The news last week regarding the Goldman Sachs and Bank of America securities fraud settlements sheds even more light on the fraudulent practices that were utilized in dumping billions of dollars of toxic MBS onto Fannie and Freddie.
The Goldman Settlement in particular is especially valuable. It is the first in which one of the banks opted not to pay a cash settlement but rather chose to buy back some of the flawed MBS they pedaled to Fannie and Freddie.The government got most banks to pay cash simply to cover part of the losses their fraud cost.This explains the varying headlines stating a 1.2 billion and 3.15 billion settlement to Fannie and Freddie.The 3.15 is the total amount of MBS that Goldman bought back, the 1.2 billion is how much it is still down in value. I would like to thank Goldman again for structuring the settlement in this way. Remember the government intentionally left out of all the lawsuits one critical piece of information. That was an estimated amount that the securities fraud cost Fannie and Freddie. Goldman’s settlement clearly shows that even after the huge recovery that the markets have witnessed since 2008 the toxic waste they dumped on Fannie and Freddie are still down about 38%! Imagine what they bottomed out at?
As far as the bank of America settlement lead by the department of Justice I first want to clarify something for our readers. There was considerable confusion over all of this even in some financial articles. The Goldman Sachs settlement was one of many suits filed by the FHFA back in 2011. Goldman is one of the last banks to settle, most of the big banks including Bank of America settled earlier this year.There are still a few cases ongoing by the FHFA, and we will watch for opportunities to assist if it helps our cause. The settlement this week by Bank of America is not connected to the 2011 FHFA suits but were a joint action by the DOJ, the Attorney generals from several states Ginnie Mae and the FHA against many of the same banks that FHFA went after.Similarly to the FHFA suits these actions were based largely on the toxic MBS sold by the big banks to Fannie and Freddie so they do provide us with further insight into the damage that was caused to Fannie and Freddie at the hands of the big banks.
The statement of facts released with the settlement news provides us a glimpse of some of the methods the banks were utilizing in getting their fraudulent MBS purchased by Fannie and Freddie. ( I know this has been reported on already, but this nugget can not be shared enough.
“When using the CLUES system, Bank of America sometimes changed an applicant’s financial information and then re-submitted the loan multiple times in an effort to get a CLUES
“accept.” For example, in at least one instance, Bank of America’s underwriter attempted to get a CLUES accept rating more than forty times and in other cases underwriters regularly changed
the relevant data and re-submitted the loans through CLUES more than twenty times. In a case note, one underwriter characterized what she was doing as trying to “trick” the CLUES system
into giving an “accept” rating.
One of our readers FnF shared this today, “We need to put together a document that lists all the settlements reached by big banks with FnF. We can use that document to drive home the point that FnF were not in any way responsible for the financial crisis. These settlements clearly show big banks sold faulty mortgages and the settlement to-date clearly outweigh the amount the taxpayer put in.”
At the end of the post, I will be providing this list. I would like to go one step further though. There is a wealth of material now that clearly proves Fannie and Freddie were victims rather than villains in the financial crisis. It is critical that we get the true narrative out before the politicians get back to DC and resume their false narrative. Many of them only repeat what they hear from their colleagues and truly do not know the truth. I encourage our readers to continue to pore over the settlements and original lawsuits so we can gather a broad array of facts to disseminate in our Light of Truth campaign. The lawsuits filed by FHFA include : Federal Housing Finance Agency v. Bank of America Corp. (BAC), 11-CV-6195; FHFA v. Barclays Bank Plc., 11-CV- 6190; FHFA v. Citigroup, 11-CV-6196; FHFA v. Credit Suisse Holdings (USA) Inc., 11-CV-6200; FHFA v. Deutsche Bank AG, 11- CV-6192; FHFA v. First Horizon National Corp., 11-CV-6193; FHFA v. Goldman, Sachs & Co., 11-CV-6198; FHFA v. HSBC North America Holdings Inc., 11-CV-6189; FHFA v. JPMorgan Chase & Co., 11-CV- 6188; FHFA v. Merrill Lynch & Co., 11-CV-6202; FHFA v. Nomura Holding America Inc., 11-CV-6201; FHFA v. SG Americas Inc., 11- CV-6203, U.S. District Court, Southern District of New York (Manhattan). FHFA v. Ally Financial Inc.; FHFA v. Countrywide Financial Corp.; FHFA v. General Electric Co.; FHFA v. Morgan Stanley, New York State Supreme Court, New York County (Manhattan).FHFA v. Royal Bank of Scotland, 11-CV-1383, U.S. District Court, District of Connecticut (New Haven).
Every so often I need to take a break for a few days and step back from the day to day proceedings and survey the entirety of the landscape. I have done this and will be sharing the results in the next few days. I will offer an overall status update on most aspects of our cause. The next few months could be the most exciting to date. Buckle up, never surrender and as always Keep the Faith!
FHFA’s Update on Private Label Securities Actions
2013 and 2014 Settlements and Remaining Cases
​​​​In 2011, the Federal Housing Finance Agency initiated litigation against 18 financial institutions involving allegations of securities law violations and, in some instances, fraud in the sale of private-label securities (PLS) to Fannie Mae and Freddie Mac. ​ Below is a list of the cases, with amounts of any settlements reached in 2013 and 2014. Settlement amounts result from various factors, including statutory requirements, number of securities, unique circumstances of each matter and litigation risks.
​PLS Litigation Settlements ​
​1. General Electric Company $6.25 million
2. CitiGroup Inc. ​$250 million
​3. UBS Americas, Inc. (Union Bank of Switzerland) ​$885 million
​4. J.P. Morgan Chase & Co. ​$4 billion
​5. Deutsche Bank AG $1.925 billion
6. Ally Financial, Inc. $475 million
7. Morgan Stanley $1.25 billion
8. SG Americas (Societe Generale) $122 million
9. Credit Suisse Holdings (USA) Inc. $885 million
10. Bank of America Corp.
11. Merrill Lynch & Co.
12. Countrywide Financial Corporation
$5.83 billion
​13. Barclays Bank PLC $280 million
​14. First Horizon National Corp. ​$110 million
​15. RBS Securities, Inc. (in Ally action)
​​$99.5 million
​16. Goldman Sachs & Co. ​ ​$1.2 billion
Non-Litigation PLS Settlements​
​Wells Fargo Bank, N.A. ​$335.23 million
Remaining PLS Cases ​ ​ ​
​Southern District of New York Cases: ​
HSBC North America Holdings, Inc. (Hong Kong Shanghai Banking Corp.)
Nomura Holding America, Inc.​
​​District of Connecticut Case:
The Royal Bank of Scotland Group, PLC ​
​​ ​