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Category: Mortgage fraud

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Scam watch: Bank theft, e-books, mortgage modification

Bank employee is sentenced to 15 months in federal prison after pleading guilty to stealing nearly $100,000 from the accounts of two customers.


Here is a roundup of alleged cons, frauds and schemes to watch out for.

Bank theft -- A Central California bank employee has been sentenced to 15 months in federal prison after pleading guilty to stealing nearly $100,000 from the accounts of two customers. Brenda Hurtado, 26, pleaded guilty in August to committing theft by a bank employee. A former employee of U.S. Bank in Arroyo Grande, she admitted changing the contact information for two customers in their 80s, closing their accounts and issuing herself cashier's checks for the closing balances. It is a good idea to check bank statements regularly to avoid mistakes, improper charges or theft, consumer advocates say.

E-books -– Consumers should take care when purchasing electronic books for devices such as Amazon’s Kindle or the Barnes & Noble Nook, the Better Business Bureau said in a recent bulletin. Some websites have been offering e-books for sale that were pirated or contain harmful malware, the BBB said. The bulletin cautions consumers to check the URL to make sure it begins with https://, a sign that it is secure, and to use reputable websites to avoid being victimized.

Mortgage modification -– Five people have agreed to repay millions of dollars to victims who they duped by promising to help them reduce their mortgage payments but providing no services after receiving their fees of $4,250. According to a lawsuit filed last year by the Federal Trade Commission, the defendants offered a “Government Mortgage Relief Program,” even though they had no affiliation with the government. The company promised full refunds if they were unsuccessful at reducing mortgages, but failed to return the money and disconnected their telephones.

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Scam watch: Discount electronics, holiday cons, telemarketers

-- Stuart Pfeifer

Photo: U.S. currency. Credit: Vahid Salemi / Associated Press

California sues Fannie Mae and Freddie Mac

California Atty. Gen. Kamala D. Harris in L.A.

California Atty. Gen. Kamala D. Harris has filed suit against mortgage titans Fannie Mae and Freddie Mac for refusing to answer subpoenas issued to the companies this year.

The suits, filed Tuesday in San Francisco County Superior Court, comes after investigators with the state attorney general's office presented the two firms with questions regarding their foreclosure, lending and mortgage-related practices in the state.

SEE THE DOCUMENTS:

California Sues Fannie Mae

California Sues Freddie Mac

The subpoenas ask the government-controlled finance companies to answer questions about their activities in California, including their roles as landlords that own thousands of foreclosed properties, The Times previously reported. The attorney general's office is also seeking details of Fannie and Freddie's mortgage-servicing and home-repossession practices.

In addition, investigators want to learn more about the companies' purchases and sponsorship of mortgage-backed securities in the Golden State. According to separate suits filed by Harris against Fannie and Freddie, the two companies refused to answer the questions. The filing of the suits was reported earlier by the Wall Street Journal.

RELATED:

Banks' foreclosure activity picks up

Many Americans say they will have to work until they're 80

Victims of improper foreclosure practices can submit claims

— Alejandro Lazo

Twitter.com/alejandrolazo

Photo: Atty. Gen. Kamala D. Harris in downtown Los Angeles. Credit: Al Seib / Los Angeles Times

SEC details lawsuits against ex-Fannie Mae, Freddie Mac executives

SEC Enforcement Director Robert Khuzami
This post has been corrected. See note at the bottom for details.

Federal officials said Friday that six former top executives of Fannie Mae and Freddie Mac -- including two former chief executives -- intentionally and repeatedly misled investors about the exposure of the companies to risky subprime loans.

In court papers and at a Washington news conference, Securities and Exchange Commission officials detailed numerous comments -- allegedly misleading -- made by the executives in regulatory filings, at investor conferences, in media interviews and even in testimony before Congress.

The statements were made as Fannie and Freddie were trying to increase their share of the housing finance market as the subprime real-estate bubble was inflating, and then collapsing, between 2006 and 2008, the SEC said.

"Throughout this period, as they were driving up their market share, Fannie, Freddie and their executives sought to maintain the illusion that their business involved minimal and manageable credit risk," said Robert Khuzami, director of the SEC’s Enforcement Division.

The SEC filed the civil suits in New York. The executives named included former Fannie Mae Chief Executive Daniel H. Mudd and former Freddie Mac Chief Executive and Chairman Richard F. Syron.

Also named were Fannie Mae's former chief risk officer, Enrico Dallavecchia, and Thomas A. Lund, former executive vice president of the company's single-family mortgage business. The other Freddie Mac officials were Patricia L. Cook, former executive vice president and chief business officer, and Donald J. Bisenius, former executive vice president for the single-family guarantee business.

The Freddie Mac complaint said that between March 23, 2007, and Aug. 6, 2008, the company told investors that the exposure of its single-family guarantee unit to subprime loans was $2 billion to $6 billion, or 0.1% to 0.2% of its portfolio.

But the SEC said the real exposure started at $141 billion at the end of 2006 and rose to about $244 billion by June 30, 2008 -- 14% of its portfolio.

The court filing quoted Syron as telling an investor conference in New York on May 14, 2007, that “at the end of 2006, Freddie had basically no subprime exposure in our guarantee business.” Three days later, Cook made the same exact statement to an investor conference in London.

Continue reading »

California, Nevada team up to investigate foreclosure fraud

Atty. Gen. Kamala Harris to join California's foreclosure probe with Nevada's investigation
California and Nevada, two states at the heart of the nation’s housing crisis, will join forces to investigate allegations of foreclosure fraud and other types of mortgage improprieties.

The agreement to share resources and work jointly is the latest sign that the nation’s state attorneys general want to be out front in cracking down on bank practices the housing crisis — from the selling of mortgage-backed securities to the handling of foreclosures.

At a joint news conference in Los Angeles on Tuesday, California Atty. Gen. Kamala D. Harris and Nevada Atty Gen. Catherine Cortez Masto said their offices would share litigation strategies and evidence would link their offices' civil and criminal teams.

The announcement comes less than a week after Massachusetts said it was suing the nation’s five largest mortgage servicers over alleged foreclosure illegalities. The move marked the first such litigation to be filed by a state.

Harris' office has opened a number of its own probes of the mortgage business. Investigators have subpoenaed information from Fannie Mae and Freddie Mac as part of a wide-ranging inquiry into lending and foreclosure practices in the state, The Times has previously reported. Her office also is investigating Bank of America and its mortgage arm Countrywide Financial, along with Citibank, seeking information on their sale of mortgaged-backed securities in California.

The new alliance between Harris and Masto comes as banks are working to strike a deal with a coalition of attorneys general who are working to seek relief for consumers allegedly wronged by faulty mortgage servicing and foreclosure practices.

Harris formally withdrew from those talks earlier this year. Masto has said Nevada officials would evaluate any proposal the talks might produce but would also push ahead with their own work. New York, Delaware, Kentucky and Minnesota also have signaled they are unhappy with the direction of the talks with the banks. All of those states have expressed concern that the banks could be let off too easily.

ALSO:

Banks' foreclosure activity picks up

California AG subpoenas Freddie, Fannie

BofA settles mortgage suit for $315 million

-- Alejandro Lazo

Photo: California Atty. Gen. Kamala D. Harris. Credit: Brian van der Brug/Los Angeles Times

CalPERS, other investors, settle suit against Countrywide, BofA

AngeloatcourtIrfanKhan
California's giant public pension fund and 15 other large investors settled lawsuits accusing former mortgage goliath Countrywide Financial Corp. of costing them billions of dollars in stock losses by failing to disclose the severity of the risks posed by the easy-money loans the Calabasas lender handed out during the housing boom.

A filing Monday in U.S. District Court in Los Angeles disclosed the confidential settlement. The filing did not reveal how much Bank of America Corp., which acquired Countrywide in 2008 and was also a defendant in the case, would pay to the California Public Employees' Retirement System and the other plaintiffs.

Bank of America's spokeswoman for legal affairs, Shirley Norton, declined to comment. An attorney for CalPERS and the other 15 investors didn't return a call Tuesday, and CalPERS officials declined to describe the settlement.

The 16 big investors, mostly pension and mutual funds, were among 33 plaintiffs who opted not to participate in a $624-million settlement of class-action litigation that U.S. District Judge Mariana R. Pfaelzer approved in February.

The opt-outs believed the proposed settlement was "shockingly cheap," Columbia University securities law expert John C. Coffee said at the time, citing a discussion with one of the lawyers representing those institutions.

Seventeen additional institutional investors who decided against participating in the February settlement still have claims pending in the case.

This week's settlement, if approved by Pfaelzer, would end the 16 plaintiffs' claims against Countrywide, Bank of America, and former Countrywide executives Angelo R. Mozilo, David Sambol and Eric P. Sieracki.

Accounting firm KPMG, which had audited Countrywide's books, is also a defendant in the case but did not settle with CalPERS and the other funds. It was a participant in the $624-million settlement finalized in February.

Bank of America, based in Charlotte, N.C., has struggled to put Countrywide's woes behind it since it shelled out $2.5 billion in stock for what was then the country's largest mortgage lender.

After running up more than $30 billion in losses on its investment, Bank of America still has undetermined liabilities outstanding for claims against soured Countrywide loans and the mortgage securities that were backed by them.

The Countrywide troubles have caused regulators to pressure Bank of America to increase its capital cushion against losses, and investors have punished the bank's stock, which has declined by 59% this year. Bank of America closed Tuesday down 12 cents, or 2.2%, at $5.37.

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Lender proves to be a costly buy for Bank of America

Judge OKs Countrywide settlement but big investors opt out

California reportedly subpoenas BofA over toxic securities

-- E. Scott Reckard

Photo: Dark glasses can't conceal Countrywide Financial co-founder Angelo Mozilo. Credit: Los Angeles Times / Irfan Khan

 

Homeowner advocates laud Harris for break with mortgage settlement

Advocates for homeowners in California applauded California Atty. Gen. Kamala Harris' decision to bow out of talks aimed at reaching a national foreclosure settlement with the nation's biggest banks.

Harris has said that the proposed settlement, the product of nearly 11 months of negotiations, let the banks off too easily. She has said that her office will conduct a more rigorous investigation.

“She stayed at the table on the settlement as long as was reasonable,” said Brian Heller de Leon, a representative of PICO California, an advocacy group for homeowners. “It became clear that there was no longer a reasonable path for California to stay in these negotiations.”

Heller de Leon said the proposed settlement would only have helped a tiny minority of California homeowners.

Harris has recently come under pressure from politicians and progressive groups inside and outside the state who wanted her to reject the settlement that was being discussed by the banks and the committee of state attorneys general.

Richard Hopson, chairman of the Alliance of Californians for Community Empowerment, said Friday that "a thorough investigation" is needed.

"We applaud Attorney General Harris for pulling out of this proposed 'settlement,' " Hopson said in a statement. "The banks need to pay for what they have done."

Meanwhile, Iowa Atty. Gen. Tom Miller, who has been leading the national negotiations, vowed to press on for a settlement without Harris.

His statement:

California has been an important part of our team and has made a significant contribution to this case. However, the multistate effort is pressing forward and we fully expect to reach a settlement with the banks. This multistate is about foreclosures and mortgage servicing abuse, and we are 100% focused on providing relief to homeowners while it can still make a difference and save homes from foreclosure. Providing relief after the foreclosure crisis is over would be a hollow victory indeed. Individual states are situated differently and after a settlement is reached it will be provided to all 50 states so that each Attorney General can make a decision on whether or not to join.

RELATED:

California bows out of probe of mortgage lenders

Kamala Harris a key player in settlement over mortgage crisis

Kamala Harris explains decision to exit mortgage settlement talks

-- Nathaniel Popper

Kamala Harris explains decision to exit mortgage settlement talks

California Atty. Gen. Kamala Harris just announced that she is bowing out of national efforts to reach a settlement with banks over their handling of mortgage foreclosures. 

She delivered the news to Iowa Atty. Gen. Tom Miller, who has been leading the efforts.

Read the letter: "There now exists a proposed settlement that is inadequate for California homeowners"

Kamala Harris Letter

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California bows out of probe of mortgage lenders

Kamala Harris a key player in settlement over mortgage crisis

BofA, Chase must do more to help troubled homeowners, Obama administration says 

-- Alejandro Lazo and Nathaniel Popper

California breaks from 50-state probe into mortgage lenders [Updated]


 

Kamala Harris
California Atty. Gen. Kamala Harris will no longer take part in a national foreclosure probe of some of the nation's biggest banks, which are accused of pervasive misconduct in dealing with troubled homeowners.

Harris removed herself from talks by a coalition of state attorneys general and federal agencies investigating abusive foreclosure practices because the nation's five largest mortgage servicers were not offering California homeowners relief commensurate to what people in the state had suffered, Harris told The Times on Friday.

The big banks were also demanding to be granted overly broad immunity from legal claims that could potentially derail further investigations into Wall Street's role in the mortgage meltdown, Harris said.

“It has been  a process of negotiating and sitting at a table in good faith, but ultimately I have decided that we have to go our own course and take an independent path. And that decision is because we need to bring relief to Californians that is equal to the pain California experienced, and what is being negotiated now is insufficient," Harris told The Times in an interview.

Harris delivered the news in a letter sent Friday to Iowa Atty. Gen. Tom Miller, who has been leading the 50-state coalition.

[Updated 5:36 p.m.: Iowa Atty. Gen. Tom Miller, who has been leading the negotiations, vowed to press on.

“California has been an important part of our team and has made a significant contribution to this case,” Miller said in a statement. “However, the multistate effort is pressing forward and we fully expect to reach a settlement with the banks.”]

The removal of California from the discussions is a major blow to fraying efforts by the coalition, which has been trying to strike a settlement deal with the big banks for months. The move by Harris to reject the settlement talks is also a key departure from efforts by the Obama administration, which has been pushing for a fast resolution to the so-called robo-signing scandal that erupted last year.

“This whole concept of a settlement on foreclosure abuse is probably dead,” said Christopher Whalen, the founder of Institutional Risk Analytics. “Nobody in their right mind is going to opt into a settlement right now.”

For California homeowners, the move means the probable end of an opportunity for relatively quick relief stemming from revelations last year that banks improperly foreclosed on troubled borrowers. Key reforms to mortgage-servicing and foreclosure practices pushed by the attorneys general may also be delayed.

Harris has faced increasing pressure in recent weeks from inside and outside the state to reject any deal that was considered too weak, particularly as the foreclosure crisis in the Golden State appears to be worsening.

Among the states with the highest foreclosure rates, California led the pack in new foreclosure proceedings last month, with an increase of 55% over July, according to data from Irvine-based RealtyTrac. Metro areas in the inland parts of California posted big jumps in August, with Riverside and San Bernardino counties soaring 68%, Bakersfield 44% and Modesto 57%.

In rejecting the 50-state talks, California also widens the riff among law enforcement officials nationwide over the best approach to pursuing banks for mortgage misdeeds.

New York Atty. Gen. Eric Schneiderman, who was originally part of the 50-state negotiations, has launched a wide-ranging investigation into Wall Street's role in the mortgage meltdown -– focusing on the efforts to bundle low-quality mortgages into sophisticated bonds.

Schneiderman has been highly critical of the proposed 50-state settlement and expressed concern that his counterparts in other states may let the banks off too lightly and provide immunity from other efforts to bring them to account for misdeeds. Schneiderman has also won support from attorneys general in Delaware, Nevada, Massachusetts, Kentucky and Minnesota, some of whom have launched their own investigations.

A spokesman for Schneiderman, Danny Kanner, welcomed Harris's move.

“Attorney General Schneiderman looks forward to his continued work with Attorney General Harris and his other state and federal counterparts to ensure those responsible for the mortgage crisis are held accountable and homeowners who are suffering receive meaningful relief,” said Kanner.

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New-home slump keeping door shut on U.S. recovery

Kamala Harris a key player in settlement over mortgage crisis

BofA, Chase must do more to help troubled homeowners, Obama administration says 

-- Alejandro Lazo and Nathaniel Popper

Photo: California Atty. Gen. Kamala Harris speaks at a news conference in May to announce the creation of the California Attorney General's Mortgage Fraud Strike Force. At left is Los Angeles Mayor Antonio Villaraigosa. Credit: Mel Melcon / Los Angeles Times

Reports of boom-era mortgage fraud on rise

Fincen_logo_300x220 Mortgage fraud reports to the Treasury Department jumped 88% in the second quarter as banks, under pressure from investors to buy back defaulted loans, dug deeper into files from the easy-money era of the housing boom.

And California led the way in this dubious trend, Treasury's Financial Crimes Enforcement Network division said.

In a report Wednesday, the agency said mortgage servicers filed 29,558 suspicious activity reports involving loan fraud, compared with 15,727 in the same quarter of 2010.

Most of the fraudulent mortgages closed during the height of the real estate bubble, the financial crimes division said: 81% of the reports involved suspicious activities before 2008 and 63% described what appeared to be fraud occurring four or more years ago.

Charts from the Financial Crimes Enforcement Network show that California had more reports of mortgage fraud on a per-capita basis than any other state, followed by Florida and Nevada. Six of the top 10 metropolitan-area hotbeds of mortgage fraud were in the Golden State.

James H. Freis Jr. Banks are required to report suspicious activities to their regulators. The Treasury unit attributed the spike of mortgage fraud reports in large part to loan repurchase demands from investors who contend that mortgages backing securities were riskier than represented when the bonds were sold.

"Financial institutions are uncovering fraud as they sift through defaulted mortgages," Financial Crimes Enforcement Network Director James H. Freis Jr. said in a statement.

Fraud continues in new loans, albeit at a lower level, he added, with misrepresentations of income, occupancy, or debts and assets the most common violations.

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California attorney general announces creation of mortgage fraud strike force

Man held in Southern California mortgage fraud case

U.S. sues Deutsche Bank over mortgage fraud

-- E. Scott Reckard

Photo: Financial Crimes Enforcement Network Director James H. Fries Jr. Source: Financial Crimes Enforcement Network 

Admitted Countrywide data thief gets 8 months in prison

BofAheadquartersDavisTurnerGettyImages 
A former employee of mortgage lender Countrywide Financial Corp. was sentenced Tuesday to eight months in prison and ordered to repay $1.2 million after pleading guilty to downloading millions of borrower files on thumb drives and selling the information to other loan officers.

Assistant U.S. Atty. Angela Davis had recommended a sentence of 30 months in prison for Rene L. Rebollo Jr. of Pasadena, who had worked as a senior analyst at Countrywide's subprime unit, Full Spectrum Lending. In January Rebollo changed his plea from not guilty to guilty.

In an impassioned entreaty to U.S. District Judge Christina A. Snyder, Rebollo expressed remorse for his actions, described his efforts to cooperate with prosecutors and told the judge that he wanted to be free as soon as possible to try to repair the damage he had caused his family.

Synder sentenced Rebollo to 10 months at a halfway house as well as the eight months in prison.

The $1.2 million represented the costs that Bank of America Corp., which acquired Calabasas-based Countrywide in 2008, incurred in notifying 2.5 million individuals that their personal financial information had been stolen. The data in about 50,000 of those cases included Social Security numbers, which make it especially easy to commit identity fraud, Davis said.

Rebollo was arrested in August 2008, a month after Bank of America acquired Countrywide. Authorities said he sold the borrower information to employees of other loan companies to be used as sales leads. Davis said Rebollo made $400,000 from the sales, but Rebollo's lawyer said it wasn't that much.

Another defendant in the case, Wahid Siddiqi, was previously convicted of selling the information that Rebollo provided and was sentenced to 36 months in prison. Davis said Siddiqi had a previous criminal history.

The case, which identity theft experts said was the biggest reported data theft that they could recall by a financial insider, led to more than 30 lawsuits, including nationwide class actions.

Bank of America settled the suits in August 2010 by agreeing to provide free credit monitoring, identity theft insurance and reimbursement for losses to as many as 17 million consumers who had dealt with Countrywide.

There was no evidence that the 2.5 million borrowers whose personal data were stolen had suffered financial harm as a result, Davis said. The government had listed Countrywide as the victim of the crime but not the borrowers.

RELATED:

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-- E. Scott Reckard

Photo: The Charlotte, N.C., headquarters of Bank of America, which acquired Countrywide in 2008. Credit: Getty Images / Davis Turner 

Wall Street: Dow up, gold down, Citigroup-SEC talks, rogue trader

Wall Street
  

Gold: Trading at $1,790.50, down $36. Dow Jones industrial average: Up 72.58 points to 11,319.31.

Citigroup talks. The Securities and Exchange Commission reportedly is negotiating with Citigroup Inc. on a potential settlement calling for the bank to pay more than $200 million for questionable mortgage-bond deals.

Rogue trader. Investment bank UBS warned that an employee's unauthorized trading could cost it more than $2 billion.

Groupon IPO. The daily deals site is proceeding with its delayed initial public offering, which now may take place in late October or early November.

Solyndra battle. Washington lawmakers are fighting an increasingly heated battle over the Fremont, Calif., solar equipment maker that failed after getting a federal loan.



-- Walter Hamilton

Photo: On Wall Street. Credit: Stan Honda / Getty Images

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