Jonathan Stempel of Reuters points out something that the press has all but ignored about the Federal Housing Finance Agency’s big lawsuits last week: It’s suing the banks, sure, but it’s also suing individual executives.
Lots of them.
Stempel adds up the names from the lawsuits and reports that the FHFA, which regulates Fannie Mae and Freddie Mac, is suing 131 individuals in addition to the seventeen big banks. Which is important, as Stempel writes in his lede:
By suing 131 individuals in its effort to recover losses on $200 billion of mortgage debt that went sour, the federal agency overseeing mortgage giants Fannie Mae and Freddie Mac is doing one thing that the government has largely left alone.
It is trying to hold actual people, not just companies, responsible for their roles in the global financial crisis.
You can dispute his implication that the government actually has tried to hold companies responsible for their roles in the crisis, but you get the drift.
The lawsuits don’t target the biggest fish like Alan Schwartz, Dick Fuld, Ken Lewis, or Kerry Killinger—no “household names,” Stempel says. Those guys insulated themselves with some degree of plausible deniability regarding what their underlings were doing.
So who are the people targeted by the FHFA?
One name that stand out is Dan Sparks, who headed Goldman Sachs’s mortgage department and was famously grilled by Sen. Carl Levin, whose report this spring spurred the FHFA lawsuit, over his “shitty deals.”
Stempel points out Jeffrey Verschleiser, who was a mortgage executive at Bear Stearns:
In one case, the FHFA said former Bear Stearns mortgage executive and defendant Jeffrey Verschleiser “forcefully advocated” packaging loans into securities before homeowners started missing payments, triggering default provisions
The FHFA lawsuit says this (on page 80):
(Bear Stearns) executives, such as Defendant Jeffrey Verschleiser, forcefully advocated packaging loans purchased by EMC (Bear’s mortgage servicer) into securities as quickly as possible. In a recently published June 13, 2006 email, Mr. Verschleiser asserted that his office needed “to be certain we can securitize the loans with 1 month [early payment default] before the [early payment default] period expires.” Similarly, recently published documents show that, in or about December 2005, Mr. Verschleiser ordered Bear Stearns’ deal managers and traders to start securitizing all “the subprime loans closed in December for the conduit” by January.
Translation: Verschleiser and Bear were trying to unload loans before they could be red-flagged as fraudulent when a borrower missed the very first payment.
Teri Buhl had more on Verschleiser back in January when mortgage-bond insurer Ambac’s lawsuit revealed his emails (also read Buhl’s April 2010 Atlantic scoop on Bear analysts falsifying loan information to give the ratings firms):
In 2007, when Ambac started to realize something was very wrong with its high-rated bonds, it demanded Bear provide loan-level detail and reviewed 695 non-performing loans in its portfolio. Ambac’s audit concluded that 80 percent of the loans showed an early payment default. This meant they should have never have been packed in the bonds Bear sold and were required to be repurchased. Bear refused, and of course had already been pocketing buyback money for itself from the originators. Bear also never told investors that its auditor Price Waterhouse and Coopers submitted an internal review in August 2006 that this repurchase process was not in-line with its due diligence standards and not typical for the industry. By January 2007, a Bear internal audit also reported the firm had collected $1.7 billion in repurchase claims — a 227% increase over the previous year. Yet Marano’s group of traders continued their double-dip payment scheme and kept selling the toxic loans with full awareness of the poor quality of the due diligence.
Jeffrey Verschleiser even said in an e-mail that he knew this was an issue. He wrote to his peer Mike Nierenberg in March 2006, “[we] are wasting way too much money on Bad Due Diligence.” Yet a year later nothing had changed. In March 2007, Verschleiser wrote to Nierenberg again about the same due diligence firm, “[w]e are just burning money hiring them.”
If self-dealing lawyers are allowed to both defend against the FHFA lawsuit, as well as to cover their malpractice and criminal conduct, the FHFA lawsuit could be in exercise in futility. What must become immediately terminated is the DECADES of attorney unjust enrichment and extortion via “simulated” foreclosure auctions, illegal “credit bids,” of residential and commercial real estate properties gained via theft! Mortgage fraud is simply not about only INVESTORS becoming harmed!
When foreclosures become filed, mortgage lenders and bankers ARE NOT required to know the laws and procedures requisite for lawful foreclosures and recordation of property titles –lawyers are!!
When title companies refuse to ensure foreclosed properties, it is usually because the foreclosure was not lawfully executed. Moreover, irrespective of borrower default, NO lawyer should be allowed to SELF-DEAL and exploit circumstances and cause homelessness, and tens of thousands of dollars in losses to City Revenues. It would be ludicrous to exclude from the FHFA lawsuit, the Elephant in the Room –hiding in plain sight!
Further, Freddie Mac has (knowingly or unknowing) shelled out $$$$$$$$$$$$$$$$$$$$ toward real estate theft, criminal frauds, and social tyranny! This FHFA lawsuit, or some additional one needs investigation and recovery of those moneys. People who acted in furtherance of those financial frauds ought to be brought to justice! With our nation’s high unemployment, self-dealing and unscrupulous exploiting of people who owe debt is ravishing America.
An irrefutable instance of Freddie Mac’s involvement in foreclosure frauds (An Elephant depiction!): A defunct mortgage lender’s identity was utilized to place a “credit bid” at a sham foreclosure auction of my home (it is impossible for a non-existent lender to bid \ has no“standing”!) From the so-called auction, a deed was recorded into the defunct lender’s name. (void as a recorded Hibernia deed, rather than successor, Capital One.) Six weeks after the so-called auction, Freddie Mac paid an imposter $86,000 for the worthless property deed, which became put back on the market.
Such in-your-face fraud transactions have continued unaddressed for decades. Fraudulent flipping of real estate make the housing market appear thriving; impresses Investors. In our land of rules and laws, identity theft is criminal, and so is Freddie Mac buying stolen property. However, all that has really mattered were the benefits to be gained by defaulted mortgage loans –even jurists and their allies stand to become enriched from foreclosures. Moreover, acceptable practices include crippling property owners who interfere with foreclosure objectives!
HUNDREDS OF PEOPLE have experienced some form of abusive, illegal tactics associated with owing debt, and have signed this petition. Their names and pleas can be seen here: http://www.change.org/petitions/request-for-congressional-foreclosure-panel-to-examine-foreclosure-lawyers Equally as important to America as Investors, they are pleading for help –because they too are victims of the Feds’ failure to properly oversee, regulate, and rein in mortgage industries.
I continue speaking out because attention to this aspect of foreclosure crisis is vital, while the monster roams! A monster so brazen, it sets forth its asinine contentions about defaulted borrowers unentitled to know why they’re being forced to abet mortgage frauds, subjected to invaded privacy, Constitutional wrongs, threats, etc. –all directly associated with real estate frauds. These all the more make is essential to tell the facts of how egregious and far reaching is mortgage fraud.
#1 Posted by Barbara Ann Jackson, CJR on Fri 9 Sep 2011 at 03:25 AM
I've reported even more scoops on the players in Bear's RMBS fraud for DealFlow media last month. It's behind a paywall but you can read some of the news here.
http://www.teribuhl.com/2011/08/24/report-says-bear-stearns-executives-sold-illegal-rmbs-and-covered-it-up/
#2 Posted by Teri Buhl, CJR on Fri 9 Sep 2011 at 03:34 PM
FINALLY!..
Some real, honest goodness names of actual people who are accused of actually committing actual malfeasance!. Yes, in Chittumland, these people are presumed guilty until found guilty no matter what the evidence says.. Yes, in Chittumland, they're not the "right" people, nor are they sufficient in number to satisfy the Marxist bloodlust...
Nonetheless, they appear to be actual, living and breathing human beings!
Maybe we're finally starting to kill off the stupid commie/liberal notion that corporations can be "guilty" of anything.
Corporations can do no good or evil. Corporations can't act. Only PEOPLE can act.
Corporations exist for one, and only one (incredibly beneficial) purpose - to shield investors from liability for the acts of people conducting business in the name of the corporation in order to encourage commerce.
#3 Posted by padikiller, CJR on Sun 11 Sep 2011 at 10:49 AM
Ryan - Aaron Elstein of Crain's New York also wrote about the indvidual players at Bear, Morgan Stanley, Goldman who were named in the FHFA suits. But is was odd the WSJ and NYT did not name these banks executives in their coverage.
#4 Posted by Teri Buhl, CJR on Mon 12 Sep 2011 at 11:41 AM