Everyone knew that the foreclosure fraud crisis was going to spawn a festival of lawsuits, and now it looks like it is already beginning. The New York Federal Reserve Bank is part of a consortium of eight large institutional investment firms that has launched an effort to force Bank of America to repurchase $47 billion worth of mortgages packaged into bonds by its Countrywide Financial unit. It turns out that most mortgage bond contracts explicitly require the repurchase of loans when the quality of the loans falls short of promises made by the sellers. As most of us know by now, many of these mortgages that were packaged together into "AAA rated" securities were actually a bunch of junk. But this is just the beginning. There are going to be hordes of lawsuits stemming from this crisis and it is going to take years and years for this thing to work through the legal system.
All of the big players in the U.S. mortgage industry are going to be paralyzed for an extended period of time by this crisis, and that means that buying a home and achieving the American Dream is going to become a lot harder for millions of Americans. Not only that, if mortgage lending institutions end up being forced to take back gigantic mountains of bad mortgages it could end up sinking a whole lot of them. The implications for the U.S. financial system would be staggering.
Pacific Investment Management Co., BlackRock Inc. and the Federal Reserve Bank of New York are seeking to force Bank of America Corp. to repurchase soured mortgages packaged into $47 billion of bonds by its Countrywide Financial Corp. unit, people familiar with the matter said.
A group of bondholders wrote a letter to Bank of America and Bank of New York Mellon Corp., the debt’s trustee, citing alleged failures by Countrywide to service loans properly, their lawyer said yesterday in a statement that didn’t name the firms. The New York Fed acquired mortgage debt through its 2008 rescues of Bear Stearns Cos. and American International Group Inc.
Investors are stepping up efforts to recoup losses on mortgage bonds, which plummeted in value amid the worst slump in home prices since the 1930s. Last month, BNY Mellon declined to investigate mortgage files in response to a demand from the bondholder group, which has since expanded. Countrywide’s servicing failures, including insufficient record keeping, may open the door for investors to seek repurchases by bypassing the trustee, said Kathy Patrick, their lawyer at Gibbs & Bruns LLP.
Patrick represents investors who own at least 25 percent of so-called voting rights in the deals and stand to recover “many billions of dollars,” Patrick said.
Countrywide hasn’t met its contractual obligations as a servicer also because it hasn’t asked for loan repurchases and is taking too long with foreclosures, Patrick said. The delays stem from missing documents, process mistakes and insufficient staffing to evaluate borrowers for loan modifications, she said.
If Countrywide doesn’t correct the servicing problems within a few months, her clients could have the right to pursue legal action against Bank of America, Bank of New York or both, she said. “None of the bondholders are opposed to modifications for deserving borrowers, but you’ve got to get it done” in a timely fashion, she added.
Mortgage-bond contracts are explicit in requiring repurchases of loans when their
So let me make sure I have this right because Lord knows I’ve been drinking more than usual lately. Feinberg spent months putting together this report only to discover 17 firms had paid out $1.8 billion in questionable bonuses but then comes out and says he’s not going to do anything about it.
U.S. "pay czar" Kenneth Feinberg on Friday declined to request 17 financial firms that doled out $1.6 billion in "ill advised" executive compensation to return the excessive payouts, saying to do so would be unfair to the companies and could trigger private lawsuits and additional Congressional investigation.
Mr. Feinberg released a report that found 17 firms—including Goldman Sachs Group Inc., J.P. Morgan Chase & Co. and Citigroup Inc.—made the bonus-like payouts to top executives in late 2008 and early 2009 even as the companies were receiving taxpayer assistance.
Mr. Feinberg, the Obama administration’s special master for compensation, said he deemed these payments as "ill advised" both for the sheer amount—some individual payouts exceed $10 million, he said—and the lack of reasonable rationale for their payment.
Other firms Mr. Feinberg criticized for poor judgment included: American Express Co., American International Group Inc., Bank of America Corp., Boston Private Financial Holdings Inc., Capital One Financial Corp., CIT Group Inc., M&T Bank Corp., Regions Financial Corp., Sun Trust Banks Inc., Bank of New York Mellon Corp., Morgan Stanley, PNC Financial Services Group Inc., U.S. Bancorp and Wells Fargo & Co.
"Lack of reasonable rationale" hahahahaha. Maybe we should charge Obama with that for giving this guy a fake job patrolling payouts in the first place.
In a post called "Break Up the Big Banks", Rolfe Winkler provides a nice graphic showing that the too big to fails have gotten bigger:
The big have gotten even bigger since the start of the financial crisis. At the end of 2007, the Big Four banks — Citigroup, JPMorgan Chase, Bank of America and Wells Fargo — held 32 percent of all deposits in FDIC-insured institutions. As of June 30th, it was 39 percent.
In total, they had $3.8 trillion worth of deposits as of June 30th. Compare that figure to the FDIC’s Deposit Insurance Fund, which showed a balance of just $10.4. billion on the same date.
A federal judge on Monday rejected a $33 million settlement between the Securities and Exchange Commission and Bank of America Corp., saying the SEC’s accusations of inadequate disclosure by the bank over bonuses paid at Merrill Lynch must now go to trial.
The SEC announced last month that it had settled its civil charges against BofA, which agreed to buy the New York investment bank last year, without the bank admitting or denying guilt in the case. BofA has said it didn’t violate disclosure rules.
U.S. District Judge Jed Rakoff held up his approval of the settlement, however, and ordered the SEC last month to explain why it didn’t pursue charges against specific executives at Bank of America over the accusations.
After receiving additional statements from the SEC and BofA last week, Rakoff ruled Monday that the proposed $33 million settlement "cannot remotely be called fair," and ordered that the case go to trial beginning Feb. 1.
Rakoff, in his ruling, found that the proposed settlement "suggests a rather cynical relationship between the parties: the SEC gets to claim that it is exposing wrongdoing on the part of the Bank of America in a high-profile merger, the bank’s management gets to claim that they have been coerced into an onerous settlement by overzealous regulators. And all this is done at the expense, not only of the shareholders, but also of the truth."
The New York Attorney General’s office is preparing charges against several high-ranking Bank of America executives over the bank’s alleged failure to disclose details about its acquisition of Merrill Lynch, according to a person familiar with the investigation.
Attorney General Andrew Cuomo’s office is likely to file civil charges against the executives over their role in failing to alert shareholders to mounting losses as well as accelerated bonus payments at Merrill, said the person, who requested anonymity because no charges have been filed yet.
One of the most evident characteristics of the recent 50% stock rally has been short squeezes. Skepticism regarding the quality of the rally kept the shorts confident that stocks would retrench. And day after day we got short squeezes in the banks that generated market rallies. As summer rolled around the trend appeared to die and the financials went through a 3 month lull. That has all changed in the last 4 weeks, however, as 5 (mostly meaningless) stocks dominate NYSE trading. BofA, Citi, Fannie, Freddie and AIG have accounted for more than 30% of NYSE volume in the last month and are again generating overall stock market optimism today as all 5 stocks rally on no news or news that is totally irrelevant to the rest of the market. Will the shorts ever learn their lesson?
Major markets around the globe saw little price movement today. Our benchmark S&P 500 rallied at the open, despite the biggest jump in new unemployment claims since January of 2015. The index hit its modest 0.44% intraday high about 45 minutes into the session. It then sold off to its -0.26% early afternoon low. The index then struggled to its -0.02% close. The 500 essentially went nowhere in advance of tomorrow employment report for April.
The yield on the 10-year note closed at 1.76%, down three basis points from the previous.
Here is a snapshot of past five sessions in the S&P 500.
Here is a daily chart of the index. Volume in today's decline was unremarkable.
By Jacob Wolinsky. Originally published at ValueWalk.
ValueWalk has learned that Kerrisdale’s big short bet is against DISH Network. The news was confirmed earlier this week but to protect sources, VW did not immediately report. Bloomberg News has just reported that DISH is rumored to be the short and now we are able to release what we have. This is the text from an email Kerrisdale sent to investors earlier this week.
Stay tuned for more to come.
To get you started on the research please see below an intro to the company and the thesis. The company is Dish Network. We think it’s worth 60% to 80% below the current price.
I’d start with the short animation — this addresses the public policy angle of the thesis:
A huge wildfire near Canada's oil sands region and escalating tensions in Libya stoked concern among investors over a near-term supply shortage, driving crude prices up for the first time in a week on Thursday.
Two years after Newsweek wrote an inaugural article upon returning to print in which it "unmasked" bitcoin creator Satoshi Nakamoto and which turned out be a hoax (the author "found" Nakamoto using a white pages search), earlier this week the world was fixated on the story of another self-professed bitcoin "creator", this time Australian entrepreneuer Craig Wright, who &quo...
How many of you like “Choppy/Sideways” markets? I humbly suspect that most don’t. They do present some short-term trading opportunities for sure, nothing wrong with that. From a trend perspective, I would understand if some think a sideways pattern is boring.
Below takes a close look at the S&P 500 over the past couple of years.
CLICK ON CHART TO ENLARGE
The S&P 500 has spent the last couple of years, forming...
Relypsa Inc (NASDAQ: RLYP) shares have plummeted 51 percent year-to-date, under pressure from debt-financing related concerns. Cantor Fitzgerald’s Mara Goldstein reiterated a Buy rating for the company, while reducing the price target from $42 to $41. The analyst believes the 1Q16 results would be “a stabilizing force for the shares.”
Positive Data Points For Veltassa Launch
Veltassa metrics look favorable so far, including a low payer rejecti...
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Although we try to stay focused on finding and managing promising trade ideas, the comments in the comment section sometimes take a political turn (for access, try PSW — click here!). So today, Jean Luc writes,
The GOP debate last night was just unreal – are these people running to be president of the US or to lead a college fraternity! Comparing tool size? The only guy that looks semi-sane is Kasich. The other guys are just like 3 jackals right now.
And something else – if Trump is the candidate, that little Romney speech yesterday is probably already being made into a commercial. And all these little snippets from the debate will also make some nice ads! If you are a conservative, you have to be scared now.
Phil writes back,
I was expecting them to start throwing poop at each other &n...
This is a non-trading topic, but I wanted to post it during trading hours so as many eyes can see it as possible. Feel free to contact me directly at email@example.com with any questions.
Last fall there was some discussion on the PSW board regarding setting up a YouCaring donation page for a PSW member, Shadowfax. Since then, we have been looking into ways to help get him additional medical services and to pay down his medical debts. After following those leads, we are ready to move ahead with the YouCaring site. (Link is posted below.) Any help you can give will be greatly appreciated; not only to help aid in his medical bill debt, but to also show what a great community this group is.
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