Connect The Dots

Bank of America Corp. has amassed $64 billion of mortgages that are at least six months delinquent and have yet to enter foreclosure, more than twice the amount held by its four largest competitors combined. 

The loans are monitored as part of February’s $25 billion settlement between the top five U.S. lenders and state attorneys general over allegations of abusive foreclosure practices. Bank of America’s stockpile of deteriorating debt is mostly from its 2008 acquisition of Countrywide Financial Corp., once the nation’s largest mortgage provider. Wells Fargo & Co. (WFC), the biggest U.S. servicer, has $15.3 billion of such unpaid loans. 

The data, published last month by the monitor of the settlement, highlight Bank of America’s vast backlog of delinquencies, and the years it will take to work through them as borrowers fall further behind and losses mount for investors in mortgage-backed securities.

http://www.bloomberg.com/news/2012-12-19/bank-of-america-delinquent-loan...

Even in the movie version of the financial crisis, the giant mortgage company accused by the U.S. government of rampant fraud and abuse wouldn't be so obvious as to nickname its mortgage lending program "the Hustle."

The real-life Countrywide Financial, however, was not known for its subtlety. In 2007, as the mortgage market was collapsing, Countrywide, now part of Bank of America, used the hustle -- officially, a program it called the "High Speed Swim Lane" -- to eviscerate lending standards in order to keep pumping out home loans, even though many were fraudulent, according to a lawsuit filed by the U.S. government last month.

Despite the abuses alleged in this lawsuit, described as "spectacularly brazen in scope" by Manhattan U.S. Attorney Preet Bharara, the federal government accused no individual bank executives with wrongdoing in the case.

http://www.huffingtonpost.com/2012/11/21/mortgage-fraud-lawsuits-_n_2174...

In the wake of the financial crisis, banks mishandled foreclosures on such a scale that regulators stepped in. Led by the Office of the Comptroller of the Currency, they ordered banks to hire independent outsiders to identify homeowners who were wrongly foreclosed on and to provide compensation.

Instead of righting a large-scale wrong, however, the "lookback" reviews have become nearly as controversial as the original servicing blunders. Consumer advocates have blasted the reviews as lacking in independence. They allege that regulators have allowed banks to subvert the program by choosing their reviewers, weighing in on whether borrowers were harmed and even appealing consultants' decisions.

http://www.americanbanker.com/issues/177_212/foreclosure-reviews-exorbit...

The latest example of bankers running our country is the weak mortgage servicing standards proposed by the Consumer Bureau.

Hmmm… how come the rules are so bad, given mortgage servicers’ rampant fraud, predatory servicing and gross incompetence, all of which has been well documented by law enforcement (albeit not effectively prosecuted)?

I have no inside scoop. But here’s someone who does: Leonard Chanin. He supervised all of the Consumer Bureau’s rule makings as its “Assistant Director for Regulations.” Guess what? Last month he left the Consumer Bureau to join Morrison & Forrester.

MoFo describes itself on its website as

“one of the leading banking and financial services law firms in the world, advising domestic and foreign banks, insurance companies, credit card companies, mortgage bankers, investment banks, investment management companies and investment advisers, and other financial institutions on regulatory and litigation, as well as transactional, matters.”

http://abigailcfield.com/?p=1486

Whenever there is a report of corporate misconduct, a predictable response is that the company in question says it has hired a reputable law firm to conduct a thorough investigation, and it pledges to cooperate with the authorities to resolve the situation quickly.

Prosecutors usually announce their own investigation, if they say anything at all. In reality, the government often uses reports provided by the companies to decide how to resolve the case.

Yet this raises significant questions about conflicts of interest. Is it a good thing that much of the effort to police corporate misconduct seems to have been shifted to lawyers retained by the companies under investigation?

http://dealbook.nytimes.com/2012/09/24/under-investigation-and-doing-the...

FORTUNE -- Few players had as close a view of the financial crisis as Sheila Bair, chairman of the Federal Deposit Insurance Corp. from June 2006 to July 2011. In this excerpt from her new book, Bull by the Horns: Fighting to Save Main Street From Wall Street and Wall Street From Itself, Bair, a Fortune columnist, describes a crucial meeting she attended at the Treasury Department on Monday, Oct. 13, 2008. There Treasury Secretary Hank Paulson persuaded a roomful of bank CEOs, including J.P. Morgan's Jamie Dimon, Citigroup's Vikram Pandit, and Goldman's Lloyd Blankfein, to go along with a $125 billion TARP bailout.

I took a deep breath and walked into the large conference room at the Treasury Department. I was apprehensive and exhausted, having spent the entire weekend in marathon meetings with Treasury and the Fed. I felt myself start to tremble, and I hugged my thick briefing binder tightly to my chest in an effort to camouflage my nervousness. Nine men stood milling around in the room, peremptorily summoned there by Treasury Secretary Henry Paulson.

http://finance.fortune.cnn.com/2012/09/20/bair-bull-horns/

Officials routinely leave federal agencies, Congress and the White House to work for the industries they once supervised. While that path is well-trod and legal — with some time restrictions — it still provokes handwringing in Washington. Nazareth’s communications provide an inside look at what happens when the revolving door spins.

Nazareth, 56, declined to discuss specific e-mails. She said that people like herself who have worked for both sides are valuable because they can “better translate to their clients” what the SEC is trying to achieve.

Lynn Turner, a former SEC chief accountant who is critical of the banks’ agenda, said Nazareth is “at the top of that list of influential attorneys” with access to regulators as former SEC officials.

http://www.washingtonpost.com/business/when-washingtons-revolving-door-s...

"Those wondering why the Department of Justice has refused to go after Jon Corzine for the vaporization of $1.6 billion in MF Global client funds need look no further than the documents uncovered by the Government Accountability Institute that reveal that the now-defunct MF Global was a client of Attorney General Eric Holder and Assistant Attorney GeneralLanny Breuer’s former law firm, Covington & Burling."

It's great fodder for the scandal mill. It's also not a surprise. Covington & Burling, a powerhouse Washington law firm that was founded in 1919 by former Representative James Harry Covington, in recent years has represented JPMorgan Chase, Wells Fargo, Citigroup, Bank of America, Morgan Stanley, Goldman Sachs and UBS, to name a few. It would have been more surprising if the firm had never represented MF Global. Corzine, for anyone who hasn't been paying attention, is the former New Jersey governor who was MF's chief executive when it collapsed.

http://www.bloomberg.com/news/2012-07-27/the-justice-department-s-mf-glo...