Saturday, September 03, 2011

Banks will be banks, Silly Silly

U.S. sues big banks over mortgage losses
The Federal Housing Finance Agency, which oversees government-seized mortgage firms Fannie Mae and Freddie Mac, is seeking billions of dollars in compensation. The lawsuits were filed in federal court and announced after the close of trading on Friday.

The FHFA argues that, when it came to mortgage securities purchased by Fannie and Freddie during the years leading up to the financial crisis, the banks failed to meet their due-diligence duties under securities law.

Large financial institutions are facing investor lawsuits over problem mortgages as well, though these investors want the big banks to repurchase problem loans they sold them before. FHFA is reportedly seeking reimbursement for losses on securities held by Fannie and Freddie.

The list of defendants is a who-who’s of mortgage finance: Bank of America Corp., Goldman Sachs Group Inc., J.P. Morgan & Chase & Co., Citigroup Inc., Deutsche Bank, Barclays PLC, Nomura Holdings Inc., Morgan Stanley, Ally Financial Inc., Credit Suisse Group Inc., First Horizon National Corp., General Electric Co., the HSBC North America Holdings unit of HSBC Holdings, The Royal Bank of Scotland Group PLC and Société Générale S.A.

There will be a lot of I told you so's and about times over that bit of news.

Robo-Signing Redux: Servicers Still Fabricating Foreclosure Documents
Several dozen documents reviewed by American Banker show that as recently as August some of the largest U.S. banks, including Bank of America Corp., Wells Fargo & Co., Ally Financial Inc., and OneWest Financial Inc., were essentially backdating paperwork necessary to support their right to foreclose.

Some of documents reviewed by American Banker included signatures by current bank employees claiming to represent lenders that no longer exist.

The banks argue that creating such documents is a routine business practice that simply "memorializes" actions that should have occurred years before. Some courts have endorsed that view, but others, such as the Massachusetts Supreme Judicial Court, have found that this amounts to a lack of sufficient evidence and renders foreclosures invalid.

According to a document submitted in a Florida court by Bank of America Corp., bank assistant vice president Sandra Juarez signed a mortgage assignment on July 29 of this year that purported to transfer ownership of a mortgage from New Century Mortgage Corp. to a trustee, Deutsche Bank. Two problems with that: New Century, a subprime lender, went bankrupt in 2007; and the Deutsche Bank trust that purported to hold the loan was created for a securitization completed in 2006 — about five years before Juarez signed it over to the trust. (Bank of America, as the servicer of the loan, was seeking to foreclose on behalf of the trust and its bondholders.)

Most of the pooling and servicing agreements governing securitizations require a complete chain of endorsements.

Banks Continue to Fabricate Documents, Commit Foreclosure Fraud
This is the dirty secret about robo-signing: it’s still happening. So are the forgeries and the document fabrication and the fraud upon state courts. After the scandal erupted last October, the banks promised to fix their operations. They did so by waiting everyone out and engaging in the exact same practices.

And you see, the banks HAVE to fabricate documents. Because they destroyed the private property system through improper and sloppy securitizations and lost or missing mortgage assignments during the bubble years, and as such they cannot prove standing to foreclose without lying. Robo-signing is a crime, but it’s also a cover-up for a much bigger crime, which involves MERS and improper mortgage transfer and securities fraud. The robo-signed, forged, fabricated documents are the smokescreen being used to foreclose and get the real problem off the books. Banks are trying to wriggle off the hook by saying they are merely “memorializing” past actions with the fake documents. Some courts aren’t buying it; the pooling and servicing agreements stipulate that all assignments showing transfers must take place within 60 days, not years later through “memorialized” actions.

Hattip to Barry Ritholtz.

Tsk tsk. Silly silly banks.



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