As the details of the case have emerged through a yearlong Times investigation and in court documents, it remains unclear how such a scheme could have gone undetected. So many of the steps were carried out in plain sight, leaving witnesses and an extensive paper trail.
At least part of the answer lies in the obscurity the assessor's office, the lack of outside scrutiny and the sheer size of the property tax rolls, which make it difficult to detect reductions, even when they amount to hundreds of millions of dollars.
The Los Angeles County assessor oversees the nation's largest local tax roll — more than 2 million properties worth more than a trillion dollars. Even a slight reduction in the assessed value of a property can produce a windfall in tax savings for the owner for years to come.
Despite that power, few Angelenos could have named the county assessor before the Noguez scandal made headlines.
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.
It is a crime (common law fraud) to knowingly use a false, perjured, forged, fraudulent document as “evidence” in court. The specific statute violated will vary from state to state, but it is impossible to conceive that there is a single state where this is legal. If I’m wrong about that, I’m sure someone from the fraud-allowing state will set me straight in the comments. This is certainly a violation of federal criminal law, for example 18 USC §§ 371, 1341, 1342, and 1343 and 39 USC§§ 1341 and 1342.
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.
This is the second part of a story on the Office of the Comptroller of the Currency's independent foreclosure review program. A close look suggests that the program is taking far longer than originally expected and resulting in much larger payments to consultants than to wronged borrowers.
Consumer groups have been quick to criticize the Office of the Comptroller of the Currency's independent foreclosure look-back reviews for giving the banks under scrutiny too much say in the process of reviewing their own loans.
A more fundamental issue—the actual mechanics of the reviews and their results—has received less attention.
The OCC granted each consultant responsibility for designing its review methods. Promontory Financial Group, which is conducting Bank of America's review, includes seven sets of yes-or-no questions, labeled A through G. For each homeowner's review file, Promontory and B of A employees must address a total of 14,768 items, according to a May 2012 presentation Promontory provided to consumer groups.
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.
In theory, independent reviewers would look back at past foreclosures, and determine if any fraud occurred. They would make a determination if the foreclosure victims are entitled to any compensation.
Questions were raised almost immediately. The “independent” reviewers were hired by the banks. Whistleblowers explained that the reviewers were hiring flunkies with no legal experience to perform the reviews, and that they were told to ease up on big awards and very narrowly define wrongful conduct. And Pro Publica reported last month that the banks were basically running the review process themselves; they can even appeal the very limited decisions of the reviewers.
Horwitz and Berry advance the story, showing that the reviewers, who if we believe Pro Publica aren’t doing too much reviewing to begin with, are nevertheless making money hand over fist.
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.
“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.”
The idea behind the Independent Foreclosure Review seems simple. During the peak of the foreclosure crisis, the banks broke laws and made errors that hurt homeowners. In response, the government mandated they compensate the victims.
But there is growing evidence some banks are playing a major role in identifying the victims of their own abuses, raising the question of whether the review is compromised by conflicts of interest.
Last week we reported that Bank of America, according to bank employees and internal memos and emails, is performing much of the work itself. Now, a ProPublica examination of contracts that outline what work the banks would do on the review shows that America's four largest banks all planned to participate heavily in evaluating whether homeowners were harmed. Three of the four banks would even help set how much compensation victimized homeowners would receive.
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?
“I went to Wall Street and told them to get their snout out of the trough because they are some of the worst offenders when it comes to bailouts and carve-outs and special deals.”
That was Tim Pawlenty, the former Republican governor of Minnesota, just over a year ago while running for president, railing against big banks.
So what’s he up to now?
Last week, he was named president of the Financial Services Roundtable, one of Wall Street’s most influential lobbying organizations. In his new job, in which his predecessor was paid $1.8 million annually, Mr. Pawlenty will spend his days shuttling around Washington, trying to convince lawmakers that those “carve-outs and special deals” really are beneficial for the nation’s banking system, though presumably without putting his “snout in the trough.”
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.
Striding barefoot through the fields of his farm in the Adirondacks, S. B. Lewis, known as Sandy, is talking without pause, gesturing this way and that in a soft summer rain.
That Mr. Lewis is in a rage is not unusual. A few days earlier, he had watched as the computerized stock trading of Knight Capital ran amok.
“If Knight blows, six firms follow, and the whole corrupt thing goes up,” he said. “Predator banks and hedge funds run the market for their pleasure — there’s no rational structure, nothing!”
He is just warming up. News reports have revealed a world he knows intimately. Goldman Sachs pays vast fines to avoid prosecution for mortgage securities fraud. Barclays manipulates interest rates. The Senate exposes HSBC as a racketeering enterprise, laundering money for drug cartels. Banks are laden with bad assets.
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.
Big mortgage bundlers tied to title companies and the real estate lobby are seeking to get Congress to allow home warranty companies to pay now-illegal kickbacks to real estate brokers under last minute Congressional legislation.
Consumer Watchdog condemned the effort to let the legislation proceed without a floor discussion or vote.
“Homeowners in this country need honest advice and fair dealing from their real estate agents, not new ripoffs blessed by Congress. The House should vote on the record and in the light of day on this bill to roll back protections and legalize kickbacks to realtors,” said Carmen Balber, Washington DC director for Consumer Watchdog.
"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.
The former Countrywide Financial Corp., whose subprime loans helped start the nation's foreclosure crisis, made hundreds of discount loans to buy influence with members of Congress, congressional staff, top government officials and executives of troubled mortgage giant Fannie Mae, according to a House report.
The report, obtained by The Associated Press, said that the discounts – from January 1996 to June 2008, were not only aimed at gaining influence for the company but to help mortgage giant Fannie Mae. Countrywide's business depended largely on Fannie, which at the time was trying to fend off more government regulation but eventually had to come under government control.
William Ibarra was pleasantly surprised to learn that the taxes he pays at his small Miami charter flight company would be slashed by thousands of dollars, after the Legislature last week passed a slew of business tax cuts.
Frank Stronach, a billionaire horse breeder whose Gulfstream Park racino has a team of nine lobbyists in Tallahassee, could save millions. He is likely to benefit from corporate tax cuts for his businesses and a $1.2 million tax break carved out specifically for a slaughterhouse he is building near Ocala.
Getting what should be public information about major Wall Street firms can be maddeningly difficult.
Bloomberg News discovered this in its ultimately successful effort to get information on the $1.2 trillion in “secret loans” the Fed doled out during the financial crisis. And I’ve had no small experience of it myself.
As I started each of my three books -- about Lazard Freres, Bear Stearns and Goldman Sachs Group Inc. (GS) -- I submitted Freedom of Information Act requests to the appropriate government agencies (the Securities Exchange Commission, the State Department and the Federal Reserve) to obtain whatever documents, memos and e-mails they had about these companies and their senior executives.