In further proof that attorneys general are abandoning the 50 state attorneys general investigation, California AG Kamala Harris announced that she is establishing a 25 person mortgage fraud task to look into abuses across the spectrum, from the individual borrower level to practices, such as questionable transfers to trusts when the securitizations were formed, that hurt investors.
Note that the defection of a second Democrat (Harris follows New York’s AG Eric Schneiderman in creating her own effort) from the AG investigation is particularly significant. A number of Republicans joined at the 11th hour and were never on board with the premise of talks, so their defection is expected. By contrast, the AGs from solidly Democratic states were expected to stay the course. The fact that the AGs from two major states have effectively left the talks confirm what we have said all along: that the negotiations were not serious precisely because no investigations had been conducted.
We applaud this step forward by Harris, since it shows at least some public servants are taking mortgage abuses seriously. From the Los Angeles Times (hat tip reader Denotis):
The team of 17 lawyers and eight special agents from the state Department of Justice will pursue three major areas, Harris said in an interview:
•Corporate fraud, including instances in which bundled mortgages were sold as securities to the state or its pension funds under false pretenses. Harris said her office plans to prosecute some cases under California’s False Claims Act, which she described as “one of those very powerful tools that California uniquely has … to pursue, in essence, what are false claims that are submitted to the state.”
•Scams, including instances in which consultants, lawyers and others took fees from people in foreclosure, saying they would help the homeowners get loan modifications or other remedies, but delivered nothing.
•Fraudulent lending practices, including deceptive marketing, failure to fully disclose loan terms and qualifying people for loans who couldn’t afford the terms…
“We are looking at a situation of up to $640 billion in wealth having been lost because of this wave of foreclosures that has hit the state,” Harris said, referring to the decline in homeowner equity. “There is a direct connection” between mortgage fraud “and the issue that we are challenged with in terms of our state budget crisis.”…
Harris said her initiative was distinct from the multistate investigation because it would go after all aspects of the mortgage-lending business…
Harris said that although successful prosecutions of major players in the mortgage meltdown have been difficult, the severity of the crisis called for a tough-minded approach to mortgage fraud, one that could target executives of major financial institutions.
“If the evidence leads us there, no case will be too big or too small to pursue,” Harris said. “There remain millions of people affected by the mortgage crisis.”…
“The burden of proof in a criminal case is very high,” Los Angeles defense attorney Jan Handzlik said. “It would be necessary for the AG to prove beyond a reasonable doubt that the mortgage executives had knowledge of the fraud and acted with a criminal intent.”….
William K. Black, a University of Missouri-Kansas City law professor and an aggressive regulator of the savings and loan industry after its crisis in the 1980s, said the state prosecutors could be successful if they carefully chose their targets.
Black asserted that the federal government has the means to pursue these cases but hasn’t shown the will.
“The success rate in the savings and loan cases, despite the fact that they were more complex … was 90%, and this was against the best criminal defense attorneys in America,” Black said.
Where’s the Wall St fraud task force? Oh that’s right Eric Holder is still sleeping and SEC in toothless
As the saying goes: I can’t possibly eat enough to vomit enough to purge myself of this misery. The SEC should be shut down. Yes. We could shut them down if we admit they are useless. They are useless. The fraud we expect them to confront is too massive. THEREFORE the fraud itself must be dealt with directly: we need to ring-fence Wall Street. Or “Wall Street,” because the fraud is pervasive. We need to strip the fraudsters of their citizenship. Whenever and wherever we find them. One strike and you are out. We need to make “Wall Street” a separate sovereign city: the City of Wall Street. WE ARE NOT RESPONSIBLE FOR THEM.
Wall St Fraud Task Force got stuck at the strip club, unwinding the expenses side of the puzzle
Gee..maybe, just maybe, the idiot bankers should have made a good deal whilt they could instead of trying to get the OCC et al to bury it.
I wish more people in public office would say this: it should be a mantra.
Why is your school district cutting to the bone? Mortgage fraud.
Why is your city cutting cops from the budget? Mortgage fraud.
It’s not rocket science, but I don’t think the US public generally grasps how deeply mortgage fraud has impacted budgets at all levels.
Later in the day… an article that looks to be just up at FT states in part that MBIA’s suit against BoA (buyer of Countrywide) ‘alleges that 91% of the loans did not comply with underwriting criteria…’
Apparently, NY state’s investigation has now expanded to seven banks. It’s not clear to me how, or whether, the two investigations in NY and CA are allowed to overlap.
How does that even happen? (Oh. wait – Control Fraud 101)
In California, this is good politics. When Jerry Brown was AG, he went after a lot of companies in the loan mod sector that were scamming consumers. Now he is governor. Where does Harris want to end up later in her career? She is a rising star in the Dem party and she came up fast from her position as DA in San Francisco. Will she be wiling to sacrifice her personal ambitions if/when this fight with the banks gets messy? Or will she cut a deal for Calpers on its RMBS and then issue a press release declaring victory? I’ll give her the benefit of the doubt for now, but I fear she is nothing more than an opportunist. Can we just elect Bill Black and be done with it??
This is really encouraging news. These are exactly the things that need to be looked at and Jerry Brown has had some success along similar lines. And California is a very significant place for this to be happening…
pretty cool to see Jerry Brown get re-elected as governor of California. I remember when he was governor in the 70’s and was dating country/rock singer Linda Ronstadt. Probably just what the state needs, he’s a lttle crazy but has turned more fiscally conservative… ;)
Ahead of his time.. He was California state attorney general when he filed this suit..
In June 2008 Brown filed a fraud lawsuit claiming mortgage lender Countrywide Financial engaged in “unfair and deceptive” practices to get homeowners to apply for risky mortgages far beyond their means.” Brown accused the lender of breaking the state’s laws against false advertising and unfair business practices. The lawsuit also claims the defendant misled many consumers by misinforming them about the workings of certain mortgages such adjustable-rate mortgages, interest-only loans, low-documentation loans and home-equity loans while telling borrowers they would be able to refinance before the interest rate on their loans adjusted. The suit was settled in October 2008 after Bank of America acquired Countrywide. The settlement involves the modifying of troubled ‘predatory loans’ up to $8.4 billion dollars.
What’s missing from Harris’ list is the millions (billions?) in recording fees that MERS fraudulently withheld from county recorders throughout California. Would really love to see her go after that pot o’ gold, too. Think of how many teacher salaries the MERS scam hoovered out of the system.
I remain stupefied as to why Ben Bernanke and Timothy Geithner
FIRST haven’t been prosecuted and SECOND adding insult to injury are still in charge our *ucking money – All or Nothing AG Harris – don’t come in half stepping
I remain stupefied as to why Ben Bernanke and Timothy Geithner
FIRST haven’t been prosecuted and SECOND adding insult to injury are still in charge of our *ucking money – All or Nothing AG Harris – don’t come in half stepping
I’m absolutely delighted to hear that Ms Harris has chosen this route. Lots of homeowners and investors alike got screwed by these Banksters, and I hope she seeks restitution on behalf of Californias directly affected by their crimes.
THe AG and its employees probably realized that mortgage fraud has greatly jeopardized their retirement and health entitlement. Suddenly, it becomes a worthy cause…
If you want to see what the Republicans and bought Democrats wanted for a settlement, try the gimme by Nebraska’s Attorney General.
Hyperlink to the Countrywide – Assurance of Voluntary Compliance.
The payoffs are in sections 3, 4 and 9. Section three create a purely voluntary loan modification, with only a single sentence of how Countrywide’s warm-body loan fraud caused the problem. Section 4 gives a lot of narrow cases where the loan modification might be given, without an assurance and mods would help the borrower.
The big butter’s in section 9, where the borrower has to swear off any and all claims or litigation against Countrywide to get even the half-cocked mods proposed. The only protection is the pro-business AG, who’ll let the borrower have a bit more if he thinks some other state gets a better deal. In his opinion.
Imagine a complete wipe out for all felonies, misdemeanors, frauds, other misdeeds in exchange for a few payment modifications. Any government official can buy into that honest mistake story, but it’s hard to see how.
“…no case will be too big or too small to pursue.”
“Too small” doesn’t sound good. Control fraud starts at the top and that’s where it needs to be attacked. Bill Black and team attacked the big players. It would be interesting to get his take on “too small.”
Does anyone remember young Casey Serin?
I noticed Casey’s exploits at about the time events really began to open my eyes.
Before, I knew things like that happened, and happened often. I did not realize that not only was fraud the norm, but in Casey’s case, almost everyone involved was either incompetent or actively running a scam.
I questioned the Texas attorney general last week as to what his office was doing to investigate the fraud…(sound of crickets chirping)
It’s about time. However, after watching Harris as San Francisco district attorney I don’t hold out much hope of anything real beyond the press packet.
She’s big on announcements and little on results.
A lovely carnival barker that fits so many of the correct categories
among certain highly evolved people and who lustily accepts their campaign donations which means that they are safe.
She’s desperate to do something after barely winning the AG
race by the skin of her teeth against a Republican who has the
campaigning abilities of a tree stump.
Nevertheless, we wish her good luck in her endeavor and pray
for some equitable results.
Is this why there is no such thing as the “New York Dream” or the “Massachusetts Dream”?
“Family incomes have not kept pace with rising costs and many families, particularly those with low-to-moderate incomes, are actually facing the decision between buying gas to drive long distances to work and paying their mortgage. During the housing boom, when gas prices were much lower, potential homebuyers moved steadily farther away from employment centers in search of more affordable homes. This was referred to as the “drive till you qualify” method of home buying. Foreclosures remain high in these areas where the cost of driving to work has become so great.”
I posted this at maxkeiser.com in the following regarding Greenwich Banker I and thought to find an appropriate story on on this website.
In The US, there is a statute of limitations on some crimes. Statue of limitations means, that after a certain number of years, if no charges have been filed, the crime is no longer prosecutable..
What fails to be mentioned in the press and by just about everyone is the statute of limitations on financial crimes. We know financial crimes were committed and are being committed. We asks ourselves the question, “Why is no one in jail?”
The question we should be asking ourselves are: “Are the regulators and law enforcement intentionally (and selectively) NOT prosecuting financial crimes in order to run out the statute of limitations within their respective jurisdictions?”
Every blog, broadcast, website, main stream media outlet; not one – to my knowledge – has ever addressed this issue. Why is this not being discussed? Why is this not being looked at? What is going on?
Forgot to add, “What happens if statute of limitations have run out and the regulators and law enforcement are afraid to admit to the public that they are powerless to prosecute?”