US regulator to sue banks over subprime mortgage losses

[dustup]

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US regulator to sue banks over subprime mortgage losses

Goldman Sachs logo The regulator alleges firms and individuals action "improperly"
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Big Banking

 

US authorities are to sue 17 major banks for losses on mortgage-backed investments that cost taxpayers tens of billions of dollars.

The Federal Housing Finance Agency said it was taking action against banks including Goldman Sachs, Barclays, Bank of America, Deutsche Bank, and HSBC.

The agency says they misrepresented the quality of the mortgages they sold during the housing bubble.

The values plunged as the US was engulfed in the financial crisis.

The FHFA oversees mortgage giants Fannie Mae and Freddie Mac.

The two firms lost more than $30bn (£18.5bn), partly because of their investments in the subprime mortgages, and were bailed out by the US government.

Since the rescues, US taxpayers have spent more than $140bn to keep the firms afloat.

http://www.bbc.co.uk/news/business-14771936

Complaints have been filed against the following lead defendants, in alphabetical order:
1. Ally Financial Inc. f/k/a GMAC, LLC
2. Bank of America Corporation
3. Barclays Bank PLC
4. Citigroup, Inc.
5. Countrywide Financial Corporation
6. Credit Suisse Holdings (USA), Inc.
7. Deutsche Bank AG
8. First Horizon National Corporation
9. General Electric Company
10. Goldman Sachs & Co.
11. HSBC North America Holdings, Inc.
12. JPMorgan Chase & Co.
13. Merrill Lynch & Co. / First Franklin Financial Corp.
14. Morgan Stanley
15. Nomura Holding America Inc.
16. The Royal Bank of Scotland Group PLC
17. Société Générale

[ivanm]

Talk about fair weather friends.  The damned government reportedly encouraged banks to make the shaky loans and now it is bitching about the losses.
What did they really expect?  When you loan money to a party that cannot afford the loan he is likely going to lose yhe property.     

[johnhp]

Talk about fair weather friends.  The damned government reportedly encouraged banks to make the shaky loans and now it is bitching about the losses.
What did they really expect?  When you loan money to a party that cannot afford the loan he is likely going to lose yhe property.     

No one demanded that banks make questionable loans.  That is a talking point.

[makesenseplease]

No one demanded that banks make questionable loans.  That is a talking point.

Ivanm did not say anything about anyone demanding anything.

Ivanm spoke the truth.

[johnhp]

Ivanm did not say anything about anyone demanding anything.

Ivanm spoke the truth.

i pukes horseshittery and you lap it up.  You guys love talking points.  The fact is that the banking industry was promoting risky loans for YEARS in its trade publications and the same time it was fighting regulation.

[ivanm]

Ivanm did not say anything about anyone demanding anything.

Ivanm spoke the truth.

Joan tends to read what her agenda at the time tells her to.  Or maybe she has a reading problem?  It must be hard to read
with your head up your ass. 

[foodserver]

No one demanded that banks make questionable loans.  That is a talking point.

"...the evidence is overwhelming that the CRA played a significant role in creating lax lending standards that fueled the housing bubble.  Once I realized this, I had to abandon my suspicion that the anti-CRA case was a figment of the rhetoric of Republicans attempting to distract attention from their own role in the mortgage mess.

So I laid out the facts and arguments that had convinced me to switch sides in the CRA debate. It was a long series of posts that generated hundreds of responses and counter-arguments. Felix Salmon’s response is here, Barry Ritholtz’s here, Mike Rorty's here, Ryan Chitum’s here, and Matthew Wurtzel’s here. All of my posts are here. Henry Blodget's earlier post on the CRA, with which I largely agreed until recently, is here. If you carefully run through these posts and the accompanying comments, I think you'll see that every argument raised by the "Defend CRA at all costs" crowd has been refuted.

For people with less time on their hands, here's a quick guide to the main points raised by the CRA defenders and the arguments that refute them. If I’ve left out any salient points, please let me know and I’ll add them to the list.

Let's begin:

    How could a piece of 1977 legislation be significant to the deterioration of mortgage standards 25 years later?

The CRA was not a static piece of legislation. It evolved over the years from a relatively hands-off law focused on process into one that focused on outcomes. Regulators, beginning in the mid-nineties, began to hold banks accountable in serious ways. Banks responded to this new accountability by increasing the CRA loans they made, a move that entailed relaxing their lending standards.

    That’s still too early. Why would changes in the mid-nineties result in a mortgage boom a decade later?

Throughout the nineties banks, as banks lowered their mortgage standards, mortgage rates remained high. The laxity was spreading but the incentives for borrowers to re-finance even under relaxed standards remained low. New buyers often still didn’t know that some of the loosey-goosey mortgages existed. Speculators had an internet bubble, so they weren’t yet attracted to real-estate. Treasury rates were not yet so low that investors seeking yield would pour into mortgage backed securities. Securitization levels were low enough that banks weren’t yet willing to fully embrace the loose standards. The historical data on default and loss rates from the lax lending were not yet available, so they weren’t embraced by banks or the broader market.

But as the years went by, these factors changed. The Fed pushed interest rates down. This made refinancing more attractive, and created an investor demand for yield. Fannie and Freddie popularized low-income securitization. Low defaults and loss rates from lax loans made them seem not as risky as previously expected.  A shrinking consumer asset base thanks to the dot com bust created a demand for home-equity loans and high loan-to-value loans, as consumers exchanged high-interest credit card debt for low interest home debt. Speculators seeking higher returns and ordinary home buyers became aware that lax lending standards would allow them to buy bigger homes with little or no money down.

In short, the lax lending standards created in response to the CRA had dug a pit that was waiting to get filled when the circumstances were right.

    Ah ha! So it wasn’t the CRA that caused the mess. It was everything else!

Of course it wasn’t the CRA that caused everything. The CRA was a factor in lowering lending standards.  This was a necessary, although not sufficient, cause for the mortgage mess.

    Wait a minute! Paul Krugman told me the CRA was relaxed during the Bush administration. What about that bit of evolution, buster?

It’s true that the CRA requirements were relaxed during the Bush administration. But at this point the lax lending standards were already in place. In any case, the relaxation took a peculiar form that actually made CRA lending more important rather than less. You see, the government let banks drop things like putting in ATMs in rural areas in favor of letting their compliance be judged entirely on CRA loans. This means the CRA had more of an influence on home lending after the requirements were relaxed, not less.

What's more, George W. Bush was a major proponent of the kind of mortgages that banks had started making under the CRA. He urged low-to-no doc mortgages and the elimination of downpayments, just like the CRA regulators had long done. “We certainly don't want there to be a fine print preventing people from owning their home,” the President said in a 2002 speech. “We can change the print, and we've got to.”

    What about "No Money Down" Mortgages? Were they required by the CRA?

Actually, yes they were..."

Read more: http://www.businessinsider.com/the-cra-debate-a-users-guide-2009-6#ixzz1WzlvMCzl

There is much more, including links to others evidence.  Some may remember notoc's attempt at bluster on this subject.  He cited a huge link he himself hadn't read as "proof" the CRA had no role when up until the moment before I'd made the comment about the CRA--he'd never heard of it.  After repeated refusal's on his part to cite anything from this "study", he left us.  To return sometime later we all hope, but I'm pretty sure he won't be bringing this topic up himself when he does...

[ivanm]

And the sad part of this scam is that top quality homeowners with a mortgage in a neighborhood where these sub standard loans are going belly up are getting hammered.  I guess that is life under a socialistic regime or with pols who play fast and loose with the most precious asset that most people have, their homes.

Have the losers ever considered renting and saving until they can afford a home mortgage?  Or is there no need with a feel good lending policy?

It even hurts those who have no mortgages on their homes because the sub prime homes drive the market prices down.   This must be some sort of a sour grapes attitude on the part of the pinko legislators and admins.  How's it go, misery likes company?

Those clowns must have a philosophy major mentality.   

[dustup]

No one demanded that banks make questionable loans.  That is a talking point.

Bush did......

John...you aren't listening or reading or comprehending again.....

The goal is, everybody who wants to own a home has got a shot at doing so. The problem is we have what we call a homeownership gap in America. Three-quarters of Anglos own their homes, and yet less than 50 percent of African Americans and Hispanics own homes. That ownership gap signals that something might be wrong in the land of plenty. And we need to do something about it.

We are here in Washington, D.C. to address problems. So I've set this goal for the country. We want 5.5 million more homeowners by 2010 -- million more minority homeowners by 2010. (Applause.) Five-and-a-half million families by 2010 will own a home. That is our goal. It is a realistic goal. But it's going to mean we're going to have to work hard to achieve the goal, all of us. And by all of us, I mean not only the federal government, but the private sector, as well.

And so I want to, one, encourage you to do everything you can to work in a realistic, smart way to get this done. I repeat, we're here for a reason. And part of the reason is to make this dream extend everywhere.

I'm going to do my part by setting the goal, by reminding people of the goal, by heralding the goal, and by calling people into action, both the federal level, state level, local level, and in the private sector. (Applause.)

And Obama is making it possible through his $75 Billion Making Home Affordable Refinance Program.....if the home owner has made all their payments on time.....of course it only helps homeowners that aren't in trouble and facing foreclosure.....

 

[dustup]

3 September 2011 Last updated at 08:35 ET

Royal Bank of Scotland to fight US mortgage action

The US Federal Housing Finance Agency (FHFA) has filed lawsuits against 17 banks, including RBS, Barclays and HSBC, over mortgage-based investments.

Values plunged during the financial crisis and a bailout of mortgage firms cost US taxpayers billions of dollars.

RBS says it has "substantial" legal and factual defences to the US claims.

A spokesman said: "We believe we have substantial and credible legal and factual defences to these claims and will defend them vigorously."
http://www.bbc.co.uk/news/business-14775177]
[url]http://www.bbc.co.uk/news/business-14775177[/url]

[Observer]

i pukes horseshittery...

You aren't telling us anything we didn't already know, but it is good to see you finally admit it.

I guess the obvious question here is... Will you ever stop?

[ivanm]

Did the govenment and the banks do anyone a favor by getting them in over their heads? Home ownership is nice, but it is also a very expensive proposition, what with the mortgage payments, the taxes, the insurance, and the utilities.

It signifies stability and the putting down of family roots, which is a suburban thing, but for millions of people it is just not a practical thing to attempt.

Perhaps the idea that one's home is an investment also comes into play as it has been a money maker for decades now.  And then the bubblle broke and people had upside down mortgages, a yoke around their necks.

[johnhp]

You aren't telling us anything we didn't already know, but it is good to see you finally admit it.

I guess the obvious question here is... Will you ever stop?

Told you you weren't ignoring me Dishonorable Discharge.  Caught you in yet another lie.

[makesenseplease]

You aren't telling us anything we didn't already know, but it is good to see you finally admit it.

I guess the obvious question here is... Will you ever stop?

No, he won't stop.  He's the only one that laps it up.

Why would he stop puking horseshittery and disrupt his own food supply

[ivanm]

No, he won't stop.  He's the only one that laps it up.

Why would he stop puking horseshittery and disrupt his own food supply

When does he find time for the head jobs?