Bank of America reaches record $17bn settlement over questionable mortgages

Deal resolves investigation into mortgage-backed securities sales and is largest settlement arising from 2008 financial crisis

theguardian.com, Associated Press in Washington, Thursday 21 August 2014

Bank of America. The deal requires the bank to acknowledge making serious
 misrepresentations about the quality of its residential mortgage-backed securities.
Photograph: Matt Rourke/AP

Bank of America has reached a record settlement of nearly $17bn (£10.2bn) to resolve an investigation into its role in the sale of mortgage-backed securities before the 2008 financial crisis, officials directly familiar with the matter have said.

One official, who spoke with AP on condition of anonymity because the announcement was not scheduled until Thursday at the earliest, said the bank will pay $9.65bn in cash and provide consumer relief valued at $7bn.

The deal is the largest settlement arising from the economic meltdown in which millions of Americans lost their homes to foreclosure. It follows agreements in the past year with Citigroup for $7bn and with JPMorgan Chase & Co for $13bn.

Like the Bank of America deal, those settlements were a mixture of hard cash and "credits" for various forms of consumer aid that the banks have promised to provide in coming years.

The Bank of America settlement was negotiated through a joint federal and state working group established by the US president, Barack Obama, two years ago with the justice department and other federal and state authorities. Individual states are expected to share in the settlement.

Justice department spokeswoman Ellen Canale declined to comment, as did the New York attorney general, Eric Schneiderman, a co-chairman of the group. The bank also declined comment.

The deal requires Bank of America to acknowledge making serious misrepresentations about the quality of its residential mortgage-backed securities issued by itself and by Countrywide Financial and Merrill Lynch. Those institutions were acquired by the bank when they were on the brink of failure in 2008 and they were responsible for the bulk of the questionable loans.

The deals are intended to offer some financial relief to homeowners, whose mortgages were bundled into securities by the banks and then sold to investors.

The securities contained residential mortgages from borrowers who were unlikely to be able to repay their loans. Yet, the securities were promoted as relatively safe investments until the housing market collapsed and investors suffered billions of dollars in losses.

The poor quality of the loans also led to a slew of foreclosures, kicking off the recession that began in late 2007. The cash totals now being paid by some of the country's largest banks are not nearly enough to reverse the damage caused by the bursting of the housing bubble and the ensuing recession.

Bank of America had argued that it should not be held liable for the subprime mortgages issued by Countrywide and Merrill Lynch. Combined, those three firms issued $965bn in mortgage-backed securities from 2004 to 2008, according to public records. Roughly 75% of that came from Countrywide.

In a federal lawsuit last year, the Securities and Exchange Commission charged Bank of America and two subsidiaries with defrauding investors in an offering of residential mortgage-backed securities by failing to disclose key risks and misrepresenting facts about the underlying mortgages.

The justice department filed a parallel civil action against Bank of America, alleging violations of the Financial Institutions Reform, Recovery, and Enforcement Act.

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"The Recalibration of Awareness – Apr 20/21, 2012 (Kryon channeled by Lee Carroll) (Subjects: Old Energy, Recalibration Lectures, God / Creator, Religions/Spiritual systems  (Catholic Church, Priests/Nun’s, Worship, John Paul Pope, Women in the Church otherwise church will go, Current Pope won’t do it),  Middle East, Jews, Governments will change (Internet, Media, Democracies, Dictators, North Korea, Nations voted at once), Integrity (Businesses, Tobacco Companies, Bankers/ Financial Institutes, Pharmaceutical company to collapse),  Illuminati (Started in Greece, with Shipping, Financial markets, Stock markets, Pharmaceutical money (fund to build Africa, to develop)), Shift of Human Consciousness, (Old) Souls, Women, Masters to/already come back, Global Unity.... etc.) - (Text version)

“…  The Shift in Human Nature

You're starting to see integrity change. Awareness recalibrates integrity, and the Human Being who would sit there and take advantage of another Human Being in an old energy would never do it in a new energy. The reason? It will become intuitive, so this is a shift in Human Nature as well, for in the past you have assumed that people take advantage of people first and integrity comes later. That's just ordinary Human nature.

In the past, Human nature expressed within governments worked like this: If you were stronger than the other one, you simply conquered them. If you were strong, it was an invitation to conquer. If you were weak, it was an invitation to be conquered. No one even thought about it. It was the way of things. The bigger you could have your armies, the better they would do when you sent them out to conquer. That's not how you think today. Did you notice?

Any country that thinks this way today will not survive, for humanity has discovered that the world goes far better by putting things together instead of tearing them apart. The new energy puts the weak and strong together in ways that make sense and that have integrity. Take a look at what happened to some of the businesses in this great land (USA). Up to 30 years ago, when you started realizing some of them didn't have integrity, you eliminated them. What happened to the tobacco companies when you realized they were knowingly addicting your children? Today, they still sell their products to less-aware countries, but that will also change.

What did you do a few years ago when you realized that your bankers were actually selling you homes that they knew you couldn't pay for later? They were walking away, smiling greedily, not thinking about the heartbreak that was to follow when a life's dream would be lost. Dear American, you are in a recession. However, this is like when you prune a tree and cut back the branches. When the tree grows back, you've got control and the branches will grow bigger and stronger than they were before, without the greed factor. Then, if you don't like the way it grows back, you'll prune it again! I tell you this because awareness is now in control of big money. It's right before your eyes, what you're doing. But fear often rules. ...”

US regulator sues 16 banks for alleged Libor rigging

BBC News, 14 March 2014

 

Some of the world's biggest banks have been accused of colluding to fix Libor

Libor scandal

• Former trader charged over Libor
• Libor change responds to scandal
• EU proposals to take control of Libor
• Can we ever trust bankers again?

A US regulator has sued 16 banks for allegedly manipulating the London interbank offered rate (Libor).

The Libor rate is used to set trillions of dollars of financial contracts, including mortgages and financial transactions around the world.

The regulator said the manipulation caused substantial losses to 38 US banks which were shut down during and after the 2008 financial crisis.

The sued banks include Barclays, HSBC, Citigroup and Royal Bank of Scotland.

The British Bankers' Association (BBA) has also been sued by the regulator - the US Federal Deposit Insurance Corporation (FDIC).

"BBA participated in the alleged scheme to protect the revenue stream it generated from selling Libor licenses and to appease the Panel Bank Defendants that were members of the BBA," it was quoted as saying by the AFP news agency.

The FDIC alleged that the banks mentioned in its lawsuit rigged the rate from August 2007 to at least mid-2011.

Other banks named in the lawsuit include Bank of America, JPMorgan Chase, Deutsche Bank, Lloyds Bank, Credit Suisse, UBS, and Rabobank.

Growing pressure

Libor is the average rate at which banks lend money to one another and is decided on a daily basis.

Most of the world's biggest banks contribute estimates to form the Libor.

But there have been allegations that some have looked to profit from it by understating or overstating their submissions.

Over the past two years, regulators across the globe have been investigating the manipulation of the rate and there have been $3.7bn (£2.26bn) in fines to date.

A string of international banks and brokers, including Barclays and the Royal Bank of Scotland, have faced both criminal and civil penalties for their involvement in the scandal.

Some banks have also been found to have understated their submissions in the period during and after the financial crisis.

They did so in order to avoid the perception that they were having to borrow at higher interest rates than their peers and might therefore be in financial difficulty.

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US seeks $864m from Bank of America in mortgage trial

BBC News, 10 November 2013

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Bank of America bought Countrywide
Financial in 2008

The US government has said it is seeking $864m (£540m) in compensation from Bank of America for losses over home loans sold to it by the bank's Countrywide Financial unit.

US attorney Preet Bharara made the request in documents filed late Friday in New York.

The bank was found liable for defrauding two US state-backed mortgage companies by a federal jury last month.

Countrywide was acquired by Bank of America in 2008.

The ruling was a major win for the US government, which launched the case in the wake of the financial crisis.

Reports last month suggested that US banking giant JP Morgan is set for a record $13bn fine to settle investigations into its mortgage-backed securities.

And Wells Fargo agreed to pay $335m to settle claims it misled investors over mortgage-backed bonds.

The US Department of Justice is investigating at least nine banks over their sales of mortgage-backed securities.

'Hustle'

Countrywide was found liable for selling thousands of defective loans to Fannie Mae and Freddie Mac.

The month-long trial focused on a Countrywide programme that was internally called "Hustle" or "high-speed swim lane" which allowed loans to be processed quickly without checking their quality.

The wrongdoing, which mostly took place before Countrywide was acquired, was discovered after a whistleblower filed a lawsuit against the firm.

The US economy witnessed a big boom in its housing market in the lead-up to the 2007-08 global financial crisis.

As house prices continued to rise, many banks looked to cash in on the boom by creating complex financial products that grouped together home loans.

However, a collapse in the housing market saw the value of those investments plummet as the underlying mortgage holders became unable to repay their debts.

This snowballed into the subprime crisis, which hurt investors globally and caused billions of dollars in losses.

JP Morgan 'may pay record $13bn fine'

BBC News, 19 October 2013

JP Morgan has recently found itself overwhelmed by mounting legal troubles

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US banking giant JP Morgan is set for a record $13bn (£8bn) fine to settle investigations into its mortgage-backed securities, US media reports say.

A tentative deal is believed to have been reached in talks with senior US justice department officials.

The sale of overvalued mortgage-backed securities was blamed for the near-collapse of the banking system in 2007.

Last month, JP Morgan was fined almost $1bn in a separate case over the "London Whale" trading debacle.

The scandal arose from disastrous trades by former bank employee Bruno Iksil, who made big bets on the financial markets.

Risky assets

The tentative deal to pay the $13bn fine to the justice department was reached during the talks on Friday, between JP Morgan lawyers with US Attorney General Eric Holder and his deputy Tony West, the Wall Street Journal said, citing officials familiar with the decision.

The New York Times also reported that the investment bank was nearing the agreement, although final details are still being discussed.

Neither the justice department nor the bank was available for comment.

If confirmed, it would be the biggest settlement of its kind ever paid by an American company.

The $13bn sum is said to include $9bn in fines and a further $4bn in relief for struggling homeowners.

In the run-up to the financial crisis, sophisticated financial products known as mortgage-backed securities were created by many investment banks.

These special bonds contained a mix of investments but at their heart were supposed to be risk-free home loans, the BBC's business correspondent Joe Lynam reports.

What JP Morgan is alleged to have done was sell the mortgage-backed assets knowing full well that many of the home loans were in fact very risky.

Some of the problems relate to mortgage bank Washington Mutual and investment bank Bear Stearns, two failing firms that JPMorgan took over in 2008.

The mortgage-backed assets are widely thought to have played a central role in the near collapse of the banking system when banks realised in 2007 that many of their assets were worth a fraction of their official book value.

The fine would settle all potential civil action that might be taken against the bank in future but does not mean that criminal cases against individuals are ruled out, our correspondent adds.

JP Morgan had initially aimed to persuade US justice department officials to drop the criminal investigation but the attorney general ruled that out, reports said.

In August, US government officials filed two lawsuits against Bank of America relating to mortgage-backed securities. Bank of America denied civil fraud in failing to disclose risks and misleading investors.

Legal woes

JP Morgan has found itself overwhelmed by mounting legal troubles lately.

Once the darling of Washington and Wall Street, it reported a rare quarterly earnings loss last week, mostly due to legal costs totalling $9.2bn.

The bank lost $380m during the quarter, compared with a profit of $5.7bn in the same period last year.

JP Morgan says it has set aside a fund of $23bn to deal with mounting legal costs. 

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US sues Bank of America for fraud over mortgage bonds

Google – AFP, 6 Aug 2013

A man withdraws cash from a Bank of America automated teller

machine in Hollywood on October 24, 2012 (AFP/File, Frederic J. Brown)

NEW YORK — The US government on Tuesday sued Bank of America for defrauding investors in the sale of $850 million in mortgage-backed securities ahead of the housing bust.

The Department of Justice civil complaint alleges Bank of America lied to investors about the riskiness of the mortgage loans backing the securities, and intentionally avoided performing adequate due diligence on the mortgages, leading to investor losses surpassing $100 million.

The government alleges that more than 40 percent of the loans in one investment did not meet Bank of America's own underwriting standards.

Many of the loans had "glaring" problems such as overstated income for the borrowers, or fake employment data, that made them "wholly inconsistent" with a prime rating, the Justice Department said.

"As a result of this lack of due diligence, Bank of America had no basis to make many of the representations it made in the offering documents regarding the credit quality of the underlying mortgages," the Justice Department said in a statement.

It pointed out that the bank's own chief executive at the time, Kenneth Lewis, had described the loans included in the bonds a "toxic waste".

In parallel action the Securities and Exchange Commission also levelled fraud charges against the bank over the same 2008 mortgage security offerings.

In response, a Bank of America spokesman defended the loans in question as "prime mortgages" that had performed better than similar loans originated and securitized at the time by other financial institutions.

"We are not responsible for the housing market collapse that caused mortgage loans to default at unprecedented rates and these securities to lose value as a result," the spokesman said in a statement.

Bank of America has been damaged to a greater extent by the housing bust than some other rival banks, thanks in part to an ill-timed purchase of Countrywide Financial, once the country's largest originator of mortgages.

'We Were Told To Lie,' Say Bank Of America Employees

NPR, Steve Mullis, June 18, 2013

Six former employees and one contractor say Bank of America's mortgage servicing unit consistently lied to homeowners, fraudulently denied loan modifications and offered bonuses to staff for intentionally pushing people into foreclosure, according to a Salon.com report.

The allegations were made in sworn statements added to a civil lawsuit filed in federal court in Massachusetts.

One of the former employees, Erika Brown, said in her statement that the bank's practice was to "string homeowners along with no apparent intention of providing the permanent loan modifications it promises."

Salon explained the process in more detail:

"The government's Home Affordable Modification Program (HAMP), which gave banks cash incentives to modify loans under certain standards, was supposed to streamline the process and help up to 4 million struggling homeowners (to date, active permanent modifications number about 870,000). In reality, Bank of America used it as a tool, say these former employees, to squeeze as much money as possible out of struggling borrowers before eventually foreclosing on them. Borrowers were supposed to make three trial payments before the loan modification became permanent; in actuality, many borrowers would make payments for a year or more, only to find themselves rejected for a permanent modification, and then owing the difference between the trial modification and their original payment."

The employees' statements went on to describe a system of negligence, falsifying records and mass, systematic rejections of loan modification applications — called a "blitz" — all intended to force borrowers into foreclosure and allow Bank of America to collect additional fees from them.

The statements also described a system of cash bonuses, as well as gift cards for local retailers, offered by senior managers to employees who met quotas for pushing accounts into foreclosure.

Bank of America has said the statements paint a "false picture" of the bank's activities and that they are "rife with inaccuracies."

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Bank of America to pay Fannie Mae billions to settle mortgage claims

BBC News, 7 January 2013

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The bank is also the subject of a
 civil lawsuit brought by federal
prosecutors

Bank of America has agreed to pay US government mortgage agency Fannie Mae $3.6bn (£2.2bn) to settle claims relating to residential home loans.

In addition, it has agreed to buy back 30,000 mortgages for $6.75bn, and pay a further $1.3bn in compensation.

Fannie Mae argued the bank sold it toxic debts and should be responsible for the losses it suffered as result.

Separately, ten big mortgage providers agreed to pay $8.5bn in compensation for mistakes in repossessing homes.

The banks include Bank of America, Citigroup, JP Morgan and Wells Fargo. They will pay $3.3bn directly to homeowners, some of whom should not have lost their homes, regulators said.

Individual owners will receive anything from a few hundred dollars to $125,000.

Loan assistance and write-offs will make up the remaining $5.2bn.

Heavy losses

Fannie Mae supports the US mortgage market, which collapsed in 2008 after the housing bubble burst.

In the run-up to the financial crisis of 2007-8, home loans grouped together and sold on as investments became increasingly popular.

When the underlying mortgage holders were unable to repay their debts, the investments plummeted in value, with disastrous consequences for banks all over the world.

Freddie Mac is the other government mortgage agency. The two firms lost more than $30bn, partly because of their investments in the subprime mortgages, and were bailed out by the US government.

Since the rescues, US taxpayers have spent more than $140bn to keep the firms afloat.

Bank of America settled with Freddie Mac in 2011.

'Significant step'

The agreement brings to an end a long-running dispute between Fannie Mae and Bank of America.

"A favourable resolution of this long-standing dispute between Fannie Mae and Bank of America is in the best interest of taxpayers," said Bradley Lerman at Fannie Mae.

The company said the loans "did not meet our standards at the time of origination, and we are pleased to have reached an appropriate agreement to collect on these repurchase requests."

The agreement covers loans worth about $1.4tn, with outstanding balances of $300bn.

Bank of America said the settlements were "a significant step in resolving our remaining legacy mortgage issues".

In October, the US government sued the bank for alleged mortgage fraud, accusing subsidiary Countrywide Financial of selling thousands of toxic home loans to Fannie Mae and Freddie Mac.

Earlier in the month, it took similar action against the banks Wells Fargo and JP Morgan Chase.

In October, JP Morgan was sued for allegedly defrauding investors who lost more than $20bn on mortgage-backed securities sold by Bear Stearns.

JP Morgan, which bought the investment bank in March 2008, said the allegations related to actions at Bear Stearns prior to its takeover.

In the same month, Wells Fargo was also sued by federal authorities for alleged mortgage fraud.

US sues Bank of America for $1bn over bad mortgages

Google – AFP, 24 october 2012

The government charged that Countrywide -- now owned by Bank of America

-- labelled defective mortgages as high-quality (AFP/File, Stan Honda)

  

WASHINGTON — The United States sued Bank of America Wednesday for more than $1 billion for allegedly having sold dodgy mortgages to state-controlled mortgage financers Fannie Mae and Freddie Mac.

The government charged that Countrywide -- the mortgage giant now owned by Bank of America -- labeled defective mortgages as good-quality and sold them to the two companies.

The suit says that between 2007 and 2009 Countrywide ran a mortgage origination program called "Hustle" which aimed to quickly process thousands of new mortgages without quality controls and then sell them to Fannie and Freddie.

Hustle caused "over $1 billion dollars in losses and countless foreclosures," Preet Bahara, the US attorney in New York City, said in a statement.

"The fraudulent conduct alleged in today's complaint was spectacularly brazen in scope," Bahara said.

"Countrywide and Bank of America made disastrously bad loans and stuck taxpayers with the bill."

"This lawsuit should send another clear message that reckless lending practices will not be tolerated."

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US sues Bank of America for $1bn over 'hustle' mortgage fraud scheme

Moody's downgrades 15 major banks

BBC News, 22 June 2012

Big Banking 

• Minority vote no to HSBC boss pay
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RBS said it "disagrees" with Moody's
move

The credit ratings agency Moody's has downgraded 15 global banks and financial institutions.

The UK banks downgraded were Royal Bank of Scotland, Barclays and HSBC. Lloyds also had its rating cut by Moody's in a separate announcement.

In the US, Bank of America and Citigroup were among those marked down.

BBC business editor Robert Peston said that banks were concerned as the downgrades may make it harder for them to borrow money commercially.

Moody's global banking managing director Greg Bauer said in the agency's statement: "All of the banks affected by today's actions have significant exposure to the volatility and risk of outsized losses inherent to capital markets activities."

The other institutions that have been downgraded are Goldman Sachs, Morgan Stanley, JP Morgan Chase, Credit Suisse, UBS, BNP Paribas, Credit Agricole, Societe Generale, Deutsche Bank and Royal Bank of Canada.

'Disagrees'

Moody's said it recognised "the clear intent of governments around the world to reduce support for creditors", but added that they had not yet put the frameworks in place that would allow them to let banks fail.

Some of the banks were put on negative outlook, which is a warning that they could be downgraded again later, on the basis that governments may eventually manage to withdraw their support.

In a statement, Royal Bank of Scotland (RBS) responded to its downgrade saying: "The group disagrees with Moody's ratings change, which the group feels is backward-looking and does not give adequate credit for the substantial improvements the group has made to its balance sheet, funding and risk profile."

RBS estimated that the downgrade could mean it needing to find an extra £9bn in collateral for its debts.

Lloyds said it believed that the change would have "limited impact on our funding costs and market capacity".

Of the banks downgraded, four were cut by one notch on Moody's ranking scale, including HSBC, Royal Bank of Scotland, and also Lloyds.

A further 10 banks had their rating reduced by two notches, including Barclays. Credit Suisse was lowered by three notches.

"The biggest surprise is the three-notch downgrade of Credit Suisse, which no one was looking for," said Mark Grant, managing director of Southwest Securities.

Peter Hahn, a former executive at Citigroup and now a lecturer at Cass Business School in London, said the downgrades could limit the banks' activities.

He added: "Banks are going to have to put up collateral in their transactions with other banks.

"As they get downgraded, other banks and system players don't want exposure.

"It's a constraint on capital, it's a constraint on business, so it's obviously not welcome for us, trying to get more money into the economy."

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Moody's cuts credit ratings on 15 major banks

Associated Press, by Pallavi Gogoi, Jun. 21

NEW YORK (AP) — Moody's Investors Service has lowered the ratings of some of the world's largest banks, including Bank of America, JPMorgan Chase, Citigroup and Goldman Sachs.

The ratings agency said late Thursday that the banks were downgraded because their long-term prospects for profitability and growth are shrinking.

The ratings agency said it was especially concerned about banks with significant capital market activities during a time of increased volatility in markets.

A downgrade usually means that it becomes more costly for banks to raise money by selling debt. Investors demand higher interest for riskier debt, which is what the downgrades represent.

Moody's had said in February that it was considering downgrading the credit ratings of major banks.

Whistleblower says BofA defrauded mortgage program

Reuters, by Jessica Dye, NEW YORK, Thu Mar 8, 2012

An ATM machine at a Bank of America office is pictured in Burbank, 

California August 19, 2011. (Credit: Reuters/Fred Prouser)

(Reuters) - Bank of America NA prevented homeowners from receiving mortgage-loan modifications under a federal program in order to avoid millions of dollars in losses while benefitting from financial incentives for participating in the program, according to a complaint unsealed in federal court Wednesday.

The suit is the second whistleblower complaint unsealed so far with apparent ties to the $1 billion False Claims Act settlement announced by Bank of America and the U.S. Attorney's Office for the Eastern District of New York on February 9.

The Bank of America settlement is also part of the sweeping $25 billion agreement reached between state and federal authorities.

Final settlement documents have yet to be filed in the BoA settlement, which the U.S. Attorney's Office said was the largest ever False Claims Act payout related to mortgage fraud.

The settlement resolved claims that Bank of America's Countywide Financial subsidiaries defrauded the Federal Housing Administration by inflating appraisals used for government-insured home loans, as well as claims involving the Home Affordable Modification Program, a federal program to help American homeowners facing foreclosure.

The complaint unsealed Wednesday was filed by whistleblower Gregory Mackler, a Colorado resident who said he worked alongside Bank of America executives while an employee at Urban Lending Solutions, a company to which Bank of America contracted some of its HAMP work.

While working at Urban Lending, Mackler said he saw BofA and its loan servicing subsidiary, BAC Homes Loans Servicing LP, implement "business practices designed to intentionally prevent scores of eligible homeowners from becoming eligible or staying eligible for permanent HAMP modification."

The bank and its agents routinely pretended to have lost homeowners' documents, failed to credit payments during trial modifications and intentionally misled homeowners about their eligibility for the program, the complaint alleged.

BoA let through just enough HAMP modifications to avert suspicion and allay congressional critics, while not enough to incur any substantial losses to its own bottom line, according to the complaint.

"In other words, BoA has had it both ways. BoA has continued to maximize the value of its mortgage portfolio with anti-HAMP modification practices and managed to make money by committing fraud on homeowner," the lawsuit said.

A lawyer for Mackler could neither confirm nor deny that the complaint was tied to the settlement. A spokesman for the U.S. attorney's office and a representative for Bank of America declined to comment.

In February, a whistleblower complaint was unsealed from Kyle Lagow, a former employee in a Countrywide appraisal unit which detailed allegations of Countrywide's "corrupt underwriting and appraisal process." Bank of America purchased Countywide in June 2008.

Under the False Claims Act, successful whistleblower complaints can earn that whistleblower up to 25 percent of the settlement amount.

According to the docket, the U.S. Department of Justice has until March 16 to decide whether to intervene in both the Mackler and Lagow case. The case is United States of America v. Bank of America NA et al., in the U.S. District Court for the Eastern District of New York, no. 11-3270.

(Reporting by Jessica Dye)

BofA in $335M settlement over Countrywide loans

Associated Press, by Pallavi Gogoi and Nedra Pickler, Dec 21, 2011

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Bank of America has agreed to pay $335 million to resolve allegations that its Countrywide unit engaged in a widespread pattern of discrimination against qualified African-American and Hispanic borrowers.

The settlement with the U.S. Justice Department was filed Tuesday with the Central District court of California and is subject to court approval. The DOJ says it's the largest settlement in history over residential fair lending practices.

Charlotte, N.C.-based Bank of America Corp. bought the nation's largest subprime lender, Countrywide Financial Corp., in 2008.

The settlement amount will be used to compensate victims of Countrywide's discriminatory mortgage loans from 2004 through 2007.

Major Banks Face New Foreclosure Lawsuit

The New YorkTimes, by GRETCHEN MORGENSON, December 1, 2011

In a suit against the nation’s five largest mortgage lenders, Martha Coakley,
the Massachusetts attorney general, contends that the banks used unfair and
deceptive business practices.

Citing extensive abuses of troubled borrowers across Massachusetts, the state’s attorney general sued the nation’s five largest mortgage lenders on Thursday, seeking relief for consumers hurt by what she called unfair and deceptive business practices.

In addition to creating a new and significant legal headache for the banks named in the suit — Bank of America, JPMorgan Chase, Citigroup, Wells Fargo and GMAC Mortgage — the Massachusetts action diminishes the likelihood of a comprehensive settlement between the banks and federal and state officials to resolve foreclosure improprieties.

Also named as a defendant in the Massachusetts suit was the electronic mortgage registry known as MERS, an entity set up by lenders to speed property transfers by circumventing local land recording officials.

The attorney general, Martha Coakley, and her investigators contend that the banks improperly foreclosed on troubled borrowers by relying on fraudulent legal documentation or by failing to provide homeowners with loan modifications after promising to do so. The suit also contends that the banks’ use of MERS “corrupted” the state’s public land recording system by not registering legal transfers properly.

“There is no question that the deceptive and unlawful conduct by Wall Street and the large banks played a central role in this crisis through predatory lending and securitization of those loans,” Ms. Coakley said at a news conference announcing the lawsuit. “The banks may think they are too big to fail or too big to care about the impact of their actions, but we believe they are not too big to have to obey the law.”

Ms. Coakley has been among the most aggressive state regulators in her pursuit of financial institutions involved in the credit crisis. In addition to her inquiry into foreclosure improprieties in Massachusetts, she has also conducted far-reaching investigations into predatory lending and securitization abuses.

Since 2009, Ms. Coakley has extracted more than $600 million in restitution and penalties from lawsuits against mortgage originators like Option One and Fremont Investment and Loan and Wall Street firms like Goldman Sachs and Morgan Stanley, which bundled loans into mortgage securities.

Officials at all of the banks issued statements saying they would fight the suit. Most of them also indicated dismay that Massachusetts had taken action during negotiations to reach a settlement over the types of practices highlighted in the case.

“We are disappointed that Massachusetts would take this action now,” said Tom Kelly, a Chase spokesman, “when negotiations are ongoing with the attorneys general and the federal government on a broader settlement that could bring immediate relief to Massachusetts borrowers rather than years of contested legal proceedings.”

Lawrence Grayson, a Bank of America spokesman, said: “We continue to believe that collaborative resolution rather than continued litigation will most quickly heal the housing market and help drive economic recovery.”

And Vickee Adams of Wells Fargo said, “Regrettably, the action announced in Massachusetts today will do little to help Massachusetts homeowners or the recovery of the housing economy in the Commonwealth.”

But as Ms. Coakley made clear during the news conference, her office had come to view as unacceptable the negotiating stance taken by the banks in the protracted settlement talks.

“When those negotiations began over a year ago, I was hopeful that we would be able to reach a strong and effective solution,” she said. “It is over a year later and I believe the banks have failed to offer meaningful relief to homeowners.”

Delaware, Nevada and New York have also objected to the direction the settlement negotiations were taking.

Kurt Eggert, a professor at Chapman University School of Law in California who is an expert in mortgages and securitization, said the Massachusetts lawsuit was a significant step because it opened the banks’ practices to far greater scrutiny than they had been subject to.

“So far the servicers have escaped any real review or punishment for their bad practices because federal regulators have by and large given them a pass on whether they followed the law in foreclosures,” Mr. Eggert said. “This lawsuit argues that they haven’t followed the law and that they can’t just fix all their problems after the fact.”

Among the misconduct cited in the Massachusetts complaint were 14 cases of foreclosures by institutions that had not shown proof that they had the legal right to seize the underlying properties when they did so. All the banks also deceived troubled borrowers, the complaint said, about the loan modification process. For example, some banks incorrectly advised borrowers that they would receive priority treatment if they were more than 90 days delinquent on their loans. Other borrowers were misled when told that they must be more than two months’ delinquent to receive a loan modification, it said.

Although Mr. Eggert said that the banks were likely to argue that a state like Massachusetts had no right to bring such a case against federally regulated institutions, he said that the Dodd-Frank legislation restricted the ability of federal authorities to bar states from acting in such cases.

“If the state can go forward and do real discovery, it will be the first time that anyone has really dug into the servicers’ files to see what they have done,” he added. “The feds conducted an investigation where they looked at very few files, and here the state could demand to see a lot.”

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S&P downgrades top US banks' credit ratings

S&P downgrades top US banks' credit ratings

Associated Press, Nov 29, 2011

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NEW YORK (AP) -- Standard & Poors Ratings Services is adjusting the ratings on 37 of the world's largest financial institutions, including downgrading the biggest banks in the U.S.

Bank of America Corp. and its main subsidiaries were among those cut at least one notch on Tuesday, along with Citigroup Inc., Goldman Sachs Group Inc., JPMorgan Chase & Co., Morgan Stanley and Wells Fargo & Co.

S&P says the changes reflect its new ratings criteria for banks, which incorporate shifts in the worldwide financial industry and macroeconomic trends, including the role of governments and central banks in industry funding.

Top U.K. downgrades include Barclays, HSBC Holdings, Lloyds Banking Group and The Royal Bank of Scotland.

Ratings for several big European banks, including Credit Suisse, Deutsche Bank, ING and Societe Generale are unchanged.

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Downgraded:

• Banco Bilbao Vizcaya Argentaria S.A.
• Bank of America Corp.
• Bank of New York Mellon Corp.
• Barclays Plc
• Citigroup Inc.
• Rabobank Nederland
• Goldman Sachs Group Inc.
• HSBC Holdings Plc
• JPMorgan Chase & Co.
• Loyds Banking Group Plc
• Morgan Stanley
• Royal Bank of Scotland Plc
• UBS AG
• Wells Fargo & Co.

Upgraded:

• Bank of China Ltd.
• China Construction Bank Corp.