Financial reform tips toward bankers Congress is Chicken!
WASHINGTON - As Congress this week inches toward a new set of rules to avert another global financial collapse, it is focused on two conflicting goals: reforming the banking system to protect consumers while still giving lenders the freedom to take risks.
So far the score looks like: Bankers 1, Consumers 0.
More than a year after a wave of risky mortgage bets brought Wall Street to its knees, banks and other financial institutions are still playing by the same rules that got them into the mess.
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Reforming the sprawling financial regulatory system — a patchwork of federal agencies and state commissions — is a tall task under the best of circumstances. It’s even tougher with Congress already polarized over the health care debate, an economy on a wobbly path to recovery, banks facing a wave of foreclosures and households licking their wounds from $7 trillion in lost home equity and near double-digit unemployment.
Proponents of comprehensive regulatory reform hope for sweeping measures to protect consumers from predatory lending, rein in high-stakes Wall Street trading in arcane derivatives, boost capital requirements for banks that want to bet big with depositors' money and spread some regulatory sunshine on the dark pools of the “shadow banking system” that caught regulators flat-footed when the market spiraled into the abyss in the fall of 2008.
“We cannot afford to let the status quo continue,” Sheila Bair, head of the Federal Deposit Insurance Corp., told a meeting of business economists in Washington.
The final law is still in doubt. Sen. Christopher Dodd, D-Conn., has pressed for reform during a year of intensely partisan bickering. On Friday, Dodd — a lame duck who announced his retirement after disclosures that he accepted favorable terms from subprime lender Countrywide Financial — claimed that the Senate Banking Committee he chairs was “days away” from wrapping up a bill.
Any resolution faces a major political hurdle that has drawn the most public attention: a proposal to create a new agency to protect consumers from predatory lending and other abusive financial practices. While the "systemic risks" to the financial system may represent a bigger threat in dollar terms, voters might be more focused on the consumer impact.
Dodd said that’s not hard to understand.
“The subject matter of derivatives and swaps and the issue of systemic risk and too-big-to- fail seem somewhat removed from the general public,” he told CNBC after the Senate compromise was reached. “Watching my credit card go to 32 percent rates and huge fees, watching prepayment penalties on mortgages, these are things that millions of people understand.”
The details of the new consumer protection agency have become a major sticking point.
After insisting for months that any new consumer protection body had to be an independent, “standalone” agency, Dodd recently championed a compromise that would embed the agency within the Federal Reserve. (That proposal has yet to win committee approval.)
Critics of the idea of turning over consumer protection to the Fed argue that the central bank badly stumbled in applying its existing consumer protection laws to clamp down on bad mortgage lending during the housing bubble. Simultaneously protecting bankers and consumers, they argue, is an inherent conflict of interest.
But the idea of a new, standalone agency has met fierce resistance from lenders, who have so far succeeded in gluing the new regulator to the agency created 100 years ago to maintain the soundness of the banking system — the Fed.
Still, some consumer advocacy groups argue that where the agency is housed matters less than the powers it brings to the task. They argue that the critical elements required to protect consumers from heavy-handed, profit-minded lenders include an administrator appointed by the White House; a separate operating budget, funded by bank fees and not subject to congressional approval or rejection; broad authority to write rules governing a variety of financial products from insurance to credit cards; and tough, independent enforcement powers.
The banking industry initially lobbied hard to make sure that any new consumer protections were housed within existing bank regulators, such as the Office of the Controller of the Currency or the FDIC.
Analysts who have followed the turf war say the latest proposal gives bankers most of what they wanted.
“This is a bill the industry will love,” said Greg Valliere, chief policy strategist for Soleil Securities.
There is still strong support among consumer advocates for a tough, independent financial regulator tasked with the sole mission of protecting consumers. The latest compromise proposal drew a chilly response from supporters of a standalone agency.
"It's got to be a joke," said Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee, when assessing the Senate proposal to add consumer protection to the Fed’s mandate.
The White House, which has also pushed for a standalone consumer protection agency, said last week it is more concerned with ensuring that the new body has the tools it needs to act independently.
The administration's backpedaling may have to do with a new calculation on how best to exert influence over the new consumer protection regime.
That’s because the Obama administration could secure more influence over a Fed-based consumer protection agency now that the White House has a third vacancy to fill on the seven-member Federal Reserve Board. Last week Fed Vice Chairman Donald Kohn announced he was stepping down, adding to two existing open seats.
Other open appointments offer the White House additional opportunities to shift the course of financial regulatory policy. In August, John Dugan will end his term as comptroller of the currency, the chief regulator for most of the nation's largest banks.
When complaints of predatory mortgage lending began rising among state regulators in the mid-2000s, the OCC steadfastly opposed their efforts to police national banks. The OCC's policy, known as “pre-emption,” asserted that federal supervision of national banks trumped state laws.
Repurchased Loans Putting Banks in Hole
By APARAJITA SAHA-BUBNA
Lenders such as Bank of America Corp., J.P. Morgan Chase & Co., Wells Fargo & Co. and Citigroup Inc. will brave stiff headwinds this year as they face demands to buy back defectively underwritten mortgages.
Annual reports filed by major mortgage lenders show big surges in the volume of loans being repurchased in 2009. Wells Fargo said it bought back mortgages with balances of $1.3 billion, triple the 2008 total of $426 million. Losses on bought-back loans doubled to $514 million from $251 million in 2008, according to the San Francisco company.
[bofa0308] AFP/Getty Images
Bank of America repurchased $1.5 billion of first-lien mortgages that were sold off by the Charlotte, N.C., bank through securitizations but are tied to faulty underwriting, up sharply from $448 million in 2008.
As of Dec. 31, J.P. Morgan had set aside $1.7 billion to meet repurchase claims from investors, a 55% jump from $1.1 billion a year earlier.
Last year, lenders bought back about $20 billion of loans with faulty underwriting, according to Barclays Capital estimates. About half of the total was written off because the loans were delinquent.
The rising tide "is definitely a surprise," said Ajay Rajadhyaksha, head of U.S. fixed-income and securitized strategy at the Barclays PLC unit. "Most investors haven't really focused on this issue and are surprised on how much impact this could have, including on earnings."
Most mortgages bouncing back to lenders are coming from Fannie Mae and Freddie Mac, which bought or guaranteed the loans but now claim they were made improperly. The two mortgage giants, taken over by the U.S. government about 18 months ago, have been revving up their efforts to reject loans that don't meet standards that are generally known as representations and warranties.
When banks are forced to buy back souring loans, they typically do so at a steep loss, while giving up income they earned in fees from making the loans. In 2009, Freddie Mac returned about $4.1 billion of single-family mortgages to lenders, more than double the $1.8 billion in 2008, according to the company's annual report.
"Borrowers, the mortgage industry and taxpayers are all well served when Fannie Mae exercises its rights to require lenders to repurchase loans that do not meet Fannie Mae's underwriting standards," Terry Edwards, an executive vice president at Fannie Mae, said in a statement.
Some lenders are resisting. "We continue to fight the battle at a loan-by-loan level," Barbara Desoer, president of Bank of America's mortgage business, said last month.
As of Dec. 31, nearly 30% of Freddie Mac's unfulfilled repurchase requests were outstanding for more than 90 days.
J.P. Morgan said last month that repurchase demand "remains elevated" at $1 billion each quarter. Loan-repurchase claims are resolved through a review process with Fannie Mae and Freddie Mac within two to three years, the bank said.
Investors holding mortgages can force lenders to take back the loans if borrowers lied about their income, misstated that the property is their primary residence, relied on a fraudulent home appraisal or provided inadequate documentation, among other reasons.
"Mortgage repurchases should have a considerable impact on banks," Mr. Rajadhyaksha said.
As of Dec. 31, Wells Fargo set aside $1 billion to cover potential loan repurchases, up 70% from $589 million a year earlier. Citigroup's repurchase reserve held $482 million at the end of 2009, up from $75 million a year earlier, according to the company's annual report.
A Citigroup spokesman declined to comment.
—Marshall Eckblad contributed to this article.
Write to Aparajita Saha-Bubna at Aparajita.Saha-Bubna@dowjones.com
Nice that Chase has foreclosure.com Are they trying to tell you something.
#
Chase
Highlights from JPMorgan Chase's ongoing efforts to improve our economy's health. ... Please contact us if you need assistance with your Chase accounts. ...
http://www.foreclosure.com
Chase CEO’s comments on California’s solvency find new traction on web
Comments last month by J.P. Morgan Chase's CEO saying he's more worried about California's solvency than Greece's are finding new life as they circulate around the web.
Jamie Dimon made the remarks at an investor conference Feb. 25.
Outlets like the Huffington Post, a widely read political blog, posted the comments on Monday.
“Greece itself would not be an issue for this company, nor would any other country,” Dimon said. “We don’t really foresee the European Union coming apart.”
But given California’s size, the state’s financial woes could spill over into other states, Dimon said.
Chase (NYSE: JPM) became a major financial institution in California in 2008 when it purchased the failed banking operations of Washington Mutual.
A few things on this. The truth was Washington Mutual was not failing at the time and If Chase would help home owners things would not be this bad.
JPMorgan Chase spends $1.9 million on lobbying
JPMorgan Chase & Co.'s banking subsidiary spent $1.9 million during the fourth quarter to lobby the federal government on issues related to regulations that would affect the banking industry.
The $1.9 million spent during the quarter by J.P. Morgan Chase Bank NA, compares with $1.1 million spent to lobby the government during the final quarter of 2008 as the credit crisis peaked.
The bank spent $1.2 million lobbying the federal government during the third quarter of 2009.
JPMorgan has been one of the best performing banks during the recession and credit crisis and has maintained its strength throughout 2009.
In the final three months of 2009, JPMorgan Chase lobbied Congress, the Federal Deposit Insurance Corp., Treasury Department, Securities and Exchange Commission, Commodity Futures Trading Commission, U.S. Trade Representative, State Department and Commerce Department.
JPMorgan lobbied the government on issues including reform to credit card lending standards, mortgage lending, income taxes and market regulation reform.
Homeowners Say Banks Keep Them Underwater by Spurning Loan Program Rules
A slew of struggling homeowners are coming forward with complaints about the way banks are operating under a federal loan modification program announced last year by the Obama administration.
You qualify.
Those two words, from the mouth of a bank representative last October, triggered a wave of relief for Tracy Davis and her husband James. The couple had been in and out of work for three years and were struggling to pay their mortgage -- so when the Bank of America worker told them they qualified under a federal program to have their loan modified, they finally saw a path to keeping their house.
"We walked out thinking, great," Tracy Davis said.
But weeks went by, and nobody contacted them, and they weren't able to reach anyone -- other than representatives at a call center in India.
"To this day, we've not heard from someone," she said. "It's February. This goes back to October 30."
The Davises, who live in Cincinnati, are among a slew of struggling homeowners coming forward with complaints about the way banks are operating under a federal loan modification program announced last year by the Obama administration. The program, called the Home Affordable Modification Program, aims to keep 3 to 4 million people in their homes. Federal statistics show banks are making plenty of offers, but relatively few of those loan changes are being made permanent -- of the more than 1 million homeowners who have started the required three-month trial period, only 116,000 have had their new terms made permanent.
The complaints have a common tune. Homeowners say the banks are giving them the runaround -- either by pledging to modify loans and then not following through, as with the Davis family, or by signing them up for the trial period and then leaving them in limbo.
"This is an epidemic problem," said Stuart Rossman, director of litigation with the National Consumer Law Center.
Under the terms of the Treasury Department program, participating banks that offer new loan terms are supposed to put homeowners through a three-month trial period. If the homeowners make timely payments and meet other conditions, the terms are supposed to become permanent.
But a pair of lawsuits filed in U.S. District Court in Boston this past week claimed Bank of America and Wells Fargo were violating those rules.
Rossman, who is helping to represent the plaintiffs, said banks -- in Massachusetts and across the country -- are stringing homeowners along for months without sealing the deal.
"That, to us, is inexcusable and a breach of contract," he said. "They are living in limbo while they are at risk of losing their home."
In the Massachusetts cases, the lawsuits describe a Kafkaesque scenario in which the banks have been holding up the loan terms because of missing paperwork that they either won't identify or never required in the first place.
For instance, homeowners Odalid and Wilfredo Bosque, according to one suit, entered the trial period from October to December of last year, but after they "timely made each of the payments," Wells Fargo did not offer a final agreement. The Bosques were told that they did not submit their paperwork, but when they called the bank, agents purportedly told them "there is no paperwork missing." Meanwhile, they continued to receive calls from the collections agency.
Wells Fargo issued a statement saying the bank has "diligently" worked with homeowners to complete the loan modifications for customers who meet the guidelines.
"Unfortunately, not all customers who enter a HAMP trial ultimately qualify for the program. In these instances, we work to determine if another foreclosure prevention option is available to them," the written statement said.
Rossman said that his borrowers qualified.
In Ohio, the Davises were among 10 plaintiffs in a suit filed against Bank of America in early February in U.S. District Court. The homeowners all say they experienced the same problem. According to the suit, they went to a Treasury-sponsored "borrower outreach" event in Cincinnati at the end of October at which bank representatives offered them modified home loans and pledged to send them the paperwork "within weeks."
The documents never came, they say.
Tracy Davis said the representative she and her husband met with gave them her phone number and extension and said they would receive a packet within seven business days. When it never came, she tried the number, but she was not able to reach the extension. She said she was sent instead to a call center in India that could not help, and that numerous e-mails to the representative went unanswered.
"It's just not right," Davis said.
She said she and her husband had good-paying jobs until late 2006, when she was laid off from the title insurance company she worked for in the midst of the housing market collapse. After that, her husband lost his job. Then she got hired doing administrative work, but she was laid off nine weeks later. Finally, she got a job at a grocery store, where her husband also recently started working -- but their income, she said, is about one-third of what it used to be. With mortgage payments at above $1,000, she was hoping to reduce it to below $400 by stretching her mortgage from 15 to 30 years.
"It's been a rough three years," she said.
She received a package from Bank of America after she filed the suit, but she has turned that over to her attorney.
Bank of America could not be reached for comment.
The Treasury program, part of a $75 billion effort, has been billed as a way to keep millions in their homes by preventing foreclosure.
Under the program, banks get $1,000 for every modification, and then they can receive $1,000 a year for up to three years. Borrowers, too, can get $1,000 a year from the government under the plan, though the incentives don't kick in until after the three-month trial. The program is meant to reduce monthly mortgage payments to 31 percent of income.
Government statistics from January show Bank of America has offered the modifications to nearly 330,000 homeowners, but it made only 12,761 permanent. Wells Fargo has made 188,749 offers and made 17,652 permanent. There's a gap between those figures for most banks. J.P. Morgan Chase, for instance, made more than 222,000 offers, but sealed 11,581 of them.
Homeowners aren't just having a hard time winning modifications under the Home Affordable Modification Program. Personal accounts detail trouble getting loan modifications of any kind.
At least one plaintiff in the Ohio case was told she did not qualify under HAMP but could get an extension anyway. But the same thing that happened to Davis happened to her. She says nobody called her, and when she called the bank she was told Bank of America had none of the information she gave the representative at the October meeting.
She was told she qualified under a separate program and forced to re-start the process several times, according to the suit, until she was told in January that she did not qualify. Then she was told again that she qualified for a review, and she re-submitted her paperwork once more.
Bruce W. Gavin, who lives in Glen Burnie, Md., said he's been trying for years to get his home loan modified to no avail.
He said his monthly payment had been climbing continuously since he and his wife refinanced a decade ago -- it went from about $800 to $1,600, which was too much. Gavin said his son has autism, his wife has lupus and he's the only one who works. He lost his job five years ago, and his new job doesn't pay enough to be able to afford the higher mortgage -- which was pegged to an interest rate of 10.25 percent.
Gavin said he was rejected for one program, but was finally able to go under consideration for a loan modification program through Bank of America. His request? Lower the interest rate and turn the 20 years left on the loan into a 30-year plan.
During that period, he said he was told not to make mortgage payments.
Then came a bank letter last month, telling him he had until Jan. 26 to accept an agreement that was even worse or be foreclosed. The interest rate would stay at 10.25 percent and he'd be required to make up for the lost payments, pushing his monthly payment to more than $2,000.
He signed it, in part out of concern that moving would aggravate his son's autism.
"It's been a mess," Gavin said. "I don't even know what to do."
Mark Lawson, an attorney with the Legal Aid Society of Southwest Ohio representing the plaintiffs in the Ohio federal case, said loan modification problems are widespread.
"It's pretty much everywhere," he said.
Move your money project and success
Anger among people against big banks is continued to swell. The banks are partly blamed for the slowdown in the economy. The blame is not limited to mortgage meltdown that led to crises but also the big bonuses executives received despite the slowdown.
“Move your Money” is the project that is aimed to get consumers to move away from biggest banks such as Bank of America, JP Morgan Chase, Wells Fargo and the Citigroup. The project is focused to create awareness to move money to community banks or smaller banks.
The website dedicated to this movement is MoveYourMoney.info. it has all information needed to move your accounts and the related “success stories” for community banks.
textbook transaction from Chase
It could have been a textbook transaction: A house is purchased. Over time, it increases in value enough to exceed the $279,000 balance on the mortgage. The first offer to buy the property covers the loan, the real estate commission, and closing costs.
Instead, after more than two years wrangling with the lender about a prepayment penalty - a dispute over $7,000 that resulted in 10 offers to buy going nowhere - the homeowner throws in the towel and deeds the house to the bank in lieu of foreclosure.
This is what happened to Kay Henson. In early 2007, amid a divorce, she decided she couldn't afford the $2,000 monthly payment on the house she and her now-former husband had bought in Townsend, Del., in 2003. The only recourse was selling it.
They had purchased the house for $170,000 from a family friend, she said, and for less than it was worth. They refinanced to bankroll a business her husband launched when they moved from New Jersey, and to pay for an addition.
The house wasn't a complete bargain. The family room was sinking into the ground and had severe termite damage. The entire floor had to be replaced. "We had to jack that side of the house up and replace the sills that the house was sitting on," she said. "Most of them had been eaten away."
Fast-forward to 2007. When Henson called the lender, JPMorgan Chase & Co., asking for the payoff amount, she said she was told $279,000. Immediately after the house went on the market, her real estate agent had a buyer willing to pay $325,000 because, thanks to all the improvements, the home's value had increased.
That sum would cover everything, including getting Henson and her two daughters moved back to New Jersey, without a penny to spare.
On the day of closing in June 2007, her agent told her that Chase now was saying there was a prepayment penalty of $7,000, boosting the payoff to $286,000. It could have been any amount, Henson couldn't afford it, and the sale was canceled. "I was in shock," she said. "I had nothing left, there was nothing I could do."
Over the next 30 months, Henson tried to get Chase, first on her real estate agent's advice, to negotiate a deal. No dice. She couldn't afford the $2,000 monthly mortgage payment, so she stopped making it. Meantime, she had 10 more offers to buy the house.
If what happened next sounds familiar, that's because it follows a pattern readers tell me about 10 times a day. I write about it here regularly.
"At one point, I tried selling it on my own so that I could avoid the Realtor fees," she said. "I called customer service over and over again, trying to get help, bounced around to different departments asking me to fax different paperwork to them." She would fax, but had to keep calling for information.
"After several voice mails to my agent, I demanded to talk to a supervisor," Henson said. "I was told that the woman who was supposed to be helping me was fired from the company, and that a new agent would be looking at my case."
The process started again. She lost the sale, and every contract thereafter, for the same reasons.
Finally, she spoke to someone at Chase who told Henson that her new agent, Damien, would call her at day's end.
He did, and Henson was "excited." She had a new offer on the house and spent the next few months faxing documents to Damien.
Then nothing. In August, another Chase rep told Henson that Damien had been transferred and no one knew the name of her new agent.
She had had enough.
"I told them that day to go ahead and foreclose on my house," Henson said. "I couldn't keep worrying anymore. I did all that I could."
Yes, Henson should have known about the prepayment penalty and asked whether the payoff figure included it. But Chase's performance won't win it an Academy Award, either.
The lender did sell the house, finally. For $189,000.
Dimon Decries Washington’s Treatment of Banks
Jamie Dimon, the chief executive of JPMorgan Chase, says he believes Washington has become increasingly erratic and unfair in its treatment of the banks over the last few months, and he now has some regrets about participating in the government’s Troubled Asset Relief Program.
“F.D.I.C. is going to cost us a lot of money. TARP cost us a lot of money. This bank tax, my first reaction was, ‘That will cost us a lot of money,’” Mr. Dimon said Thursday at the bank’s annual Investor Day conference in New York. “I think we are getting into the capricious, arbitrary and punitive behavior.”
Mr. Dimon said he did not know whether he would have taken the $25 billion that the government lent to JPMorgan during the 2008 financial crisis to bolster its capital if he knew then how troublesome the TARP money would be for the bank.
“The mistake was we let the government and the politicians not differentiate between irresponsible companies and prudent companies, from irresponsible, imprudent, and everybody got lumped together in the same boat,” Mr. Dimon said “Yes, a lot of those companies needed TARP to survive, and yes, a lot did not.”
Mr. Dimon has expressed some of these complaints before. During JPMorgan’s earnings conference call in January, he said it was unfair that the big banks would be the only ones forced to pay the Obama administration’s proposed bank tax to ensure that all the TARP money is repaid.
Mr. Dimon said Thursday at the Investor Day conference that he supported certain new regulations to secure the financial system, but not all of them. He said JPMorgan had always supported the creation of a systemic risk regulator, which would be controlled by the Federal Reserve, to monitor the largest and most interconnected banks in the nation.
He disagreed with one proposal to create a separate agency devoted to consumer protection, which would regulate a whole host of activities from mortgages to credit cards.
“We want better consumer protection; we just don’t want a new agency. We think it should be done by the O.C.C. and the Fed,” Mr. Dimon said, referring to the Office of the Comptroller of the Currency.
“Yes, you can say they didn’t do a great job, but they are professional people,” he said. The elegant solution is for Congress to tell them do a better job.”
Mr. Dimon may get his wish, thanks to some persuasive lobbyists in Washington. Senator Christopher J. Dodd, Democrat of Connecticut and chairman of the Senate Banking Committee, said last month that he might drop demands for a new agency after pushing for its creation.
Thursday was certainly a day for JPMorgan to express its concerns about regulatory changes in Washington. Earlier in the day, James E. Staley, the bank’s investment banking chief, acknowledged that regulatory changes being considered in Congress had influenced the bank’s acquisition strategy.
– Cyrus Sanati
I love when Chase comes by to find there own Documents. LOL
Westerville, Ohio, United States
Jpmorgan Chase & Co. (159.53.78.144) [Label IP Address]
chasehomefinancesucks.com/?tag=httpswwwchasecomchfmortgagehrm_documents
chasehomefinancesucks.com/?page_id=485
www.bing.com/search?FORM=DNSAS&q=https%3b%2f%2fwww.chase.com%2fchf%2fmortgage%2fhrm_documents
