Newscast Media NEW YORK—A Manhattan jury found Bank of America responsible for fraud in its mortgage-related practices, in conjunction with its now-defunct Countrywide Financial Corp. affiliate.
Forbes said: “The verdict is a win for the US government as this is one of the few cases stemming from the financial crisis that it’s taken to trial.
“In a rush to feed at the trough of easy mortgage money on the eve of the financial crisis,
Bank of America purchased Countrywide, thinking it had gobbled up a cash cow. That
profit, however, was built on fraud, as the jury unanimously found,” US Attorney Preet
Bharara said in a statement.
Bank of America may or may not appeal. The bank said in a statement, “The jury’s decision concerned a single Countrywide program that lasted several months and ended before Bank of America’s acquisition of the company. We will evaluate our options for appeal.”
Bank of America’s problems aren’t over yet. The Securities and Exchange Commission is also suing the bank for “fraud” because BofA obtained money and property by means of untrue statements of material fact, and also engaged in transactions, practices and courses of business which would and did operate as a fraud and deceit upon the purchasers of such securities.
One of the counts Bank of America is being charged with is failure to file a prospectus with the SEC. The prospectus is accompanied by the infamous Pooling and Servicing Agreement (PSA) the one every lawyer is afraid. No lawyer in the history of litigation of mortgage-backed securities, has been successful in producing a valid PSA or prospectus, because they don’t teach “structured financing” in law school.
Under US law, if a bank claims to own a mortgage in form of a mortgage-backed security, it has to have a prospectus that is valid and current. If it can produce the prospectus, it cannot produce the Pooling and Servicing Agreement, therefore it cannot win a case, because the mortgages are based on fraud. Think of it as a driver being stopped by police for a traffic violation and the driver cannot produce a driver’s license and proof of insurance. What do you think would happen? Here is the specific law:
15 U.S.C. §§ 77e(b)(1):
(b) Necessity of prospectus meeting requirements of section 77j of this title
“It shall be unlawful for any person, directly or indirectly—(1) to make use of any means
or instruments of transportation or communication in interstate commerce or of the
mails to carry or transmit any prospectus relating to any security with respect to which a
registration statement has been filed under this subchapter, unless such prospectus meets the requirements of section 77j of this title.”
The SEC is asking for an unspecified amount of damages including injunctive relief against Bank of America, while the US government is looking to get $848 million out of BofA.
Bank of America Corp said on Thursday that it was cutting 1,200 to 1,300 mortgage jobs.
Categories: News Tags: Bank of America, Bank of America class action, Bank of America Countrywide Financial Corp, Bank of America foreclosure lawsuit, Bank of America Merril Lynch, bank of america mortgage fraud, Bank of America SEC lawsuit, Bank of America settlement, Department of Justice Bank of America, US government vs. Bank of America
Newscast Media CHARLOTTE, N.C—Bank of America Corp has announced a settlement deal with Fannie Mae of $11.6 billion for bad mortgages of nearly a decade’s worth of home loans, as a result of Bank of America’s acquisition of Countrywide Financial Corp. five years ago.
The agreement is also separate from an $8.5 billion foreclosure-abuse settlement between regulators and 10 banks, including Bank of America, additionally announced Monday. That pact is in addition to another settlement reached last February, where five large banks, including Bank of America, agreed to a $25 billion settlement with the Obama administration and 49 state attorneys general.
Under the deal announced Monday, the bank will pay $3.6 billion to Fannie Mae and buy back $6.75 billion in loans that the North Carolina-based bank and its Countrywide banking unit sold to the government agency from Jan. 1, 2000 through Dec. 31, 2008, according to the Washington Post.
In layman’s terms here’s what happened:
(i) Mortgages that were generated over the last decade were bundled together into Mortgage-Backed Securities, and placed into a pool.
(ii) The pools are then placed into a trust called a Real Estate Mortgage Investment Conduit Trust (REMIC) and a Trustee is appointed to oversee the trust.
(iii) The trustee then hires a servicer whose duty is to collect money on behalf of the REMIC trust, and the servicer is paid a small fee for collecting these monies from homeowners.
(iv) Meanwhile, the Mortgage-Backed Securities are sold on the secondary market as derivatives, which are insured with Credit Default Swaps in case the trust goes under.
(v) The mortgage changes hands as it is bought and sold multiple times on the secondary market throughout the world, making it virtually impossible to identify who owns the loan, due to the use of MERS (Mortgage Electronic Registration Systems) on the deed of trust. The lack of transparency of MERS prevents anyone from knowing the true and actual owner of the mortgage.
*It is the reason why when you send a “Qualified Written Request” to a servicer asking for the trust documents and the real owner of the loan, in 100 percent of the cases, the servicers cannot provide such information because the loan changed hands multiple times when bought and sold as a Mortgage Backed Security. This practice has clouded the titles of securitized mortgages from 2003-2010.
What went wrong
(vi) The problem with Bank of America and other banks that were sued is that all these mortgages were fraudulent, because the Notes were not transferred into the REMIC trusts. The trusts were empty!
(vii) To prevent the financial collapse, the banks declared the mortgages “toxic assets” and requested bailout money from the government under the Toxic Asset Relief Program (TARP), to halt a financial collapse. $16 trillion was extended.
According to an audit of the Federal Reserve by GAO (Government Accountability Office) below is some of the money the banks received:
Citigroup: $2.5 trillion ($2,500,000,000,000)
Morgan Stanley: $2.04 trillion ($2,040,000,000,000)
Merrill Lynch: $1.949 trillion ($1,949,000,000,000)
Bank of America: $1.344 trillion ($1,344,000,000,000)
Barclays PLC (United Kingdom): $868 billion ($868,000,000,000)
Bear Sterns: $853 billion ($853,000,000,000)
Goldman Sachs: $814 billion ($814,000,000,000)
Royal Bank of Scotland (UK): $541 billion ($541,000,000,000)
JP Morgan Chase: $391 billion ($391,000,000,000)
Deutsche Bank (Germany): $354 billion ($354,000,000,000)
UBS (Switzerland): $287 billion ($287,000,000,000)
Credit Suisse (Switzerland): $262 billion ($262,000,000,000)
Lehman Brothers: $183 billion ($183,000,000,000)
Bank of Scotland (United Kingdom): $181 billion ($181,000,000,000)
BNP Paribas (France): $175 billion ($175,000,000,000)
(viii) The banks receive trillions of dollars, and instead of correcting the defects, they sit on the money, and use some of it to buy up smaller failing banks.
(ix) Investors find out that the Mortgage-Backed Securities weren’t in fact mortgage-backed—they were useless pieces of paper. Lawsuits are filed. Banks settle.
(x) Government teams up with homeowners and whistleblowers reaching a multi-billion dollar settlement with the banks for foreclosure abuse.
The latest settlement between Bank of America and Fannie Mae falls within the sequence of events just described above.
Categories: News Tags: Bank of America class action lawsuit, bank of america foreclosure fraud, bank of america mortgage fraud, bank of america settlement fannie mae, foreclosure, foreclosure fraud, mortgage foreclosure, mortgage fraud, securities and exchange commission, securities fraud
Newscast Media HOUSTON, Texas — Bank of America agreed to settle a class action lawsuit brought against it by investors for $315 million. The class action lawsuit was led by the Public Employees’ Retirement System of Mississippi pension fund. The fund claimed that the investments were backed by poor quality mortgages written by subprime lenders Countrywide Financial Corp., First Franklin Financial, and IndyMac Bancorp, a bank that failed in 2008.
The settlement still has to be approved by U.S. District Judge Jed Rakoff something that could prove difficult since the settlement includes no admission of guilt from Bank of America.
During the housing boom, several mortgages were sold on the secondary market as Mortgage-Backed Securities (MBS) and were bundled into pools and sold as derivatives to investors across the world. What investor did not know was that most of the MBS, were never mortgage-backed because the Trusts that presided over the securities were defunct, or the mortgages were non-qualifying for the Real Estate Mortgage Investment Conduit (REMIC) Trusts. For a mortgage to be a qualified mortgage, it cannot be in default, nor can it have a lawsuit on it. It has to be a performing loan. It also has to be transferred into the Trust on the startup day of the Trust. REMICs are governed by IRS Tax code 860A-860G.
IRS Tax Code Section 860G(a)(3)(A)(i):
“A mortgage loan is not a qualified mortgage unless it is transferred to the REMIC Trust on the startup day in exchange for regular or residual interests in the REMIC”.
IRS Tax Code Section 860F(1):
“To file as a REMIC, and in order to avoid one hundred percent (100%) taxation by the IRS an MBS REMIC could not engage in any prohibited action.”
If mortgages were never transferred into the Trusts, then the investors purchased bogus securities that never existed to begin with. Most defunct Trusts filed Forms 15-D with the Securities and Exchange Commission, notifying all parties of their Termination of Registration and suspension of their Duty to File Reports under the Securities and Exchange Act of 1934 (15 U.S.C.A. §§ 77a et seq., 78a et seq.).
Because it would have been almost impossible for Bank of America to prove that it owned the MBS and that the Trusts were actually functional, they decided to settle rather than fight the investors. On the other hand, even if they could prove that the Trusts existed but the mortgages were “non-performing” they would be in violation of the tax code because only “qualified mortgages” are permitted to be transferred, or they would have engaged in “prohibited action”. So on both sides of the argument BofA would have lost.
A proficient lawyer, Pro Se or Sui Juris, should be able to argue both sides of any argument with cold, hard logic, supported by legal debate.
Newscast Media NEW YORK, New York –Bank of America’s problems continue to grow ever since the financial giant purchased Countrywide and its assets. On June 29, BofA settled an $8.5 billion lawsuit with investors for selling them mortgage-backed securities that were never mortgage-backed. The Attorneys General for all 50 states opened investigations with the bank, and inside sources speaking on condition of anonymity say a settlement in the neighborhood of $25billion by Bank of America will soon be reached, in exchange for immunity from prosecution by individual states.
Bank of America also faces several class action lawsuits, and now has to deal with the most recent lawsuit by insurer AIG seeking to recover more than $10billion in losses from Bank of America on $28 billion of investments, in what could be the largest mortgage-security-related action filed by a single investor, the report said. The AIG lawsuit is American International Group Inc et al v. Bank of America Corp et al, New York State Supreme Court, New York County No. 652199/2011.
Here’s how it works:
The homeowner expects to be a “Borrower” receiving a “Loan” from the bank. The bank then sells the loan to a Special Purpose Vehicle (a shell company) and gets paid in full without recourse, and also gets a commission as a finder’s fee, but the bank never funded the loan. The homeowner was tricked into believing the bank funded the loan, when the bank was just paid for finding a homeowner willing to sell the debt obligation. The bank’s commission was also for the bank to allow its name to be on the instrument, and often to act as Servicer to get monthly fees.
The homeowner was never told truth about who funded the transaction, because a Deed of Trust would not normally be allowed for a Financial Asset purchased by a Securitization Trust (a Security covered by security laws), or a Commercial Paper which is covered by the Uniform Commercial Code Division (UCC) 8, whereas Securitized Transactions with a Deed of Trust are covered under UCC 9.
The “Lender” named on the instrument did not fund the transaction, and therefore was not really the “Lender” at all. They acted only as a “Nominal Lender”, named on the debt instrument only to facilitate the creation of a Deed of Trust or Mortgage to secure the debt obligation as an alleged “Loan”, when it was not a “Loan”, but rather the receptacle for an Asset-Backed Investment Security. The “Pretender Lender” was paid in full, plus a commission, and lost interest in the debt obligation.
Also, the Deed of Trust or Mortgage can’t secure an Asset-Backed Investment Security, and homeowners were tricked into thinking they were “Borrowers” of “Loans”,when they were actually SELLERS of a debt instrument to a Securitization Special Purpose Vehicle. An invalid Deed of Trust or Mortgage, was fraudulently procured under the guise of a “Loan”, when it wasn’t a Loan, but rather the “Purchase of a Note” into an Asset-Backed Investment Security.
The investor on the other hand, who put up the money was never told that the mortgage-backed security was never mortgage backed because the majority of them do not make it into the trust, as they are resold over and over again. The pretender-lender holds on to the Note and in most cases never delivers it into the
trust as admitted by Countrywide representative in Kemp v. Countrywide, Case No. 08-18700-JHW.
None of this is revealed to the homeowner or investors at closing, hence the fraud lawsuits that are being filed. Insurers like AIG were taken for a ride, because most of these mortgage-backed securities that they insured never became assets of the trusts. The trusts were either empty or had bad mortgages.
The Pooling and Servicing Agreement, the document that governs the trust Section 2.01(a) states:
(a)“Each Seller concurrently with the execution and delivery hereof, hereby sells, transfers, assigns, sets over and otherwise conveys to the Depositor, without recourse, all its respective right, title and interest in and to the related Mortgage Loans…”
The Depositor then assigns the mortgage to the Trustee who deposits it into the trust for the benefit of the Certificateholders. If the mortgage is either a non-qualified mortgage delivered into a trust, or is simply not delivered into the trust, these defects can never be cured because when a mortgage is securitized the act is irreversible. You cannot unscramble the eggs.
Categories: News Tags: aig sues bank of america, Bank of America class action lawsuit, bank of america investors fraud, bank of america mortgage fraud, bank of america securities fraud, homeowners sue bank of america, investors sue bank of america
Newscast Media NEW YORK — After battling allegations it sold bogus mortgage-backed securities to investors, Bank of America and its Countrywide unit have agreed to pay $8.5 billion to settle claims that the lenders sold poor-quality mortgage-backed securities that went sour when the housing market collapsed. The deal, announced Wednesday, comes after a group of 22 investors demanded that the Charlotte, N.C. bank repurchase $47 billion in mortgages that its Countrywide unit sold to them in the form of bonds.
The group, which includes the Federal Reserve Bank of New York, Pimco Investment Management, and Blackrock Financial Management, argued that Countrywide enriched itself at the expense of investors by continuing to service bad loans while running up servicing fees.
Bank of America, which bought Countrywide in 2008 for $4 billion, has denied those claims.
Bank of America CEO Brian Moynihan said Wednesday that the settlement would minimize “future economic uncertainty” in the banking business and “clean up the mortgage issues largely stemming from our purchase of Countrywide.”
For several months, Bank of America battled claims based on estimates “that were much different from ours,” Moynihan said. But at this point, it made more sense to settle than to keep fighting, he said.
“We have said consistently if people are reasonable and can get to a reasonable assessment of their claims and it’s in the best interest of shareholders, we will settle,” Moynihan told Wall Street analysts in a conference call.
The settlement is subject to court approval and covers 530 trusts with original principal balance of $424 billion.
Citi analyst Keith Horowitz said the settlement, which amounts to only 2 percent of the original principal balance, removes one of the largest investor risks for Bank of America.
“We think this could prove to be a step forward” for Bank of America, Horowitz said. It would show investors that the bank can manage through crisis without raising additional capital.
As a result of the settlement, Bank of America put its second-quarter loss at $8.6 billion to $9.1 billion. Excluding the settlement and other charges, the bank expects to post a quarterly loss of $3.2 billion to $3.7 billion. http://www.newscastmedia.com/bofasettlement.html