fraud

Deutsche Bank Sued by U.S. Government

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Bloomberg is reporting Deutsche Bank is being sued by the U.S. government for $1 billion over mortgage fraud lending.

Deutsche Bank AG, Germany’s biggest bank, was sued for more than $1 billion by the U.S. government for allegedly selecting mortgages “recklessly” for inclusion in a government insurance program.

The Frankfurt-based bank and its MortgageIT unit violated the U.S. False Claims Act by presenting fraudulent data to obtain mortgage insurance from the Federal Housing Administration of the U.S. Housing and Urban Development Department

Seems Deutsche Bank hoodwinked the government and used them to insure a host of worthless mortgages and then collected on the insurance when those mortgages defaulted.

$1 Billion is a drop in the bucket, but the fraudulent amount in question is $386 million in FHA insurance claims, paid by HUD.

The Wall Street Journal reports mortgage reviews were stuffed into a closet by Deutsche Bank. And you thought your receipts in a shoebox were bad.

More than 39,000 mortgages that Mortgage IT endorsed for HUD’s mortgage-insurance program, FHA, about one third of them defaulted. The government says that when an outside auditor showed MortgageIT its findings about serious problems in its mortgages, the auditor’s findings were literally shoved in a closet.

In other words, an outside consultant group reviewed the underwriting of these mortgages and instead of even reading the reports, they were stuffed, unopened, into a closet.

Massachusetts Surpeme Court Says No to the Banksters' Foreclosure Mill

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Finally, some in this country are actually paying attention to the law. Wells Fargo and U.S. Bancorp just lost their Foreclosuregate case in Massachusetts. The Supreme Court of Massachusetts just ruled against them. The case boils down to if the bank cannot locate the paperwork, too bad, they cannot foreclose, even when they bundle these things up in derivatives and trade them like baseball cards.

Financial Times has the background on the case itself and gives one of the court rulings on securitization of mortgages with respect to foreclosures:

The Land Court then proceeded to find that (1) neither Appellant had a valid assignment of mortgage at the time of publication of the notices or at the time of the foreclosure sale, (21 the foreclosure notices failed to identify the “holder” of the mortgage, and ( 3 ) the notices were deficient under Mass. Gen. L. ch. 244, 5 14. [A592-93]. Put another way, the Land Court held that Appellants lacked authority as assignees to conduct the subject: foreclosures.

Naked Capitalism on what this ruling means:

This is the key sentence from the decision, that the use of a securitization does not alter or reduce the requirements that apply to transfers and ownership of the loans and the related property.

Major Bust for Mortgage Fraud, 485 arrests

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Some Progress! The DOJ announced a major bust on mortgage fraud, with a nice title too, Operation Stolen Dreams.

The nationwide initiative called Operation Stolen Dreams is the largest collective enforcement effort aimed at confronting the problem of mortgage fraud, Attorney General Eric Holder told a news conference. It involves 1,215 criminal defendants in cases that uncovered more than $2.3 billion in losses.

The Justice Department also has engaged in civil enforcement actions to recover more than $147 million in the operation.

This was the largest criminal action on mortgage fraud in history. From the Department of Justice press conference:

In Miami, just yesterday we unsealed an indictment and arrested two defendants who allegedly targeted the Haitian-American community, often claiming they would assist them with immigration and housing issues, but then instead using victims’ personal information to produce false documents to obtain mortgage loans.

Make This Go Away! Goldman Sachs to Settle SEC Fraud Civil Case

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The New York Post is reporting Goldman is going to settle:

It's almost a certainty that there will be a settlement," said a source.

As another person put it, the SEC has an "unlimited supply of ammunition" in the form of e-mails and records that it could release, and Goldman officials would like to avoid having those documents fired back at them the way they were on Tuesday.

Deutsche Bank, JP Morgan accused of derivatives fraud

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This case could have worldwide repercussions.

(Bloomberg) -- Deutsche Bank AG, JPMorgan Chase & Co., UBS AG and Hypo Real Estate Holding AG’s Depfa Bank Plc unit were charged with fraud linked to the sale of derivatives to the City of Milan.
Judge Simone Luerti scheduled the trial of the four firms, 11 bankers and two former city officials for May 6, Prosecutor Alfredo Robledo said after a hearing in Milan today. The banks allegedly misled the city over swaps that adjusted interest payments on 1.7 billion euros ($2.3 billion) of bonds sold in 2005.

Finally, the Justice Department Investigating Credit Default Swaps

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Bloomberg is reporting Credit-Default Swaps Probed by Justice Department:

The U.S. Justice Department is investigating the market for credit-default swaps, according to Markit Group Ltd., the data provider majority-owned by Wall Street’s largest banks.

“Markit has been informed of an investigation by the Department of Justice into the credit-derivatives and related markets,” spokeswoman Teresa Chick said yesterday in an e- mailed statement in response to questions from Bloomberg News. She declined to comment on the nature of the investigation. “We will work with the Department to provide any information requested of us.”

The antitrust division sent civil investigative notices this month to banks that own London-based Markit to determine if they have unfair access to price information, according to three people familiar with the matter

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