The Resolution Law Group: JPMorgan Said to Reach Record $13 Billion U.S. Settlement

JPMorgan Chase & Co.’s record $13 billion deal to end U.S. probes of its mortgage-bond sales would free the nation’s largest bank from mounting civil disputes with the government while leaving a criminal inquiry unresolved.

The tentative pact with the Department of Justice increased from an $11 billion proposal last month and would mark the largest amount paid by a financial firm in a settlement with the U.S. The deal wouldn’t release the bank from potential criminal liability, at the insistence of U.S. Attorney General Eric Holder, according to terms described by a person familiar with the talks, who asked not to be named because they were private.

“To not get the waiver from criminal prosecution is not good,” said Nancy Bush, a bank analyst who founded NAB Research LLC in New Jersey. “What we’re looking for in a settlement of this size is certainty from things like the criminal prosecution of a company. The Street wants certainty.”

JPMorgan Chief Executive Officer Jamie Dimon, 57, personally discussed the deal with Holder after markets closed Oct. 18 as the banker sought to end probes that have beset his firm and resulted in its first quarterly loss under his watch. The agreement, which isn’t yet final, includes $4 billion in relief for unspecified consumers and $9 billion in payments and fines, according to another person briefed on the terms.

The payouts would cover a $4 billion accord with the Federal Housing Finance Agency over the bank’s sale of mortgage-backed securities, that person said. The deal, which may be announced in the coming week, also resolves pending inquiries by New York Attorney General Eric Schneiderman, the people said.

Dwarfing Pay

The settlement would amount to more than half of JPMorgan’s record $21.3 billion profit last year, or 1.5 times what the firm’s corporate and investment bank set aside to pay employees during this year’s first nine months. Only seven companies in the Dow Jones Industrial Average earned more than $13 billion in 2012, according to data compiled by Bloomberg. Some portions of the deal, such as relief to homeowners, would probably be tax deductible for JPMorgan.

The outline of the tentative accord was reached during a telephone call between Holder, Dimon, JPMorgan General Counsel Stephen Cutler and Associate U.S. Attorney General Tony West, said the person. The settlement’s statement of facts is still being negotiated.

Bondholder Concerns

Holder told Dimon that a release from the criminal inquiry wouldn’t be forthcoming as part of any deal, said the person familiar with their talks. The accord will probably require JPMorgan to cooperate in criminal investigations of individuals tied to wrongdoing associated with the bank’s mortgage practices, said the person.

Brian Fallon, a spokesman for the Justice Department, and Matt Mittenthal, a spokesman for Schneiderman, declined to comment.

The possible inclusion of homeowner relief has revived concerns among mortgage-bond investors that efforts to ease the financial burdens of millions of Americans may lower the value of instruments held by Wall Street money managers.

The Association of Mortgage Investors, representing mutual funds and pensions, urged Holder in an Oct. 7 letter not to let banks saddle them with costs associated with relief for mortgage borrowers. Banks settling claims of underwriting lapses often service debts in bonds held by others, who can wind up bearing the burden of breaks granted to homeowners.

Talks Intensify

JPMorgan’s push to settle the mortgage probes and other cases required a $7.2 billion charge in the third quarter, causing the bank to report a $380 million loss on Oct. 11. The firm has tapped $8 billion of $28 billion in reserves set aside since 2010 to cover its legal expenses.

Those costs follow three years of record profits that have driven the stock higher. JPMorgan’s shares have climbed 72 percent since the end of 2008, compared with a 48 percent gain in the KBW Bank Index of 24 U.S. firms. On the day the firm reported its quarterly loss, the stock closed little changed. It has since climbed 3.4 percent.

“It looks like they are gradually becoming able to put the past and the crisis behind them,” said Craig Pirrong, professor of finance at the University of Houston’s Bauer College of Business whose research includes risk management. “It’s an expensive history lesson, and they are not out of the woods yet.”

JPMorgan’s push to end the mortgage probes intensified last month after the U.S. Attorney’s office in Sacramento, California, told the bank it was preparing to bring a case. Authorities there already had concluded there were civil violations and opened a criminal probe, JPMorgan said in an August regulatory filing.

Government’s Stance

Dimon spent two hours at the Justice Department in Washington on Sept. 26 to discuss a possible settlement of state and federal probes with Holder, a person familiar with the matter said at the time. During the bank’s talks with senior Justice Department officials, proposals swung by billions of dollars, people with knowledge of the situation said. At one point, officials rejected the company’s offer to pay $3 billion to $4 billion, one person said at the time.

“It almost sounds like a negotiation where the government just kept saying, ‘No. No. No,’ until JPMorgan met their number,” said Peter Henning, a former federal prosecutor and Securities and Exchange Commission attorney who teaches law at Wayne State University in Detroit.

Others involved in the talks of a global deal included the Department of Housing and Urban Development and Schneiderman, who is co-chairman of a federal and state working group on residential mortgage-backed securities, which negotiated the civil-mortgage settlement with JPMorgan.

False Statements

The FHFA sued JPMorgan and 17 other banks over faulty mortgage bonds two years ago to recoup some of the losses taxpayers were forced to cover when the government took control of failing mortgage finance companies in 2008.

The FHFA accused JPMorgan and its affiliates of making false statements and omitting material facts in selling $33 billion in mortgage bonds to Fannie Mae and Freddie Mac from Sept. 7, 2005, through Sept. 19, 2007. Those two firms, regulated by FHFA, have taken $187.5 billion in federal aid since then.

The regulator said executives at JPMorgan, Washington Mutual and Bear Stearns Cos., which were acquired by JPMorgan in 2008, knowingly misrepresented the quality of the loans underlying the bonds, according to the lawsuit filed in federal court in Manhattan.

Dimon said in a speech last year that he did the U.S. a favor by buying Bear Stearns and that he might not go through with it again because of how much the deal ultimately cost.

Settlement ‘Chagrin’

“The settlement probably comes with a sense of chagrin at JPMorgan,” said Joseph Grundfest, a former SEC commissioner who’s now a professor of business and law at Stanford University Law School. “Many of the problematic transactions were done by banks that JPMorgan acquired during the financial crisis at the behest of the U.S. government — not by JPMorgan itself.”

UBS AG, Switzerland’s largest bank, agreed to pay $885 million last month to settle claims it misrepresented the quality of the loans backing $4.5 billion in residential mortgage bonds it sponsored and $1.8 billion of third-party mortgage bonds sold to Fannie Mae and Freddie Mac. UBS was the third bank to reach an agreement with FHFA.

Citigroup Inc. and General Electric Co. both paid undisclosed amounts to settle the regulator’s claims.

Probes Pending

JPMorgan has paid more than $1 billion to five different regulators in the past month to settle probes into botched derivatives trades that lost more than $6.2 billion in 2012. It also settled unrelated claims it unfairly charged customers for credit-monitoring products.

The bank faces an investigation into its hiring practices in Asia. It’s also the subject of a probe by Manhattan U.S. Attorney Preet Bharara into claims it abetted Bernard Madoff’s Ponzi scheme, a person familiar with that matter said.

The six biggest U.S. banks, led by JPMorgan and Charlotte, North Carolina-based Bank of America Corp., have piled up more than $100 billion in legal costs since the financial crisis, a figure that exceeds all of the dividends paid to shareholders in the past five years, Bloomberg data show.

The Obama administration set up the residential mortgage-backed securities working group in 2012 to coordinate a crackdown on deceptive underwriting practices that contributed to the financial crisis.

Schneiderman’s Claims

Schneiderman’s office sued JPMorgan last October over mortgage-bonds packaged by Bear Stearns.

Schneiderman alleged Bear Stearns misled mortgage-bond investors about defective loans backing the securities. The firm failed to fully evaluate the debt, ignored defects uncovered by a limited review and hid that it failed to adequately scrutinize the loans or disclose their risks, according to the complaint.

At the time it was filed, the cumulative realized losses on more than 100 subprime and Alt-A securities that the bank and its affiliates sponsored and underwrote in 2006 and 2007 totaled about $22.5 billion, or about 26 percent of the original balance of about $87 billion, according to the complaint. Alt-A is a term for mortgages that typically didn’t require documentation such as proof of income.

Schneiderman’s office asserted claims under New York’s Martin Act, an almost century-old law that gives the state’s attorney general broad powers to target financial fraud. The bank denied the claims in the case, which is pending in state Supreme Court in Manhattan.

‘Self-Inflicted’

The FHFA alleged in its 2011 lawsuit that the bank misled Fannie Mae and Freddie Mac about the soundness of loans in billions of dollars of residential mortgage-backed securities. The bank didn’t disclose that a significant portion of the loans failed to adhere to underwriting standards and had poor credit quality, according to the complaint.

The number of loans for owner-occupied properties was lower than investors were told, and the bank’s disclosures misrepresented the properties’ value, according to the complaint.

JPMorgan’s rising legal and regulatory penalties don’t mean the company’s bankers are “immoral,” Dimon told an audience Oct. 12 at a meeting hosted by Institute of International Finance, where he acknowledged the bank was working through a series of problems.

“Some are self-inflicted, which we’ve completely confessed to the whole world. Some are obviously industrywide,” he said. “And yes, we’ve had some mistakes. But honestly, you can never expect to have no mistakes. So, we’ve had more than our share.”

The case is Federal Housing Finance Agency v. JPMorgan Chase & Co., 11-06188, U.S. District Court Southern District of New York (Manhattan).

 

If you feel you are the victim of Mortgage Fraud, please do not hesitate to email or call the The Resolution Law Group (203) 542-7275 for a confidential, no obligation consultation.

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The Resolution Law Group: New California Appellate case published on August 8, 2013, “Glaski v. Bank of America”, holds that a homeowner can challenge his lender’s right to foreclose by showing that the Deed of Trust never made it into the securitized trust until after the trust’s closing date.

A new California Appellate case published on August 8, 2013, “Glaski v. Bank of America”, holds that a homeowner can challenge his lender’s right to foreclose by showing that the Deed of Trust never made it into the securitized trust until after the trust’s closing date. This is the case in most loans made in the last 12 years. If the bank foreclosed we should be able to get the homeowner money damages and/or the house back. Or a lawsuit could be filed and a court ruling obtained preventing the court from foreclosing.Recently enacted Sections 2924(a)(6) and 2924.19 of California Civil Code provide the same relief to homeowners.

It is highly suggested that homeowners take this window of opportunity to get relief before the banks get Congress to close this door with national legislation.  If you feel you are the victim of Mortgage Fraud, please do not hesitate to email or call the The Resolution Law Group (203) 542-7275 for a confidential, no obligation consultation.

 

The Resolution Law Group: JP Morgan Chase admitted that it broke the law in the “London Whale” trading debacle. While it is commonplace for banks to settle cases and pay money, it is uncommon for a Wall Street Bank to admit guilt.

JP Morgan Chase admitted that it broke the law in the “London Whale” trading debacle. While it is commonplace for banks to settle cases and pay money, it is uncommon for a Wall Street Bank to admit guilt.

The “Whale” losses stemmed from wrong-way bets made by JP Morgan’s London office involving complex derivatives. JP Morgan Chase agreed to pay $920 Million in addition to admitting guilt.

Geoffrey Broderick, the senior partner of the Resolution Law Group, says “While the admission of guilt is unprecedented, it is also appropriate. However, the admission was done at the corporate level. The behavior and culture on Wall Street must change, and that will only happen when CEOs and other senior executives are personally charged and held responsible.“

Mr. Broderick adds that “The housing market will continue to suffer until it is fixed by the Courts or the Legislature. Somebody has to fix the problem. That is why The Resolution Law Group continues its fight for homeowners. Homeowners cannot expect the problem to fix itself.”

The Resolution Law Group continues to prosecute ground breaking litigation in Federal Court on behalf of homeowners suing lenders and servicers for, among other things, the illegal use of MERS, robo-signing, and intentionally ignoring underwriting standards and encouraging inflated appraisals.

The Resolution Law Group is currently enrolling clients into the pending lawsuit. For further information, visit its website at www.TheResolutionLawGroup.com.

The Resolution Law Group: It has been a very good week for AIG in California litigation. AIG prevailed in the publicized Michael Jackson trial. Less publicized, but probably more valuable to AIG is the recent ruling by a Federal Judge in the central district of California.

It has been a very good week for AIG in California litigation. AIG prevailed in the publicized Michael Jackson trial. Less publicized, but probably more valuable to AIG is the recent ruling by a Federal Judge in the central district of California.

AIG previously sued Bank of America over fraudulent mortgage securities. Bank of America argued that AIG had no standing to sue because it had transferred that right when it sold the instruments to the federal Reserve Bank of New York in 2008.

Geoffrey Broderick, the senior partner of the Resolution Law Group, says “Judge Pfaelzer’s finding that AIG has standing to sue Bank of America may also be bad news for other banks that sold troubled mortgage securities to the insurer. AIG has not yet sued other institutions, but we know from public records that AIG suffered at least $11 Billion in losses involving other banks.”

Mr. Broderick adds that “The housing market will continue to suffer until it is fixed by the Courts or the Legislature. Somebody has to fix the problem. That is why The Resolution Law Group continues its fight for homeowners. Homeowners cannot expect the problem to fix itself.”

The Resolution Law Group continues to prosecute ground breaking litigation in Federal Court on behalf of homeowners suing lenders and servicers for, among other things, the illegal use of MERS, robo-signing, and intentionally ignoring underwriting standards and encouraging inflated appraisals.

The Resolution Law Group is currently enrolling clients into the pending lawsuit. For further information, visit its website at www.TheResolutionLawGroup.com

The Resolution Law Group: A Bankruptcy Court in Wisconsin has invalidated a bank’s security interest and treated the mortgage loan as an unsecured debt.

A Bankruptcy Court in Wisconsin has invalidated a bank’s security interest and treated the mortgage loan as an unsecured debt. While this is not unique, the Court’s published opinion has garnered some attention.

In re Couillard, starts, as follows: “Whether one is baking a cake, building a house, or recording a mortgage, sometimes even the slightest deviation from the directions can lead to catastrophe. Cakes don’t rise, buildings fall down, and … mortgages aren’t perfected.”

Under applicable Wisconsin state law, a conveyance that is not recorded is generally void as against a subsequent purchaser who records first. In Couillard, since the recorded mortgage was not in the chain of title, the Court concluded that it was not properly recorded.

Geoffrey Broderick, the senior partner of the Resolution Law Group, says “This isn’t rocket science. Banks need to take all required steps in order to perfect security interests, or they will be unsecured.”

Mr. Broderick adds that “It is refreshing to see a Judge holding the banks to do what is required. That doesn’t happen in every instance. The housing market will continue to suffer until it is fixed by the Courts or the Legislature. Somebody has to fix the problem. That is why The Resolution Law Group continues its fight for homeowners. Homeowners cannot expect the problem to fix itself.”

The Resolution Law Group continues to prosecute ground breaking litigation in Federal Court on behalf of homeowners suing lenders and servicers for, among other things, the illegal use of MERS, robo-signing, and intentionally ignoring underwriting standards and encouraging inflated appraisals.

The Resolution Law Group is currently enrolling clients into the pending lawsuit. For further information, visit its website at www.TheResolutionLawGroup.com

The Resolution Law Group: Darryl Woods, the Chairman of Mainstreet Bank in Ashland, Missouri, pleaded guilty to charges that he used the TARP bailout money given to his bank in 2008 to buy an oceanfront condo in Florida, rather than use the money for its intended purposes.

Darryl Woods, the Chairman of Mainstreet Bank in Ashland, Missouri, pleaded guilty to charges that he used the TARP bailout money given to his bank in 2008 to buy an oceanfront condo in Florida, rather than use the money for its intended purposes.

Mainstreet bank applied for and received just over One Million Dollars in TARP funds. Woods took over $380,000 and used that money to buy his luxury condo.

Geoffrey Broderick, the senior partner of the Resolution Law Group, says “At a time when many Americans were losing their homes, and the Government made money available for the specific purpose of assisting the homeowners, Mr. Woods’ actions are reprehensible. For a Bank Chairman to siphon off public funds to pay for an oceanfront condo is shameful“

Mr. Broderick adds that “The housing market will continue to suffer until it is fixed by the Courts or the Legislature. Somebody has to fix the problem. That is why The Resolution Law Group continues its fight for homeowners. Homeowners cannot expect the problem to fix itself.”

The Resolution Law Group continues to prosecute ground breaking litigation in Federal Court on behalf of homeowners suing lenders and servicers for, among other things, the illegal use of MERS, robo-signing, and intentionally ignoring underwriting standards and encouraging inflated appraisals.

The Resolution Law Group is currently enrolling clients into the pending lawsuit. For further information, visit its website at www.TheResolutionLawGroup.com

The Resolution Law Group: In a trial now pending in the U.S. District Court, Southern District of New York (Manhattan), The Government is suing Bank of America’s Countrywide unit for issuing defective mortgages and then selling them to Fannie Mae.

In a trial now pending in the U.S. District Court, Southern District of New York (Manhattan), The Government is suing Bank of America’s Countrywide unit for issuing defective mortgages and then selling them to Fannie Mae.

An ex-Countrywide employee has testified that pursuant to the company’s “High Speed Swim Lane” program, loan applications were pushed through without taking the time to evaluate the application. Evidence was presented at trial showing that the entire review process for one loan was 13 minutes, from beginning to end. The review process began at 3:53 pm and the loan was “cleared to close” at 4:06pm!

Geoffrey Broderick, the senior partner of the Resolution Law Group, says “Obviously, the review process must take more than 13 minutes to complete. A bank employee would have to review, at a minimum, title searches, deeds, taxes, a review of the applicant’s credit and employment history, a determination of whether the home was located in a flood zone, property appraisals, and a comparison with similar properties, among other things.“

Mr. Broderick adds that “The housing market will continue to suffer until it is fixed by the Courts or the Legislature. Somebody has to fix the problem. That is why The Resolution Law Group continues its fight for homeowners. Homeowners cannot expect the problem to fix itself.”

The Resolution Law Group continues to prosecute ground breaking litigation in Federal Court on behalf of homeowners suing lenders and servicers for, among other things, the illegal use of MERS, robo-signing, and intentionally ignoring underwriting standards and encouraging inflated appraisals.

The Resolution Law Group is currently enrolling clients into the pending lawsuit. For further information, visit its website at www.TheResolutionLawGroup.com.