In a statement shortly after he sued JPMorgan Chase, Mr. Schneiderman [Attorney general, New York state] said the lawsuit was a template “for future actions against issuers of residential mortgage-backed securities that defrauded investors and cost millions of Americans their homes.”
For assistance with presenting a case for wrongful foreclosure or to challenge whoever is taking your money every month, please call 520-405-1688, customer service, who will put you in touch with an attorney in the states of Florida, Tennessee, Georgia, California, Ohio, and Nevada. (NOTE: Chapter 11 may be easier than you think).
A PRIMER ON COOKING THE BOOKS
Editor’s Comment and Analysis: It’s been a long pull to get the real information about the misbehavior of the mega banks and their officers. But Schneiderman, Attorney general of the State of New York, is drilling down to where this really needs to go. And others, tired of receiving hollow assurances from the mega banks are suing — with specific knowledge and proof that is largely unavailable to borrowers — a good reason to watch these suits carefully.
Both internal emails and interviews have revealed that they repeatedly were warned by outside analysts of the perils of the mortgage lending process. The officers of JPM chose to change the reports to make them look more appealing to investors who gave up the pension money of their pensioners in exchange for what turns out to be bogus mortgage bonds issued by a non-existent or unfunded entity that never touched a dime of the investors’ money and never received ownership or backing from real loans with real security instruments (mortgages and deeds of trust).
A lawsuit filed by Dexia, a Belgian-French bank is being closely watched with justified trepidation as the onion gets pealed away. The fact that the officers of JPM and other mega banks were getting reports from outside analysts and took the trouble to change the reports and change the make-up of the bogus mortgage bonds leads inevitably to a single conclusion — the acts were intentional, they were not reckless mistakes, they weren’t gambling. They were committing fraud and stealing the pension money of investors and getting ready to become the largest landowners in the country through illegal, fraudulent, wrongful foreclosure actions that should have been fixed when TARP was first proposed.
The Dexia lawsuit focuses on JPM, WAMU and Bear Stearns, acquired by JPM with government help. The failure to provide bailout relief to homeowners at the same time sent the economy into a downward spiral. Had the Federal reserve and US Treasury department even ordered a spot check as to what was really happening, the “difficult” decisions in 2008 would have been averted completely.
Receivership and breakdown of the large banks would have produced a far more beneficial result to the financial system, and is still, in my opinion, inevitable. Ireland is doing it with their major bank as announced yesterday and other countries have done the same thing. Instead of the chaos and trouble that the banks have policy makers afraid of creating, those countries are coming out of the recession with much stronger numbers and a great deal more confidence in the marketplace.
The practice note here is that lawyers should look at the blatant lies the banks told to regulators, law enforcement and even each other. The question is obvious — if the banks were willing to lie to the big boys, what makes you think that ANYTHING at ground level for borrowers was anything but lies? They went to their biggest customers and lied in their faces. They certainly did the same in creating the illusion of a real estate closing at ground level.
Lawyers should question everything and believe nothing. Normal presumptions and assumptions do not apply. Keep your eye on the money, who paid whom, and when and getting the proof of payment and proof of loss. You will find that no money exchanged hands except when the investors put up money for the bonds that were supposed to be mortgage backed, and the money that was sent down the pipe via wire transfer to the closing agent under circumstances where the “lender” was not even permitted to touch the money, much less use it in their own name for funding.
The diversion of money away from the REMICs and the diversion of title away from the REMICs leaves each DOCUMENTED loan as non-existent, with the note evidence of a transaction in which no value exchanged hands, and the mortgage securing the obligations of the invalid note.
The diversion of the documents away from the flow of money leaves the borrower and lenders with a real loan that, except for the wire transfer receipts, that was undocumented and therefore not secured. Yet nearly all borrowers would grant the mortgage if fair market value and fair terms were used. Millions of foreclosures would have been thwarted by settlements, modifications and agreements had the investors been directly involved.
Instead the subservicers rejected hundreds of thousands of perfectly good proposals for modification that would have saved the home, mitigated the damages to investors, and left the bank liable to investors for the rest of the money they took that never made it into the money chain and never made it into the REMIC.
Add to this mixture the rigging of LIBOR and EuroBOR, the receipt of trillions in mitigating payments kept by the banks that should have been paid and credited to the investors, and it is easy to see, conceptually, how the amount demanded in nearly all foreclosure cases is wrong.
Discovery requests should include, in addition to third party insurance and CDS payments, the method used to compute new interest rates and whether they were using LIBOR ( most of them did) and what adjustments they have made resulting from the revelation that LIBOR was rigged — especially since it was the same mega banks that were rigging the baseline rate of interbank lending.
Once you are in the door, THEN you can do not only your own computations on resetting payments, but you can demand to see all the transactions so that the applied interest rate was used against the alleged principal. At that point you will know if a loan receivable account even exists and if so, who owns it — and a fair guess is that it is not now nor was it ever any of the parties who have “successfully” completed foreclosure, thus creating a corruption of title in the marketplace for real estate that has never happened before.
E-Mails Imply JPMorgan Knew Some Mortgage Deals Were BadBy JESSICA SILVER-GREENBERG
When an outside analysis uncovered serious flaws with thousands of home loans, JPMorgan Chase executives found an easy fix.
Rather than disclosing the full extent of problems like fraudulent home appraisals and overextended borrowers, the bank adjusted the critical reviews, according to documents filed early Tuesday in federal court in Manhattan. As a result, the mortgages, which JPMorgan bundled into complex securities, appeared healthier, making the deals more appealing to investors.
The trove of internal e-mails and employee interviews, filed as part of a lawsuit by one of the investors in the securities, offers a fresh glimpse into Wall Street’s mortgage machine, which churned out billions of dollars of securities that later imploded. The documents reveal that JPMorgan, as well as two firms the bank acquired during the credit crisis, Washington Mutual and Bear Stearns, flouted quality controls and ignored problems, sometimes hiding them entirely, in a quest for profit.
The lawsuit, which was filed by Dexia, a Belgian-French bank, is being closely watched on Wall Street. After suffering significant losses, Dexia sued JPMorgan and its affiliates in 2012, claiming it had been duped into buying $1.6 billion of troubled mortgage-backed securities. The latest documents could provide a window into a $200 billion case that looms over the entire industry. In that lawsuit, the Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac, has accused 17 banks of selling dubious mortgage securities to the two housing giants. At least 20 of the securities are also highlighted in the Dexia case, according to an analysis of court records.
In court filings, JPMorgan has strongly denied wrongdoing and is contesting both cases in federal court. The bank declined to comment.
Dexia’s lawsuit is part of a broad assault on Wall Street for its role in the 2008 financial crisis, as prosecutors, regulators and private investors take aim at mortgage-related securities. New York’s attorney general, Eric T. Schneiderman, sued JPMorgan last year over investments created by Bear Stearns between 2005 and 2007.
Jamie Dimon, JPMorgan’s chief executive, has criticized prosecutors for attacking JPMorgan because of what Bear Stearns did. Speaking at the Council on Foreign Relations in October, Mr. Dimon said the bank did the federal government “a favor” by rescuing the flailing firm in 2008.
The legal onslaught has been costly. In November, JPMorgan, the nation’s largest bank, agreed to pay $296.9 million to settle claims by the Securities and Exchange Commission that Bear Stearns had misled mortgage investors by hiding some delinquent loans. JPMorgan did not admit or deny wrongdoing.
“The true price tag for the ongoing costs of the litigation is terrifying,” said Christopher Whalen, a senior managing director at Tangent Capital Partners.
The Dexia lawsuit centers on complex securities created by JPMorgan, Bear Stearns and Washington Mutual during the housing boom. As profits soared, the Wall Street firms scrambled to pump out more investments, even as questions emerged about their quality.
With a seemingly insatiable appetite, JPMorgan scooped up mortgages from lenders with troubled records, according to the court documents. In an internal “due diligence scorecard,” JPMorgan ranked large mortgage originators, assigning Washington Mutual and American Home Mortgage the lowest grade of “poor” for their documentation, the court filings show.
The loans were quickly sold to investors. Describing the investment assembly line, an executive at Bear Stearns told employees “we are a moving company not a storage company,” according to the court documents.
As they raced to produce mortgage-backed securities, Washington Mutual and Bear Stearns also scaled back their quality controls, the documents indicate.
In an initiative called Project Scarlett, Washington Mutual slashed its due diligence staff by 25 percent as part of an effort to bolster profit. Such steps “tore the heart out” of quality controls, according to a November 2007 e-mail from a Washington Mutual executive. Executives who pushed back endured “harassment” when they tried to “keep our discipline and controls in place,” the e-mail said.
Even when flaws were flagged, JPMorgan and the other firms sometimes overlooked the warnings.
JPMorgan routinely hired Clayton Holdings and other third-party firms to examine home loans before they were packed into investments. Combing through the mortgages, the firms searched for problems like borrowers who had vastly overstated their incomes or appraisals that inflated property values.
According to the court documents, an analysis for JPMorgan in September 2006 found that “nearly half of the sample pool” – or 214 loans – were “defective,” meaning they did not meet the underwriting standards. The borrowers’ incomes, the firms found, were dangerously low relative to the size of their mortgages. Another troubling report in 2006 discovered that thousands of borrowers had already fallen behind on their payments.
But JPMorgan at times dismissed the critical assessments or altered them, the documents show. Certain JPMorgan employees, including the bankers who assembled the mortgages and the due diligence managers, had the power to ignore or veto bad reviews.
In some instances, JPMorgan executives reduced the number of loans considered delinquent, the documents show. In others, the executives altered the assessments so that a smaller number of loans were considered “defective.”
In a 2007 e-mail, titled “Banking overrides,” a JPMorgan due diligence manager asks a banker: “How do you want to handle these loans?” At times, they whitewashed the findings, the documents indicate. In 2006, for example, a review of mortgages found that at least 1,154 loans were more than 30 days delinquent. The offering documents sent to investors showed only 25 loans as delinquent.
A person familiar with the bank’s portfolios said JPMorgan had reviewed the loans separately and determined that the number of delinquent loans was far less than the outside analysis had found.
At Bear Stearns and Washington Mutual, employees also had the power to sanitize bad assessments. Employees at Bear Stearns were told that they were responsible for “purging all of the older reports” that showed flaws, “leaving only the final reports,” according to the court documents.
Such actions were designed to bolster profit. In a deposition, a Washington Mutual employee said revealing loan defects would undermine the lucrative business, and that the bank would suffer “a couple-point hit in price.”
Ratings agencies also did not necessarily get a complete picture of the investments, according to the court filings. An assessment of the loans in one security revealed that 24 percent of the sample was “materially defective,” the filings show. After exercising override power, a JPMorgan employee sent a report in May 2006 to a ratings agency that showed only 5.3 percent of the mortgages were defective.
Such investments eventually collapsed, spreading losses across the financial system.
Dexia, which has been bailed out twice since the financial crisis, lost $774 million on mortgage-backed securities, according to court records.
Mr. Schneiderman, the New York attorney general, said that overall losses from flawed mortgage-backed securities from 2005 and 2007 were $22.5 billion.
In a statement shortly after he sued JPMorgan Chase, Mr. Schneiderman said the lawsuit was a template “for future actions against issuers of residential mortgage-backed securities that defrauded investors and cost millions of Americans their homes.”
Filed under: bubble, CDO, CORRUPTION, currency, Eviction, foreclosure, GTC | Honor, Investor, Mortgage, securities fraud | Tagged: Bear Sterns, cooking the books, DEXIA, Eric T. Schneiderman, fraud against homeowners, fraud against investors, interest rates, JP Morgan Chase, Libor, principal, residential mortgage-backed securities, TARP, WAMU |