Short-Term Pain, Long-Term Wonder Foreclosure.com Scholarship Program Winning Essay 2017, (Grand Prize)

You know, I just read the following article, and see that the “Millennials” are being brain washed. Goldman Sachs said back around 2008 “Only the rich should own houses, everyone else should be renting”. Sorry, I am still looking for the article wherein I quoted from. I will find it, I used that in a brief.

I knew that meant trouble. Even with foreclosure hell in the middle of its heyday, it still meant something. Not long after that, people being foreclosed upon, began being offered the chance to rent the house that they just lost.

Now, these third party entities popped up almost over night, and instead of the properties at foreclosure, reverting back to the lenders, these third parties now purchase at foreclosure auctions. Then they offer to rent you your house, or take you to magistrate court and have your thrown out, instead of the banks having to do that.

Funny thing, if you research most of these third parties, back far enough, the banks own them too, so still the same thing, just different names. Nevertheless, I could not help but post the article. It is obvious that “they” want us all in little apartments in and around the cities, easier to control “us”. I just had not realized that they were in the progress of brain-washing the Millennials into not even wanting to own a house.

Read the article:

Short-Term Pain, Long-Term Wonder
Foreclosure.com Scholarship Program Winning Essay 2017, (Grand Prize)
https://article.foreclosure.com/short-term-pain-long-term-wonder-82f82b90ff52
Go to the profile of Foreclosure.com Staff
Foreclosure.com Staff
Feb 28, 2018
By Jack Duffley | University of Illinois At Urbana-Champaign

foreclosure-kid
(photo from https://article.foreclosure.com/short-term-pain-long-term-wonder-82f82b90ff52)

In the gleeful times of 2005, my parents decided, like so many others, that it was time to “upgrade.” They sold our smaller home on the other side of town, which had appreciated nicely, and bought a 3700 square foot behemoth in a town with already exorbitant property taxes. My younger brother and I were thrilled to finally have a basement, our own rooms, and even a concrete basketball court in our backyard! All eight-year-old me knew was that things were going to be a whole lot more comfortable from there, and my optimistic parents seemed to think the same.

Jack Duffley | University of Illinois At Urbana-Champaign
The year is 2017, and my parents have only just now reached the equity levels in the house that they started with over a decade ago, nearly one-hundred-fifty mortgage payments later. However, after being bombarded by extremely high taxes for that entire time, they are essentially underwater on the property, but see little choice but to hang on for dear life until equity recovers just a bit more before they abandon ship. A thin retirement plan, mostly resting on the house, has forced their hand.

My parents’ story is in no way unique; millions of Americans who purchased homes before the 2008 recession have faced similar dilemmas, often worse than theirs. Many had no choice but to foreclose during the worst of it. After all, the homeownership rate has declined almost 5 points nationwide since the recession.[1] If anything, they can be considered lucky, yet they are still stuck in the mud. Their children, on the other hand, are now at their own fork in the road: to be [a homeowner] or not to be.

And, all things considered, they are often choosing not to be. The census shows a stark dip in homeownership among those under the age of 35 of almost 10 percent, lowering significantly from its peak pre-recessionary levels of 43 percent to a dismal 34 percent. At the same time, rental vacancy rates nationwide fell from over 10 percent to less than 7 percent as more people turned to renting, millennials especially.[2] Why is this happening?

Aside from the obvious fear of the failure that their parents faced, millennials are renting more as they define their own unique lifestyle. Millennials, in ever increasing numbers, are focusing on “living now.” They are choosing to move into urban areas in particular. As a predominantly liberal group, and with large cities tending to lean left, this is partially due to political forces. The majority, however, is due to lifestyle conveniences that come with a city: multiple options for transportation and not needing to own a car, proximity to cultural events and nightlife, and, especially with the decline of the suburbs as retail simultaneously sinks, a more positive future economic outlook. They more readily take the loss in living space for these benefits than their previous generations did.

At the same time, a growing number of millennials are facing burdensome student loan debt. Rather than come out of college with pristine back-end ratios primed for a hefty mortgage, they are handcuffed by the debt that they have amassed in their early twenties. As the Pew Research Center has noted, 37 percent of people under the age of thirty have student loan debt. They contribute to the $1.3 trillion in student debt, leverage that could presumably be used for a mortgage or some other useful credit if it were not locked up already.[3] Millennials are trying to increase their earning power by going to school so that they have the opportunity to advance economically, but it is simultaneously holding many of them back via years of extra debt — debt that is notably not going to a physical asset.

What does this mean for real estate? For the single family home market, it spells disaster, at least in the short term. Grant Cardone, one of the premier real estate investors in the world, calls homeownership a “scam,” and emphasizes that renting over homeownership among young people is becoming more and more popular. He notes that there is a huge need for affordable rentals as millennials deviate away from single family homes. Cardone is always one to advocate renting as a more advantageous and flexible lifestyle choice, and, as it has been mentioned, millennials increasingly value the flexibility that comes with renting instead of buying a home. Many, like Cardone, now see homeownership as a solely negative ordeal.

While it may not be up to the level of a “scam,” there are significant drawbacks with owning a home. For one, it locks up a significant amount of capital, money that could be used for a number of different projects or investments. In sum, homeownership is very expensive, at least in the short term when people make their initial down payment and any potential renovations. This makes it very hard to own a home for people of all ages. Additionally, owning a home can financially lock someone to a particular location, one which they might not want to be in after a while. Finally, for those hoping for appreciation when they purchase their home, as with any investment, there is a chance that it does not pan out. A poorly timed crash can wipe out an owner’s equity in seconds just as it did to my parents and so many others.

While there are drawbacks, the Great Recession and its subsequent lifestyle shift suggest the lack of education about the benefits of owning real estate. Even my parents are constantly warning me of the dangers of homeownership; the shift is not totally driven by millennials themselves. They too are still shaken by their mistakes and the sledgehammer that was the crash. They ignore the value of building equity over the long term, the typical tax benefits that come with a primary residence, and the relative stability of the real estate market because they mistakenly overpaid for a house that, in hindsight, they cannot comfortably afford in a downturn. They just hope that I do not do the same, and rightfully so. However, what millennials should have learned from the recession is not that real estate is bad, but that they simply must be careful and reasonable with what they assume when purchasing it.
3310-Harrison-Rd-east-point
Unfortunately, the average consumer purchases on emotion. With the tremendous amounts of emotional trauma from the recession, millennials are increasingly refusing to buy a home as their parents might have desired at the same age. But what are they purchasing in its place? Many take on higher rents, consistent with the “living now” mentality. Many more use their money to buy a wealth of products online. Some are even speculating on cryptocurrency, something far more unknown than real estate, expecting to make a lot of money. Why do they do that? Because the average consumer purchases on emotion, not on something systematic. Real estate has already been proven to be a relatively safe and a potentially very powerful asset. Instead, the negatives have been, and continue to be, emphasized. This masks the positives of owning a home, or even a simple condo. Millennials in some cases are mistakenly ignoring all real estate and not just the kind of overleveraging or speculating that got their parents into trouble.

Does this spell the end to America? Will the country burst into flames as millennials move to urban areas? Of course not. It must be noted that the current trend does not own the future; millennials could very well begin to purchase homes in huge numbers, especially as prices drop over the next few years. While it is likely that this will not be the case, it is impossible for anyone but millennials themselves to determine that.

What is certain is that, in the short run, there will be pain. The single family housing market is going to suffer as millennials make lifestyle choices contrary to their parents. The market will be oversupplied with single family homes. However, millennials will still need a place to live, just like anyone else. Their increasing demand for urban locations and conveniences will push rent up in cities, as it already has in places like San Francisco and Seattle. This will open a new, and huge, opportunity for real estate investors and developers alike to profit in the cities as millennials develop their own American Dream. After all, a dream is only what a person makes of it, not what someone else defines it as.

References:
[1] U.S. Census Bureau, Annual Homeownership Rates for the United States and Regions: 1968–2016, (accessed Dec 10, 2010), https://www.census.gov/housing/hvs/data/charts/fig05.pdf

[2] U.S. Census Bureau, Annual Rental Vacancy Rates for the United States and Regions: 1968–2016, (accessed Dec 10, 2010), https://www.census.gov/housing/hvs/data/charts/fig03.pdf

[3] Anthony Cilluffo, “5 facts about U.S. student loans,” Pew Research Center, last modified August 24, 2017. http://www.pewresearch.org/fact-tank/2017/08/24/5-facts-about-student-loans/

The winning essay above was submitted to Foreclosure.com’s scholarship program.

The 2017 essay topic:
IS THE “AMERICAN DREAM” OF ONE DAY OWNING A HOME ALIVE AND WELL AMONG MILLENNIALS?
Millennials having experienced the “Great Recession,” which was the traumatic housing crisis that triggered the financial crisis a decade ago. As a result, data suggests that Millennials (those born between 1981 to 1997) have been slow to adopt homeownership. Discuss the pros and cons of homeownership for Millennials, as well as which factors could increase or decrease homeownership among the generation. Will their collective hesitation and apprehension hurt them in the long run or are Millennials simply in the process of re-defining the “American Dream?”

Pay Attention! Look at the money trail AFTER the foreclosure sale, by Neil Garfield

Pay Attention! Look at the money trail AFTER the foreclosure sale
Posted on July 3, 2018 by Neil Garfield
https://livinglies.wordpress.com/2018/07/03/pay-attention-look-at-the-money-trail-after-the-foreclosure-sale/

My confidence has never been higher that the handling of money after a foreclosure sale will reveal the fraudulent nature of most “foreclosures” initiated not on behalf of the owner of the debt but in spite of the the owner(s) of the debt.

It has long been obvious to me that the money trail is separated from the paper trail practically “at birth” (origination). It is an obvious fact that the owner of the debt is always someone different than the party seeking foreclosure, the alleged servicer of the debt, the alleged trust, and the alleged trustee for a nonexistent trust. When you peek beneath the hood of this scam, you can see it for yourself.

Real case in point: BONY appears as purported trustee of a purported trust. Who did that? The lawyers, not BONY. The foreclosure is allowed and the foreclosure sale takes place. The winning “bid” for the property is $230k.

Here is where it gets real interesting. The check is sent to BONY who supposedly is acting on behalf of the trust, right. Wrong. BONY is acting on behalf of Chase and Bayview loan servicing. How do we know? Because physical possession of the check made payable to BONY was forwarded to Chase, Bayview or both of them. How do we know that? Because Chase and Bayview both endorsed the check made out to BONY depositing the check for credit in a bank account probably at Chase in the name of Bayview.

OK so we have the check made out to BONY and TWO endorsements — one by Chase and one by Bayview supposedly — and then an account number that might be a Chase account and might be a Bayview account — or, it might be some other account altogether. So the question who actually received the $230k in an account controlled by them and then, what did they do with it. I suspect that even after the check was deposited “somewhere” that money was forwarded to still other entities or even people.

The bid was $230k and the check was made payable to BONY. But the fact that it wasn’t deposited into any BONY account much less a BONY trust account corroborates what I have been saying for 12 years — that there is no bank account for the trust and the trust does not exist. If the trust existed the handling of the money would look very different OR the participants would be going to jail.

And that means NOW you have evidence that this is the case since BONY obviously refused to do anything with the check, financially, and instead just forwarded it to either Chase or Bayview or perhaps both, using copies and processing through Check 21.

What does this mean? It means that the use of the BONY name was a sham, since the trust didn’t exist, no trust account existed, no assets had ever been entrusted to BONY as trustee and when they received the check they forwarded it to the parties who were pulling the strings even if they too were neither servicers nor owners of the debt.

Even if the trust did exist and there really was a trust officer and there really was a bank account in the name of the trust, BONY failed to treat it as a trust asset.

So either BONY was directly committing breach of fiduciary duty and theft against the alleged trust and the alleged trust beneficiaries OR BONY was complying with the terms of their contract with Chase to rent the BONY name to facilitate the illusion of a trust and to have their name used in foreclosures (as long as they were protected by indemnification by Chase who would pay for any sanctions or judgments against BONY if the case went sideways for them).

That means the foreclosure judgment and sale should be vacated. A nonexistent party cannot receive a remedy, judicially or non-judicially. The assertions made on behalf of the named foreclosing party (the trust represented by BONY “As trustee”) were patently false — unless these entities come up with more fabricated paperwork showing a last minute transfer “from the trust” to Chase, Bayview or both.

The foreclosure is ripe for attack.

Spread the word

FORECLOSURE HELL

I had been doing so much better about keeping up with my blogs, until about this last week. I had not gotten back to posting as much as I had in the past, but was doing much better.

I have to admit though, every month, beginning the week before foreclosure hell (the day they auction the homes foreclosed upon), have been particularly hellish.

I guess for a while, no one I know was being foreclosed upon. But beginning last month, my friends began being sold at auction again. It had been a whole year until just these last couple of months. Then all of the sudden, properties that the banks had lost interest in, out of the blue, and with little or no warning, were sold at auction.

We all managed to stop two of the sales, those two were cancelled, but last month, one was lost to foreclosure, and it took a lot of work to get cancelled, the two that were cancelled.

So, even though there may not be the number of foreclosures every month that there had been for a long time, looks like the banks have managed to get lined up, these companies, that will purchase damn near any house at auction. These companies that want to turn around and rent you your house they just purchased at foreclosure.

I told everyone, back in 2008-2009 when Goldman Sachs’ sorry ass said that “only the rich should own houses, everyone else should be renters”, that this is what could be expected. Yes, it took another 8 years for it to happen to this scale, but it is here, and it won’t be going away, till they get every one of our homes.

I have watched foreclosure sales every month since around 2006, and all the properties that were fought for, and the banks, just kind of fizzled away without a lot of fuss, homes that they realized would be close to impossible to get the foreclosed upon owner to leave, now that they can work it out to where these rent home companies, are the ones that has to get rid of the previous owners of the properties.

The banks see this as minor housekeeping, which they don’t mind at all.

When I read this article, I kept hearing that song “Take It To The Limit One More Time”! They’ve changed the words “Sub-Prime” to “Non-Prime” and we re going to take it to the limit one more time…

Subprime mortgages make a comeback—with a new name and soaring demand
The subprime mortgage industry vanished after the Great Recession but is now being reinvented as the nonprime market.
Carrington Mortgage is now offering mortgages to borrowers with “less-than-perfect credit.”
Demand from both borrowers and investors is exceeding expectations.
Diana Olick | @DianaOlick
Published 10:45 AM ET Thu, 12 April 2018 Updated 1:54 PM ET Thu, 12 April 2018
CNBC.com
https://www.cnbc.com/2018/04/12/sub-prime-mortgages-morph-into-non-prime-loans-and-demand-soars.html
Subprime stages comeback as ‘non-prime’ loans Subprime stages comeback as ‘non-prime’ loans
1:41 PM ET Thu, 12 April 2018 | 01:28

They were blamed for the biggest financial disaster in a century. Subprime mortgages – home loans to borrowers with sketchy credit who put little to no skin in the game. Following the epic housing crash, they disappeared, due to strong, new regulation, and zero demand from investors who were badly burned. Barely a decade later, they’re coming back with a new name — nonprime — and, so far, some new standards.

California-based Carrington Mortgage Services, a midsized lender, just announced an expansion into the space, offering loans to borrowers, “with less-than-perfect credit.” Carrington will originate and service the loans, but it will also securitize them for sale to investors.

“We believe there is actually a market today in the secondary market for people who want to buy nonprime loans that have been properly underwritten,” said Rick Sharga, executive vice president of Carrington Mortgage Holdings. “We’re not going back to the bad old days of ninja lending, when people with no jobs, no income, and no assets were getting loans.”

A home improvement contractor works on a house in Cambridge, Massachusetts. Here’s how much homeowners could cash out in home equity
2:32 PM ET Mon, 2 April 2018 | 01:14
All loans will not be the same


Sharga said Carrington will manually underwrite each loan, assessing the individual risks. But it will allow its borrowers to have FICO credit scores as low as 500. The current average for agency-backed mortgages is in the mid-700s. Borrowers can take out loans of up to $1.5 million on single-family homes, townhomes and condominiums. They can also do cash-out refinances, where borrowers tap extra equity in their homes, up to $500,000. Recent credit events, like a foreclosure, bankruptcy or a history of late payments are acceptable.

All loans, however, will not be the same for all borrowers. If a borrower is higher risk, a higher down payment will be required, and the interest rate will likely be higher.

“What we’re talking about is underwriting that goes back to common sense sort of practices. If you have risk, you offset risk somewhere else,” added Sharga, while touting, “We probably are going to have the widest range of products for people with challenging credit in the marketplace.”

Carrington is not alone in the space. Angel Oak began offering and securitizing nonprime mortgages two years ago and has done six nonprime securitizations so far. It recently finalized its biggest securitization yet — $329 million, comprising 905 mortgages with an average amount of about $363,000. Just more than 80 percent of the loans are nonprime.

A ‘who’s who of Wall Street’
Investors in Angel Oak’s nonprime securitizations are, “a who’s who of Wall Street,” according to company representatives, citing hedge funds and insurance companies. Angel Oak’s securitizations now total $1.3 billion in mortgage debt.

Angel Oak, along with Caliber Home Loans, have been the main players in the space, securitizing relatively few loans. That is clearly about to change in a big way, as demand is rising.

“We believe that more competition is positive for the marketplace because there is strong enough demand for the product to support multiple originators,” said Lauren Hedvat, managing director, capital markets at Angel Oak. “Additionally, the more competitors there are, the wider the footprint becomes, which should open the door for more potential borrowers.”

Big banks are also getting in the game, both investing in the securities and funding the lenders, according to Sharga.

“It’s large financial institutions. A lot of people with private capital sitting on the sidelines, who are very interested in this market and believe that as long as the risks are managed well, and companies like ours are particularly good at managing credit risk, that it’s a good investment opportunity,” he said.

As the economy improves, and rents continue to rise, more Americans are trying to become homeowners, but the scars of the Great Recession still stand in the way. One-fifth of consumers today still have very low credit scores, often disqualifying them from obtaining a mortgage in today’s tight lending market.

Relaxed lending standards
Last summer, Fannie Mae announced it would relax its lending standards for prime loans, allowing borrowers with higher debt and lower credit scores to obtain loans without additional risk overlays, such as large down payments and a year’s worth of cash reserves.

Fannie Mae raised its debt-to-income (DTI) limit from 45 percent to 50 percent. DTI is the amount of total debt a borrower can have compared to his or her income. As a result, demand from buyers with higher debt exceeded all expectations. The share of high DTI loans jumped from 6 percent in January 2017 to nearly 20 percent by the end of February 2018, according to a study by the Urban Institute.

“From January to July 2017, Fannie purchased 80,467 loans with DTI ratios between 45 and 50 percent. But from August 2017 to February 2018, Fannie purchased 181,911 loans in the same DTI bucket. This increase of more than 100,000 loans in just seven months exceeded our estimate (85,000 additional Fannie loans annually) and Fannie’s expectations.” – Urban Institute

The mortgage industry expectation was that Fannie Mae would mitigate the additional risk with other factors, like a higher necessary credit score, but that was not added. The mortgage insurers balked, since they would be on the hook for the risk, so last month Fannie Mae “recalibrated” its risk assessment criteria again.

“We got a bigger response than we thought we were going to, so we dialed back to make sure we were in the right spot where our governance kicks in to make sure we’re not taking excessive risk,” said Doug Duncan, Fannie Mae’s chief economist.

Millennials carry more debt
The outsized demand from borrowers with more debt as well as demand for nonprime mortgages in the private sector show just how many borrowers today would like to become homeowners but are frozen out of the mortgage market.

Millennials, the largest homebuying cohort today, have much higher levels of student debt than previous generations. Members of older generations who went through foreclosures during the housing crisis or other hits to their credit are still struggling with lower FICO scores.

In addition, credit tightened up dramatically. In fact, between 2009 and 2015, tighter credit accounted for just more than 6 million “missing” loans, according to research by Laurie Goodman at the Urban Institute. These are mortgages that would have been granted under more normal historical underwriting standards.

The rebirth of the nonprime market is focused on these missing mortgages. The hope is that the industry will also focus on better standards of underwriting and not take risk to the levels it once did, levels that resulted in disaster.

California Attorney Pleads Guilty in National Securities Fraud


California Attorney Pleads Guilty in National Securities Fraud
A California attorney pleads guilty to a securities conspiracy charge in a pump-and-dump stock scam.
https://www.law.com/dailybusinessreview/sites/dailybusinessreview/2018/01/26/california-attorney-pleads-guilty-in-national-securities-fraud/
By Samantha Joseph | January 26, 2018 at 05:59 PM

U.S. Securities and Exchange Commission building.

Diego M. Radzinschi

California attorney Andrew H. Wilson pleaded guilty of conspiracy to unlawfully sell unregistered securities.

The Nevada City man was one of 10 people convicted in a conspiracy to sell shares of shell companies they secretly controlled, then inflating values in a pump-and-dump scam that involved participants from New York and Colorado.

Wilson pleaded guilty Thursday in federal court in Miami. He faces a maximum statutory sentence of five years in prison and a fine of up to $250,000 or double the proceeds of the offense, according to prosecutors. He is at least the second attorney charged in the scam.

Prosecutors say the scheme ran for about seven years and involved fraudulent U.S. Securities and Exchange Commission filings listing nominee chief executive officers for shell companies.

Participants presented the CEO as the owner and listed shareholders while maintaining full control over blocks of shares. When the shares become unrestricted, or free trading, participants secretly sold them to shell buyers or got SEC approval to sell them publicly.

Wilson created fraudulent paperwork to support the scam, according to court documents.

In October, attorney James M. Schneider of Hillsboro Beach faced a parallel civil enforcement action by the SEC, accusing him and Wilson of participating in a fraud involving 22 blank-check companies “secretly bound for reverse mergers.” Blank-check companies “have no operations, making them attractive targets for those seeking reverse mergers for use in pump-and-dump schemes,” according to prosecutors.

New York stock promoter Yelena Furman and Colorado registered stock transfer agent John Ahearn are among those convicted, according to a news release from the Department of Justice.

Sentencing for Ahearn and Wilson is set for June 8 before U.S. District Judge Kathleen M. Williams in Miami. Furman’s sentencing is set for April 25 before U.S. District Judge Cecilia M. Altonaga.

We have new details on Goldman Sachs’ $5 billion legal settlement

We have new details on Goldman Sachs’ $5 billion legal settlement

Evan Vucci/APGoldman Sachs CEO Lloyd Blankfein.

Jamie Dimon Lloyd Blankfein

Wells Fargo just agreed to pay $1.2 billion to settle ‘shoddy’ mortgage practices

We now know more about the $5 billion settlement Goldman Sachs has agreed to pay related to residential mortgage-backed securities it sold between 2005 and 2007.

Regulators announced details of the settlement on Monday.

Goldman initially announced the settlement in January. That nearly wiped out fourth-quarter earnings for the firm.

“Today’s settlement is yet another acknowledgment by one of our leading financial institutions that it did not live up to the representations it made to investors about the products it was selling,” said one regulator, US Attorney Benjamin B. Wagner of the Eastern District of California, in a statement.

“We are pleased to put these legacy matters behind us,” Goldman Sachs said in a statement. “Since the financial crisis, we have taken significant steps to strengthen our culture, reinforce our commitment to our clients, and ensure our governance processes are robust.”

Morgan Stanley announced a similar settlement in February. It agreed to pay $3.2 billion over charges that it misled investors on the quality of mortgage loans it sold.

And on Friday, the US Justice Department announced that Wells Fargo had agreed to pay $1.2 billion to settle “shoddy” mortgage-lending practices.

Here’s what we learned about the Goldman settlement on Monday:

  • $2.385 billion in a civil-monetary penalty
  • $875 million to settle claims by various federal and state entities, including:
    • $575 million to settle claims by the National Credit Union Administration
    • $37.5 million to settle claims by the Federal Home Loan Bank of Des Moines as successor to the Federal Home Loan Bank of Seattle
    • $37.5 million to settle claims by the Federal Home Loan Bank of Chicago
    • $190 million to settle claims by the state of New York
    • $25 million to settle claims by the state of Illinois
    • $10 million to settle claims by the state of California
  • $1.8 billion in the form of relief to aid consumers who were allegedly harmed

Here’s a press release from the Department of Justice:

WASHINGTON — The Justice Department, along with federal and state partners, announced today a $5.06 billion settlement with Goldman Sachs related to Goldman’s conduct in the packaging, securitization, marketing, sale and issuance of residential mortgage-backed securities (RMBS) between 2005 and 2007. The resolution announced today requires Goldman to pay $2.385 billion in a civil penalty under the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA) and also requires the bank to provide $1.8 billion in other relief, including relief to underwater homeowners, distressed borrowers and affected communities, in the form of loan forgiveness and financing for affordable housing. Goldman will also pay $875 million to resolve claims by other federal entities and state claims. Investors, including federally-insured financial institutions, suffered billions of dollars in losses from investing in RMBS issued and underwritten by Goldman between 2005 and 2007.

“This resolution holds Goldman Sachs accountable for its serious misconduct in falsely assuring investors that securities it sold were backed by sound mortgages, when it knew that they were full of mortgages that were likely to fail,” said Acting Associate Attorney General Stuart F. Delery. “This $5 billion settlement includes a $1.8 billion commitment to help repair the damage to homeowners and communities that Goldman acknowledges resulted from its conduct, and it makes clear that no institution may inflict this type of harm on investors and the American public without serious consequences.”

“Today’s settlement is another example of the department’s resolve to hold accountable those whose illegal conduct resulted in the financial crisis of 2008,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division. “Viewed in conjunction with the previous multibillion-dollar recoveries that the department has obtained for similar conduct, this settlement demonstrates the pervasiveness of the banking industry’s fraudulent practices in selling RMBS, and the power of the Financial Institutions Reform, Recovery and Enforcement Act as a tool for combatting this type of wrongdoing.”

“Today’s settlement is yet another acknowledgment by one of our leading financial institutions that it did not live up to the representations it made to investors about the products it was selling,” said U.S. Attorney Benjamin B. Wagner of the Eastern District of California. “Goldman’s conduct in exploiting the RMBS market contributed to an international financial crisis that people across the country, including many in the Eastern District of California, continue to struggle to recover from. I am gratified that this office has developed investigations, first against JPMorgan Chase and now against Goldman Sachs, that have led to significant civil settlements that hold bad actors in this market accountable. The results obtained by this office and other members of the RMBS Working Group continue to send a message to Wall Street that we remain committed to pursuing those responsible for the financial crisis.”

The $2.385 billion civil monetary penalty resolves claims under FIRREA, which authorizes the federal government to impose civil penalties against financial institutions that violate various predicate offenses, including wire and mail fraud. The settlement expressly preserves the government’s ability to bring criminal charges against Goldman, and does not release any individuals from potential criminal or civil liability. In addition, as part of the settlement, Goldman agreed to fully cooperate with any ongoing investigations related to the conduct covered by the agreement.

Of the $875 million Goldman has agreed to pay to settle claims by various other federal and state entities: Goldman will pay $575 million to settle claims by the National Credit Union Administration, $37.5 million to settle claims by the Federal Home Loan Bank of Des Moines as successor to the Federal Home Loan Bank of Seattle, $37.5 million to settle claims by the Federal Home Loan Bank of Chicago, $190 million to settle claims by the state of New York, $25 million to settle claims by the state of Illinois and $10 million to settle claims by the state of California.

Goldman will pay out the remaining $1.8 billion in the form of relief to aid consumers harmed by its unlawful conduct. $1.52 billion of that relief will be paid out pursuant to an agreement with the United States that Goldman will provide loan modifications, including loan forgiveness and forbearance, to distressed and underwater homeowners throughout the country, as well as financing for affordable rental and for-sale housing throughout the country. This agreement represents the largest commitment in any RMBS agreement to provide financing for affordable housing—a crucial need following the turmoil of the financial crisis. $280 million will be paid out by Goldman pursuant to an agreement separately negotiated with the state of New York.

The settlement includes a statement of facts to which Goldman has agreed. That statement of facts describes how Goldman made false and misleading representations to prospective investors about the characteristics of the loans it securitized and the ways in which Goldman would protect investors in its RMBS from harm (the quotes in the following paragraphs are from that agreed-upon statement of facts, unless otherwise noted):

  • Goldman told investors in offering documents that “[l]oans in the securitized pools were originated generally in accordance with the loan originator’s underwriting guidelines,” other than possible situations where “when the originator identified ‘compensating factors’ at the time of origination.” But Goldman has today acknowledged that, “Goldman received information indicating that, for certain loan pools, significant percentages of the loans reviewed did not conform to the representations made to investors about the pools of loans to be securitized.”
  • Specifically, Goldman has now acknowledged that, even when the results of its due diligence on samples of loans from those pools “indicated that the unsampled portions of the pools likely contained additional loans with credit exceptions, Goldman typically did not . . . identify and eliminate any additional loans with credit exceptions.” Goldman has acknowledged that it “failed to do this even when the samples included significant numbers of loans with credit exceptions.”
  • Goldman’s Mortgage Capital Committee, which included senior mortgage department personnel and employees from Goldman’s credit and legal departments, was required to approve every RMBS issued by Goldman. Goldman has now acknowledged that “[t]he Mortgage Capital Committee typically received . . . summaries of Goldman’s due diligence results for certain of the loan pools backing the securitization,” but that “[d]espite the high numbers of loans that Goldman had dropped from the loan pools, the Mortgage Capital Committee approved every RMBS that was presented to it between December 2005 and 2007.” As one example, in early 2007, Goldman approved and issued a subprime RMBS backed by loans originated by New Century Mortgage Corporation, after Goldman’s due diligence process found that one of the loan pools to be securitized included loans originated with “[e]xtremely aggressive underwriting,” and where Goldman dropped 25 percent of the loans from the due diligence sample on that pool without reviewing the unsampled 70 percent of the pool to determine whether those loans had similar problems.
  • Goldman has acknowledged that, for one August 2006 RMBS, the due diligence results for some of the loan pools resulted in an “unusually high” percentage of loans with credit and compliance defects. The Mortgage Capital Committee was presented with a summary of these results and asked “How do we know that we caught everything?” One transaction manager responded “we don’t.” Another transaction manager responded, “Depends on what you mean by everything? Because of the limited sampling . . . we don’t catch everything . . .” Goldman has now acknowledged that the Mortgage Capital Committee approved this RMBS for securitization without requiring any further due diligence.
  • Goldman made detailed representations to investors about its “counterparty qualification process” for vetting loan originators, and told investors and one rating agency that Goldman would engage in ongoing monitoring of loan sellers. Goldman has now acknowledged, however, that it “received certain negative information regarding the originators’ business practices” and that much of this information was not disclosed to investors.
  • For example, Goldman has now acknowledged that in late 2006 it conducted an internal analysis of the underwriting guidelines of Fremont Investment & Loan (an originator), which found many of Fremont’s guidelines to be “off market” or “at the aggressive end of market standards.” Instead of disclosing its view of Fremont’s underwriting, Goldman has acknowledged that it “[u]ndertook a significant marketing effort” to tell investors about what Goldman called Fremont’s “commitment to loan quality over volume” and “significant enhancements to Fremont underwriting guidelines.”  Fremont was shut down by federal regulators within several months of these statements.
  • In another example, Goldman was aware in early-mid 2006 of certain issues with Countrywide Financial Corporation’s origination process, including a pattern of non-responsiveness and inability to provide sufficient staff to handle the numerous loan pools Countrywide was selling. In April 2006, while Goldman was preparing an RMBS backed by Countrywide loans for securitization, a Goldman mortgage department manager circulated a “very bullish” equity research report that recommended the purchase of Countrywide stock. Goldman’s head of due diligence, who had just overseen the due diligence on six Countrywide pools, responded “If they only knew . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .”
  • Meanwhile, as Goldman has acknowledged in this statement of facts, “[Around the end of 2006], Goldman employees observed signs of uncertainty in the residential mortgage market [and] by March 2007, Goldman had largely halted new purchases of subprime loan pools.”

Assistant U.S. Attorneys Colleen Kennedy and Kelli Taylor of the Eastern District of California investigated Goldman’s conduct in connection with RMBS, with the support of the Federal Housing Finance Agency’s Office of the Inspector General (FHFA-OIG) and the Office of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP).

“Goldman Sachs had a fiduciary responsibility to investors, which they blatantly side stepped,” said Deputy Inspector General for Investigation Rene Febles of FHFA-OIG. “They knowingly put investors at risk and in so doing contributed significantly to the financial crisis. The losses caused by this irresponsible behavior deeply affected not only financial institutions but also taxpayers and one can only hope that Goldman Sachs has learned the difference between risk and deceit. Two Federal Home Loan Banks suffered significant losses so we are pleased to see both entities receive a portion of this settlement. We will continue to work with our law enforcement partners to hold those accountable who have engaged in misconduct.”

“Goldman took $10 billion in TARP bailout funds knowing that it had fraudulently misrepresented to investors the quality of residential mortgages bundled into mortgage backed securities,” said Special Inspector General Christy Goldsmith Romero for TARP. “Many of these toxic securities were traded in a taxpayer funded bailout program that was designed to unlock frozen credit markets during the crisis. While crisis investigations take time, SIGTARP is committed to working with our law enforcement partners to protect taxpayers and bring accountability and justice.”

The settlement is part of the ongoing efforts of President Obama’s Financial Fraud Enforcement Task Force’s RMBS Working Group, which has recovered tens of billions of dollars on behalf of American consumers and investors for claims against large financial institutions arising from misconduct related to the financial crisis. The RMBS Working Group brings together attorneys, investigators, analysts and staff from multiple state and federal agencies, including the Department of Justice, U.S. Attorneys’ Offices, the FBI, the U.S. Securities and Exchange Commission (SEC), the Department of Housing and Urban Development (HUD), HUD’s Office of Inspector General, the FHFA-OIG, SIGTARP, the Federal Reserve Board’s OIG, the Recovery Accountability and Transparency Board, the Financial Crimes Enforcement Network and multiple state Attorneys General offices around the country. The RMBS Working Group is led by Director Joshua Wilkenfeld and five co-chairs: Principal Deputy Assistant Attorney General Mizer, Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, Director Andrew Ceresney of the SEC’s Division of Enforcement, U.S. Attorney John Walsh of the District of Colorado and New York Attorney General Eric Schneiderman. This settlement is the fifth multibillion-dollar RMBS settlement announced by the working group.

Here’s a press release from New York Attorney General Eric Schneiderman:

NEW YORK — Attorney General Eric T. Schneiderman today joined members of the state and federal working group he co-chairs to announce a $5 billion settlement with Goldman Sachs over the bank’s deceptive practices leading up to the financial crisis. The settlement includes $670 million—$480 million worth of creditable consumer relief and $190 million in cash—that will be allocated to New York State. The resolution requires Goldman Sachs to provide significant community-level relief to New Yorkers, including resources that will facilitate a significant expansion of the New York State Mortgage Assistance Program enabling distressed homeowners to restructure their debt, as well as first-lien principal forgiveness, and funds to spur the construction of more affordable housing. Additional resources will be dedicated to helping communities transform their code enforcement systems, and invest in land banks and land trusts.

The settlement was negotiated through the Residential Mortgage-Backed Securities Working Group, a joint state and federal working group formed in 2012 to share resources and continue investigating wrongdoing in the mortgage-backed securities market prior to the financial crisis.

New York has now received $5.33 billion in cash and consumer relief from the National Mortgage Settlement (NMS) and all five Residential Mortgage-Backed Securities Working Group settlements (RMBS). The combined $3.2 billion in cash and consumer relief from RMBS settlements is more than any other state.

“Since 2012, my number one priority has been getting New Yorkers the resources they need to rebuild,” Attorney General Schneiderman said. “These dollars will immediately go to work funding proven programs and services to help New Yorkers keep their homes and rebuild their communities. We’ve witnessed the incredible impact these programs and services can have in helping communities recover from the financial crisis. This settlement, like those before it, ensures that these critical programs—such as mortgage assistance, principal forgiveness, and code enforcement—will continue to get funded well into the future, and will be paid for by the institutions responsible for the financial crisis.”

The settlement includes an agreed-upon statement of facts that describes how Goldman Sachs made multiple representations to RMBS investors about the quality of the mortgage loans it securitized and sold to investors, its process for screening out questionable loans, and its process for qualifying loan originators. Contrary to those representations, Goldman Sachs securitized and sold RMBS backed by large numbers of loans from originators whose mortgage loans contained material defects.

In the statement of facts, Goldman Sachs acknowledges that it securitized thousands of Alt-A, and subprime mortgage loans and sold the resulting residential mortgage-backed securities (“RMBS”) to investors for tens of billions of dollars. During the course of its due diligence process, Goldman Sachs received pertinent information indicating that significant percentages of the loans reviewed did not conform to the representations it made to investors. Goldman also received and failed to disclose negative information that it obtained regarding the originators’ business practices. Indeed, Goldman’s due diligence vendors provided Goldman with reports reflecting that the vendors had graded significant numbers and percentages of sampled loans as EV3s, i.e., not in compliance with originator underwriting guidelines. In certain circumstances, Goldman reevaluated loan grades and directed that such loans be waived into the pools to be purchased or securitized.

Even when the percentage of problematic loans in pools sampled by it vendors indicated that the unsampled portions of the pools likely contained additional such loans, Goldman typically did not increase the size of the sample or review the unsampled portions of the pools to identify and eliminate any additional such loans. In many cases, 80 percent or more of the loans in the loan pools Goldman purchased and securitized were not sampled for credit and compliance due diligence. Nevertheless, Goldman approved various offerings for securitization without requiring further due diligence to determine whether the remaining loans in the deal contained defects. A Goldman employee overseeing due diligence for a particular loan pool noted that the pool included loans originated with “[e]xtremely aggressive underwriting” and “large program exceptions made without compensating factors.” Despite this observation, Goldman did not review the remaining portion of the pool, and subsequently securitized thousands of loans from the pool.

Goldman made statements to investors in offering documents and in certain other marketing materials regarding its process for reviewing and approving originators, yet it failed to disclose to investors negative information it obtained about mortgage loan originators and its practice of securitizing loans from suspended originators.

Beginning in mid-2006, Goldman recognized that Fremont, a “key originator, was experiencing an increasing level of early payment defaults (“EPDs”) (i.e., loans for which the borrowers had failed to make one or more of their first payments). Goldman was aware that EPDs were a sign of originators’ bad credit decisions and could be indicators of potential borrower fraud. However, Goldman did not put Fremont on its “no bid” list and continued to purchase loan pools from Fremont during the period Fremont’s EPD claims remained unpaid. Moreover, Goldman “[u]ndertook a significant marketing effort” to tell investors about what Goldman called Fremont’s “commitment to loan quality over volume” and “significant enhancements to Fremont underwriting guidelines.” Likewise, Goldman identified issues with Countrywide’s origination practices. Goldman’s head of due diligence, when presented with a “very bullish” equity report on Countrywide, another large originator, exclaimed “[i]f they only knew  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .”

Attorney General Schneiderman was elected in 2010 and took office in 2011, when the five largest mortgage servicing banks, 49 state attorneys general, and the federal government were on the verge of agreeing to a settlement that would have released the banks—including Bank of America—from liability for virtually all misconduct related to the financial crisis. Attorney General Schneiderman refused to agree to such sweeping immunity for the banks. As a result, Attorney General Schneiderman secured a settlement that preserved a wide range of claims for further investigation and prosecution. In his 2012 State of the Union address, President Obama announced the formation of the RMBS Working Group. The collaboration brought together the Department of Justice (DOJ), other federal entities, and several state law enforcement officials—co-chaired by Attorney General Schneiderman—to investigate those responsible for misconduct contributing to the financial crisis through the pooling and sale of residential mortgage-backed securities.

Under today’s settlement, Goldman Sachs will be required to provide a minimum of $480 million in creditable consumer relief directly to struggling families and communities across the state. The settlement includes a menu of options for consumer relief to be provided, and different categories of relief are credited at different rates toward the bank’s $480 million obligation, including at least:

  • $220 million for debt restructuring
  • $30 million for land banks and land trusts
  • $30 million for code enforcement
  • $150 million for first-lien principal reduction
  • $50 million for the creation and preservation of affordable rental housing

In addition to the settlement with Goldman Sachs, the RMBS working group has reached settlements with four other major financial institutions since 2012:

  • J.P. Morgan Chase: $13 Billion
  • Bank of America: $16.6 Billion
  • Citibank: $7 Billion
  • Morgan Stanley: $3.2 Billion

The National Mortgage Settlement (NMS), reached with the five largest national mortgage servicers, has provided $51 billion in consumer relief and cash nationwide. The combined amount of cash and consumer relief that has been returned to New York as a result of all the RMBS and NMS deals is $1.481 billion in cash and $3.857 in consumer relief, for a total of $5.338 billion. This matter was led by Senior Enforcement Counsel for Economic Justice Steven Glassman and Assistant Attorneys General Desiree Cummings and Kenneth Haim, both of the Investor Protection Bureau.

 

Remember 2013 JP Morgan Settlement

Department of Justice
Office of Public Affairs
FOR IMMEDIATE RELEASE
Tuesday, November 19, 2013
Justice Department, Federal and State Partners Secure Record $13 Billion Global Settlement with JPMorgan for Misleading Investors About Securities Containing Toxic Mortgages
 

*CORRECTION: The release below previously stated that New York is receiving $613.8 million in this settlement, however, the number is $613.0 million. This correction notice was posted on Nov. 20, 2013.*

The Justice Department, along with federal and state partners, today announced a $13 billion settlement with JPMorgan – the largest settlement with a single entity in American history – to resolve federal and state civil claims arising out of the packaging, marketing, sale and issuance of residential mortgage-backed securities (RMBS) by JPMorgan, Bear Stearns and Washington Mutual prior to Jan. 1, 2009.  As part of the settlement, JPMorgan acknowledged it made serious misrepresentations to the public – including the investing public – about numerous RMBS transactions.  The resolution also requires JPMorgan to provide much needed relief to underwater homeowners and potential homebuyers, including those in distressed areas of the country.  The settlement does not absolve JPMorgan or its employees from facing any possible criminal charges.

This settlement is part of the ongoing efforts of President Obama’s Financial Fraud Enforcement Task Force’s RMBS Working Group. 

“Without a doubt, the conduct uncovered in this investigation helped sow the seeds of the mortgage meltdown,” said Attorney General Eric Holder.  “JPMorgan was not the only financial institution during this period to knowingly bundle toxic loans and sell them to unsuspecting investors, but that is no excuse for the firm’s behavior.  The size and scope of this resolution should send a clear signal that the Justice Department’s financial fraud investigations are far from over.  No firm, no matter how profitable, is above the law, and the passage of time is no shield from accountability.  I want to personally thank the RMBS Working Group for its tireless work not only in this case, but also in the investigations that remain ongoing.”

The settlement includes a statement of facts, in which JPMorgan acknowledges that it regularly represented to RMBS investors that the mortgage loans in various securities complied with underwriting guidelines.  Contrary to those representations, as the statement of facts explains, on a number of different occasions, JPMorgan employees knew that the loans in question did not comply with those guidelines and were not otherwise appropriate for securitization, but they allowed the loans to be securitized – and those securities to be sold – without disclosing this information to investors.  This conduct, along with similar conduct by other banks that bundled toxic loans into securities and misled investors who purchased those securities, contributed to the financial crisis.
                                    
“Through this $13 billion resolution, we are demanding accountability and requiring remediation from those who helped create a financial storm that devastated millions of Americans,” said Associate Attorney General Tony West.  “The conduct JPMorgan has acknowledged – packaging risky home loans into securities, then selling them without disclosing their low quality to investors – contributed to the wreckage of the financial crisis.  By requiring JPMorgan both to pay the largest FIRREA penalty in history and provide needed consumer relief to areas hardest hit by the financial crisis, we rectify some of that harm today.”

Of the record-breaking $13 billion resolution, $9 billion will be paid to settle federal and state civil claims by various entities related to RMBS.  Of that $9 billion, JPMorgan will pay $2 billion as a civil penalty to settle the Justice Department claims under the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA), $1.4 billion to settle federal and state securities claims by the National Credit Union Administration (NCUA), $515.4 million to settle federal and state securities claims by the Federal Deposit Insurance Corporation (FDIC), $4 billion to settle federal and state claims by the Federal Housing Finance Agency (FHFA), $298.9 million to settle claims by the State of California, $19.7 million to settle claims by the State of Delaware, $100 million to settle claims by the State of Illinois, $34.4 million to settle claims by the Commonwealth of Massachusetts, and $613 million to settle claims by the State of New York. 

JPMorgan will pay out the remaining $4 billion in the form of relief to aid consumers harmed by the unlawful conduct of JPMorgan, Bear Stearns and Washington Mutual.  That relief will take various forms, including principal forgiveness, loan modification, targeted originations and efforts to reduce blight.  An independent monitor will be appointed to determine whether JPMorgan is satisfying its obligations.  If JPMorgan fails to live up to its agreement by Dec. 31, 2017, it must pay liquidated damages in the amount of the shortfall to NeighborWorks America, a non-profit organization and leader in providing affordable housing and facilitating community development. 

The U.S. Attorney’s Offices for the Eastern District of California and Eastern District of Pennsylvania and the Justice Department’s Civil Division, along with the U.S. Attorney’s Office for the Northern District of Texas, conducted investigations into JPMorgan’s, Washington Mutual’s and Bear Stearns’ practices related to the sale and issuance of RMBS between 2005 and 2008.

“Today’s global settlement underscores the power of FIRREA and other civil enforcement tools for combatting financial fraud,” said Assistant Attorney General for the Civil Division Stuart F. Delery, co-chair of the RMBS Working Group.  “The Civil Division, working with the U.S. Attorney’s Offices and our state and agency partners, will continue to use every available resource to aggressively pursue those responsible for the financial crisis.”

“Abuses in the mortgage-backed securities industry helped turn a crisis in the housing market into an international financial crisis,” said U.S. Attorney for the Eastern District of California Benjamin Wagner.  “The impacts were staggering.  JPMorgan sold securities knowing that many of the loans backing those certificates were toxic.  Credit unions, banks and other investor victims across the country, including many in the Eastern District of California, continue to struggle with losses they suffered as a result.  In the Eastern District of California, we have worked hard to prosecute fraud in the mortgage industry.  We are equally committed to holding accountable those in the securities industry who profited through the sale of defective mortgages.”
                                
“Today’s settlement represents another significant step towards holding accountable those banks which exploited the residential mortgage-backed securities market and harmed numerous individuals and entities in the process,” said U.S. Attorney for the Eastern District of Pennsylvania Zane David Memeger.  “These banks packaged and sold toxic mortgage-backed securities, which violated the law and contributed to the financial crisis.  It is particularly important that JPMorgan, after assuming the significant assets of Washington Mutual Bank, is now also held responsible for the unscrupulous and deceptive conduct of Washington Mutual, one of the biggest players in the mortgage-backed securities market.”

This settlement resolves only civil claims arising out of the RMBS packaged, marketed, sold and issued by JPMorgan, Bear Stearns and Washington Mutual.  The agreement does not release individuals from civil charges, nor does it release JPMorgan or any individuals from potential criminal prosecution. In addition, as part of the settlement, JPMorgan has pledged to fully cooperate in investigations related to the conduct covered by the agreement.

To keep JPMorgan from seeking reimbursement from the federal government for any money it pays pursuant to this resolution, the Justice Department required language in the settlement agreement which prohibits JPMorgan from demanding indemnification from the FDIC, both in its capacity as a corporate entity and as the receiver for Washington Mutual.   

“The settlement announced today will provide a significant recovery for six FDIC receiverships.  It also fully protects the FDIC from indemnification claims out of this settlement,” said FDIC Chairman Martin J. Gruenberg.  “The FDIC will continue to pursue litigation where necessary in order to recover as much as possible for FDIC receiverships, money that is ultimately returned to the Deposit Insurance Fund, uninsured depositors and creditors of failed banks.”

“NCUA’s Board extends our thanks and appreciation to our attorneys and to the Department of Justice, who have worked closely together for more than three years to bring this matter to a successful resolution,” said NCUA Board Chairman Debbie Matz.  “The faulty mortgage-backed securities created and packaged by JPMorgan and other institutions created a crisis in the credit union industry, and we’re pleased a measure of accountability has been reached.”

“JPMorgan and the banks it bought securitized billions of dollars of defective mortgages,” said Acting FHFA Inspector General Michael P. Stephens.  “Investors, including Fannie Mae and Freddie Mac, suffered enormous losses by purchasing RMBS from JPMorgan, Washington Mutual and Bear Stearns not knowing about those defects.  Today’s settlement is a significant, but by no means final step by FHFA-OIG and its law enforcement partners to hold accountable those who committed  acts of fraud and deceit.  We are proud to have worked with the Department of Justice, the U.S. attorneys in Sacramento and Philadelphia and the New York and California state attorneys general; they have been great partners and we look forward to our continued work together.”

The attorneys general of New York, California, Delaware, Illinois and Massachusetts also conducted related investigations that were critical to bringing about this settlement.

“Since my first day in office, I have insisted that there must be accountability for the misconduct that led to the crash of the housing market and the collapse of the American economy,” said New York Attorney General Eric Schneiderman, Co-Chair of the RMBS Working Group.  “This historic deal, which will bring long overdue relief to homeowners around the country and across New York, is exactly what our working group was created to do.  We refused to allow systemic frauds that harmed so many New York homeowners and investors to simply be forgotten, and as a result we’ve won a major victory today in the fight to hold those who caused the financial crisis accountable.”

“JP Morgan Chase profited by giving California’s pension funds incomplete information about mortgage investments,” California Attorney General Kamala D. Harris said. “This settlement returns the money to California’s pension funds that JP Morgan wrongfully took from them.”

“Our financial system only works when everyone plays by the rules,” said Delaware Attorney General Beau Biden.  “Today, as a result of our coordinated investigations, we are holding accountable one of the financial institutions that, by breaking those rules, helped cause the economic crisis that brought our nation to its knees.  Even as the American people recover from this crisis, we will continue to seek accountability on their behalf.”

“We are still cleaning up the mess that Wall Street made with its reckless investment schemes and fraudulent conduct,” said Illinois Attorney General Lisa Madigan.  “Today’s settlement with JPMorgan will assist Illinois in recovering its losses from the dangerous and deceptive securities that put our economy on the path to destruction.”

“This is a historic settlement that will help us to hold accountable those investment banks that played a role in creating and exacerbating the housing crisis,” said Massachusetts Attorney General Martha Coakley.  “We appreciate the work of the Department of Justice and the other enforcement agencies in bringing about this resolution and look forward to continuing to work together in other securitization cases.”

The RMBS Working Group is a federal and state law enforcement effort focused on investigating fraud and abuse in the RMBS market that helped lead to the 2008 financial crisis.  The RMBS Working Group brings together more than 200 attorneys, investigators, analysts and staff from dozens of state and federal agencies including the Department of Justice, 10 U.S. attorney’s offices, the FBI, the Securities and Exchange Commission (SEC), the Department of Housing and Urban Development (HUD), HUD’s Office of Inspector General, the FHFA-OIG, the Office of the Special Inspector General for the Troubled Asset Relief Program, the Federal Reserve Board’s Office of Inspector General, the Recovery Accountability and Transparency Board, the Financial Crimes Enforcement Network, and more than 10 state attorneys general offices around the country.

The RMBS Working Group is led by five co-chairs: Assistant Attorney General for the Civil Division Stuart Delery, Acting Assistant Attorney General for the Criminal Division Mythili Raman, Co-Director of the SEC’s Division of Enforcement George Canellos, U.S. Attorney for the District of Colorado John Walsh and New York Attorney General Eric Schneiderman.

Learn more about the RMBS Working Group and the Financial Fraud Enforcement Task Force at: http://www.stopfraud.gov. 

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