Posts Tagged ‘collateralized debt obligations’

Deutsche Bank settles $1.9 billion suit over faulty mortgages

Deutsche Bank

Newscast Media WASHINGTON—Deutsche Bank (XETRA: DBKGn.DE / NYSE: DB)
announced today that it has reached an agreement to resolve its residential
mortgage-backed securities litigation with the Federal Housing Finance Agency
(FHFA) as conservator for Fannie Mae and Freddie Mac. As part of the agreement,
Deutsche Bank will pay $1.9 billion.

The FHFA made claims against 17 financial institutions in relation to residential
mortgage-backed securities, including Deutsche Bank.

The settlement agreement does not release Deutsche Bank from any claims relating
to LIBOR manipulation and does not include claims made against Deutsche Bank in two
other PLS lawsuits presently the subject of ongoing litigation: FHFA v. SC Americas,
Inc., et. al., and FHFA v. Countrywide Financial Corp., et. al. The other parties to
those lawsuits were not part of the negotiations with Deutsche Bank.

*Click here to read or download the entire $1.9 billion settlement.

Jürgen Fitschen and Anshu Jain, Co-Chief Executive Officers of Deutsche Bank, said:
“Today’s agreement marks another step in our efforts to resolve the Bank’s legacy
issues, and we intend to make further progress in this regard throughout 2014.”

They added: “We have exited the mortgage businesses that gave rise to these claims
and have further improved our controls.”


Be the first to comment - What do you think?  Posted by Joseph Earnest - December 20, 2013 at 10:26 pm

Categories: News   Tags: , , , , ,

Merrill Lynch agrees to settle SEC lawsuit for $131.8 million


Newscast Media WASHINGTON—The Securities and Exchange Commission has charged
Merrill Lynch with making faulty disclosures about collateral selection for two
collateralized debt obligations (CDO) that it structured and marketed to investors,
and maintaining inaccurate books and records for a third CDO. CDOs are the same as
mortgage-backed securities or derivatives.

Merrill Lynch agreed to pay $131.8 million to settle the SEC’s charges. CONTINUE TO FULL STORY>>


Be the first to comment - What do you think?  Posted by Joseph Earnest - December 14, 2013 at 2:01 am

Categories: News   Tags: , , ,

JPMorgan Chase settle mortage fraud suit for $13 billion

JPMorgan Chase has reached a $13 billion deal with the Department of Justice to settle mortgage fraud charges. Other major banks including Bank of America have also come under pressure by the DOJ for defrauding homewoners and investors through the use of bogus mortgage-backed securities, and corrupt attorneys.

Newscast Media NEW YORK—A tentative deal has been negotiated by JPMorgan Chase CEO Jamie Dimon to settle a case for $13 billion regarding fraudulent mortgage-backed securities (MBS) that were never mortgage backed.

Here is how the scam works: The banks bundled mortgages into pools. These pools of mortgages were then further divided into what is referred to as “tranches”. The tranches are based on the credit scores of homeowners. For example, those with a high beacons score 750+ would be in the top tier. Then those with, say 700-749 would be in the tranche below. Homeowners with 600-699 would be in the next tranche and the bottom tranche would have the lowest credit score, and would be the riskiest. In essence, a tranche is a slice of a deal in structured financing.

These pools of mortgages, also referred to as “derivatives” are then sold on the secondary market in form of a bond that is backed by the value of the house (mortgage). The bond certificate that is issued is what is referred to as a “mortgage-backed security” or a “Collateralized Debt Obligation” (CDO).

These mortgage-backed securities are put into a trust called a Real Estate Mortgage Investment Conduit Trust (REMIC Trust). A trustee like JPMorgan Chase or Bank of America or Wells Fargo is then chosen to oversee the trust. The trust is usually called something like Alternative Loan Trust 2010-XYZ Certificate series. (The year indicates when the trust was opened).

Each trust is then insured with what is referred to as “credit default swaps” that way if a homeowner defaults, the bank cashes in on the insurance policy which is up to 30 times the amount of the home. For example if a person purchases a home for $200,000 the insurance money the bank would get is ($200K X 30)= $6,000,000, for just one home. The bank then sends the homeowner an eviction notice and sells the home again for perhaps $80,000. This money is mostly pocketed by the foreclosure attorneys who run the scam for the banks.

The problem is, during the bailout, the government gave JPMorgan Chase & Company, $390 billion as the Troubled Asset Relief Program (TARP). At the time of the bailout, the bank then declared the derivatives (mortgage-backed securities/collateralized debt obligations) in its possession as “toxic assets.” Upon declaring the CDOs toxic assets, the trusts became defunct and ceased to exist. In other words, the trusts were empty, because the government bought all of them out through TARP. However, because of greed, these banks continued to sell derivatives knowing that those mortgage-backed securities were never mortgage backed and the trusts were empty. That’s how they caused the financial meltdown that started in 2007 and is continuing to be felt to this very day.

So even if JPMprgan Chase and Co. were to pay $13 – $23 billion out of the $390 billion they received, it wouldn’t hurt them. It would be like a drop in the bucket…all of which is taxpayer money. What!

The banks defrauded the federal government (by taking TARP money and continuing to sell bogus mortgage-backed securities); they defrauded investors (by selling them bogus mortgage-backed securities from phantom trusts); they defrauded homeowners (by selling the titles to their homes multiple times on the secondary market, hence creating a cloud on those titles); and finally, they are defrauding the court system (through the use of greedy corrupt attorneys who use forged documents to steal thousands of properties across America, on behalf of trusts that do not even exist!)

Obama is finally cracking down on the big fish. The corrupt attorneys in this game are like sardines, the CEOs like Jamie Dimon, are the crocodiles Obama is going after. I’ve been to Africa and I have swum in the River Nile. Anyone will tell you that before you can safely swim or fish in the Nile, you have to make sure the area is not infested with crocodiles. What Obama is doing is, he’s getting rid of the crocodiles, and once he is done with them, then he’ll go after the sardines.

There is an old African saying that goes: “The big fish is caught with the big hook.” The big fish here are the bank CEOs, the big hook is the Department of Justice.

The entire story about this fraudulent scheme and the settlement between JPMorgan Chase and the Justice Department can be found here.


Be the first to comment - What do you think?  Posted by Joseph Earnest - October 21, 2013 at 6:50 pm

Categories: News   Tags: , , , , , , , ,

SEC awards whistleblower $14 million for providing relevant information


Newscast Media WASHINGTON—The Securities and Exchange Commission today announced an award of more than $14 million to a whistleblower whose information led to an SEC enforcement action that recovered substantial investor funds. Payments to whistleblowers are made from a separate fund previously established by the Dodd-Frank Act and do not come from the agency’s annual appropriations or reduce amounts paid to harmed investors.

The award is the largest made by the SEC’s whistleblower program to date.

*Click here to read or download SEC Order determining award.

The SEC’s Office of the Whistleblower was established in 2011 as authorized by the Dodd-Frank Act. The whistleblower program rewards high-quality original information that results in an SEC enforcement action with sanctions exceeding $1 million, and awards can range from 10 percent to 30 percent of the money collected in a case.

“Our whistleblower program already has had a big impact on our investigations by providing us with high quality, meaningful tips,” said SEC Chair Mary Jo White. “We hope an award like this encourages more individuals with information to come forward.”

The whistleblower, who does not wish to be identified, provided original information and assistance that allowed the SEC to investigate an enforcement matter more quickly than otherwise would have been possible. Less than six months after receiving the whistleblower’s tip, the SEC was able to bring an enforcement action against the perpetrators and secure investor funds.

By law, the SEC must protect the confidentiality of whistleblowers and cannot disclose any information that might directly or indirectly reveal a whistleblower’s identity.


Be the first to comment - What do you think?  Posted by Joseph Earnest - October 2, 2013 at 8:41 pm

Categories: News   Tags: , , , , , , ,

SEC halts $100 million fraudulent real estate based Ponzi scheme


Newscast Media WASHINGTON, D.C. — The Securities and Exchange Commission obtained a temporary restraining order and asset freeze against a Utah man and company charged with operating a real estate-based Ponzi scheme that bilked $100 million from investors nationwide.

The SEC’s complaint filed in U.S. District Court for the District of Utah, names Wayne L. Palmer and his firm, National Note of Utah, LC, both of West Jordan, Utah. According to the complaint, Palmer told investors that their money would be used to buy mortgage notes and real estate assets, or to make real estate loans. More than 600 individuals invested, lured by promises of annual returns of 12 percent, the SEC alleged.

“Palmer promised double-digit returns at his real estate seminars, where investors learned the hard way about his lies and deceit,” said Kenneth Israel, Director of the SEC’s Salt Lake City Regional Office.

The SEC’s complaint charges National Note and Palmer with violating the anti-fraud and securities registration provisions of U.S. securities laws. Palmer also faces charges that he operated as an unregistered broker-dealer.

Section 17(a)(2) – Anti-Fraud Authority of the Securities Act of 1933 states:

“It shall be unlawful for any person in the offer or sale of any securities or any security-based swap agreement (as defined in section 206B of the Gramm-Leach-Bliley Act [15 USCS § 78c note]) by the use of any means or instruments of transportation or communication in interstate commerce or by use of the mails, directly or indirectly (1) to employ any device, scheme, or artifice to defraud, or (2) to obtain money or property by means of any untrue statement of a material fact or any omission to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading.”
Click here to download or read entire complaint.

2 comments - What do you think?  Posted by Joseph Earnest - June 26, 2012 at 8:15 pm

Categories: News   Tags: , , , , , ,

SEC applies Admin. Procedure as one-two punch to UBS bank fraud

UBS bank

Newscast Media WASHINGTON, D.C.—The Securities and Exchange Commission has charged UBS Financial Services Inc. of Puerto Rico and two executives with making misleading statements to investors and concealing material information regarding securities. However, this approach is very unique that the SEC is taking. It bypasses the courts by the use Administrative Procedure Act, and directly charges the banks and executives involved with securities fraud, and even imposes a fine.

This is very powerful because the majority of judges in federal courts do not understand securities; attorneys also do not know how to defend such cases because they do not learn about securities laws in law school, so rather than risk losing a case based on a technicality or a judge’s unwillingness to address fraud committed by banks, the SEC is charging them directly and writing orders very much like a judge would do. This out-of-court approach will help investors and beneficiaries of fraudulently-created trusts resolve cases in which mortgage-backed securities are involved.

Just like a judge can issue an injunction, the SEC’s version is to issue a cease and desist from violating the Securities Act of 1933. Which means if a bank defrauds investors in regard to the existence of Trusts that don’t exist, and they bring it to the awareness of the SEC rather than the courts, they can receive relief for the fraud. Homeowners whose mortgages were put in defunct trusts secured by their deeds of trusts, benefit from such an order because it prohibits the banks and their agents from ever receiving any financial gain relating to such trusts. This way, homeowners are quietly winning injunctions against the big banks, without having to deal with the courts or when ruled against by the courts.

In this particular case of UBS in PR, the SEC used the Administrative Procedure to resolve the case. Here is exactly what the SEC said in its order:

In view of the foregoing, the Commission deems it appropriate and in the public interest to impose the sanctions agreed to in UBS PR’s Offer.

Accordingly, pursuant to Section 8A of the Securities Act, and Sections 15(b) and 21C of the Exchange Act, it is hereby ORDERED that:

A. UBS PR cease and desist from committing or causing any violations and any future violations of Sections 17(a) of the Securities Act, Sections 10(b) and 15(c) of the Exchange Act, and Rule 10b-5 of the Exchange Act.

B. UBS PR shall, within 14 days of the entry of this Order, pay disgorgement of $11,500,000.00, prejudgment interest of $1,109,739.94, and a civil money penalty of $14,000,000.00 to the Securities and Exchange Commission.


When a bank violates Section 17 of the Securities Act of 1933, it means there was fraud involved in the sale or acquring of securities. As I have said before in previous articles, almost 100 percent of the Trusts banks claim to be Trustees over do not exist, so the mortgage-backed securities are not mortgage backed. Banks like Deutsche Bank, Option One, Wells Fargo and many others that claim to hold mortgages for Trust XYZ on behalf of Certificate holders would be in violation of Section 17(a)(2) if the Trusts in which those alleged mortgage-backed securities they claim to own do not exist.

Violation of Section 17(a)(1) and 17(a)(2) of the Securities Act of 1933

Section 17 – Anti-Fraud Authority

Section 17(a) provides one of the central sources of anti-fraud authority for law enforcement. In most securities actions you will see Section 17(a) used as a basis for jurisdiction (along with Section 10(b) of the Securities Exchange Act and Rule 10b-5 promulgated thereunder).

“It shall be unlawful for any person in the offer or sale of any securities or any security-based swap agreement (as defined in section 206B of the Gramm-Leach-Bliley Act [15 USCS § 78c note]) by the use of any means or instruments of transportation or communication in interstate commerce or by use of the mails, directly or indirectly (1) to employ any device, scheme, or artifice to defraud, or (2) to obtain money or property by means of any untrue statement of a material fact or any omission to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading.”

So when the SEC issues a cease and desist to a bank from committing or causing any violations and any future violations of Sections 17 of the Securities Act of 1933, it is an equivalent of a permanent injunction to enjoin(stop) the bank from claiming any property rights to the related trust as highlighted in Section 17(a)(2) above.

Unfortunately not too many homeowners or even their attorneys are familiar with SEC rules, to be able to benefit from the rulings that are happening in regard to fraud. Only the savvy homeowners are the ones benefiting from such rulings, and when a “clear title” is filed, the bank, in accordance to the SEC order, cannot attempt to claim ownership over a property tainted with fraud, or else it will be in violation of the SEC order. This is something the media is forbidden to report, because the large corporations own the corporate media, and do not want an awakening to occur. You may read or download the UBS cease and desist order here.


2 comments - What do you think?  Posted by Joseph Earnest - May 4, 2012 at 12:55 am

Categories: News   Tags: , , , , , , , ,

SEC sues Texas bank for engaging in fraudulent mortgage scheme


Newscast Media WASHINGTON, D.C. —The Securities and Exchange Commission today announced that it charged Franklin Bank Corp.’s former chief executives for their involvement in a fraudulent scheme designed to conceal the deterioration of the bank’s loan portfolio and inflate its reported earnings during the financial crisis. The SEC alleges that former Franklin CEO Anthony J. Nocella and CFO J. Russell McCann used aggressive loan modification programs during the third and fourth quarters of 2007 to hide the true amount of Franklin’s non-performing loans and artificially boost its net income and earnings. The Houston-based bank holding company declared bankruptcy in 2008.

“Nocella and McCann used the loan modification scheme like a magic wand to change non-performing loans into performing assets,” said Robert Khuzami, Director of the SEC’s Division of Enforcement. “Their disclosure and accounting tricks misled investors into believing that Franklin was outperforming other banks during the height of the financial crisis.”

What the SEC means is that these banks sold “toxic assets” to investors in form of Mortgage-Backed Securities (MBS) that were pooled together into Trusts. The banks were first compensated through TARP (Troubled Assets Relief Program) money using billions of taxpayers’ money. They were also compensated a second time through insurance (credit default swaps), and the third compensation came through the stream of monthly payments by homeowners. The fourth compensation came when banks were unable to modify loans, and sold the homes at public auctions through foreclosure.

So these banks have earned money four-fold, and are not being held accountable. It seems the magic word is to add the word “bank” in a business name and one is virtually immune from being charged with illegal business practices. However, the SEC is slowly changing that, yet whether the courts will be willing to hold the banks accountable remains to be seen.

The SEC’s complaint filed in U.S. District Court for the Southern District of Texas seeks financial penalties, officer-and-director bars, and permanent injunctive relief against Nocella and McCann to enjoin them from future violations of the federal securities laws.

The SEC has a strong case under Exchange Act Section 10(b) [15 U.S.C. § 78j(b)] and Rule 10b-5 [17 C.F.R. § 240.10b-5]

15 USC § 78j(b) – Manipulative and deceptive devices states:

It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce or of the mails, or of any facility of any national securities exchange—

(b) To use or employ, in connection with the purchase or sale of any security registered on a national securities exchange or any security not so registered, or any securities-based swap agreement (as defined in section 206B of the Gramm-Leach-Bliley Act), any manipulative or deceptive device or contrivance in
contravention of such rules and regulations as the Commission may prescribe as necessary or appropriate in the public interest or for the protection of investors.

17 C.F.R. § 240.10b-5 states:

It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce, or of the mails or of any facility of any national securities exchange,

(a) To employ any device, scheme, or artifice to defraud,

(b) To make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or

(c) To engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person,

in connection with the purchase or sale of any security.

The securities banks deal with are Mortgage-Backed Securities (MBS). A company that engages in the business of investing, reinvesting, owning, holding, or trading in securities should abide by the Investment Company Act of 1940 also referred to as (15 USC § 80a–3) that requires any such business to be registered in order to conduct business.

Almost 100 percent of these banks that claim to be Trustees for XYZ Trust are operating illegally because the Trusts are defunct and do not exist. Unfortunately judges and attorneys seem to be unfamiliar or unwilling to learn about the securitization process, so one has to school them using charts, tables or
diagrams. The SEC is doing just that, and we should expect more diagrams to be provided at trial.

When fighting such cases involving banks claiming to be Trustees, acting on behalf of some Trust, one has to be willing to fight them all the way to the Supreme Court, since those justices are more knowledgeable in dealing with such complex laws.

For more information about this enforcement action, contact:

David Woodcock
Regional Director, SEC’s Fort Worth Regional Office

David Peavler
Associate Regional Director, SEC’s Fort Worth Regional Office


Be the first to comment - What do you think?  Posted by Joseph Earnest - April 10, 2012 at 5:01 pm

Categories: News   Tags: , , , , , , , , , ,

How to find your Pooling and Servicing Agreement (PSA)

Know your PSA

Guest article by Michael Olenik

Newscast Media — The pooling and servicing agreement (PSA) is a contract that should govern the terms under which trillions of dollars worth of equity in the land of the United States of America was flung around the world. These contracts should govern how disputes over ownership and interest in the land that was the United States of America should be resolved. Pretty simple stuff, right? I mean if I’m a millionaire big shot New York Lawyer working for big shot billionaire Wall Street Investors and banks, then I’d do my job as a lawyer to make sure the contract was right and that all the “is” were dotted and the “Ts” were crossed right?

But that’s not at all what’s happened. In our scraggly street level offices, far below the big fancy marble encased towers of American law and finance simple dirt lawyers defending homeowners started actually reading these contracts. We ask lots of questions about just what all those fancy words in their big shot contracts mean. Invariably, the big shot lawyers and the foreclosure mills tell us, “Don’t you worry about all them words you scraggly, simple dirt lawyer. Those words aren’t important to you.”

But increasingly judges recognize that the words really do mean something. Take note of the following statements from the recent Ibanez Ruling:

I concur fully in the opinion of the court, and write separately only to underscore that what is surprising about these cases is not the statement of principles articulated by the court regarding title law and the law of foreclosure in Massachusetts, but rather the utter carelessness with which the plaintiff banks documented the titles to their assets.

The type of sophisticated transactions leading up to the accumulation of the notes and mortgages in question in these cases and their securitization, and, ultimately the sale of mortgaged-backed securities, are not barred nor even burdened by the requirements of Massachusetts law. The plaintiff banks, who brought these cases to clear the titles that they acquired at their own foreclosure sales, have simply failed to prove that the underlying assignments of the mortgages that they allege (and would have) entitled them to foreclose ever existed in any legally recognizable form before they exercised the power of sale that accompanies those assignments.

The Ibanez decision underscores the fact that it is important for all of us to know and understand how the pooling and servicing agreements directly impact what is occurring in the courtroom. And for assistance with understanding the PSA and how to find it, more commentary from Michael Olenick at Legalprise:

Overview of PSAs

Securitized loans are built into securities, which happen to look and function virtually identically to bonds but are categorized and called securities because of some legal restrictions on bonds that nobody seems to know about.

The securities start with one or more investment banks, called the Underwriter (should be called the Undertaker), that seems to disappear right after cashing in lots of fees. They create a prospectus that has different parts of the security that they are proposing. Each of these parts is called a tranche. There are anywhere from a half-dozen to a couple dozen tranches. Each one is considered riskier.

Each tranche is actually a separate sub-security, that can and is traded differently, but governed by the same PSA, listed in the Prospectus. Similar tranches from multiple loans were often bundled together into something called a Collateralized Debt Obligation, or CDO. So besides the MBS there might also be one or more CDOs made up of, say, one middle tranche of each MBS. Each tranche is considered riskier, usually based a combination of the Credit Scores of the people in the tranche and the type of loans (ex: full/partial/no doc, traditional/interest-only/neg am, first or secondary lien, etc…).

CDOs were eligible for a type of “insurance” in case their price went down called a Credit Default Swap, or CDS (also known as “synthetic CDOs). There was actually no need to own the CDO to buy the insurance and many companies purchased the insurance, that paid out handsomely. [That's what the AIG bailout was for, because they didn't keep adequate reserves to pay out the insurance policies.]

Later, investors could also purchase securities made up of multiple CDOs, much the same way that CDOs were made up of tranches of multiple MBSs. These were called “CDOs squared.” Not surprisingly, there were also a few “CDOs cubed, CDOs of CDOs squared. CDOs were virtually all written offshore so little is known about who owns them, except that they were premised on the idea that since there was
collateralized mortgage debt at their base they could not collapse. Their purpose was to spread the various of risks of mortgages which, back then, meant prepayment of high interest debt and default.

Investors were actually way more obsessed with prepayment because they thought the whole country could not default; to make sure of that MBSs and all their gobbly gook were spread around the country; you can see where in the prospectus. They were almost more concerned with geographic dispersion than
credit dispersion.

One warning on those secondary filings, servicers and trusts both break them out as assets. How one loan can be reported as an asset in two places is a mystery, but considering this doesn’t even cover the CDOs and CDSs dual reporting doesn’t seem to strange. You’ll see your loan keep wandering through the financial
system, with one exception (next paragraph), right up to the present day. You can even see how much the investment banks thinks that its worth over time since they report out both original amount and fair market value.

The exception – when your loan really does disappear – is when it was eaten up by the Federal Reserve’s Toxic Loan Asset Facility, TALF. But you can look that up to and see how the government purchased your loan for full-price, when investors on the open market were only willing to pay a few cents on the dollar. If
your loan went to TALF you can find it in the spreadsheet here:…eform_talf.htm

Your loan will be in the top spreadsheet and the genuine lender in the bottom.

Michael Olenick
Legalprise, Inc.
305 Puritan Rd.
W. Palm Beach, FL 33405
Office: 561-847-3443

2 comments - What do you think?  Posted by Joseph Earnest - March 17, 2011 at 5:43 am

Categories: News   Tags: , , , , , , , , , , , , , , , ,