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Federal Government Sues Bank of America for Fraud: Fannie Mae and Freddie Mac Want Actuals and Exemplary Damages From Countrywide "Hustle" Scheme. Bank of America Says Nope.

Posted on October 25, 2012 by Rosa Schechter

The federal government has sued the second-biggest bank in the country, Bank of America Corp.,  in United States District Court for the Southern District of New York for fraud. That's right: fraud, which brings with it the possibility of punitive (exemplary) damages, which under the federal False Claims Act are set at treble ( three times) the amount of actual damages incurred. 

That's right: the federal government is suing Bank of America for fraud and asking the courts to order the bank to pay the federal government over a billion dollars in damages. Legally, the suit is based upon the False Claims Act and the Financial Institutions Reform, Recovery and Enforcement Act and it's asking not just for actual damages but for exemplary ones, too. 

You can read the complaint that was filed this week by Preet Bharara, U.S. Attorney for the Southern District of New York, online here. 

Bank of America has been quick to respond.  Here is their initial, complete statement on the matter:

Bank of America has stepped up and acted responsibly to resolve legacy mortgage matters. The claim that we have failed to repurchase loans from Fannie Mae is simply false. At some point, Bank of America can’t be expected to compensate every entity that claims losses that were actually caused by the economic downturn.

The federal government is alleging in its civil lawsuit that it wants the defendant, Bank of America, to cover the damages that FNMA (Fannie Mae) and Freddie Mac (FMCC) incurred from buying home loans that were later found to less than stellar, leaving the taxpayers holding the bag for the bad mortgages.

Of course, these bad things didn't start with Bank of America.  They started with Countrywide, whose mortgages Bank of America bought in 2008. 

What the complaint alleges is that Countrywide came up with a profitable scheme to get more people into mortgages that is being called the "Hustle."  The Countrywide Hustle debuted in 2007 and worked like a charm, apparently. 

Officially, it was a program known as "Loans Move Forward, Never Backward," where Countrywide's people worked to erase the checkpoints which would have sounded the alarm that the home loan being analyzed might not be on the up and up.   Countrywide also handed out bonuses to those employees who made the most home loans. 

Which meant more loans were made, of course, and which also proved that those checkpoints were good things, since those speedy quick home loans ended up with an alleged "defect rate" of around 40%.   The loan originator, Countrywide or Bank of America, did not volunteer to buy those notes back from Fannie Mae or Freddie Mac, according to the pleadings just filed.

The Complaint additionally alleges that this abnormally high bad loan rate was not shared with  Fannie Mae and Freddie Mac.  A material misrepresentation that hurt Fannie Mae and Freddie Mac which has now become part of this fraud action. 

The Hustle continued into 2009, after Bank of America had bought out Countrywide.  Accordingly, the Complaint is arguing that Bank of America is liable for the Hustle Fraud damages not only as the successor to Countrywide but because BofAm did the Hustle, too.

You'll recall that this isn't the first big financial slap to Bank of America by the federal government:  it was just last February that Bank of America settled another fraud case, agreeing to pay $1 billion in resolution of allegations made by the U.S. Attorney for the United States District Court for the Eastern District of New York on behalf of the Federal Housing Administration (FHA).  No wrongdoing was admitted at the time. 

Here is the press release issued by U.S. Attorney Preet Bharara which accompanied the filing of the lawsuit yesterday:

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Big News for Florida Finance with Gretchen Morgenson's NYT Expose: Obama Admin Wants to Block Individual State Investigations Into ForeclosureGate

Posted on August 23, 2011 by Rosa Schechter

On Tuesday, Pultizer-Prize winning journalist Gretchen Morgenson's article "Attorney General of N.Y. Is Said to Face Pressure on Bank Foreclosure Deal," was published in the New York Times and the next day, the New York Times published its editorial,"It's a Flawed Settlement," opining that the New York AG should persevere in his fight against this deal getting done. 

The firestorm this has sparked is still spreading across the country. 

Why? It may end up being the death knell to the national attorneys general ForeclosureGate settlement with the nation's biggest mortgage lenders - which would have a significant impact on Florida.

In her expose, Ms. Morgenson reveals that Obama Administration has been pulling its Executive Branch strings to get the Attorney General for the State of New York, Eric Schneiderman, to stop resisting the finalization of the AG - Big Bank Deal. 

According to Ms. Morgenson's investigations, the NY Attorney General as well as some of the other Attorneys General involved in the negotiations with the lenders, are not too keen on the current deal sitting on the table because it would bar their states from going after the banks under their state laws, including specifically alleged illegalities that occurred during the sales of mortgage-backed securities.  Joining these AGs in their opposition to the proposed deal are various consumer advocate groups and the like. 

Their position:  the deal lets the banks walk with merely a hand slap and it bars the states from instituting their own actions against the lenders. 

The New York Times story reveals that behind the scenes, White House representatives have been contacting the NY Attorney General as well as these consumer  advocates and others who share Mr. Schneiderman's concern - trying to convince them to get Eric Schneiderman to go along with the proposed deal.  And according to Ms. Morgenson, the White House calls began after officials from the Big Banks asked Shaun Donovan, Secretary of Housing and Urban Development, to help get the contrary NY Attorney General in line. 

Mr. Donovan did admit to the NYT that he had discussed the deal with Mr. Schneiderman - but his position was that he was motivated by a need to help troubled homeowners, not banks. 

What Is On The Table?

The top prosecutors from all fifty states and representatives of the federal government have negotiated with the major lenders involved in the ForeclosureGate crisis to find a settlement agreement that would rectify improprieties that have resulted from widespread activities that include robosigning and false filings (including forged real estate documents and the like).   

In March 2011, basic terms of the proposed deal were released by the group, where big national lenders (e.g., Bank of America, Citi, JPMorgan Chase, Wells Fargo) would pay approximately $20 billion into a fund that would be used to help homeowners who had been harmed by the foreclosure crisis.  In exchange for the money, the lenders would receive releases -- and that's the problem: how big should those releases be?

The deal on the table has each state's attorney general agreeing to release the lenders from any other claims based upon the bad acts addressed in the negotiations (robosigning, etc.).  The lenders would be freed from future lawsuits in exchange for putting the billions of dollars into the fund. 

Here's Where It Hits Florida - Banking Business Is Needed Here

It's true that Florida may have substantial claims against these lenders -- claims that former Florida Attorney General Bill McCollum began investigating last fall (see our discussion "Real Estate Transactions: Florida Attorney General Spearheading Foreclosuregate Investigation - All Other State Attorneys General May Follow Bill McCollum's Lead.")  It's also true that counties have lost significant filing fee revenue, etc., from the ForeclosureGate practices that they'd like to get back (see last week's post, "Suing MERS: Calif Case Reaches Supreme Court and States, Counties Pursue Claims for Lost Fees - But Whose Pockets Would Pay Their Damage Claims?")

However, these prosecutions would seek to bring more money from the lender's pockets into the government's pockets for distribution as the state or county entity saw fit.  Meanwhile, as the Federal Reserve's Kathryn Wilde points out, these lenders are the very same banks that Florida citizens (and elsewhere in the country) depend upon not only as depositors but as home buyers and businesspeople who need solid banking business upon which they can depend. 

What the NYT reveals may be accurate, but in the bigger picture, does this help Florida?  How much money is in the lender's pockets and by taking that cash in claims filed by the government(s), how free will those lenders be to participate in the crucial role of getting Florida's economy out of its dire straits?  Banks aren't bottomless pits of cash - and if they are forced to pay federal settlements, state claims, county claims, both as direct defendants and as indirect defendants (i.e., MERS ownership), then how long does that keep South Florida down?

Read and Review of "Wall Street and the Financial Crisis: Anatomy of a Financial Collapse" - Report by US Senate Investigation Subcommittee

Posted on April 21, 2011 by Rosa Schechter

First things first: the new Senate report on Wall Street is long and detailed.  So long, in fact, that it will take you more than a ream of paper just to print the whole thing.  Luckily, it's also available online in its entirety, should you choose to read the whole thing.  (And you won't be wasting time if you choose to do so.) 

Download a complete copy of the 650-page Majority and Minority Staff Report of the Permanent Subcommittee on Investigations | Committee of Homeland Security and Government Affairs of the United States Senate entitled "WALL STREET AND THE FINANCIAL CRISIS: Anatomy of a Financial Collapse," HERE. 

What is the Wall Street and the Financial Crisis Report All About?

It is the culmination of the Senate's own investigation into some of the reasons our economy is in the turmoil it is: this is the Homeland Security synopsis of why we're here and how we got here. 

Two years in the making, the bipartisan subcommittee has issued its findings and conclusions in a report that names names and gives details - times, dates, documents.  Again, it's best to read it on-screen. There is an amazing amount of information in this report. 

One Tidbit:  Analysis of The Washington Mutual Fiasco

Fingers are pointed at the role various governmental agencies have played in the financial collapse throughout the report.  Of particular note, the Office of Thrift Supervision which had the job of overseeing lenders like Washington Mutual. 

Remember Washington Mutual?  That's right: WaMu was that big bank that offered free checking across the country - and doesn't exist anymore. 

Over eight days in September 2008, there was a bank run on WaMu by fearful depositors who took out $16.7 BILLION in that short time window - this was the apparent final straw for WaMu, and the Office of Thrift Supervision shut its doors shortly thereafter, selling the WaMu assets to JP Morgan (WaMu sued, of course).  Read the OTS Fact Sheet on WaMu here.

At one time, WaMu branch offices were almost as commonplace as the golden arches or Kentucky chicken joints.  WaMu was a major financial player in this country - and yet, how many remember that bank run?  Even more importantly, what happened in Washington that allowed WaMu to get to the point that in one week's time, disgruntled bank depositors withdrew almost $17,000,000,000.00? 

The Senate Report bring the Office of Thrift Supervision to task for this and other failures to protect the banking industry.  Emails are revealed, documents are incorporated, that explain the OTS's failure to protect WaMu from its own demise. 

Things like OTS's director John Reich complaining about FDIC chairwoman Shiela Barr in an email to his deputy Scott Polakoff:  "...I cannot believe the audacity of this woman."  [Report page 186, footnote 644.]

Juicy stuff for a government report, right?  

Back to the WaMu story.  The report is in hindsight and some of it is a little like shutting the barn door after the horse is gone -- the OTS no longer exists.  Last year, it was dissolved in Dodd-Frank and its operations are being taken over by the Comptroller of the Currency. 

Report Is Worth Your Time - and It's Better Late than Never

One of the great things about America is its ability to be honest with itself and admit to being wrong, and changing course as need be.  The Senate Report is filled with detailed analysis of what happened over the past decade or so within the financial industry - all for the purpose of learning from the mistakes that have been made as well as the flagrant frauds that did indeed transpire.

It's true, the Senate is using hindsight here.  We're all using hindsight now, attempting to discover clues to get ourselves out of this economic mess.  The Senate Report was worth the time and effort expended, and it's a must read for all involved in the American financial community - including depositors - as we work together toward a better, and more prosperous, future. 

Florida Commercial Real Estate Gets Hit Again by Florida's Plan to Shrink State Government: Commercial Leases Targeted

Posted on March 29, 2011 by Rosa Schechter

Florida commercial real estate already awaits the final tally on how much the real estate market will be impacted by proposed deregulation of professionals such as surveyors, landscape architects, and the like.  However, that isn't the only jab to the Florida commercial real estate market by the state government these days. 

Florida commercial leasing is being hit by disappearing government leases - the State of Florida isn't the trustworthy tenant that it used to be, office-space wise.

The new Powers that Be in Tallahassee are all about cutting back on state government - as we've been following with the massive deregulation bill (HB5055) in the past few weeks.  That proposed law would end lots of regulatory efforts by the State of Florida, meaning less state tax dollars would be needed to fund state oversight.  (Read more about it here.)

However, in today's bad economy, the State of Florida has been slashing agency budgets across the state by reducing its office lease rents -- which may look good for the state's budget-balancing monthly accounting, but which is far from good news for those leasing companies and owners of leaseholds who are now facing lots and lots of empty, unprofitable office space.

The Wall Street Journal, in an article by Anton Troianovski entitled "Government Cuts Clip Office Market," reports that already Florida's statewide total of leased office space has declined by five percent (5%) and it's predicted by industry experts that approximately half a million (500,000) of leased square feet will be lost in 2011 as the State of Florida vacates its current leaseholds. 

That is a lot of empty offices in an economy that's already reeling from business declines.

Moreover, this doesn't appear to be the only whammy that the Florida commercial real estate industry will have to survive - and attempt to thrive in spite of its impact.  Those holding leases with the State of Florida may not be secure in those profit projections: the Florida Tax Watch, for example, is calling for existing leases held by the State of Florida to be reviewed and renegotiated.  

Florida Deregulation Bill Zooms Forward - Hurry to Let Your Voice Be Heard

Posted on March 21, 2011 by Rosa Schechter

Last week's post about the Florida Legislature considering massive deregulation as a budgetary strategy resulted in lots of discussion and commenting - and rather than respond to each item individually, we're providing the following information so anyone with a strong opinion on this issue can give that opinion where it counts: to their representatives in the Florida Legislature itself.

To get the email or phone number or mailing address of your representatives in the Florida Senate and the Florida House of Representatives, go here and input either your zip code or your mailing address. 

The Florida Deregulation Bill Moves Forward - Track it as HB 5055

In our earlier post, the bill was gaining momentum in the House but it was still in subcommittee.  Now, it's official over 300 pages and it's HB 5055, which you track online at the government website. 

On Friday, it moved to the Economic Affairs Committee of the Florida House. You may also want to contact those serving on the Florida Economic Affairs Committee.   

Read the text of this proposed law here.  Here is the summary of what this bill intends to do, according to the Florida House (the official description of the proposed law):

Deregulation of Professions and Occupations: Deletes provisions establishing DBPR's Division of Florida Condominiums, Timeshares, & Mobile Homes, Florida Board of Auctioneers, Board of Employee Leasing Companies, Board of Landscape Architecture, Board of Professional Geologists, & Board of Professional Surveyors & Mappers, Motor Vehicle Repair Advisory Council, & Regulatory Council of Community Association Managers; deletes provisions for regulation of yacht & ship brokers, auctioneers, talent agencies, community association managers, athlete agents, employee leasing companies, home inspectors, mold assessors & remediators, professional surveyors & mappers, persons practicing hair braiding, hair wrapping, or body wrapping, interior designers, landscape architects, professional geologists, professional fundraising consultants & solicitors, water vending machines & operators, health studios, ballroom dance studios, commercial telephone sellers & salespersons, movers & moving brokers, certain outdoor theaters, certain business opportunities, motor vehicle repair shops, sellers of travel, contracts with sales representatives involving commissions, & television picture tubes; revises name & membership of Board of Architecture; revises license classifications of public lodging establishments; deletes DBPR's authority to enforce & ensure compliance of certain provisions relating to condominiums, cooperatives, vacation plans & timeshares, & mobile homes.

Of importance, since this bill is considered to be budgetary in nature it will not need to follow the more well known path of substantive legislation - which means it can get passed a lot faster than the substantive proposals. 

If you want to have your opinion heard by the Powers that Be, then speak now, speak soon -- the proposed effective date of this bill is July 1, 2011. 

Elizabeth Warren and the Consumer Financial Protection Bureau: What Will They Do to Florida Banking and Florida Real Estate?

Posted on March 17, 2011 by Rosa Schechter

The brand new, shiny as a new penny Consumer Financial Protection Bureau is up and running now, with Harvard Law professor Elizabeth Warren at its helm.  Look at the CFPB's nice, new website and it looks like Martha Stewart might be advising on both the design of the site as well as Professor Warren's hairstyle. 

And the CFPB sounds so friendly and helpful, too.  From the site:

The CFPB will work to ensure that financial companies make the true price clear to consumers so they can make the decisions that are best for them. Companies shouldn’t compete by figuring out how to fool you best. Transparency means that markets really work for consumers.... [and]

The CFPB will work to promote fair competition for depository and non-depository institutions, large and small. No one should be able to ignore the rules in order to take customers away from those who follow them.

Well, Elizabeth Warren and the CFPB, created by Title X of the Dodd-Frank Act, may not be so nice and sweet and wonderful.  Particularly if you are in Florida, dealing with the current bad economy.

Bankers Do Not Trust Professor Warren and the Consumer Finance Protection Bureau

Financial experts in Florida and elsewhere are wary of this new agency, acting under the aspices of the U.S. Department of Treasury.  This isn't news.  Professor Warren has been criss-crossing the country, meeting with bankers to try and make friends.  (There's even a map tracking her good will tour on the CFPB site.)  Bankers don't trust this agency because it's not clear what the boundaries are with this agency.  How much power does Elizabeth Warren have?  Where is this all laid out, for everyone (including the CFPB) to reference? 

As the Wall Street Journal reported last week, Sen. Richard Shelby of the Senate Banking Committee, has publicly criticized Elizabeth Warren and the CFPB of a “regulatory shakedown” of mortgage servicers in the recent settlement deal made by the coalition of all fifty state attorneys general, the FDIC, and the CFPB in the Foreclosure Fraud matter.

This month, Iowa Attorney General Tom Miller announced a settlement had been reached in the Attorneys General investigation of ForeclosureGate and a 27-page overview was released.  Many banks, large and small, are unhappy with this proposal. 

Senator Shelby opined to the media (and Congress) that according to the news media, Elizabeth Warren and other federal regulators were involved in these negotiations, and that rumors had it that around $30,000,000 was on the table as the amount that the banks must pay to settle the foreclosure claims the AGs are collectively advancing.

Senator Shelby is telling the WSJ that this big stash of cash isn't marked to help the homeowners who suffered from the ForeclosureGate mess.  Senator Shelby is arguing that this massive amount of money is going into the hands of Warren and other executive agencies, so housing programs nixed by Congress can be funded.  

And, where is the accountability of CFPB here?  Can't find it. Seems that the CFPB has the power to take the money and run - and neither banks nor homeowners can do much to easily stop them.

Wall Street Journal Editorial Warns of Elizabeth Warren's Power Here

In an editorial published by the Wall Street Journal on March 15, 2011, entitled "More Mortgage Mischief," the Wall Street Journal provides perspective on Elizabeth Warren and this latest turn of events.  With bold words -- extortion, fiat, stall -- the WSJ's point is clear:  Elizabeth Warren's activity and this 27-page deal is scary.

The WSJ points not only to the Senator's concern about who gets this pot of gold from the ForeclosureFraud settlement, but to the language of the deal itself.  There's big, broad liability language that it opines no CEO in good faith would agree to sign. 

The WSJ also confirms its earlier worry that Dodd-Frank would result in the fed's attempt at controlling credit allocation has become a reality as part of this deal. 

Bottom line, this isn't a good debut for Professor Elizabeth Warren and her agency.  The ForeclosureGate settlement has the potential to be disastrous for the nation.  And likewise, it's very, very dangerous for Florida banking, Florida business, and Florida real estate development. 

Florida Deregulation Bill - Will It Open a Pandora's Box of Evildoing Here in Florida?

Posted on March 15, 2011 by Rosa Schechter

A bill that would remove the State of Florida from overseeing and regulating a wide variety of business activities is moving through the Florida Legislature right now -- and it's so comprehensive that even the industry leaders currently subject to agency oversight are denouncing the proposed law as bad for Florida. 

As reported in today's Orlando Sentinel in a story by Jason Garcia entitled, "Some industries balk at giant deregulation bill in Florida House ," the bill is big - it's 281 pages long, and even lots of businesses don't like it.

Garcia reports that over 30 representatives (lobbyists and others) have gone before the House Business and Consumer Affairs Subcommittee to give their testimony of how bad things could get if the Florida state government were to exit the building in these various industries.  Even Disney had a man go before the committee, warning of land fraud temptations without Florida's oversight of time shares. (Disney's big into the time share condo business.)

What the Deregulation Bill Proposes to Do

It's a budget cutting manuever that would take the State of Florida out of the business of overseeing and regulating 25+ professions and industries operating for profit in this state -- including home inspectors, time-shares, condos, landscape architects, professional surveyors, professional mappers, and other real estate related industries as well as businesses like auto mechanics and travel agencies. 

For example, here's what is being considered regarding architects.

Architects - Currently, an Architect business must be licensed by the state, unless exempt from licensure, in addition to the requirement that the individual be licensed. Persons currently exempt from licensure include anyone who makes plans and specifications for, or supervises the erection, enlargement, or alteration of:

1. Any building upon any farm for the use of any farmer, regardless ofthecost of the building;

2. Anyone-family or two-family residence building, townhouse, or domesticoutbuilding appurtenant to any one-family or two-family residence, regardless of cost; or

3. Any other type ofbuilding costing less than $25,000, except a school,auditorium, or other building intended for public use, provided that theservices of a registered architect shall not be required for minor school projects.

The proposal is to eliminate business license equirements for sole proprietorships for individuals licensed as Architects.

Florida isn't new to deregulation -- Governor Crist made lots of headlines in 2009 regarding the extent that the State of Florida would regulate the commercial insurance industry.  There was also lots of controversy over the extent that Florida should or would oversee the telecommunications industry in the state.

However, with the new shift in power up in Tallahassee, and Governor Scott's stated intention to run the State of Florida like a business, wide-spread deregulation like this may not face the big fight that it has seen in past years. 

Deregulation From a Land Development Perspective

Land developers often find state regulations to be time-consuming and expensive, but all reputable real estate professionals still respect the reality that there are those that push the edge of the envelope (or go past it) for the sake of profit.  No one wants to open the door to a free-for-all here in Florida, just because the state is in economic hard times.

So, is this massive deregulation good for Florida?  Many respected business professionals think not.  Consider what's being done here.  Specifically, the government would be hands-off regarding the following industries:

1. Athlete Agents

2. Auctioneers

3. Auctioneer Apprentices

4. Barbers

5. Body Wrappers

6. Business Opportunities

7. Cattle Owners with Officially Registered Brands

8. Charitable Organizations

9. Community Association Managers/Finns

10. Condominiums and Cooperatives

11. Dance Studios

12. Employee Leasing Companies

13. Hair Braiders

14. Hair Wrappers

15. Health Studios

16. Home Inspectors

17. Interior Designers

18. Intrastate Movers

19. Landscape Architects

20. Manicurists

21. Mobile Home Lots

22. Mold Related Services

23. Motor Vehicle Repair Shops

24. Professional Geology

25. Professional Surveyors and Mappers

26. Rooming Houses

27. Sellers ofTravel

28. Specialty Salons (Manicurists, Pedicurists, Nail Extensions)

29. Talent Agents

30. Telemarketing

31. Timeshares

32. Yacht and Ship Brokers

33. Television Tube Labeling (HB 4013 by Eisnaugle-Reported Favorably by BCA

Subcommittee on 2/8/11)

34. Contract Commissions (HB 4023 by Plakon- Reported Favorably by BCA

Subcommittee on 2/8/11)

35. Water Vending Machines (HB 4009 by Workman- Reported Favorably by BCA

Subcommittee on 2/8/11)

 

 

Ready Reference: Florida Statutes Dealing With Land Development

Posted on March 03, 2011 by Rosa Schechter

Florida laws dealing with aspects of real estate development are found throughout various sections and chapters of the Florida Statutes.   For a ready online reference, here is a list of links to the full text of various Florida laws that are commonly applicable in land development projects.

Title to Property

Quieting Title - Chapter 65

Leases

Landlord and Tenant - Nonresidential Properties - ss. 83.001-83.251

Landlord and Tenant - Residential Tenancies -ss. 83.40-83.682

Landlord and Tenant - Self-Service Storage Space - ss. 83.801-83.809

Mobile Parking Lot Tenancies - Chapter 723

More on the following page....

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List of Florida Agencies Involved Florida Real Estate Development - Ready Reference for Miami and South Florida Land Development

Posted on February 24, 2011 by Rosa Schechter

Land Developers in South Florida must work with numerous authorities within the State of Florida as they move from conception to completion of a wide variety of projects.  For ready reference, here is a link list of those Florida agencies most often involved in land development issues:

  1. Agriculture and Consumer Services
  2. Department of Community Affairs
  3. Department of Environmental Protection
  4. Department of Housing and Community Development
  5. Department of State
  6. Department of Transportation
  7. Fish and Wildlife Conservation Commission
  8. South Florida Regional Planning Council
  9. South Florida Water Management District
  10. Southwest Florida Water Management District
  11. St. Johns River Water Management District

Florida Real Estate Development: The St. Joe Company Shake-Up as an Example of Good Things to Come

Posted on February 08, 2011 by Rosa Schechter

Right now, there's lots of chatter in investment circles (see yesterday's Fortune magazine coverage for details) about St. Joe Company, a well-known Florida real estate developer, since news is that there will be a fruit basket turnover of the St. Joe board of directors. 

The board meeting takes place today.

What will be proposed is Bruce Berkowitz taking on the mantle of Chairman of the Board; Charles Fernandez (Berkowitz's partner) becoming Vice-chairman; and new blood coming to the St. Joe board in the form of Carnival's Howard Frank (its COO) and Florida Fish and Wildlife Conservation Commission's Chairman Rodney Barreto.

That's right: in a move that might (or might not) appease the character Clinton Tyree, aka Skink, in Florida bestselling author Carl Hiessen's series of books, the head of the environmental agency is being offered a spot on the real estate development company's board, just as St. Joe's Billy Buzzett (its former head of strategic planning) is now working for our new governor as the head of Florida's Department of Community Affairs. 

News of this possible change (leaked over the weekend, apparently) has already upped the cost of St. Joe stock 11%, and one can assume that the price will go higher after the vote.  Bezinga is predicting more of a jump ("St. Joe Poised to Go Higher").

St. Joe Company isn't the biggest land development in Florida.  St. Joe Company isn't the only developer with an awareness of conservation.  However, St. Joe Company is important to Florida for its impact upon the real estate industry - and having the national eye upon it and stock voting confidence in its future with this leadership change bodes well for our economic future.

Let's see what happens.

Is FDIC Chairman Sheila Bair Very, Very Wrong In Her Proposals Regarding Regulating Mortgage Servicers?

Posted on February 01, 2011 by Rosa Schechter

Sheila Bair chairs the Federal Depository Insurance Corporation ("FDIC") and has since since June 2006, when she was appointed for a five year term by President George W. Bush.  (Sheila Bair is also serving a term on the FDIC's Board of Directors which will end in 2013.)

For many, Sheila Bair's biggest role involves overseeing and salvaging banks that are going under.  Watching the FDIC today usually means watching the news for what banks have failed this week. 

The FDIC Failed Bank List

The FDIC Failed Bank List keeps track of banks that are taken over by the FDIC, which comes in as receiver -- it's a scary list for most at this juncture and many are watching the 2011 FDIC Failed Bank List to see just how many banks fail in 2011 (there have been 11 bank failures so far this year - all in January 2011). 

FDIC Chair Sheila Bair Also Player in Financial Reform

However, FDIC Chair Sheila Bair is also a key mover and shaker in finance and lending practices in this country.  Right now, for example, she is calling for Mortgage Servicers to fork up the necessary funding to establish a Mortgage Servicer Foreclosure Commission that would investigate complaints from consumers regarding these companies and would have the power to resolve these disputes with money provided by the mortgage servicing companies. (If this sounds familiar, it should: it's analogous to the British Petroleum model.)

Sheila Bair is also pushing for the Dodd-Frank Act's risk retention rules to be expanded to incorporate mortgage servicers.  No news here that banks and others involved in the mortgage business are not happy with this proposal.  She advanced this proposition a couple of weeks back during a speech to the Mortgage Bankers Association (see link to full text of her speech, below). 

Rebutting FDIC Chair Sheila Bair's Position on the Mortgage Industry - Maybe She's Wrong

However, rather than go through the details here on why Ms. Bair may not be right in her approach, read the excellent itemized rebuttal of Thomas Brown of Bankstocks.com where he takes her speech, paragraph by paragraph, and points out key issues that include:

  • the problem with the mortgage crisis in our country is not how the mortgage notes were serviced, but the fact that borrowers stopped paying on their notes - in massive numbers.  This unprecedented number of home loan defaults forced the financial industry to deal with a new and unique crisis; 
  • many of these mortgages were given to folk that should not have been given a home loan, and would not have received financing in prior years; and
  • the finance industry views the true crisis as occuring in 2008 and here in 2011, the issue is how to clean things up and move forward.  The massive defaults have already hit. 

Read FDIC Chair Shiela Bair's speech to the Mortgage Bankers Association's January 2011 Summit on Residential Mortgage Servicing for the 21st Century here. 

For an excellent resource on the details of the Dodd-Frank Act, refer to the Law Librarians' Society of Washington, D.C.'s online resource here. 

5 Great Blogs for Understanding the Complexities of Today's Real Estate Marketplace

Posted on January 27, 2011 by Rosa Schechter

There are lots of news stories dealing with issues concerning those of us working with commercial and residential real estate matters, however the internet also offers us the opportunity to learn how to interpret the events as they happen. 

It's one thing to read about the latest ForeclosureGate scandal; it's another to ponder its impact upon the Miami economy and particularly, things like commercial leasing; land development; construction; franchises; real estate finance, etc.  Some great, free online resources for this type of analysis are:

1. Property Profs Blog - a blog giving a professorial perspective on current real property and contract issues written by D. Benjamin Barros, Associate Professor of Law at Widener University School of Law and having as contributing editors Alfred L. Brophy, Reef C. Ivey II Professor of Law at the University of North Carolina School of Law; Stephen Clowney, Assistant Professor of Law at the University of Kentucky College of Law; Mark A. Edwards, Associate Professor of Law at William Mitchell College of Law; and Tanya D. Marsh, Assistant Professor at Wake Forest Law School.

2.  The Bigger Pockets Real Estate Blog - edited by Joshua Dorkin, founder of Bigger Pockets, and with 18 regular contributors from a variety of real estate niches, this site provides daily input on a variety of issues that impact the residential and commercial real estate markets in an easy to read format and from a street-smart viewpoint.

3.  Calculated Risk - described by Time Magazine as " ...among the most thoughtful and thorough financial commentary on the internet. Period," this six-year old blog is written by Bill McBride, a retired senior executive from an unnamed corporation with MBA from the University of California, Irvine. Highly respected, this blog covers a number of finance topics, but does have a dependable focus on real estate topics.

4. The Wall Street Journal offers several good reads, including its Deal Journal (discussing various big events where "money changes hands") and its Law Blog (discussing, well - law and lawyers).

5. Heard Along the Coast published by the South Florida Business Journal and offering commentary by editor Kevin Gale, reporter Paul Brinkmann, and web editor Susan R. Miller on a variety of news stories that impact our local community. 

 

 

WikiLeaks Rumor on Heels of Dec 21 Securitization Standards Letter Sent to BigWig U.S. Regulators

Posted on December 21, 2010 by Rosa Schechter

There's a letter bouncing through the web -- the full text is saved online at Scribd (read it here) dated today, sent to Tim Geithner (Secretary of the Treasury), Ben Bernanke (Chairman of the Federal Reserve), Sheila Bair (Chairman of the FDIC), Mary Schapiro (Chairman of the SEC), John Walsh (Comptroller of the Currency), and Ed DeMarco (Director of the Federal Housing Finance Agency).  The biggest of the big, American finance-wise.  These are the Regulators, folks.

Entitled, "Open Letter to U.S. Regulators Regarding National Loan Servicing Standards," it asks that major changes be implemented in the mortgage securitization markets.  It urges that cohesive change needs to happen as soon as possible because not only homeowners and investors but the national economy as a whole is being determinally impacted by the current state of affairs.

"...[N]ew securitization standards should be adopted now.  The rules under the Dodd-Frank Act relating to disclosure and risk retention for securitizations, which apply to all market participants, are the place to start.  We suggest, therefore, that the agencies concerned, led by FDIC and SEC, undertake a coordinated rule making effort to start the process and then also report to Congress."

Details are given on how and what should be done, and the letter is signed by 50 pretty prominent folk, such as Martin Mayer of the Brookings Institution; Allan Mendelowitz, former chairman of the Federal Housing Finance Board; James K. Galbraith of the University of Texas; and Zvi Bodie of Boston University. 

Convergence in Coverage: WikiLeaks Threat and Securitizations Standards Letter

Meanwhile, even bigger coverage in today's online news is the rumor that WikiLeaks is targeting Bank of America in its next Leak, speculation that has been driven in part by Julian Assange's comments to Forbes magazine last week, where he warned that WikiLeaks would be targeting a major bank or two in the near future. (Read the Forbes interview here.) 

HuffPo is reporting that WikiLeaks has in its possession a 5GB hard drive originally owned by a Bank of America executive. 

Andrew Ross Sorkin at the New York Times is taking the Forbes interview a bit differently.  After pointing to an Assange interview given to the Times of London, where Assange claims enough leakable material to force the resignation of at least one major bank executive, Sorkin looks not to the impact of WikiLeaks upon the banks but instead upon the regulators. 

According to Sorkin, the same regulators who received the Securitizations Standards Letter this morning may be the ones really hurt by this new, rumored WikiLeak.  Why?  If the leaked documents are as juicy as some expect, the public outcry may point more to the Powers that Be (like the SEC) who have spent years of time and millions of dollars in investigations that have come to nothing.

  • Will there be Bad Stuff in the leaked documents?
  • If there is Bad Stuff, then why didn't the SEC and its fellow regulatory agencies find it?
  • If there is Bad Stuff and the regulatory agencies found it, then why didn't they do something about it?

Yes, it's a sure bet that there are some sleepless nights now and in the future for the Regulators.  And one has to wonder if the Securitization Standards Letter's public debut now is in proactive response to an expected WikiLeak within the next few days.  Has there already been a "mini-leak" of sorts?

Media Spotlights Attorney David Stern as Florida's "Foreclosure King" while AG Investigates, Clients Pull Files - Is This Trial by Media? Will There Be More?

Posted on November 02, 2010 by Rosa Schechter

The South Florida Business Journal tips its hat to the growing scrutiny Florida attorney David Stern is receiving from the national media in an article describing Intercoastal water taxi tours combining treks past disbarred attorney Scott Rothstein's Las Olas Isles homestead, seized after his $1+ billion Ponzi scheme was discovered, with Stern's yacht (the "Misunderstood") and his own $15 million landmark waterfront mansion. 

Throwing Stern's name alongside Scott Rothstein with Rothstein's now infamous and rogue reputation may make good copy - who wouldn't like a tour of Stern's waterfront property? - but it's premature.  Stern has not been found guilty of wrongdoing, although as the "Foreclosure King" of Florida, odds are high Stern faces a tough fight to not become the poster boy of Florida Foreclosuregate. 

In fact, that shoe may have already dropped, considering the following media coverage over the past week (this is a scant selection of the thousands of newstories covering David Stern and available online):

Trial by Media of Attorney David Stern - Is He Just the First Among Many in ForeclosureGate?

What is happening here is not unique to this new national foreclosure story: trial by media is a known cultural event in our country, where individual guilt or innocence is determined by the public at large and covered by the media long before there is any trial on the merits. 

The point here is not whether or not David Stern is a greedy lawyer or a dishonest one.  Maybe David Stern steals candy from babies and kicks puppies for sport.  I do not know David Stern personally.  Here's the point: a trial by media is happening here.  Surely this wave will not stop with one Florida law firm; banks, other lawyers, trust companies, and others are all vulnerable to this type of exposure. Why?

There is a huge segment of our society that is angry about the number of foreclosures that have happened in the past few years, seeing it as the demise of the American Dream, and there exists another large contingent that is concerned that inaccurate foreclosure methods may result in a long, damaging ripple effect upon the housing industry and indeed, the national economy. 

The Irony of Trial by Media in Foreclosure Gate Coverage: Pot Calling the Kettle Black

These are legitimate concerns.  However, in the hurry to point fingers and scapegoat evildoers, what are we losing?  In this trial by media, isn't there circumvention of legal, procedural protections -- the very thing that Stern et al are being charged with as wrongdoing? 

Bottom line, in the bigger picture, is what we are seeing here a more invasive problem in our society than robo-signing foreclosure documents?  This is something that deserves some thought.

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