Aug 27

By Peter Rudegeair – Reuters

Bank of America Corp has long argued to enforcement officials that it was being forced to pay for the sins of companies it acquired in the crisis, but on Thursday the bank admitted at least some of its mortgage problems happened on its watch.

In a statement of facts that the bank agreed to as part of the settlement, Bank of America said it had sought government insurance on mortgages that did not qualify for that coverage from May 1, 2009, after the crisis had subsided. The bank failed to take basic steps that the Federal Housing Administration demanded banks to take, including verifying borrowers’ income, it said.

Those missteps came after the bank had acquired Countrywide Financial Corp and Merrill Lynch & Co, the two companies responsible for most of the mortgage bond problems the bank admitted to.

The bank agreed to an $800 million settlement with the U.S. Department of Housing and Urban Development for those loans, which it had sought to bundle into bonds guaranteed by the FHA. That represents a relatively small portion of Bank of America’s overall $16.65 billion settlement with authorities announced on Thursday.

But the facts the bank admitted to underscore that not all of its mortgage problems were inherited. A Bank of America spokesman declined to comment. [read more]

Aug 25

By Brad Hoppmann – Uncommon Wisdom

Banks literally have a license to print money. Bank of America (BAC) needs to run the presses even faster after yesterday’s record setting $16.7 billion mortgage securities settlement.

Stockholders and analysts reacted by bidding BAC shares higher. Their logic: the bank finally has the mess behind it.

Are they right? Probably not, and today I’ll tell you why.

We all know — some of us painfully — that the 2007-2009 financial crisis wreaked havoc on stockholders, bondholders, homeowners, regular workers and the entire economy. We are still cleaning up the mess years later.

In September 2013, I wrote about JPMorgan’s $17.3 Billion ‘Cost of Doing Business.’ Back then, JPM had just concluded a settlement similar to the one BAC agreed to this week. CEO Jamie Dimon was unfazed and kept his job.

One would think that bankers might improve their practices after this experience …

Yet, I showed you back in April how Bank of America’s own accountants simply lost track of $2.7 billion. Again, executives yawned and shareholders did not revolt.

In fact, the latest multi-billion dollar settlement does NOT settle Bank of America’s mess. It is only a small part of a much larger mess. [read more]

Aug 25

By Kelli B. Grant – CNBC

Surprisingly, more than a third of Americans have a debt in collections, whether a $40 parking fine or a $40,000 auto loan. That rate is even higher in these states.

Debt gone bad

Are you a delinquent debtor?

About 5 percent of consumers with credit files are past-due on an account and another 35.1 percent have a debt in collections, according to a new report from the Urban Institute. The report is based on 2013 data from credit bureau TransUnion.

How much these consumers owe varies, with some on the hook for less than $25 and others, more than $125,000. The average: $5,178. [read more]

Aug 21

By Jake Halpern – The New York Times

One afternoon in October 2009, a former banking executive named Aaron Siegel waited impatiently in the master bedroom of a house in Buffalo that served as his office. As he stared at the room’s old fireplace and then out the window to the quiet street beyond, he tried not to think about his investors and the $14 million they had entrusted to him. Siegel was no stranger to money. He grew up in one of the city’s wealthiest and most prominent families. His father, Herb Siegel, was a legendary playboy and the majority owner of a hugely profitable personal-injury law firm. During his late teenage years, Aaron lived essentially unchaperoned in a sprawling, 100-year-old mansion. His sister, Shana, recalls the parties she hosted — lavish affairs with plenty of Champagne — and how their private-school classmates would often spend the night, as if the place were a clubhouse for the young and privileged.

So how, Siegel wondered, had he gotten into his current predicament? His career started with such promise. He earned his M.B.A. from the highly regarded Simon Business School at the University of Rochester. He took a job at HSBC and completed the bank’s executive training course in London. By all indications, he was well on his way to a very respectable future in the financial world. Siegel was smart, hardworking and ambitious. All he had to do was keep moving up the corporate ladder.

Instead, he decided to take a gamble. Siegel struck out on his own, investing in distressed consumer debt — basically buying up the right to collect unpaid credit-card bills. When debtors stop paying those bills, the banks regard the balances as assets for 180 days. After that, they are of questionable worth. So banks “charge off” the accounts, taking a loss, and other creditors act similarly. These huge, routine sell-offs have created a vast market for unpaid debts — not just credit-card debts but also auto loans, medical loans, gym fees, payday loans, overdue cellphone tabs, old utility bills, delinquent book-club accounts. The scale is breathtaking. From 2006 to 2009, for example, the nation’s top nine debt buyers purchased almost 90 million consumer accounts with more than $140 billion in “face value.” And they bought at a steep discount. On average, they paid just 4.5 cents on the dollar. These debt buyers collect what they can and then sell the remaining accounts to other buyers, and so on. Those who trade in such debt call it “paper.” That was Aaron Siegel’s business. [read more]

Aug 15

By Matthew Goldstein – DealBook

Rises in housing prices have been profitable to private equity firms and institutional investors that bought foreclosed homes to flip them or to rent them out. Now the recovery in housing is fueling a niche market for newly minted bonds that are backed by the most troubled mortgages of them all: those on homes on the verge of foreclosure.

And it is not just vulture hedge funds swooping in to try to profit from the last remnants of the housing crisis. The investors making money off these obscure bonds — none are rated by a major credit rating agency — include American mutual funds. And one of the biggest sellers of severely delinquent mortgages to investors is a United States government housing agency.

The demand for securitizations of nonperforming loans illustrates Wall Street’s never-ending hunt for higher-yielding investment opportunities. The market also reflects in part an effort by regulators to close a chapter on the housing mess.

For mutual funds and other institutional investors, the appeal of these bonds is obvious. They have yields of about 4 percent and pay out quickly — often in just two years — if the foreclosure process on the loans in the portfolio goes smoothly. The yields look enticing compared with the current 2.42 percent yield on a 10-year Treasury note.

So far this year, there have been 28 deals backed by $7 billion worth of nonperforming loans sold to investors, according to Intex Solutions, a structured finance cash-flow modeling firm. Last year, Intex said, there were 72 deals backed by $11.6 billion worth of nonperforming loans. [read more]

Aug 14

By David Morgan – PerformLine

Did you know that Connecticut just passed a state law that increases penalties for TCPA type violations? The law, signed by Governor Malloy, basically replicates the language of the
Telephone Consumer Protection Act with one huge difference: instead of fines ranging from $500 to $1,500 per violation, Connecticut’s “mini-TCPA” statute provides for statutory damages up to $20,000 per violation!

The new law, (Public Act 14-53) which goes into effect October 1, 2014, strengthens Connecticut’s already existing “Do Not Call Registry” by banning unsolicited commercial text and media messages and “robocalls” without prior “prior express written consent” by the consumer.

Mitigating the risk of a TCPA suit continues to be paramount for marketers. By using a proactive compliance monitoring platform, like the PerformMatch TCPA Toolkit that automatically tracks and documents consent on both webpages and in call centers, marketers can minimize the risk of non-compliant violations and possible litigation. [read more]