.

Chase’s main regulator, the Office of the Comptroller of the Currency, said its policy is not to comment on specific individuals or ongoing litigation. “The OCC and the Federal Reserve are monitoring the conduct of the Independent Foreclosure Review to ensure reviews are conducted fairly and thoroughly,” said spokesman Bryan Hubbard.

Jonathan Gandal, a spokesman for Deloitte, the consultant Chase hired for the review, said, “We are conducting an independent review of the files and it is our review and analysis alone that will drive our recommendations. Beyond that, we are not at liberty to discuss matters pertaining to our services.”

 

9 Responses

  1. JPM house of Hustle in sT.lOUIS PERFORMING MUCH FRAUD FROM
    7700 fORSYTH CLAYTON , MO
    CENTENNE GROUP , ACTING ATTORNEYS
    THEY ARE COMMITTING FRAUD WITH MANY OTHER FINANCIAL SERVICES COMPANIES.

  2. The servicers and the investors are one of the same family members.
    You will find this industry seem to hire family and friends only;. This way they keep the fraud contained and the money withoin the family. Just take a look at the Bankrupcy Courts and visit Susan gargula website. You will find the list of Artinger family members listed . They are also in the insurance industry as well. This family is and are Debt Collectors and part of the Shadow Banking Industry.
    They are a cartel they have set up to control the insurance Industry , Disability , Bankrupcy , Construction and Financial Services. They are dangerous people , I was subjected to Radiation while working for these people. They are heavily connected and have attorneys network listed with the federal Government , local police . The problem is Bank of America employed people to imvest in these loans with the idea of later moving the Companies into Bankrupcy. This in part is due to submitting certificates into the bankrupcy courts and allowing the Governement to do the fraud for the Banks. You see the Judges know exactly what is going on , they only pretend that they do not.
    the Companies unload the useless certificates which has no secuirty at all , they then refinance the loan , take the money out , resecuritize the loans and push you into foreclosure. Now the bankruocy courts can say for certain , you had a loan for sure. The only problem is they do tell the homeowner the loan is being refinances. because they own the reporting agencies they can do this without this transacton being listed on your credit report. its clever however fraudulent.
    No One has ever bothered to come to St.Louis to verify this fraud.
    They stay away fronm St.Louis as much as possible. This is Governement sanctioned destroy.com

  3. My repsonse to the message from above. The discovery of such un imaginable fraud goes way deeper than one thinks. it appears these homes are ebing run under the Chidrens Fund of St.Louis which appears to have Government funding for over 81 million dollars. These funds will buy the homes that will go into foreclosure for certain.
    This is why they have placed the indivudual over these funds. Just check this out for yourself. it is unthinkable HUD and fannie mae are using Governement workers to rent mulit family housing from homeowners with the full intent on taking these homes under fraud.
    HUD Housing now ha a new facility in stlouis. They have enlisted multiple employees whom soley work to harrass the homeowners attempting to foreclosure.
    The main issue here at hand is …. how is that these Government facilities are allowed to do such things? They own nothing, they push you inot foreclosure with the intent on gaining from insurance , and the housing. This is nothing more than a ponzi scheme. They terminate your employment with the same attempt. read how illinios employee’s are claiming wrong doing by the unemployed. Simply criminal. They cheat you out of unemployment an then want to accuse someone else. These people should be jailed.
    IT is the Government doing this fraud. They are telivising fraud with the Banks , however, the truth of the matter is the Governement is doing these things. What they are not stating is the communications are being diverted under fraud. This is how the Mayor is resecuriting the loans ( Bonds )
    This is perhaps why they rounded up the Mafia , to take the control away from these indivuduals. They have nothing other than fraud that they have unleashed upon the citizens. they have clearly decided they are above the law dozzing citizens with Radiation, mulitple Dailysis Centrs goig up everywhere. Why ? They are using radiation against the people. The signs of failure and problems. Eyes, lower abdominal irritation., blood in the stool , itching skin , discoloring, memory loss;. They are doing this to the American People. This is the HUD , Housing debt collectors , MSD debt collectors.
    They are getting ready for O’bama Care to kick in. They will make a fortune at your expoense. Needless to say , they are taking unlawful insurance out on people. it i the same scheme they are using with the housing market. Go read about the Berkshire hathaway investors response to family planning. All for the money

  4. Should one submit a foreclosure review if they are in Judicial process and denying that B of A and Countrywide have legal position to foreclose? Doesn’t filing this document authenticate the plaintiff has standing?
    Harry Milhisler
    405.520.8880

  5. “I can’t bear to read these postings any longer I’m so full of frustrated rage I can barely contain myself”

    I rarely visit anymore and when I do, I don’t even read the postings. I’m done here.

  6. Louise, you are right. But it seems it is not going to happen, sadly enough.

    Jim, isn’t it odd, how this blog turned….go figure.

  7. The banksters and servicers will keep up the fraud and abuse of investors, homeowners, smaller banks and regulators until they are taken down with civil and CRIMINAL charges. Even if they are not convicted (a few of them) they will think twice about doing it again. Getting charged with multiple felonies is not fun, and has a dampening effect on being hired again in financial services.

  8. Ps. Why is strategy so seldom discussed on this blog. Revictimization with all this bad news we don’t need

  9. I can’t bear to read these postings any longer I’m so full of frustrated rage I can barely contain myself

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