‘Foreclosure Review’ Link Surfaces from BofA-Countrywide Trial

The following article is brought to you by ECreditDaily.Com

The Independent Foreclosure Review has sent $2.8 billion in compensation checks to more than 4 million borrowers to remedy foreclosure or mortgage-modification abuses, but along this settlement’s long and winding road there have been many bumps and potholes.(CHASEHOMEFINANCESUX RESPONSE: Yeah, The Big Banks Paid ‘Independent’ Consultants An Average Of $20,000 Per Case, An The Families Received An Average Of $400 to $600 For The Years Of Abuse!?!? A Pathetic Country We Have Become!!!)

Now you can add another dubious distinction to the IFR.

A jury this week found a top executive at Bank of America’s Countrywide unit, Rebecca Mairone, liable for at least some of the fraud related to selling bad mortgages, which were later bundled into investments and sold to Fannie Mae and Freddie Mac in the run-up to the financial crisis and housing meltdown.

ProPublica had previously reported that Rebecca Marione left Bank of America (the nation’s second-largest bank) last year for a job in the mortgage unit of JP Morgan Chase (the largest bank), where she helped with the Independent Foreclosure Review.

The IFR has been a source of anger and frustration among victims who feel they were under-compensated and given few, if any, details about the reviews of their own foreclosures. Meanwhile, high-profile Democratic lawmakers are trying to get regulators to be more transparent about the IFR process.

A JPMorgan spokeswoman has confirmed that Mairone now works in another unit of the bank, and is no longer in mortgage banking.

Bank of America was also found liable on Wednesday for having purposely sold defective mortgages, a bit of a victory for the federal government as it tries hold big banks accountable for their role in the housing crisis.

Through a program officially known as the High Speed Swim Lane, or “Hustle,” Countrywide (which Bank of America now owns) processed risky loans, which in turn were backed by Fannie Mae and Freddie Mac, prosecutors alleged.

Jamie Dimon’s Cameos in Fannie-Freddie Lawsuit

The following article is brought to you by Jonathan Weil at Bloomberg.Com

Now that JPMorgan Chase & Co. and the Federal Housing Finance Agency are on the verge of a $4 billion settlement, it’s worth revisiting the occasionally prominent role that Jamie Dimon played in the complaint against the company by the government conservator for Fannie Mae and Freddie Mac.

This also is an opportune time to point out a noteworthy difference between the approaches taken by the Securities and Exchange Commission and the housing-finance agency in going after JPMorgan. The SEC’s claims over the London Whale trading scandal last month didn’t name names. The housing-finance agency’s lawsuit in 2011 over faulty mortgage bonds did.

The SEC’s administrative order — part of a $200 million settlement in which JPMorgan admitted to violating federal securities laws without specifying which ones — referred to “senior management” more than 100 times. Most of the time you can’t tell whom the SEC is referring to, which was by design. The SEC said it used the term to refer to “one or more of the following individuals who held the listed positions as of May 10, 2012: the JPMorgan chief executive officer, the JPMorgan chief financial officer, the JPMorgan chief risk officer, the JPMorgan controller, and the JPMorgan general auditor.”

JPMorgan’s CEO, of course, is Dimon. In contrast to the cozy settlement papers between JPMorgan and the SEC, Dimon’s name appears several times in the Federal Housing Finance Agency’s amended complaint against the company over faulty mortgage bonds that were sold to Fannie Mae and Freddie Mac, although Dimon wasn’t named a defendant.

Attorneys for the Fannie-Freddie conservator relied in part on Dimon’s January 2010 testimonyto the Financial Crisis Inquiry Commission and tried to use his words to buttress the agency’s case. In one section, the agency said that JPMorgan’s home-mortgage division, Chase Home Finance, originated many of the loans underlying the mortgage bonds that JPMorgan sponsored. The agency said the unit’s “departure from industry standards was confirmed by Jamie Dimon” when he testified to the crisis commission that “the underwriting standards in our mortgage business, for example, should have been higher, and we wish we had done an even better job in managing our leveraged lending and mortgage-backed securities exposures.”

Another section of the complaint used Dimon’s crisis-commission testimony to assert that he had confirmed the mortgage division’s overreliance on third parties to originate loans. To that end, the agency included the following quotes from Dimon: “We’ve also closed down most — almost all of the business originated by mortgage brokers where credit losses have generally been over two times worse than the business we originate ourselves.” The agency also included his statement that “there were some unscrupulous mortgage salesmen and mortgage brokers. And, you know, some people missold.”

Another paragraph from the complaint, again citing Dimon’s testimony to the crisis commission, said: “When asked whether JPMorgan conducted stress tests in order to prevent its exposure to these systemic risks and what risk management procedures were in place, Mr. Dimon replied: `[i]n mortgage underwriting, somehow we just missed, you know, that home prices don’t go up forever and that it’s not sufficient to have stated income in home [loans].’ Mr. Dimon further confirmed this failure of basic due diligence when he was later quoted as saying,`[t]here was a large failure of common sense’ because `[v]ery complex securities shouldn’t have been rated as if they were easy-to-value bonds.’”

The agency’s complaint also alleged that Dimon was the person responsible for JPMorgan’s decision in 2006 to begin selling its subprime-loan holdings, after the company grew alarmed at the increasing rate of late payments. (The references to GSEs in the next paragraph refer to Fannie and Freddie, which are government-sponsored enterprises.)(CHASEHOMEFINANCESUX RESPONSE: Chase Bank Was Alarmed That People Were Not Just Going To Let Their Bank Rob & Steal From The American People!?)

Again from the lawsuit: “Despite Mr. Dimon’s view that JPMorgan’s subprime holdings `could go up in smoke!’ and JPMorgan’s decision to sell its own holdings in subprime assets, JPMorgan continued to originate and securitize poorly underwritten mortgage loans and vouch for their quality. This was the time period in which the GSEs acquired a significant amount of the JPMorgan certificates, relying on JPMorgan’s representations that the mortgage loans were underwritten in accordance with JPMorgan’s purported underwriting standards.”
It went on: “JPMorgan waived a significant (over 51 percent) number of the loans rejected by its third-party due diligence firm into loan pools for securitization.

JPMorgan also abandoned its underwriting standards in directing its employees to enter untrue and misleading information into its automated underwriting system in order to generate approvals for loans that would otherwise be rejected.

“Finally, JPMorgan CEO Jamie Dimon himself knew that subprime positions were risky and dangerous; all the while JPMorgan continued to originate, acquire and securitize defective and credit-impaired loans for inclusion in its securitizations.”

We may never know how much of what the conservator alleged is true. But we have an idea of how much the FHFA’s claims on behalf of Fannie and Freddie will cost JPMorgan now that the sides have reached a tentative settlement. How much blame does Dimon bear? Most JPMorgan shareholders seem unconcerned. They’re just glad the company is putting more of its litigation woes behind it.

Major JPMorgan Chase settlements and fines

The following article is brought to you by Kevin McCoy at USAToday.Com

Here’s a list of what the fines and settlements have cost JPMorgan Chase to date in the fallout of the 2008 financial crisis, not including the tentative settlement reached with the Justice Department Saturday of $13 billion:

Oct. 2013: $100 million: Agreed to pay a $100 million fine and admit to reckless conduct and market manipulation in connection with its 2012 “London whale” trading debacle, the Commodity Futures Trading Commission announced.

Sept. 2013: $920 million – Paid to the Federal Reserve, Securities and Exchange Commission, Office of Comptroller of the Currency and the United Kingdom’s Financial Conduct Authority to settle claims about management and oversight of traders involved in the “London Whale” disaster. The bank also admitted wrongdoing in the trading episode, which caused roughly $6 billion in losses.

REPORTS: JPMorgan strikes tentative $13B mortgages settlement

Sept. 2013: $389 million – A total of $80 million in fines paid plus $309 million in refunds after regulators charged that more than 2.1 consumers were harmed by unfair billing practices that charged for credit monitoring services they did not receive. The settlement also covered allegations that consumers were harmed by mistakes in thousands of debt-collection lawsuits.

July 2013: $410 million – Penalties and repayments related to Federal Energy Regulatory Commission findings of alleged bidding manipulation of California and Midwest electricity markets from Sept. 2010 through Nov. 2012.

January 2013 and Feb. 2012: $1.8 billion – Two agreements in which JPMorgan joined other major banks in a nationwide settlement over allegations the institutions improperly carried out home foreclosures after the housing market crisis. JPMorgan also agreed to $3.7 billion for financially troubled homeowners and roughly $540 million in refinancing.

November 2012: $296.9 million – Paid to settle SEC allegations that the bank misstated information about the delinquency status of mortgages that served as financial collateral for a securities offering underwritten by the bank. JPMorgan received more than $2.7 million in fees on the offering, while investors sustained at least $37 million in losses.

August 2012: $1.2 billion – The bank’s share of a broad settlement resolving a class-action lawsuits that alleged JPMorgan, other banks, Visa and Mastercard improperly conspired to set the price of credit and debit card interchange fees.

April 2012: $20 million – Paid to settle Commodity Futures Trading Commission allegations that the bank improperly extended credit to Lehman Brothers based in part on customer funds that were required to be kept separate.

August 2011: $88.3 million – Fines settling allegations by the Treasury Department’s Office of Foreign Assets Control that the bank improperly processed transactions involving Cuba, Iran and Sudan.

July 2011: $228 million – Settling SEC allegations that the bank fraudulently rigged at least 93 municipal bond transactions in 31 states, generating millions of dollars in ill-gotten gains.

June 2011: $153.6 million – Penalties to the SEC in settling allegations that the bank misled investors about a collateralized debt obligation it marketed without telling them a hedge fund chosen the underlying collateral and made investment bets it would fail.

April 2011: $56 million – Paid to settle claims the bank overcharged active-duty service members on their mortgages. The agreement included $27 million in cash to approximately 6,000 military personnel, lower interest rates on soldiers’ home loans and the return of homes taken in improper foreclosures.

June 2010: $48.6 million – Fine paid to settle allegations by Great Britain’s financial regulator that the bank’s London unit failed to maintain required separation between clients’ accounts and JPMorgan funds.

Lawsuit accuses JPMorgan of exposing Social Security numbers

The following article is brought to you by Dena Aubin at Reuters.Com

JPMorgan Chase & Co has been hit with a proposed class action lawsuit accusing it of printing Social Security numbers on the outsides of form letters mailed to customers to tell them about the bank’s efforts to protect their private information.(CHASEHOMEFINANCESUX RESPONSE: REALLY!?!? How Pathetic Does Chase Bank Have To Be, Before They Get Broke Up!?!?)

Filed on Thursday in federal court in Chicago, the lawsuit accused the largest bank in the United States of violating federal and state laws and subjecting its customers to increased risk of identity theft.

A JPMorgan spokeswoman declined comment.

The allegations are another embarrassment for the financial company amid a rash of civil and criminal probes, ranging from the massive “London Whale” trading scandal to possible bribery in China.

On Thursday, it disclosed $1 billion in payouts to settle four civil regulatory probes.

The new lawsuit was filed on behalf of Alexander Furman, a Buffalo Grove, Illinois resident, who said JPMorgan twice mailed him preprinted forms with his name, address and Social Security number on the outsides, and failed to follow up on his complaints.

The first mailing, sent around September 1, was a privacy notification explaining how JPMorgan safeguards customers’ personal information, according to the lawsuit.

Furman complained immediately and was told the bank would rectify the situation, according to the lawsuit.

Even so, Furman received a benefit notification from the bank about two weeks later with his social security number still printed on the front, the lawsuit said.

COVETED BY THIEVES

“It (the bank) should have immediately notified its customers and certainly taken steps to prevent it happening the second time,” said Elizabeth Fegan, a partner at Hagens Berman law firm in Oak Park, Illinois, who filed the suit.

The lawsuit cited JPMorgan’s own warning, in online information about its security procedures, that a name combined with a Social Security number is a prime way for thieves to steal an identify.

“It’s very damaging,” Fegan added. “Chase even says on its Web site that providing Social Security numbers to an identity thief is ‘as good as gold.’”

Disclosure of Social Security numbers can be especially harmful since they cannot easily be replaced, like a credit or debit card, the lawsuit said.

Among other violations, the lawsuit alleged that Chase broke Illinois’ consumer fraud act, which prohibits the printing of Social Security numbers on mailings. Several states have passed such laws to help combat identity theft.

The lawsuit seeks class action status representing any JPMorgan customers who received mailings with their Social Security numbers printed on the outside. It said thousands or possibly millions of customers could be part of the class.

Fegan said she has not received confirmation from the bank about how many customers were affected, but the forms appeared to be mass mailings.

The case is Alexander Furman et al v JP Morgan Chase & Co et al, No. 13-cv-06749, U.S. District Court, Northern District of Illinois.

JPMorgan in talks to settle government probes for $11 billion: sources

The following article is brought to you by David Henry and Karen Freifeld at Reuters.Com

JPMorgan Chase & Co is in talks with government officials to settle federal and state mortgage probes for $11 billion, two people familiar with the matter said on Wednesday.

The sum could include $7 billion in cash and $4 billion for consumers, said the sources, who asked not to be identified because the negotiations are private.

The talks are fluid and the $11 billion amount could change, the people familiar with the matter said. The discussions include the U.S. Department of Justice, the Securities and Exchange Commission, the U.S. Department of Housing and Urban Development and the New York State Attorney General, the sources said.

JPMorgan is hoping to ease some of the pressure that regulators have been putting on the bank for months. The bank sidestepped the worst losses in the financial crisis, but it has looked less smart since May 2012, when it said it was losing money on derivatives bets that became known as the “London Whale” trades.

Those wagers ended up costing the bank more than $6.2 billion before taxes, and subsequent probes into how the losses happened revealed that the bank’s outspoken chief executive officer, Jamie Dimon, had a dysfunctional relationship with regulators.

But the London whale trades were just one of many missteps that has drawn regulatory scrutiny. The largest U.S. bank has disclosed more than a dozen probes globally in recent filings, including an investigation from the U.S. Department of Justice in California that preliminarily concluded that JPMorgan violated securities laws in selling subprime mortgage bonds.

U.S. Department of Justice lawyers from other areas of the country and state authorities have been investigating JPMorgan’s liability for mortgage securities sold by two other companies it acquired during the financial crisis, Bear Stearns and Washington Mutual.

The talks to reach a global settlement on the mortgage issues heated up this week after U.S. Department of Justice officials in California told the bank that it was preparing to file a lawsuit.

The New York prosecutor’s office is participating in the talks because it is part of a working group formed by President Barack Obama in January 2012 to investigate misconduct in mortgage securities that contributed to the financial crisis.

For the bank, the biggest in the United States by assets, the sums being discussed are painful but manageable. The company reported net income of $21.3 billion last year and analysts have estimated that profits this year will be higher. At the end of June, the bank’s net worth, as measured by the accounting value of its assets minus liabilities, was about $209 billion.

TAKING A TOLL

JPMorgan generates so much excess capital from its operations that its board, with approval of regulators, authorized spending $6 billion to buy back stock in the 12 months through next March. That buyback was conditioned on the bank improving the way it calculates its capital needs.

Still, the investigations have taken a toll. Before the London Whale debacle, regulators had given the bank approval to buy back stock at twice the current rate.

The bank has spent about $5 billion a year on legal costs the past two years, largely because of the London Whale debacle and because of mishandling of mortgage loans and mortgage securities.

After two government regulators in January issued public orders that the bank improve its risk and operational controls, as well as its anti-money laundering and Bank Secrecy Act processes, CEO Dimon said the bank had postponed projects that would have built its business so that it could put its house in order.

JPMorgan has added 4,000 staff to its control groups since 2012 – three quarters of them this year – and increased spending on those efforts by about $1 billion. The bank’s control group includes risk, compliance, legal, finance, technology, oversight and control and audit functions. Dimon pointed out the efforts in a memo to employees last week in which he warned that the company was about to face more bad publicity.(CHASEHOMEFINANCESUX RESPONSE: NO, Not Bad Publicity; Just More Facts That Chase Bank Is Nothing But A Criminal Entity That Continues To Steal From The American People!)

The bank’s chief financial officer said earlier this month that many types of loans on its books are performing better, but mounting legal costs will prevent those gains from boosting profits.

JPMorgan shares were up 2.7 percent at the close of New York Stock Exchange trading on Wednesday.