Settlement talks have been taking place for awhile between five (5) huge Mortgage Servicers and most if not all of the fifty (50) State Attorneys General and the Obama Justice Department. The talks started about the issues of "robosigning" and other issues of Fraud strictly arising from Mortgage Servicers' alleged conduct in Foreclosures. October 27, 2011 post on Insurance Claims and Bad Faith Law Blog.
The five huge Mortgage Servicers participating in the settlement talks are:
- Bank of America;
- JPMorgan Chase;
- Wells Fargo;
- Citigroup; and
- Ally Financial.*
*Ally Financial's "mortgage unit" is now the Employer of escapees from the executive ranks of Bear Stearns' mortgage-backed securities department and the Bear Stearns due diligence section. The two individuals and Bear Stearns, and JPMorgan Chase, are all defendants in a civil case filed by private investors who claim that the Bear Stearns' residential mortgage-backed securitization caused them damage. Gretchen Morgenson, "Fair Game / It Has a Fancy Name, But Will It Get Tough?" p.1, col. 1 (New York Times Nat'l ed., "SundayBusiness" Section, Sunday, January 29, 2012).
All five of them are also Banks.
The Mortgage Servicers' (and Banks') settlement talks expanded to discuss settlement which the Banks wanted very much, and still want dearly. Settlement would now include all their exposure from Residential Mortgage-Backed Fraud, and not just their exposure as Mortgage Servicers. In other words, any settlement would have to include accommodating the Banks' insistence that their as yet unknown liability be capped for their activities in selling Mortgages to Homeowners-Mortgagors in the first place.
The Obama Administration reportedly tried to pressure the State Attorneys General into accepting the Banks' terms for settlement. HUD Secretary SHAUN DONOVAN reportedly was in charge of the attempts at applying the pressure. January 25, 2012 post, Insurance Coverage Claims and Issues Weblog. "The housing secretary, Shaun Donovan, met on Monday [January 23, 2012] in Chicago with Democratic attorneys general to iron out the remaining details and to persuade holdouts to agree with any eventual deal. He later held a conference call with Republican attorneys general." Nelson D. Schwartz and Shaila Dewan, "Political Push Moves a Deal On Mortgages Inches Closer" p. B1, col. 5 (New York Times Nat'l ed., Tuesday, January 24, 2012).
Previously, at least one State's (California's) Attorney General had walked out on the settlement talks, and others did not actively participate in expanding them or "voiced unhappiness" with the talks. There were reportedly eight (8) State Attorneys General in this group, from:
- California;
- Delaware;
- Illinois;
- Kentucky;
- Massachusetts;
- Minnesota;
- Nevada; and
- New York.
E.g., January 9, 2012 post on Insurance Claims and Issues Weblog; October 27, 2011 post on Insurance Claims Bad Faith Law Blog.
The SEC and the DOJ File Lawsuits in the Interim, With the Effect if Not the Purpose of Forcing the Banks to Settle on the Banks' Terms.
While the Mortgage Fraud settlement talks have been going on, the Securities and Exchange Commission and the Department of Justice have filed several actions against Banks, accusing them of Fraud which contributed to the Residential Mortgage-Backed Securitization Fiasco. "Their record in these pursuits has been disappointing so far." Gretchen Morgenson, New York Times, supra. They have filed criminal and civil actions which have resulted mostly in settlements without convictions. See, e.g., October 25, 2011 post on Insurance Claims and Bad Faith Law Blog.
The SEC's Record on Settlements.
The SEC even says that it thinks that settlements bring as much money as Judgments for Damages. "'Put Your Hands Up Or We'll ... SETTLE!' Not Hardly Pilgrim", December 19, 2011 post on Insurance Claims and Issues Web Log; December 18, 2011 post on Insurance Claims and Bad Faith Law Blog.
The SEC does not mention very often, if ever, that its settlements with the defendant Banks are paid by shareholders and not by the perps. See Gretchen Morgenson, New York Times, supra.
The SEC's and DOJ's Record, Together, in Civil Enforcement Actions.
Recoveries are vastly greater in PRIVATE civil enforcement actions than in any civil enforcement actions filed either by the SEC or the DOJ -- or by any other agency of the current Federal Government. December 18, 2011 post, Insurance Claims and Bad Faith Law Blog.
The DOJ established a Task Force. Only the DOJ, And Not the SEC, Can File Criminal Prosecutions Over Mortgage Fraud. No CRIMINAL proceedings Have EVER Been Filed By DOJ As a Result of Residential Mortgage-Backed Securitization Fraud.
The Department of Justice established a Financial Fraud Enforcement Task Force a couple of years ago. Its Chair is Attorney General Eric Holder. www.stopfraud.gov.
There is no record of any DOJ criminal prosecution over Mortgage Fraud Foreclosures, or over Mortgage-Backed Securitization, for that matter.
Where Does That Put the New RMBS Working Group?
The new RMBS Working Group has been put under the Financial Fraud Enforcement Task Force.
This post is a first. It is the first part of a post which continues from Insurance Claims and Issues Blog, to Insurance Bad Faith Law Blog, and for the first time....
Please Read The Disclaimer.
Comments