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Govt. Should keep the sweep amount that equals the loan amount in return the warrants are cancelled. FnF keeps the remainder. Crooks go to jail and FnF are released. That is my perfect world.
Mortgage Bailout – Taking or Regulation?
Aug 20th, 2014 @ 09:58 am › Alan Ackerman
Pershing Square’s initiation of an action against the United States government for the stripping of profits from Fannie Mae provides the issue of whether Fannie Mae and its sister entities are effectively government agencies or really for-profit corporations.
Those who invested in these companies thought they were buying something that did not exist. If the government cannot regulate the funds of government controlled entities, what can investors expect? At the same time, when investors buy into corporations, they take the risk that the corporation may not be profitable. Here, the investors probably thought that the profitability was a “guarantee” because of the government’s involvement.
Today Online
“The net worth sweeps make plaintiffs – and all of the other common shareholders – ‘shareholders’ in name only,” according to the complaint, which three retirees who own Fannie Mae stock have joined as plaintiffs.
Pershing accused the government of violating the Fifth Amendment of the U.S. Constitution by taking private property for public use without just compensation. It seeks damages and other remedies.
The Treasury Department declined to comment. The Federal Housing Finance Agency, which is Fannie’s and Freddie’s conservator, did not immediately respond to a similar request.
Pershing’s lawsuit adds to public battles being waged by Ackman, including a bid with Valeant Pharmaceuticals International Inc for Botox maker Allergan Inc , and a campaign against nutrition company Herbalife Ltd , which he calls a pyramid scheme, a characterization the company denies.
http://www.nationaleminentdomain.com/2014/08/articles/national-eminent-domain/mortgage-bailout-taking-or-regulation/
But I do like your calculation.
I think it is more simple than that. Government was not even thinking about protecting tax payers. The offer was rejected because the administration is protecting it's cash cow. Does anybody remember the budget surplus because of the net profit sweep?
They are fools but they do often move stocks. This seems like a modestly positive article to me. In fact I think that it is the most positive article from that rag in some time for FnF.
timhoward717
The most important eight pages you may ever read.
20 Wednesday Aug 2014
Posted by timhoward717 in Uncategorized
Any American who reads this and does not feel compelled to stop it really needs to examine their beliefs.I am simply going to post the brief first 8 pages containing the preliminary statement from the Ackman/Commons injunction complaint.This requires very little analysis as it stands alone quite well. It presents very simply exactly what our government has done. This type of action is exactly what our founding fathers warned of, please folks for Gods sake take a few minutes and study theses eight pages. This is what happens when too many citizens choose blindly to believe the leaders of their parties. This is what happens when the majority of our citizens falsely believe that freedom is free. Thank God we have a judicial branch in our government, they are our last line of defense against this kind of government tyranny. Please send this brief portion of the complaint to your congressman and ask that if this is the America that your vote for them will get you? Send it to your newspaper editors and remind them the critical role they play in a democracy. The summons have gone out in this case today. How sweet it was reading each and every one. Demanding that those responsible answer to these crimes. I have attached a PDF below of both the summons and the entire complaint. Keep the Faith!
FOR THE DISTRICT OF COLUMBIA
LOUISE RAFTER,
3085 Ebano Drive,
Walnut Creek, CA 94598
JOSEPHINE RATTIEN
and
STEPHEN RATTIEN,
4101 Ingomar Street, N.W.
Washington, D.C. 20015
and
PERSHING SQUARE CAPITAL
MANAGEMENT, L.P.,
888 7th Avenue, 42nd Floor
New York, New York 10019
Plaintiffs,
v.
THE DEPARTMENT OF THE TREASURY,
1500 Pennsylvania Avenue, N.W.
Washington, D.C. 20220
THE FEDERAL HOUSING FINANCE AGENCY,
Constitution Center
400 7th Street, S.W.
Washington, D.C. 20024
JACOB J. LEW, in his official capacity as
Secretary of the Treasury,
1500 Pennsylvania Avenue, N.W.
Washington, D.C. 20220
and
MELVIN L. WATT, in his official capacity as
Director of the Federal Housing Finance Agency,
Constitution Center
400 7th Street, S.W.
Washington, D.C. 20024
Defendants.
Civil Action No. 14-1404
Case 1:14-cv-01404 Document 1 Filed 08/15/14 Page 1 of 45
2
COMPLAINT
Plaintiffs Louise Rafter, Josephine Rattien, Stephen Rattien, and Pershing Square Capital
Management, L.P. (“Pershing Square”) (collectively, the “Plaintiffs”), by and through their
undersigned attorneys, allege as follows:
PRELIMINARY STATEMENT
1. This is an action to redress an unlawful and enormous governmental expropriation
in connection with the conservatorships of the Federal National Mortgage Association (“Fannie
Mae”) and the Federal Home Loan Mortgage Corporation (“Freddie Mac”) (individually, a
“Company”; collectively, the “Companies”).
2. In 2012, the Federal Housing Finance Agency (“FHFA”), purportedly acting as
the conservator of the Companies, and the Department of the Treasury (“Treasury”)
(collectively, the “Government”) agreed between themselves to strip all profits from the
Companies and to sweep those profits to Treasury every quarter, in perpetuity (the “Net Worth
Sweep Agreements”).
3. That Government confiscation of the entire net worth of the Companies is
specifically intended not just to reap a windfall for the Government but to deprive the
Companies’ common shareholders of any economic value in their shares. Through the
confiscation, Treasury and FHFA simultaneously seek to “expedite the wind down of Fannie
Mae and Freddie Mac.”
4. The Government’s brazen conduct in establishing the self-dealing Net Worth
Sweep Agreements and requiring the ongoing quarterly sweeps (the “Net Worth Sweeps”) is
illegal. It violates the Administrative Procedure Act and the statute that Congress constructed to
govern conservatorship of the Companies. It breaches FHFA’s and Treasury’s fiduciary duties
to Plaintiffs, including by, in effect, converting Treasury’s special class of preferred shares of the
Case 1:14-cv-01404 Document 1 Filed 08/15/14 Page 2 of 45
3
Companies into a new super-senior form of preferred shares, for which the principal is never
satisfied despite Treasury’s receiving all residual value of the Companies—a right reserved to
common shares. Simultaneously, the Government’s new regime prevents Plaintiffs, who are
common shareholders, from participating in their rightful economic share of the Companies’
distributions. The Government’s efforts to prevent Plaintiffs from pursuing any of their rights or
powers as common shareholders, even as the Government illegally confiscates the economic
value of their shares and liquidates the Companies, violates fundamental corporate law
principles, including as established by state statute.
5. The Housing and Economic Recovery Act of 2008 (the “Act” or “HERA”)
obligates FHFA as conservator to “put [a Company] in a sound and solvent condition,” “carry on
[its] business,” and “preserve and conserve [its] assets and property.” HERA gives the
conservator no authority to liquidate or wind down the Companies, much less to confiscate their
entire net worth.
6. Treasury and FHFA decided to take the Companies into conservatorship soon
after the enactment of HERA in 2008. HERA had granted Treasury temporary authority to
purchase securities of each Company until the end of 2009. Shortly after appointing itself
conservator in September 2008, FHFA entered into a Senior Preferred Stock Purchase
Agreement with Treasury with respect to each Company (the “Stock Purchase Agreements”).
Those Stock Purchase Agreements allowed each Company to draw funds from Treasury in
exchange for various interests and compensation, including a quarterly dividend at a fixed annual
rate of 10% in cash or 12% in kind. Those basic terms remained in place until Treasury and
FHFA radically altered them, in effect creating an entirely new security, through the 2012 Net
Worth Sweep Agreements.
Case 1:14-cv-01404 Document 1 Filed 08/15/14 Page 3 of 45
4
7. Congress chartered Fannie Mae and Freddie Mac to operate as privately owned,
for-profit corporations. Their stocks were widely held before conservatorship and remain so
today. Plaintiffs in this action include a retired nurse who has held common shares of Fannie
Mae for approximately 25 years, and a retired psychiatric social worker and a retired scientist
who have held common shares of Fannie Mae for approximately 15 years.
8. HERA makes clear Congress’s intent to “maintain [each Company’s] status as a
private shareholder-owned company.” 12 U.S.C. §§ 1455(l)(1)(C)(v), 1719(g)(1)(C)(v). Under
HERA, only in receivership—in contrast to conservatorship—can the rights of shareholders be
“terminate[d],” id. § 4617(b)(2)(K)(i), and even then, the Act gives shareholders procedural
protections, including the right to seek judicial review. Indeed, upon taking the Companies into
conservatorship and entering into the Stock Purchase Agreements with Treasury, then-FHFA
Director James B. Lockhart publicly affirmed that, during conservatorship, the Companies’ stock
would remain outstanding and continue to trade, and “[s]tockholders w[ould] continue to retain
all rights in the stock’s financial worth” (emphasis added). As then-Treasury Secretary Henry
M. Paulson stated on September 7, 2008, “conservatorship does not eliminate the common stock”
(emphasis added).
9. The Companies’ financial results had improved markedly by 2012. By the end of
the second quarter of 2012, both Companies were profitable, with the prospect of exceptionally
large future profits.
10. Treasury’s authority to purchase securities of the Companies had expired years
earlier, at the end of 2009. But Treasury nevertheless devised the Net Worth Sweep Agreements
with the intention of preventing the Companies’ other shareholders from ever realizing any
economic benefit from their shares, of seizing all of the Companies’ profits for itself, and of
furthering its long-held plan to liquidate the Companies. It is no coincidence that Treasury and
Case 1:14-cv-01404 Document 1 Filed 08/15/14 Page 4 of 45
5
FHFA executed the Net Worth Sweep Agreements just days after the Companies publicly
disclosed their second quarter 2012 results showing strong profitability.
11. Treasury has reaped an enormous windfall from the Net Worth Sweeps, having
received a total of $218.5 billion. As a result of the Net Worth Sweeps, from 2013 through
September 2014, the Government will have expropriated approximately $130.5 billion more
from the Companies than it was owed under the fixed 10% cash dividend option established in
the Stock Purchase Agreements ($163.4 billion versus $32.9 billion). As of September 2014, the
Government will have stripped and swept approximately $31 billion more from the Companies
than it had invested in them ($218.5 billion versus $187.5 billion).
12. The Net Worth Sweeps have continued unabated: every quarter, FHFA—
purportedly acting as the Companies’ conservator—directs each Company to pay its entire
earnings to Treasury, in cash, without regard to any other shareholders. The scale of the
confiscation is vast: the $31 billion that the Government has to date swept from the Companies
above what it had invested in them equals 4.6% of the total U.S. federal budget deficit during
fiscal year 2013. The Congressional Budget Office estimated in February 2014 that the Net
Worth Sweeps in 2014 alone will equal 0.5% of this year’s U.S. gross domestic product.
13. Moreover, under the terms of the self-dealing Net Worth Sweep Agreements, not
only does Treasury receive the entire net worth of both Companies, but its liquidation
preferences remain intact and undiminished. (Treasury’s liquidation preference for each
Company comprises an initial $1 billion liquidation preference plus the amount of Treasury’s
capital infusions into each Company, totaling $187.5 billion.) Thus, if and when FHFA is
ultimately appointed receiver for the depleted Companies, Treasury having expropriated all of
their profits, Treasury would still stand ahead of all other shareholders with a combined,
undiminished liquidation preference of approximately $189.5 billion.
Case 1:14-cv-01404 Document 1 Filed 08/15/14 Page 5 of 45
6
14. The Government’s Net Worth Sweeps do not just harm the Companies’ other
shareholders. As further evidence of the Government’s disregard for its statutory
responsibilities, the Net Worth Sweeps eviscerate and imperil the Companies. Freddie Mac has
indicated that, “as a result of the net worth sweep dividend provisions of the senior preferred
stock, [it does] not have the authority to build and retain capital from the earnings generated by
[its] business operations and will not be able to build or retain any net worth surplus or return
capital to stockholders other than Treasury” (emphasis added). Fannie Mae has repeatedly
warned that it will not be able to withstand any serious economic downturn because it cannot
build or retain any capital as a result of the Net Worth Sweeps. Rather than conserving the
Companies’ assets, Defendants are confiscating the entire net worth of the Companies and
effectively liquidating them under the guise of conservatorship.
15. Defendants’ conduct is unlawful. It violates FHFA’s statutory authority and
obligations as the conservator of each Company to preserve and conserve the assets of the
Companies. It constitutes an unauthorized purchase of what are in effect new securities years
after Treasury’s authority to do so expired. It represents blatant self-dealing by the
Government—which is both the Companies’ conservator (FHFA) and their controlling
shareholder (Treasury)—to strip and expropriate all profits from the Companies for the
Government’s sole benefit, to the detriment of Plaintiffs, and thus breaches Defendants’
fiduciary duties to Plaintiffs. The Net Worth Sweeps make Plaintiffs “shareholders” in name
only, rather than the ultimate beneficiaries of the Companies’ value that the law entitles them to
be. The Government’s perpetual confiscations strip them of all economic value in their shares.
16. To make matters worse, the Government has doubled down on its unlawful
confiscation of the entire net worth of the Companies, by claiming that the shareholders have no
right to the procedural protections that they would receive if the Government took the
Case 1:14-cv-01404 Document 1 Filed 08/15/14 Page 6 of 45
7
Companies into receivership. The only legal way under HERA for the Government to liquidate
the Companies and terminate their shares is via receivership. But Treasury and FHFA chose to
take the Companies into conservatorship, and have no authority to flout the clear distinction that
HERA draws between conservatorship and receivership. Indeed, the Government’s actions
directly contradict its and the Companies’ prior statements regarding conservatorship. In
September 2008, for example, FHFA publicly emphasized that “nder a conservatorship, the
Company is not liquidated. . . . The Conservator cannot make a determination to liquidate the
Company. . . . Receivership is a statutory process for the liquidation of [the Company].” FHFA
even issued a final rule in 2011 with commentary explaining that “allowing capital distributions
to deplete [a Company’s] conservatorship assets would be inconsistent with the agency’s
statutory goals.” Both of the Companies have publicly stated that “unlike conservatorship, the
purpose of which is to conserve [their] assets and return [them] to a sound and solvent condition,
the purpose of receivership is to liquidate [their] assets and resolve claims against [them].” The
Government’s assertion now that the shareholders and the courts have no power to stop its
unlawful conduct is incorrect, contrary to its own public statements, and antithetical to the rule of
law.
17. Indeed, the Government maintains that Plaintiffs have no rights or powers
whatsoever as common shareholders of the Companies, even while it confiscates all economic
value of their shares and illegally winds down the Companies. For example, FHFA summarily
denied valid written demands by Pershing Square to the Companies’ boards of directors for a
books and records inspection, thus violating a fundamental right of common shareholders under
state corporate law. In doing so, FHFA asserted that Pershing Square, as a common shareholder
of the Companies, had no rights or powers at all. The Government is using the conservatorships,
impermissibly, as a sword to expropriate for itself the Companies’ entire net worth and wind
Case 1:14-cv-01404 Document 1 Filed 08/15/14 Page 7 of 45
8
down the Companies, while simultaneously using them as a shield to attempt to foreclose
Plaintiffs from pursuing any legal rights and powers as common shareholders.
18. The Government’s conduct also violates state fiduciary duty law by giving
Treasury’s special class of preferred stock rights that reside exclusively with the common
shareholders. Fundamental corporate law allows corporations to make cash payments in only a
few ways: meeting business expenses (e.g., payments to suppliers, employees, and for taxes);
paying interest and principal payments on debt; issuing dividends to preferred and common
stockholders; and, finally, making distributions in liquidation. Any other extraction of cash is
contrary to law—in this case, an unlawful Government confiscation. If the Government is
claiming that it has not engaged in an illegal confiscation of the entire net worth of the
Companies, then it has violated corporate law in another way: it has granted itself super-senior
preferred stock, unilaterally appropriating all rights of common shares to residual value and
income generated by the Companies but without extinguishing or even reducing the principal of
the previously issued senior preferred stock. The holders of other senior securities (other
outstanding preferred) and the common stock have thus suffered unique harm. Plaintiffs bring a
direct claim for breach of fiduciary duty to remedy the harm caused to them individually by the
Government.
19. This is an action to put an end to the Government’s unlawful conduct. Plaintiffs
seek, and respectfully submit that they are entitled to, a declaratory judgment that the Net Worth
Sweep Agreements and the Net Worth Sweeps pursuant to them are unlawful; injunctive relief
barring Defendants’ ongoing implementation of the Net Worth Sweeps; and rescission or other
equitable and ancillary relief to undo the harm Defendants have done.
Case 1:14-cv-01404 Document 1 Filed 08/15/14 Page 8 of 45
81514-ackmancommons injunction-complaint
8:19:14 Summons 2IN THE UNITED STATES DISTRICT COURT
http://timhoward717.com/
Excellent post. Wraps it all up in an understandable way. Thanks
Ah, thanks
Wouldn't multi family be apartments for people who can not afford a house? That is my assumption.
I wonder if John Carney and Jay Carney are related.
WASHINGTON — Vice President Joe Biden swore in former San Antonio Mayor Julian Castro as secretary of housing and urban development yesterday, completing the formalities of a post many see as a platform for a potential vice presidential bid.
The ceremony in the Indian Treaty Room of the Eisenhower Executive Office Building next to the White House came a week after the newly minted cabinet member dined with Bill Clinton, fueling speculation about a slot on former first lady Hillary Clinton’s expected White House ticket in 2016.
Castro, 39, has been on the job at HUD since July 28, when Chief Judge Richard W. Roberts of the United States District Court in Washington administered the oath of office at agency headquarters.
Yesterday’s swearing-in with Biden, himself a potential 2016 presidential aspirant, will be followed this week by Castro’s “Opportunity and Investment” tour in Chicago and Gary, Ind.
Castro becomes HUD’s 16th secretary and the first Latino to lead the agency since Cuban-born Mel Martinez was appointed more than a decade ago by President George W. Bush.
Castro took the oath with his wife, Erica Castro, holding the Bible.
Castro’s daughter, Carina, stood in front of her mother, holding a brown-and-black stuffed version of the vice president’s dog, Champ, which Biden customarily gives to children at events he attends.
Castro faces serious issues as HUD secretary, including building up the system of government support of home mortgages, which took a battering in the 2008 recession. Castro will be a key player in deliberations on the future of mortgage giants Freddie Mac and Fannie Mae.
But in the political world, the HUD post is viewed as little more than a bus stop for a young, up-and-coming figure whose Texas origin and Mexican-American roots are key assets for the Democratic Party.
Castro’s dinner with Bill Clinton at the Clintons’ Washington home this month sent speculation into overdrive that the former San Antonio mayor will be on Hillary Clinton’s vice presidential short list, should she become a candidate in 2016.
But political pundits say that although Castro’s star is rising, he is far from a shoo-in.
http://www.dispatch.com/content/stories/national_world/2014/08/19/castro-takes-oath-as-16th-hud-secretary.html
Thank you
Thank you
I second that request. I read it several times and it seems contridicting. Make it understandable for us/me. Thanks
Fannie Mae: Joint Status Report Regarding August 7 Status Conference by TimHowards717
Fannie Mae Freddie Mac FHFA Federal National Mortgage Assctn Fnni Me (FNMA) Bove
Joint Staus report filed a day early? Time to change flight plans! Be sure to look at the order changing the conference from Thursday to Monday. Keep the faith!
JOINT STATUS REPORT REGARDING AUGUST 7 STATUS CONFERENCE…
Fannie Mae: Joint Status Report Regarding August 7 Status Conference
Case 1:13-cv-00465-MMS Document 77 Filed 08/05/14
IN THE UNITED STATES COURT OF FEDERAL CLAIMS
FAIRHOLME FUNDS, INC., et al., Plaintiffs, v.
THE UNITED STATES, Defendant.
No. 13-465C
Judge Sweeney
JOINT STATUS REPORT REGARDING AUGUST 7 STATUS CONFERENCE
Consistent with this Court’s Orders of April 4, 2014 (Doc. 40) and April 9, 2014 (Doc. 41), the parties hereby respectfully submit this joint status report to alert the Court that they are of the view that a status conference would be appropriate to discuss issues that have arisen in the course of discovery. The following attorneys for the Fairholme Plaintiffs plan to appear in per-son at the August 7 status conference:
Charles J. Cooper, Cooper & Kirk, PLLC
David H. Thompson, Cooper & Kirk, PLLC
Vincent J. Colatriano, Cooper & Kirk, PLLC
The following attorney for the Fairholme Plaintiffs plans to appear by telephone:
Christine Cubias, General Counsel, Fairholme Funds, Inc.
The following attorneys for the United States plan to appear in person:
Kenneth M. Dintzer
Gregg M. Schwind
Daniel B. Volk
The following other attorneys plan to appear by telephone:
Zac Hudson, Bancroft PLLC (representing Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA))
Michael Ciatti, King & Spalding (representing Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC))
Finally, in accordance with the Court’s April 9 Order, counsel for the Fairholme Plain- tiffs has contacted counsel for the plaintiffs in the related cases pending before this Court. The following attorneys intend to listen to the status conference telephonically:
Michael Barr, Dentons (Arrowood Indemnity Corp. v. United States, No. 13-698)
RobertM. Roseman, Spector Roseman Kodroff & Willis (WashingtonFederal v. United States, No. 13-385)
Jennifer Fountain Connolly, Hagens Berman (WashingtonFederal v. United States, No. 13-385)
Noah Schubert, Schubert Jonckheer & Kolbe LLP (Fisher v. United States, No. 13-608, Reid v. United States, No. 14-152)
Miranda Kolbe, Schubert Jonckheer & Kolbe LLP (Fisher v. United States, No. 13-608, Reid v. United States, No. 14-152)
Ed Haber, Shapiro Haber & Urmy LLP (Fisher v. United States, No. 13-608, Reid v. United States, No. 14-152)
Date: August 5, 2014 Respectfully submitted, STUART F. DELERY
Assistant Attorney General
s/ Robert E. Kirschman, Jr.
ROBERT E. KIRSCHMAN, JR.
Director
s/ Kenneth M. Dintzer
KENNETH M. DINTZER
Acting Deputy Director
Commercial Litigation Branch
U.S. Department of Justice
s/ Charles J. Cooper
Charles J. Cooper
Counsel of Record for Plaintiffs
COOPER &KIRK, PLLC
1523 New Hampshire Avenue, N.W.
Washington, D.C. 20036
(202) 220-9600
(202) 220-9601 (fax)
ccooper@cooperkirk.com
Of counsel:
Vincent J. Colatriano
8:7 JOINT STATUS REPORT REGARDING AUGUST 7 STATUS CONFERENCE 2
http://www.valuewalk.com/2014/08/fannie-mae-and-fairholme-joint-status-report/
Were there previous status conferences? I know that they were scheduled initially. In other status conferences were so many other plaintiffs lawyers in other similar suits listening in on the telephone? I don't recall this. It seems like there is more interest now.
Well I do like conspiracy theories. This is a good one.
Thanks
Warren has a "hoard of cash" according to cnbc just now. He is looking for that one perfect stock to buy. Any suggestions?
Excellent idea don't let the door hit you in the fannie.
Does anybody know how this old news plays into the current lawsuits? It was before I started buying FnF but is it srill relevant?
SEC Charges Former Fannie Mae, Freddie Mac Executives with Fraud
By Elizabeth Murphy | December 16, 2011 11:18 am
Printable Version
Rights/Reprints
The Securities and Exchange Commission charged six former top executives from Fannie Mae and Freddie Mac today have been charged today with securities fraud.
The six former executives knowingly underreported the companies’ loan holdings and fooled investors by giving them “false comfort,” according to an SEC news release.
The three former Fannie Mae Executives charged in the SEC complaint include:
Daniel H. Mudd, former chief executive officer
Enrico Dallavecchia, former chief risk officer
Thomas A. Lund, former executive vice president for the company’s single family mortgage business
The three former Freddie Mac executives charged in a separate SEC complaint include:
Richard F. Syron, former CEO and chairman of the board
Patricia L. Cook, former executive vice president and chief business officer
Donald J. Bisenius, former executive vice president for the single family guarantee business
“Fannie Mae and Freddie Mac executives told the world that their subprime exposure was substantially smaller than it really was,” Robert Khuzami, Director of the SEC’s Enforcement Division, said in the release. “These material misstatements occurred during a time of acute investor interest in financial institutions’ exposure to subprime loans, and misled the market about the amount of risk on the company’s books.”
The suit against former Fannie Mae executives Dallavecchia, Lund and Mudd alleges that when the company began disclosing its exposure to subprime loans in 2007, it reported less than one-tenth of the loans that met the description it provided. The suit also alleges that the executives knew and approved of the decision to underreport its Alt-A loan holdings, disclosing in 2007 that it was 11 percent of its single family loans portfolio when it was actually almost 18 percent.
The suit against former Freddie Mac executives alleges that they falsely led investors to believe the firm used a wide definition of subprime loans. According to the complaint, Syron and Cook publicly said the business had “basically no subprime exposure,” but in reality it was exposed to about $141 billion of loans internally. This accounted for about 10 percent of the loan portfolio in 2006, and grew to almost $244 billion, making it 14 percent of the portfolio, in 2008, according to the suit.
Both Fannie Mae and Freddie Mac have signed non-prosecution agreements with the commission as litigation moves forward, according to the release.
http://www.mainjustice.com/2011/12/16/sec-charges-former-fannie-mae-freddie-mac-executives-with-fraud/
Bank Stock Roundup: Settlement, Restructuring Continues - Citigroup, BofA and JPMorgan in Focus
by Zacks Equity Research Published on August 04, 2014 | No Comments
JPM COF WFC C BAC FMCC FNMA
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Efforts of major banks to conclude litigation issues pertaining to their past business conduct remained the key trend in the last five trading days. Litigation issues dominated the headlines. Among others, JPMorgan Chase & Co.’s (JPM - Analyst Report) recent mortgage securities deal worth $4.5 billion with nearly 21 institutional investors was remarkable.
Nevertheless, the pessimism was somewhat offset by the restructuring and streamlining initiatives announced by some banks during the week. Amid ongoing instability in Russia and Ukraine, these banks are curtailing their Russian exposure. These moves should bolster the banks’ financial performance and drive operational efficiencies going forward. (Read last to last week’s developments: Regions, SunTrust, BB&T in Focus Following Q2 Earnings)
Recap of the Week’s Most Important Developments:
1. Bank of America Corp. (BAC - Analyst Report) announced a settlement associated with the sale of risky residential mortgage-backed securities (RMBS) by Countrywide Financial Corp. (acquired in 2008), for which the bank has been ordered to pay $1.27 billion.
The fine was levied by the U.S. District Judge Jed Rakoff in Manhattan, after a jury held BofA accountable to pay penalty for selling defective loans to Fannie Mae (FNMA) and Freddie Mac (FMCC) from Aug 2007–May 2008 via Countrywide. The company was accused of selling loans underlying these RMBS without properly assessing the creditworthiness of borrowers. (Read more: BofA Fined $1.3B for 'Hustle' Fraud, May Appeal)
2. JPMorgan Chase & Co.’s $4.5-billion mortgage securities deal with nearly 21 institutional investors has been approved by the trustees of the securities. The settlement accord was announced in Nov 2013, just a few days prior to the $13-billion deal with the U.S. regulators. Nevertheless, the settlement accords for 6 of the 330 RMBS trusts issued by JPMorgan and Bear Stearns have been rejected by the trustees. Further, 27 trusts have obtained extension till Oct 1, 2014 to approve the accord.
JPMorgan also reached a $650,000 settlement with the Commodity Futures Trading Commission (CFTC) to resolve the claims of filing falsified reports on the trading positions of some of its large traders. This settlement clears the bank of charges made by the U.S. futures and option markets regulator. Besides monetary penalty, the federal regulator has ordered the firm to tighten its systems associated with reports of the large traders. (Read more: JPMorgan to Pay $650K for Clearing CFTC False-Report Charges)
3. In an effort to strengthen its commercial banking operations in the Asia-Pacific region, Citigroup Inc. (C - Analyst Report) intends to hire around 100 bankers. The company, which has presence in more than 100 countries, operates commercial banking business in 32 countries with around 4,000 employees. This hiring represents an increase of 10% in the company’s employee base in its Asia-Pacific commercial banking business. (Read more: Citigroup to Hire 100 Bankers in Asia, Targets Smaller Clients)
4. In a bid to streamline its technology platform, JPMorgan has decided to cut hundreds of technology support jobs in its corporate and investment bank (CIB) division. As part of the downsizing process, jobs will be cut in New York, Chicago, Tampa and Dubai operations. JPMorgan had already indicated a job slash nearly a month and a half ago. In case of a persistent lull in the trading business, the bank had hinted, a large-scale pink-slip handout might take place in the Investment Banking division, with compensation levels going down as well. (Read more: JPMorgan to Slash Tech Support Jobs Amid Trading Worries)
5. Bound by the regulatory pressure, Citigroup announced that it inked a deal with an investment firm – Lexington Partners to vend 80% of its limited partnership interest worth $1.5 billion in Metalmark Capital Partners II (MCP II). Following the announcement of revised business terms between Citigroup and Metalmark in Dec 2013, Citi will continue to tender 20% of its limited partnership interest to existing MCP II limited partners. The terms of the agreement with Lexington, which is anticipated to close in fourth quarter of 2014, were not disclosed. Moreover, the deal awaits certain customary conditions.
To abide by the Dodd Frank Wall Street Reform and Consumer Protection Act, Citigroup has taken the recent move of dropping its alternative holdings in recent years. Notably, in 2013, Citi Venture Capital International was sold to Rohatyn Group for an undisclosed amount.
Price Performance
Despite reporting decent second-quarter results, banking stocks continued to depict a downward trend. The performance of banking stocks remained subdued owing to legal hassles and restructuring costs. Hence, the stocks ended last week on a pessimistic note.
Company
Last Week
Last 6 months
JPM
-4.6%
3.4%
BAC
-3.4%
-10.5%
WFC
-2.4%
12.6%
C
-3.2%
1.5%
COF
-2.5%
13.5%
USB
-2.9%
5.2%
PNC
-2.2%
3.8%
In the last five trading sessions, JPMorgan and BofA were the major losers, with their share prices declining 4.6% and 3.4%, respectively.
Over the last 6 months, Capital One Financial Corporation (COF - Analyst Report) and Wells Fargo & Company (WFC - Analyst Report) were the top performers, with their shares gaining 13.5% and 12.6%, respectively. However, BofA witnessed a 10.5% price decline over the same time frame.
http://www.zacks.com/stock/news/142565/bank-stock-roundup-settlement-restructuring-continues-citigroup-bofa-and-jpmorgan-in-focus
Goldman Says It Exercised Care In Selling Disputed RMBS
Share us on: By Daniel Wilson
Law360, Washington (August 04, 2014, 12:37 PM ET) -- Goldman Sachs & Co. on Friday hit back at the Federal Housing Finance Agency’s bid to extinguish its due diligence and reasonable care defenses in a New York federal suit alleging the bank knowingly sold billions of dollars of toxic residential mortgage-backed securities to Fannie Mae and Freddie Mac.
In a memorandum opposing the FHFA’s bid for partial summary judgment, Goldman argued that the agency had not met its burden of proof to show the bank had failed to conduct reasonable due diligence or show reasonable...
I don't have a subscription. Does anyone else?
http://www.law360.com/securities/articles/563681?utm_source=rss&utm_medium=rss&utm_campaign=section
Expanded jobless benefits prevented more than 1 million foreclosures
August 4, 2014, 12:21 PM ET
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Rather than shoving jobless homeowners through underperforming federal programs that aim to reduce mortgage payments, new research suggests a simpler solution to support troubled families: Give them more money.
By helping families make their debt payments, expanding unemployment-insurance benefits cut the likelihood of mortgage delinquency, and prevented about 1.4 million foreclosures between 2008 and 2012, a team of researchers at the Federal Reserve and Northwestern University wrote in a report titled “Positive Externalities of Social Insurance: Unemployment Insurance and Consumer Credit.”
“This finding implies that unemployment insurance played an important role in preventing mortgage default during the Great Recession, despite neither being targeted at mortgage borrowers nor being promoted as a housing policy,” according to the working paper from the National Bureau of Economic Research, a Cambridge, Mass.-based organization.
Those 1.4 million avoided foreclosures (the paper’s Table VII shows the annual number of prevented foreclosures) represented a large chunk of distressed properties during that time period. About 5 million foreclosures were completed between 2008 and 2012, according to data from CoreLogic, an Irvine, Calif.-based analysis firm.
There were other benefits from jobless benefits, too, researchers found. Banks who saw a lower default risk expanded credit access. Mortgage investors lost less than they otherwise would have. Local governments took a smaller hit.
Also, more owners hanging onto their properties meant that homes stood a better chance of not falling into disrepair, which in turn would have sunk property values in their neighborhoods.
“Policies improving borrowers’ ability to pay can be effective in reducing delinquency risk, even among those with incentive to strategically default,” researchers wrote. “[Unemployment-insurance] extensions during the Great Recession created a substantial welfare gain, especially in light of evidence that the extensions created minimal distortions to job search.”
And here’s one key finding for housing-policy wonks: Fewer troubled properties cut the government’s costs for expanding jobless benefits by narrowing the number of bad loans that would have been covered by federally controlled mortgage-finance giants Fannie Mae FNMA and Freddie Mac FMCC . Savings related to Fannie and Freddie decreased net costs for the federal government’s jobless-benefits expansion by about one-fifth, researchers estimated.
“These saving are particularly notable because the fiscal cost of extending [unemployment insurance] was a key consideration in the public policy debate,” the authors wrote.
–Ruth Mantell
http://blogs.marketwatch.com/capitolreport/2014/08/04/expanded-jobless-benefits-prevented-more-than-1-million-foreclosures/
At least there is no bad news out.
Riskychick or peskychick, try to think cup half full. LOL
Bruce Berkowitz Q2 Letter: FNMA, FMCC Prefs 15% Of Portfolio
by VW StaffAugust 04, 2014, 12:26 pm
The latest from Bruce Berkowitz!
the Shareholders and the Directors of The Fairholme Fund
The Fairholme Fund (Trades, Portfolio) (the “Fund” or “FAIRX” or “Fairholme”) gained 8.72% versus 7.14% for the S&P 500 Index (the “S&P 500”) for the six-month period that ended June 30, 2014. The following table compares the Fund’s unaudited performance (after expenses) with that of the S&P 500, with dividends and distributions reinvested, for various periods ending June 30, 2014.
Bruce Berkowitz
Bruce Berkowitz
At June 30, 2014, the value of a $10.00 investment in the Fund at its inception was worth $59.90 (calculated by assuming reinvestment of distributions into additional fund shares) compared to $17.64 for the S&P 500. FAIRX returned six and a half times more than the S&P 500 on a $10.00 investment over fourteen and a half years. Of the $59.90, the share price (net asset value per share) was $42.62 and the value of distributions reinvested was $17.28. This difference, more than anything, demonstrates how the Fund has outperformed the market (as represented by the S&P 500) over the long run.
The potential advantages of our long-term focused investment approach are most evident when evaluating our performance over any 5-year period since the inception of FAIRX. Fairholme has achieved 111 positive 5-year return periods and only 4 negative 5-year return periods, compared with 88 positive 5-year return periods and 27 negative 5-year return periods for the S&P 500. The Fund’s average rolling 5-year return was 72.41% versus 27.26% for the S&P 500. The Fund has outperformed the S&P 500 in 96 of 115 5-year periods, calculated after each month’s end. The Fund’s worst 5-year-period return was (6.89)% versus (29.05)% for the S&P 500. In its best 5-year period, the Fund’s return was 185.26% versus the S&P 500’s best return of 181.57%.
Rolling 5-Year-Period Returns*
FAIRX S&P 500
Best +185.26% +181.57%
Worst (6.89)% (29.05)%
Average +72.41% +27.26%
Positive Performance Periods 111 (96.5%) 88 (76.5%)
AIG (AIG) common stock and warrants are nearly one-half the value of the Fund’s portfolio due to appreciation of these securities – even after realizing profits on the sale of millions of shares of AIG common stock.
Fannie Mae (FNMA) and Freddie Mac (FMCC) preferred stocks and common shares constitute approximately 15% of the Fund’s portfolio. We believe that the two companies may be the most important financial institutions in the United States – perhaps the world – and directly support housing affordability and accessibility, including the uniquely American 30-year fixed-rate mortgage. They are a major reason why our country did not enter a second Great Depression, and are proving to be the most successful taxpayer investments of the Great Recession.
Bank of America (BAC) common stock is the Fund’s third largest position. Acquiring and then fixing Countrywide Financial has cost the bank tens of billions. Finishing the task will, in our view, allow much more to drop to the bank’s bottom line.
Sears (SHLD) remains the Fund’s least successful investment, yet has the highest potential based on our estimates of tangible values.
Tailwinds are building at St. Joe!
Patience will pay.
Onward and upward,
Bruce Berkowitz
Managing Member
Fairholme Capital Management
*Represents the cumulative percentage total returns over a five-year rolling period (calculated after each month’s end) since inception through June 30, 2014. Monthly rolling 5-year performance is a period of 60 consecutive months determined on a rolling basis, with a new 60-month period beginning on the first day of each calendar month since the inception of the Fund.
The Portfolio Manager’s Report is not part of The Fairholme Fund (Trades, Portfolio)’s Semi-Annual Report due to forward-looking statements that, by their nature, cannot be attested to, as required by regulation. The Portfolio Manager’s Report is based on calendar-year performance. A more formal Management Discussion and Analysis is included in the Semi-Annual Report. Opinions of the Portfolio Manager are intended as such, and not as statements of fact requiring attestation. All references to portfolio investments of The Fairholme Fund (Trades, Portfolio) are as of the latest public filing of The Fairholme Fund (Trades, Portfolio) with respect to such holdings at the time of publication, unless specified.
Bruce Berkowitz Comments on Fannie Mae and Freddie Mac
By Vera Yuan - 2 minutes ago
About FNMA, FMCC
Fannie Mae (FNMA) and Freddie Mac (FMCC) preferred stocks and common shares constitute approximately 15% of the Fund’s portfolio. We believe that the two companies may be the most important financial institutions in the United States – perhaps the world – and directly support housing affordability and accessibility, including the uniquely American 30-year fixed-rate mortgage. They are a major reason why our country did not enter a second Great Depression, and are proving to be the most successful taxpayer investments of the Great Recession.
http://m.gurufocus.com/news_read.php?id=271570
Judge’s Ruling Against Bank of America Showcases a Novel Enforcement Strategy
By PETER J. HENNING
August 4, 2014 11:32 am
Photo
Judge Jed Rakoff, of Federal District Court in Manhattan, in his office.
Judge Jed Rakoff, of Federal District Court in Manhattan, in his office.Credit Victoria Will/Reuters
Teddy Roosevelt’s admonition to “speak softly and carry a big stick” applies to the Justice Department these days as it seeks multibillion-dollar penalties from banks for their role in the financial crisis. One of its sticks just got a little bit bigger as a result of a decision last week by Judge Jed S. Rakoff of Federal District Court in Manhattan in a lawsuit against Bank of America.
After persistent criticism for not pursuing cases related to the collapse of the housing market, the Justice Department in 2012 started using a once-obscure provision of the Financial Institution Reform, Recovery, and Enforcement Act, known as Firrea, to sue banks. The government targeted banks that helped fuel the boom in subprime mortgages by making loans to unqualified borrowers and then packaging them as residential mortgage-backed securities sold to investors to finance more loans.
The statute, 12 U.S.C. § 1833A, which was approved in 1989 in response to the savings and loan crisis, is a bit of an oddity in the federal arsenal. It allows the Justice Department to seek a penalty by proving a criminal violation, including mail or wire fraud “affecting a federally insured financial institution,” in a civil lawsuit that only requires proof of the crime by a preponderance of the evidence. A penalty up to $1 million per violation can be assessed, and if the defendant realizes “pecuniary gain” or causes a “pecuniary loss,” then the maximum penalty is “the amount of such gain or loss.”
The courts have turned back challenges to the scope of the law. Federal district court judges have rejected arguments by banks that a fraud can occur only if it affects a different financial institution. Instead, the judges have found, the bank committing the crime can also be the one that is affected. So even a self-inflicted wound would be enough to violate Firrea and subject the bank to additional costs.
A jury found that Countrywide Financial, which Bank of America acquired in 2008, engaged in a fraudulent scheme to sell questionable mortgages through a program called the High-Speed Swim Lane, or “the hustle” for its acronym, which linked bonuses to how fast bankers could originate loans. The decision on the amount of the penalty was left to Judge Rakoff, who presided over the trial, for what he described as a “brazen fraud” that was “driven by a hunger for profits and oblivious to the harms thereby visited.”
The issue for the judge was how to determine the formula for finding the “gain or loss” from a violation, terminology the statute left undefined. The answer depends, of course, on where you start.
To figure out what constitutes a gain, Judge Rakoff noted that a penalty under Firrea is largely the same as a fine in a criminal case, a form of punishment for violating the criminal law rather than recovery of a defendant’s ill-gotten gains. The statute is civil, not criminal. Yet the judge treated it much the same as a fine by taking an expansive approach to calculating Bank of America’s gains.
Rather than subtracting any benefits from the mortgages that were sold, Judge Rakoff determined that the fraud affected every mortgage because the buyers – the government-controlled finance giants Fannie Mae and Freddie Mac, in this case – would never have purchased the mortgages in the first place had they been told about Countrywide’s shoddy loan approval practices. He compared the transactions to buying a diseased cow, noting that even if there was some residual value, the fraud occurred in a sale that never should have taken place.
This approach is quite favorable to the government because it means that the gross amount of the mortgages at issue was the starting point for the calculating the maximum penalty rather than trying to figure out how each loan actually performed. The more loans the bank made, the greater the penalty that can be assessed under Firrea.
Judge Rakoff calculated that the hustle program generated over 17,000 loans with a total value of $2.96 billion, so that was the maximum penalty he could impose. Rather than assess the full amount, however, the judge excluded those loans that were made to qualified buyers, so the penalty was reduced to $1.26 billion. Bank of America can appeal the jury verdict and penalty.
That is a hefty sum, and the penalty formula gives the Justice Department additional leverage in other pending cases if Judge Rakoff’s analysis is followed by the judges presiding over them. The number of loans made through the hustle program was not significant compared with the millions of shoddy mortgages issued in the years before the financial crisis. And Firrea has a 10-year statute of limitations, so the Justice Department has time to file more suits.
Nor is the statute limited to cases involving mortgage underwriting practices. The mail and wire fraud statutes reach any scheme to defraud, and the Justice Department has sued Bank of America in two other cases for how it serviced mortgages and packaged them into mortgage-backed securities. As DealBook reported, the bank has been trying to negotiate with the Justice Department to settle claims over mortgage activities at Countrywide and Merrill Lynch, two ill-fated acquisitions that have cost it billions of dollars. One stumbling block to a resolution has been the amount of any penalty assessed, and Judge Rakoff’s analysis of the maximum Firrea penalty is sure to stiffen the government’s resolve to demand even more money from the bank.
The Justice Department has also brought a Firrea charge against Standard & Poor’s for issuing inflated ratings of mortgage securities from 2004 to 2007. The potential liability could be substantial if a fraudulent scheme can be shown because the total value of the securities would be the starting point for assessing a penalty, not how the ratings might have affected their value.
Firrea has turned out to be a powerful weapon for pursuing settlements from banks that played a role in fueling the housing boom that contributed so much to the financial crisis. And with a little help from Judge Rakoff, it is now even more formidable.
http://dealbook.nytimes.com/2014/08/04/the-governments-big-stick/?_php=true&_type=blogs&_r=0
Too-Big-to-Fail Bankers Have Not Been Charged Criminally for the Mortgage-backed Securities Collapse But Plenty of People Have Been Criminally Charged for Mortgage Fraud Perpetrated by the Bankers
As early as 2004, the FBI was warning of widespread mortgage fraud. CNN reported, “Rampant fraud in the mortgage industry has increased so sharply that the FBI warned Friday of an “epidemic” of financial crimes which, if not curtailed, could become the next S&L crisis.” Assistant FBI Director Chris Swecker said the booming mortgage market, fueled by low interest rates and soaring home values, has attracted unscrupulous professionals and criminal groups whose fraudulent activities could cause multibillion-dollar losses to financial institutions. ‘It has the potential to be an epidemic,” said Swecker, who heads the Criminal Division at FBI headquarters in Washington. “We think we can prevent a problem that could have as much impact as the S&L crisis,’ he said.” (Click here for the complete 2004 story from CNN.) The financial crisis cause by mortgage fraud was not even close to the size of the S&L crisis—it was at least 40 times bigger!! Why didn’t the FBI stop it, and why are they not prosecuting the crime now? [Source]
Michael P. Stephens is the Federal Housing Finance Agency’s acting inspector general. Stephens leads the Office of Inspector General section of the Residential Mortgage-Backed Securities Working Group, whose other members include the Department of Justice and state attorneys general. The group coordinated a $13 billion settlement between JPMorgan Chase & Co. and the government in 2013, among other actions. His own agency is the watchdog for the overseer of taxpayer-backed Fannie Mae and Freddie Mac. Stephens said he’s “not a big fan” of the idea that banks shouldn’t be charged criminally because it could hurt their employees and shareholders.
http://magiclougie.blogspot.com/
Light of truth FOIA campaign set to launch. Updated regularly. Latest update-8/2/14
01 Friday Aug 2014
Posted by timhoward717 in Uncategorized
˜ 15 Comments
Some of our readers came up with a brilliant plan today to launch a coordinated FOIA (Freedom of information act) campaign. You can see how this came about in the comments section of last nights post 7/31/14. I think its a great idea.I believe we have a distinguished guest participating occasionally in our comments section as well. We should come up with the search terms, date’s etcetera. It will be very helpful to coordinate everything from this one post to avoid redundant requests. For starters, I think we should request documents related to the discovery issues. We also can come up with many of our own. Dan W already had this idea, “I’m considering it. I think the FHFA’s admission in its report to congress that there was a conflict of interest between being a regulator and conservator would be an interesting on to FOIA on “.
I will be updating this post as we proceed. Here are the links to both the FHFAs and the treasury departments FOIA web pages.
http://www.treasury.gov/FOIA/Pages/index.aspx
http://www.fhfa.gov/AboutUs/FOIAPrivacy/Pages/FOIA.aspx
The FHFAs page has some very useful information. It will be interesting to see how much information they disclose. We can then turn over denials for attorneys to review. This will be an excellent way to ensure that we keep the flow of critical data to the public. I know for a fact our message is having an effect across all spheres of influence and power. This will only help further our cause.
I attended a moving community band performance on a town green tonight; I will be attaching a video to a post that will be very fitting in the next few days. Keep the Faith
UPDATES TO ORIGINAL POST
8/1/14 Comments on this post will be limited to FOIA related material, all others will be deleted. Feel free to comment on our other posts with other subject matter. As always we discourage senseless partisan bashing, both parties have equally wronged us.
8/2/14 We have already received some very good suggested FOI requests. I have received some excellent emails as well. Our email is timhoward717@yahoo.com if there is something you want to share with us privately. Also, if you want to share something you can simply point us in the right direction with an “FOI suggestion”. Someone let me know that the “Freddie Mac and Fannie Mae Investor Discussion / Message Board” has done some FOI work. I am posting a link to a discussion where this took place, https://groups.google.com/forum/m/#!topic/freddienfannie/t-dacWObczw .There is much very useful information there. David Sims was very involved in that process. He states “It says that it might be cheaper if someone has already requested this information. I will not be surprised if one of the hedge funds has requested the information and kept it to themselves. I inquired if there were any completed requests of a similar nature. I guess that a person has to be extremely specific and say “any document using the word shareholder” for instance.” Vicorjh provided a list of all the FOI requests received by FHFA in 2013. This is very enlighten, and it will give us a good idea how to phrase our requests. Vicor also attached a link to the treasury log as well. Here is a sample request Vicorjh posted as well.
Federal Housing Finance Agency (FHFA)
FOIA Requester Service Center
400 7th Street, SW
Washington, DC 20024
<>
FREEDOM OF INFORMATION ACT REQUEST
Dear Sir or Madam:
I am making a request for records under the provisions of the Freedom of Information Act.
Please process this request under this statute to release all available records related to
this request. I thank you in advance for your assistance.
This is a request under the Freedom of Information Act. I hereby request the following
records with, if deemed necessary, appropriate redaction to protect individual privacy:
<>
1) A log of all FOIA requests made in the fiscal year 2008
2) A log of all FOIA requests made in the fiscal year 2009
3) A log of all FOIA requests made in the fiscal year 2010
4) A log of all FOIA requests made in the fiscal year 2011
5) A log of all FOIA requests made in the fiscal year 2012
6) A log of all FOIA requests to date made in this fiscal year of 2014
Please note, prior requests of the agency for these log files may have been
requested by other parties and may be readily available for transmittal.
I can receive responsive documents electronically via email at
<> or by postal mail in electronic or printed form at
<>
I am also requesting that, if appropriate, associated processing and review
fees to be waived as this request is in the public interest. The requested
documents are for research and study purposes and are not for commercial
usage. Responsive documents will be made available to the general public
on-line and free of charge. I agree that I will pay up to <> for fees if fees
cannot be waived. Please notify me in advance if fees are expected to exceed
this amount.
I am looking forward to your response and can be reached at <> if there are
any questions or concerns. Again, thank you for your assistance. Very best regards.
Under penalty of perjury, I hereby declare that I am the person named above and I
understand that any falsification of this statement is punishable under the provisions of
Title 18, United States Code (U.S.C.), Section 1001 by a fine of not more than $10,000 or
by imprisonment of not more than five years, or both; and that requesting or obtaining any
record(s) under false pretenses is punishable under the provisions of Title 5, U.S.C.,
Section 552a(i)(3) as a misdemeanor and by a fine of not more than $5,000.
Sincerely,
http://timhoward717.com/category/uncategorized/
Thursday, July 31, 2014
Fannie Mae: Mortgage Serious Delinquency rate declined in June, Lowest since October 2008
by Bill McBride on 7/31/2014 03:59:00 PM
Fannie Mae reported today that the Single-Family Serious Delinquency rate declined in June to 2.05% from 2.08% in May. The serious delinquency rate is down from 2.77% in June 2013, and this is the lowest level since October 2008.
The Fannie Mae serious delinquency rate peaked in February 2010 at 5.59%.
Last week, Freddie Mac reported that the Single-Family serious delinquency rate declined in June to 2.07% from 2.10% in May. Freddie's rate is down from 2.79% in June 2013, and is at the lowest level since January 2009. Freddie's serious delinquency rate peaked in February 2010 at 4.20%.
Note: These are mortgage loans that are "three monthly payments or more past due or in foreclosure".
Fannie Freddie Seriously Delinquent RateClick on graph for larger image
The Fannie Mae serious delinquency rate has fallen 0.72 percentage points over the last year, and at that pace the serious delinquency rate will be under 1% in late 2015 or early 2016.
Note: The "normal" serious delinquency rate is under 1%.
Maybe serious delinquencies will be back to normal in 2016.
Read more at http://www.calculatedriskblog.com/2014/07/fannie-mae-mortgage-serious-delinquency.html#0Cwp7kRLh24J5kdT.99
http://www.calculatedriskblog.com/2014/07/fannie-mae-mortgage-serious-delinquency.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+CalculatedRisk+%28Calculated+Risk%29
Full article . FHFA Predicted $72,000,000,000 Profit 26 Days After Brazen Soviet Style Profit Grab by TimHoward717
In light of the news regarding the newly leaked secret treasury documents, I want to share a nice little gem. It’s a report produced on October 26,2012 entitled “FHFA Updates Projections of Potential Draws for Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC).” I have attached a PDF file below. Keep in mind the Third Amendment Sweep was signed in August of 2012 to be effective September 30,2012. On page 8 they state,”Furthermore, over the projection period the Enterprises pay additional dividends of $78 billion in Scenario 1 to $32 billion in Scenario 3.” The projection period was from June 2012 to December 2015. Less than a month after the governments Soviet-style profit grab took effect, the government acknowledges that even under the worst case scenario Fannie Mae and Freddie Mac would turn a 32 billion dollar profit by December 2015. The mid-range scenario based on Moody’s “Current Baseline” house price paths produce a whopping 72 billion-dollar profit.
Fannie Mae Freddie Mac FHFA Federal National Mortgage Assctn Fnni Me (FNMA) Bove
Once again we let the government tell you all you need to know in their own words. With discovery in full swing and reams of documents exchanging hands as we speak, we have only seen the tip of the iceberg. Keep the Faith!
FHFA’s updated projections of Fannie Mae, Freddie Mac financial performance, October 26, 2012
The Federal Housing Finance Agency (FHFA) today released updated projections of the financial performance of Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC), including potential draws under the Senior Preferred Stock Purchase Agreements (PSPAs) with the U.S. Department of the Treasury. These updated projections show cumulative Treasury draws that are reduced and more stable compared to previous projections. The key drivers of those results include an overall reduction in actual and projected credit-related expenses and changes in the dividend structure contained in the PSPAs, which eliminates the need to borrow from Treasury to pay dividends.
FHFA first released financial projections in October 2010, and has provided updates of those projections on an annual basis. Through the FHFA Conservator’s Report, FHFA reports actual performance versus projections on a quarterly basis.
Projected Treasury Draws and Dividends
To date, Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) have drawn $187.5 billion from Treasury under the terms of the PSPAs. Under the three scenarios used in the projections, cumulative Treasury draws (including draws required to pay dividends) at the end of 2015 range from $191 billion to $209 billion. If dividend payments were subtracted from the projected cumulative draws, the net combined amounts for both Enterprises would range from $67 billion to $138 billion. In the previous projections released in October 2011, cumulative Treasury draws (including draws required to pay dividends) at the end of 2014 ranged from $220 billion to $311 billion.
For the selected scenarios, in the current projections, an additional $3 to $22 billion would be required to support the Enterprises over the projection period. Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) would not require additional Treasury draws after 2012 in any of the three scenarios. Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) would not require additional Treasury draws after 2012 in two of the three scenarios. Furthermore, over the projection period the Enterprises pay additional dividends of $78 billion in Scenario 1 to $32 billion in Scenario 3.
Fannie Mae, Freddie Mac: October 2012 Projections versus October 2011 Projections
The projection period for the current projections and the previous projections runs three and a half years. The current projection period runs through the end of 2015. The prior projection period ran through the end of 2014. The difference in the range of ending cumulative Treasury draws between the October 2012 projections and the October 2011 projections can be attributed to three primary factors:
Actual financial results for the first year of the projection period in the October 2011 projections (the second half of 2011 and the first half of 2012) were substantially better than projected.
Updated projections of financial results for the remaining two and a half years of the projection period in the October 2011 projections (the second half of 2012; 2013 and 2014) are substantially better than in previous projections.
Changes to the PSPAs, effective January 1, 2013, which replace a fixed 10 percent dividend on senior preferred stock with a sweep of net worth, effectively ends the contribution of dividends to projected Treasury draws.
http://www.valuewalk.com/2014/07/ffhfa-predicted-72b-profit-for-fannie-mae-26-days-after-grab/
. On page 8 they state,”Furthermore, over the projection period the Enterprises pay additional dividends of $78 billion in Scenario 1 to $32 billion in Scenario 3.” The projection period was from June 2012 to December 2015. Less than a month after the governments Soviet-style profit grab took effect, the government acknowledges that even under the worst case scenario Fannie Mae and Freddie Mac would turn a 32 billion dollar profit by December 2015. The mid-range scenario based on Moody’s “Current Baseline” house price paths produce a whopping 72 billion-dollar profit.
Fannie Mae Freddie Mac FHFA Federal National Mortgage Assctn Fnni Me (FNMA) Bove
Once again we let the government tell you all you need to know in their own words. With discovery in full swing and reams of documents exchanging hands as we speak, we have only seen the tip of the iceberg. Keep the Faith!
FHFA’s updated projections of Fannie Mae, Freddie Mac financial performance, October 26, 2012
The Federal Housing Finance Agency (FHFA) today released updated projections of the financial performance of Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC), including potential draws under the Senior Preferred Stock Purchase Agreements (PSPAs) with the U.S. Department of the Treasury. These updated projections show cumulative Treasury draws that are reduced and more stable compared to previous projections. The key drivers of those results include an overall reduction in actual and projected credit-related expenses and changes in the dividend structure contained in the PSPAs, which eliminates the need to borrow from Treasury to pay dividends.
FHFA first released financial projections in October 2010, and has provided updates of those projections on an annual basis. Through the FHFA Conservator’s Report, FHFA reports actual performance versus projections on a quarterly basis.
Projected Treasury Draws and Dividends
To date, Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) have drawn $187.5 billion from Treasury under the terms of the PSPAs. Under the three scenarios used in the projections, cumulative Treasury draws (including draws required to pay dividends) at the end of 2015 range from $191 billion to $209 billion. If dividend payments were subtracted from the projected cumulative draws, the net combined amounts for both Enterprises would range from $67 billion to $138 billion. In the previous projections released in October 2011, cumulative Treasury draws (including draws required to pay dividends) at the end of 2014 ranged from $220 billion to $311 billion.
For the selected scenarios, in the current projections, an additional $3 to $22 billion would be required to support the Enterprises over the projection period. Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) would not require additional Treasury draws after 2012 in any of the three scenarios. Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) would not require additional Treasury draws after 2012 in two of the three scenarios. Furthermore, over the projection period the Enterprises pay additional dividends of $78 billion in Scenario 1 to $32 billion in Scenario 3.
Fannie Mae, Freddie Mac: October 2012 Projections versus October 2011 Projections
The projection period for the current projections and the previous projections runs three and a half years. The current projection period runs through the end of 2015. The prior projection period ran through the end of 2014. The difference in the range of ending cumulative Treasury draws between the October 2012 projections and the October 2011 projections can be attributed to three primary factors:
Actual financial results for the first year of the projection period in the October 2011 projections (the second half of 2011 and the first half of 2012) were substantially better than projected.
Updated projections of financial results for the remaining two and a half years of the projection period in the October 2011 projections (the second half of 2012; 2013 and 2014) are substantially better than in previous projections.
Changes to the PSPAs, effective January 1, 2013, which replace a fixed 10 percent dividend on senior preferred stock with a sweep of net worth, effectively ends the contribution of dividends to projected Treasury draws.
http://www.valuewalk.com/2014/07/ffhfa-predicted-72b-profit-for-fannie-mae-26-days-after-grab/
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Did Treasury plan to shortchange Fannie, Freddie investors?
As more layers peel away, a pattern forms
Trey Garrison
July 30, 2014 12:00PM
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A report on TheStreet.com Tuesday focusing on the potential for conflict of interest in Blackstone serving as an advisor to the U.S. Department of Treasury missed a much bigger story.
The Street, which cited Investors Unite as the source for the presentation, didn’t notice that the 2011 presentation in question is a textbook example of the documents that Investors Unite believe will come out in the discovery process that was just granted to plaintiffs in the case of Fairholme v. The United States.
Investors Unite, a coalition of retail investors in the GSEs who have been shut out of the equation since Fannie Mae and Freddie Mae were placed in conservatorship, says that they believe discovery in that case will produce thousands of documents like the 2011 presentation, as well as emails, notes and other records that will show a pattern of intent to keep investors in the GSEs from their share of the profits.
Investors Unite won a major victory just last week when a federal judge ruled that the FHFA could not limit discovery to a mere few months of documents, but rather must provide a wide range that the investor group thinks will show the government has long planned to deny shareholders their rights even after the GSEs were profitable again. (More on Investors Unite and the debate over the future of the GSEs here.)
“Investors Unite welcomes this process, and we're eager to find out whether or not it yields insight into whether the Sweep was an accidental confiscation (did Treasury know the entities would be wildly profitable?) or an intentional one,” Investors Unite said after the story came out.
An unnamed spokesperson for Treasury downplayed the revelation, saying, "Treasury did not issue a request for proposals, and no contract was awarded."
But that raises a host of questions from Investors Unite and, frankly, this writer.
For instance, if this presentation came from an unsolicited pitch, as Treasury claims, then why wasn't it with FHFA?
Why was Treasury taking the meeting with Blackstone in the first place?
Was Treasury calling the shots, and not the FHFA, which is actually the entity prescribed by HERA statute as the official conservator of the GSEs?
If there really was no request-for-proposal, did Treasury enact the Third Amendment sweep without seeking any outside input or advice?
Did Blackstone make other presentations to Treasury?
And a big one for open record and transparency advocates, regardless of what position one takes on this kerfuffle — why wasn’t this presentation part of the administrative record?
But then there are The Really Big Questions.
Was this a matter of hapless good fortune that the entities became profitable shortly afterward?
Or, more nefariously, was the sweep a result of deliberate calculations arising from presentations such as Blackstone's, that the GSEs would soon be throwing off profits?
Consider the following:
A Treasury press release saying the need for wind down is implicit.
The plan to put them into a government conservatorship was meant to be temporary, although it is likely to be years before a long-term replacement structure takes shape. Here’s where former Secretary of Treasury Timothy Geithner lays out the plan in February 2011.
Excerpts from the Perry brief asking for Summary Judgment.
“By the end of this month, FHFA, charged by statute with a mandate of conserving and preserving the assets of Fannie Mae / Federal National Mortgage … and Freddie Mac / Federal Home Loan Mortgage Corp …, will have sent $158 billion from the Companies¹ treasuries to the government’s Treasury pursuant to the Net Worth Sweep, $130 billion more than Treasury previously would have received under the 10% fixed dividend provided in its stock agreements.”
“Treasury and FHFA would have this Court believe that they had no idea the Net Worth Sweep would give Treasury such a windfall. The Net Worth Sweep was needed, the agencies say, to save Fannie Mae and Freddie Mac from a 'downward spiral' caused by borrowing money from Treasury to pay Treasury a cash dividend that could have been paid in- kind, without any borrowing. In their view, the massive transfer of wealth to Treasury is just a happy (for the government) coincidence.”
Finally, the timeline from one of the first lawsuits over the issue.
July 2008: Congress passes the Housing and Economic Recovery Act (HERA), creating the Federal Housing Finance Agency (FHFA), and providing the option to place Fannie and Freddie into conservatorship or receivership.
September 6, 2008: the FHFA chooses to place Fannie Mae and Freddie Mac into conservatorship. This left approximately $34 billion of privately held preferred shares outstanding.
September 26, 2008: Treasury enters into preferred stock purchase agreements (PSPAs) with FHFA to purchase senior preferred stock of both Fannie Mae and Freddie Mac and to receive warrants for 79.9% of the common stock of each company.
May 6, 2009: The First Amendment raises the maximum aggregate amount of funds permitted to be invested by Treasury into Fannie Mae and Freddie Mac from $100 billion to $200 billion.
December 28, 2009: The Second Amendment removes the cap on funds available through 2012 to provide stability in the mortgage market.
December 31, 2009: Treasury's statutory authority to set the "terms and conditions" of Fannie Mae and Freddie Mac security purchases expires.
November 2010: Two years after the rules of conservatorship are established and after Treasury's authority to set the "terms and conditions" of security purchases expires, Perry Capital begins to purchase Fannie Mae and Freddie Mac securities for its institutional clients.
August 2012: Treasury and FHFA revise PSPAs via Sweep Amendment from 10% annual dividend to quarterly sweep of all profits. Further, these payments will not redeem the senior preferred stock or otherwise reduce the balance owed by Fannie Mae and Freddie Mac, essentially wiping out private investors, and liquidating, rather than conserving, the companies.
2012: Both GSEs become profitable.
June 29, 2013: Fannie Mae and Freddie Mac pay a combined $66.4 billion payment to Treasury. With these payments, Fannie Mae has now paid $95 billion of the roughly $116 billion it has received, while Freddie Mac has repaid roughly $37 billion of the $71.3 it received.
2014: Fannie Mae and Freddie Mac are expected to fully pay back the taxpayers plus 10% interest.
Was the Treasury planning all along to shut shareholders out even after the GSEs got profitable?
The Fairholme lawsuit – and all they get in discovery – may very well answer that.
But just looking at what’s already there, it’s hard not to draw some damning conclusions.
When you hear hoofbeats, you think of horses, not zebras.
http://www.housingwire.com/articles/30847?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+housingwire%2FuOVI+(HousingWire)
Is a $1.3 Billion Fine for BofA Getting Off Cheap?
By Jon C. Ogg July 30, 2014 3:13 pm EDT
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A sum of nearly $1.3 billion in a government fine would put most businesses out of business. However, if your corporate name is Bank of America Corp. (NYSE: BAC) or one of the other too big to fail banks you might look at a fine of this size as good news. BofA was ordered by a federal judge to pay out $1.27 billion after a federal jury found the bank liable for fraud — yet again, over mortgages sold by Countrywide.
The verdict was that BofA’s Countrywide sold defective mortgages to Fannie Mae and Freddie Mac, but it is perhaps nowhere near as bad as it could have been. We are taking a closer look at this versus other fines tied to BofA and/or to Countrywide.
U.S. District Judge Rakoff ruled on the matter some nine months after the a federal jury found Bank of America and a former Countrywide executive liable. The verdict covered defrauding Fannie Mae and Freddie Mac, the two government sponsored entities running the nation’s mortgages, by effectively selling substandard or defective mortgage paper. This paper was covering loans made by Countrywide mostly back in 2007 and 2008.
The case pertained to some $2.96 billion of what were called questionable loans, which were securitized via Fannie and Freddie. What created the difference between the balance was because only some of the mortgages were found to have material defects. It appears that many of the loans were actually acceptable, making them not a part of the damages.
What is ironic here, and something that has been ongoing, is that this is a carryover from before Bank of America bought Countrywide. We do not yet have word of what Bank of America will do on this particular case, as far as appeals or other options. As of now, maybe they should just call it a day and move on as the Bank of America common shares were up 1.5% at $15.57 against a 52-week range of $13.60 to $18.03.
Citi recently took a $7 billion hit, but what about BofA? Here are some of its big charges and fines seen already:
BofA was among the top five banks agreeing to pay a combined $25 billion over foreclosure abuses;
BofA was among a dozen banks in 2013 paying a combined $9.3 billion to the Comptroller of Currency and Fed over foreclosure abuses;
and BofA agreed to a settlement of $8.5 billion with group of private mortgage bond holders that were not the government.
Maybe a fine of close to $1.3 billion isn’t so bad. The real question is what pending cases and suits are still out there. That tally seems to have been lost in the ongoing shuffle.
By Jon C. Ogg
http://247wallst.com/banking-finance/2014/07/30/is-a-1-3-billion-fine-for-bofa-getting-off-cheap/
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