Bank of America’s stock had plunged 52 percent in the past year on concerns over the bank's mortgage problems and worries that it would have to sell large amounts of stock to shore up its balance sheet. Warren Buffett's Berkshire Hathaway announced today that it would invest $5 billion in Bank of America Corp., giving a much-needed vote of confidence in the struggling bank.
Much of BofA's problem stems from the 2008 purchase of Countrywide Financial Corp., then the largest U.S. mortgage lender. Bank of America has been under heavy pressure from investors for selling them securities based on bad mortgages that later lost value.
Bank of America has paid a total of $12.7 billion earlier this year to settle claims that it sold investors faulty mortgage investments. Investors have become worried that the bank would have to pay out even more to settle future claims.
Investors' confidence in the bank took another blow this month as its mortgage headaches got even worse. On Aug. 8, American International Group Inc. sued Bank of America for more than $10 billion, saying the bank deceived AIG by selling it overvalued mortgage-backed securities.
Berkshire also holds investments in several other banks. One of Berkshire's biggest stock investments is a 16 percent stake in Wells Fargo. Buffet also holds stakes in US Bancorp, M&T Bank Corp. and the Bank of New York Mellon Co.
_______________________
Mortgage Loan Compliance® | The Forensic Loan Audit Company
Get The Facts, Audit Your Loan, Sue Your Lender and Protect Your Rights!
Call Today 1-866-966-6615 or Visit www.ml-compliance.com
Thursday, August 25, 2011
Wednesday, August 24, 2011
Mortgage Loan Compliance | FDIC Sued For $10 Billion In Bad Loans
Washington Mutual Bank was seized by the Office of Thrift Supervision in September 2008 in the biggest bank failure in U.S. history. The FDIC was then appointed receiver and immediately sold the bank to JPMorgan Chase & Co for $1.9 billion.
Now a federal judge has ruled that the Federal Deposit Insurance Corp must face a $10 billion lawsuit tied to the failure of Washington Mutual Bank. The judge refused the FDIC’s request to dismiss the lawsuit files by Deutsche Bank National Trust Co over bad mortgages that were securitized by Washington Mutual.
The Deutsche Bank unit filed its lawsuit in 2009 arguing that loans that were pooled into mortgage bonds did not meet the underwriting standards that had been promised by WaMu, causing investors to lose billions of dollars.
A Senate committee report this year said WaMu’s mortgage securitization was “polluting the financial system” with bad home loans and partly to blame for the 2008 financial crisis.
The FDIC argued it should be dismissed from the lawsuit and Deutsche Bank should bring its claims against JPMorgan, which assumed WaMu’s liabilities as well as assets.
_______________________
Mortgage Loan Compliance® | The Forensic Loan Audit Company
Get The Facts, Audit Your Loan, Sue Your Lender and Protect Your Rights!
Call Today 1-866-966-6615 or Visit www.ml-compliance.com
Now a federal judge has ruled that the Federal Deposit Insurance Corp must face a $10 billion lawsuit tied to the failure of Washington Mutual Bank. The judge refused the FDIC’s request to dismiss the lawsuit files by Deutsche Bank National Trust Co over bad mortgages that were securitized by Washington Mutual.
The Deutsche Bank unit filed its lawsuit in 2009 arguing that loans that were pooled into mortgage bonds did not meet the underwriting standards that had been promised by WaMu, causing investors to lose billions of dollars.
A Senate committee report this year said WaMu’s mortgage securitization was “polluting the financial system” with bad home loans and partly to blame for the 2008 financial crisis.
The FDIC argued it should be dismissed from the lawsuit and Deutsche Bank should bring its claims against JPMorgan, which assumed WaMu’s liabilities as well as assets.
_______________________
Mortgage Loan Compliance® | The Forensic Loan Audit Company
Get The Facts, Audit Your Loan, Sue Your Lender and Protect Your Rights!
Call Today 1-866-966-6615 or Visit www.ml-compliance.com
Tuesday, August 16, 2011
Mortgage Loan Compliance | Insurer Sues Goldman Sachs For Bad Loans
Monday in New York State Supreme Court a subsidiary of Allstate Insurance Co. sued Goldman Sachs Group Inc., saying that Goldman's characterizations of the investments were "revealed to the public by the numerous governmental investigations into Goldman's role in the market's collapse."
Allstate Corp. is suing Goldman claiming the broker fraudulently sold it more than $123 million in mortgage-backed securities in 2006 and 2007, before the housing market collapse sent the investments' value plunging.
The insurer claims in a lawsuit filed in New York that the documents Goldman provided at the time "contained untrue statements and omitted material facts" about the mortgages underlying the investments.
"Goldman knew these types of securities were, to use Goldman's own words,”junk,” “dogs,” “crap” and “lemons,” according to the complaint.
The lawsuit alleges Goldman violated state laws against fraud and negligent misrepresentation, and it seeks unspecified damages from Goldman and certain affiliates.
_______________________
Mortgage Loan Compliance® | The Forensic Loan Audit Company
Get The Facts, Audit Your Loan, and Protect Your Rights!
Call Today 1-866-966-6615 or Visit www.ml-compliance.com
Allstate Corp. is suing Goldman claiming the broker fraudulently sold it more than $123 million in mortgage-backed securities in 2006 and 2007, before the housing market collapse sent the investments' value plunging.
The insurer claims in a lawsuit filed in New York that the documents Goldman provided at the time "contained untrue statements and omitted material facts" about the mortgages underlying the investments.
"Goldman knew these types of securities were, to use Goldman's own words,”junk,” “dogs,” “crap” and “lemons,” according to the complaint.
The lawsuit alleges Goldman violated state laws against fraud and negligent misrepresentation, and it seeks unspecified damages from Goldman and certain affiliates.
_______________________
Mortgage Loan Compliance® | The Forensic Loan Audit Company
Get The Facts, Audit Your Loan, and Protect Your Rights!
Call Today 1-866-966-6615 or Visit www.ml-compliance.com
Tuesday, August 9, 2011
Mortgage Loan Compliance | NCUA Sues Goldman Sachs For Bad Loans
Buyers of mortgage-backed securities, mostly banks, pension funds and other big investors, made money from the investments if the underlying debt was paid off. But as homeowners started falling behind on their mortgages and defaulted in droves in 2007, the securities failed and their buyers lost billions.
Today the National Credit Union Administration (NCUA) sued Goldman Sachs & Co. for more than $491 million in damages over losses incurred by two failed credit unions that purchased mortgage-backed securities underwritten by the investment bank.
The complaint filed in U.S. District Court in Los Angeles is the latest lawsuit brought by the federal regulatory agency against a major bank as it seeks to recover billions in losses related to risky mortgage-backed securities that brought down credit unions in recent years.
In the complaint, which also names as defendants several issuers of mortgage-backed securities, regulators claim that the documents used in offering the securities contained untrue statements or omissions as to how risky the investments were.
U.S. Central Federal Credit Union in Lenexa, Kan., and Western Corporate Federal Credit Union in San Dimas, Calif., purchased the mortgage-backed securities, believing the risk of loss was minimal because virtually all of the securities had a triple-A rating. However, these loans represented a substantial risk of losses, the NCUA claims. And when the investments' market value plummeted, the two largest U.S. credit unions failed.
_______________________
Mortgage Loan Compliance® | The Forensic Loan Audit Company
Get The Facts, Audit Your Loan, and Protect Your Rights!
Call Today 1-866-966-6615 or Visit www.ml-compliance.com
Today the National Credit Union Administration (NCUA) sued Goldman Sachs & Co. for more than $491 million in damages over losses incurred by two failed credit unions that purchased mortgage-backed securities underwritten by the investment bank.
The complaint filed in U.S. District Court in Los Angeles is the latest lawsuit brought by the federal regulatory agency against a major bank as it seeks to recover billions in losses related to risky mortgage-backed securities that brought down credit unions in recent years.
In the complaint, which also names as defendants several issuers of mortgage-backed securities, regulators claim that the documents used in offering the securities contained untrue statements or omissions as to how risky the investments were.
U.S. Central Federal Credit Union in Lenexa, Kan., and Western Corporate Federal Credit Union in San Dimas, Calif., purchased the mortgage-backed securities, believing the risk of loss was minimal because virtually all of the securities had a triple-A rating. However, these loans represented a substantial risk of losses, the NCUA claims. And when the investments' market value plummeted, the two largest U.S. credit unions failed.
_______________________
Mortgage Loan Compliance® | The Forensic Loan Audit Company
Get The Facts, Audit Your Loan, and Protect Your Rights!
Call Today 1-866-966-6615 or Visit www.ml-compliance.com
Monday, August 8, 2011
Mortgage Loan Compliance | AIG Sues BofA For $10 Billion In Bad Loans
American International Group Inc. has said Bank of America and two companies that were later purchased up by the bank, Countrywide and Merrill Lynch, sold the insurance company $28 billion in securities backed by home mortgages between 2005 and 2007, at the height of the housing boom.
AIG said Monday it sued Bank of America Corp. for more than $10 billion, saying the bank cheated it by selling residential mortgage-backed securities that were overvalued. It said it looked at more than 260,000 of the underlying mortgages, and found that the bank's "stated metrics" for 40 percent of the securities were false.
Bank of America denied the allegations, saying AIG "recklessly" chased investments with high returns, and was big and sophisticated enough to know the risks.
Banks have been hit by a series of suits over misrepresentations of mortgage-based securities.
In one case, a borrower said she had been the owner of a construction business for 25 years, which would have made her 10 years old when she took ownership, AIG said.
Bank of America spokesman Lawrence Grayson said the blame lies with AIG.
"AIG recklessly chased high yields and profits throughout the mortgage and structured finance markets. It is the very definition of an informed, seasoned investor, with losses solely attributable to its own excesses and errors," Grayson said.
AIG spokesman Mark Herr shot back: "It is disappointing but unsurprising that Bank of America continues to attempt to blame others for its own misconduct. Investors, no matter how sophisticated, were entitled to rely on its numerous written representations about the securities it sold."
_______________________
Mortgage Loan Compliance® | The Forensic Loan Audit Company
Get The Facts, Audit Your Loan, and Protect Your Rights!
Call Today 1-866-966-6615 or Visit www.ml-compliance.com
AIG said Monday it sued Bank of America Corp. for more than $10 billion, saying the bank cheated it by selling residential mortgage-backed securities that were overvalued. It said it looked at more than 260,000 of the underlying mortgages, and found that the bank's "stated metrics" for 40 percent of the securities were false.
Bank of America denied the allegations, saying AIG "recklessly" chased investments with high returns, and was big and sophisticated enough to know the risks.
Banks have been hit by a series of suits over misrepresentations of mortgage-based securities.
In one case, a borrower said she had been the owner of a construction business for 25 years, which would have made her 10 years old when she took ownership, AIG said.
Bank of America spokesman Lawrence Grayson said the blame lies with AIG.
"AIG recklessly chased high yields and profits throughout the mortgage and structured finance markets. It is the very definition of an informed, seasoned investor, with losses solely attributable to its own excesses and errors," Grayson said.
AIG spokesman Mark Herr shot back: "It is disappointing but unsurprising that Bank of America continues to attempt to blame others for its own misconduct. Investors, no matter how sophisticated, were entitled to rely on its numerous written representations about the securities it sold."
_______________________
Mortgage Loan Compliance® | The Forensic Loan Audit Company
Get The Facts, Audit Your Loan, and Protect Your Rights!
Call Today 1-866-966-6615 or Visit www.ml-compliance.com
Tuesday, August 2, 2011
Mortgage Loan Compliance | FHFA Sues Lender After Forensic Audit
On July 27, 2011, in U.S. District court for the Southern District of New York, the Federal Housing Finance Agency (FHFA) brought suit against UBS Americas Inc., several of its subsidiaries, and four former executive officers charging violations of securities laws in the sale of private label residential mortgage-backed securities (MBS) to government sponsored enterprises (GSEs) Freddie Mac and Fannie Mae. FHFA sued as conservator of the GSEs and seeks a jury trial in an attempt to recover losses and damages on behalf of the GSEs that occurred as a result of their investment in the UBS securities.
A forensic audit of 966 randomly selected loans from two of the pools at issue found that approximately 78 percent were not underwritten in conformance with guidelines. The underwriting guidelines that were violated were those designed to assess the likelihood that loans would be repaid. The forensic review revealed the following types of breaches:
1. Failure to test the reasonableness of the borrowers' stated income relative to their line of work, leading to material misrepresentation of income. The forensic review found multiple instances in which income appeared unreasonable yet there was no indication the originator attempted to confirm that income.
2. Failure to investigate multiple submissions from the same borrower of applications showing increasing stated incomes. In each instance the stated income on the original application did not meet underwriting guidelines, but subsequent applications at higher income levels did. Forensic review confirmed that the later applications misrepresented that income and that underwriters did not investigate the discrepancies.
3. Failure to confirm the intended owner occupancy of the property despite indications that the property was intended as an investment. In some cases the loans were underwritten as owner-occupied properties even though the borrower stated they intended the property to be as second home or investment. Additionally, the Prospectus Supplements materially understated the proportions of the loans that were not owner occupied.
4. Failure to properly calculate the borrower's outstanding debt, resulting in a debt-to-income (DTI) ratio that exceeded underwriting guidelines. When properly calculated, 32 percent of the 996 loans in the random sample for forensic review contained DTI ratios that exceeded applicable guidelines.
5. Failure to investigate credit report information that indicated potential misrepresentation of borrower debt. The forensic review revealed numerous instances where multiple credit inquiries on borrower credit reports should have put underwriters on notice for potential misrepresentations of debt obligations, but underwriters did not investigate.
The lawsuit alleges that the underwriters of the underlying mortgages systematically disregarded their respective underwriting guidelines in order to increase production and profits and that the Defendants failed to conduct adequate due diligence on the mortgage loan files and mortgaged properties prior to or during the securitization process. A number of banks and mortgage companies originated the loans in question including Fremont Mortgage, Wells Fargo Bank, Countrywide Home Loans, IndyMac, and Provident Funding Associates.
_______________________
Mortgage Loan Compliance® | The Forensic Loan Audit Company
Get The Facts, Audit Your Loan, and Protect Your Rights!
Call Today 1-866-966-6615 or Visit www.ml-compliance.com
A forensic audit of 966 randomly selected loans from two of the pools at issue found that approximately 78 percent were not underwritten in conformance with guidelines. The underwriting guidelines that were violated were those designed to assess the likelihood that loans would be repaid. The forensic review revealed the following types of breaches:
1. Failure to test the reasonableness of the borrowers' stated income relative to their line of work, leading to material misrepresentation of income. The forensic review found multiple instances in which income appeared unreasonable yet there was no indication the originator attempted to confirm that income.
2. Failure to investigate multiple submissions from the same borrower of applications showing increasing stated incomes. In each instance the stated income on the original application did not meet underwriting guidelines, but subsequent applications at higher income levels did. Forensic review confirmed that the later applications misrepresented that income and that underwriters did not investigate the discrepancies.
3. Failure to confirm the intended owner occupancy of the property despite indications that the property was intended as an investment. In some cases the loans were underwritten as owner-occupied properties even though the borrower stated they intended the property to be as second home or investment. Additionally, the Prospectus Supplements materially understated the proportions of the loans that were not owner occupied.
4. Failure to properly calculate the borrower's outstanding debt, resulting in a debt-to-income (DTI) ratio that exceeded underwriting guidelines. When properly calculated, 32 percent of the 996 loans in the random sample for forensic review contained DTI ratios that exceeded applicable guidelines.
5. Failure to investigate credit report information that indicated potential misrepresentation of borrower debt. The forensic review revealed numerous instances where multiple credit inquiries on borrower credit reports should have put underwriters on notice for potential misrepresentations of debt obligations, but underwriters did not investigate.
The lawsuit alleges that the underwriters of the underlying mortgages systematically disregarded their respective underwriting guidelines in order to increase production and profits and that the Defendants failed to conduct adequate due diligence on the mortgage loan files and mortgaged properties prior to or during the securitization process. A number of banks and mortgage companies originated the loans in question including Fremont Mortgage, Wells Fargo Bank, Countrywide Home Loans, IndyMac, and Provident Funding Associates.
_______________________
Mortgage Loan Compliance® | The Forensic Loan Audit Company
Get The Facts, Audit Your Loan, and Protect Your Rights!
Call Today 1-866-966-6615 or Visit www.ml-compliance.com
Subscribe to:
Posts (Atom)