NY AG Schneiderman sues banks, accusing them of deceit in use of electronic mortgage registry

Flashback: Last year, some mortgage lenders and government officials took action after discovering that many mortgage documents were mishandled.

Πηγή: Washington Post
By AP
Feb 3 2012

ALBANY, N.Y. — New York’s attorney general on Friday accused some of the nation’s largest banks of deceit and fraud in using an electronic mortgage registry that he said puts homeowners at a disadvantage in foreclosures while saving banks over $2 billion.

Democrat Eric Schneiderman sued Bank of America, J.P. Morgan Chase and Wells Fargo over their use of the Mortgage Electronic Registration Systems Inc., or MERS, claiming the banks submitted court documents containing false and misleading information that appeared to provide the authority for foreclosures when there was none.

The lawsuit also names the registry operator, MERSCORP Inc. of Virginia.

Schneiderman claims the MERS system has eliminated homeowners’ ability to track property transfers through traditional public records. He said the electronic system now stores that data and is plagued by inaccuracies and what the lawsuit calls “faulty and sloppy document preparation and execution practices.”

“The banks created the MERS system as an end-run around the property recording system, to facilitate the rapid securitization and sale of mortgages,” Schneiderman said Friday. “Once the mortgages went sour, these same banks brought foreclosure proceedings en masse based on deceptive and fraudulent court submissions, seeking to take homes away from people with little regard for basic legal requirements or the rule of law.”

MERS spokeswoman Janis L. Smith promised to fight the lawsuit. She said the company complies with all laws and county and state recording regulations.

“Federal and state courts around the country have repeatedly upheld the MERS business model, and the validity of MERS as legal mortgagee and nominee for lenders,” she said.

J.P. Morgan Chase and Bank of America declined comment. There was no immediate comment from Wells Fargo.

MERS was set up by banks to rapidly package and sell mortgages as securities without recording each transaction in county records offices. Complaints allege among other things that homeowners have trouble responding to foreclosure actions and mortgage inaccuracies because MERS makes it difficult to find out who owns the mortgages.

“By creating this bizarre and complex end-around of the traditional public recording system, banks achieved their primary goal — over 70 million mortgage loans, including millions of subprime loans, have been registered in the MERS system and the industry has saved more than $2 billion in recording fees,” according to the lawsuit.

The lawsuit also claims that over the several years, “banks rapidly securitized and sold off millions of loans, often misrepresenting the quality and nature of the mortgages being transferred.”

Last month, President Barack Obama announced a new Justice Department fraud-fighting unit to bring together 55 prosecutors and federal and state investigators focusing on one of the contributing causes behind the financial crisis — the collapse of residential mortgage-backed securities. Obama named Schneiderman as co-chairman to pull together state and federal probes into the bubble that led to the market crash.

Delaware officials have said MERS has sown confusion among consumers, investors and other stakeholders in the mortgage finance system. Officials claim the company has damaged the integrity of Delaware’s land records system and lead to unlawful foreclosure practices.

The Massachusetts attorney general sued the banks and MERS in December and Delaware’s attorney general has sued MERS Corp.

Britain to sue ECB over threat to City

Πηγή: FT
By Alex Barker and George Parker and Jeremy Grant 

September 14 2011

Britain is to sue the European Central Bank for setting rules that allegedly handicap the City of London and would force one of the world’s largest clearing houses to decamp operations to the euro area.

The unprecedented legal action underlines the depth of ministerial concern over the ECB policy, which comes as the UK engages in a turf war with France and Germany over Europe’s financial markets infrastructure.

An ECB policy paper, released in the summer, requires clearing houses to be based in the eurozone if they handle more than 5 per cent of the market in a euro-denominated financial product.

Britain will ask the courts to strike down the rule on the grounds that it restricts the free movement of capital and infringes on the right to establish cross-border businesses across a multicurrency European Union.

The policy, if enforced by the ECB, would undermine London’s financial market infrastructure since it would require that clearing houses shift many of their operations to the eurozone – most likely Frankfurt or Paris.

A Treasury spokesperson said: “This decision contravenes European law and fundamental single market principles by preventing the clearing of some financial products outside the Euro area. That is why we have begun proceedings against the European Central Bank through the European Court of Justice.”

British diplomats have long feared that Paris was leading attempts to rig market regulations in a bid to shift the centre of gravity for financial services from the City to the continent.

The UK fought off French attempts in recent months to insert into an EU directive a requirement for clearing houses to have access to central bank liquidity – a measure effectively confining most euro-denominated clearing to the eurozone.

The lawsuit is expected to be filed imminently at the European Court of Justice. It is the first case brought against the ECB by Britain.

London is home to LCH.Clearnet, which processes all share trading that takes place on the London Stock Exchange and operates an over-the-counter (OTC) derivatives clearing service, making it one of the largest clearing houses in the world. The clearer also operates a clearing house in Paris, called Clearnet SA.

Clearing houses have assumed heightened importance to maintaining the stability of the financial system due to G20 regulations designed to clean up after the 2008 financial crisis.

The ECB argues that, in the interests of financial stability, it is necessary to locate financial market infrastructure in the eurozone so that crises are not handled by multiple central banks with conflicting interests.

“As a matter of principle, infrastructures that settle euro-denominated payment transactions should settle these transactions in central bank money and be legally incorporated in the euro area,” its policy states.

The ECB’s policy would immediately hit LCH.Clearnet, since it has a large portfolio of euro-denominated business split between clearing of European government bonds and repos, and euro-denominated over the counter interest rate swaps.

The ECB declined to comment on Wednesday.

Michael McKee, partner at DLA Piper, a law firm, said: “There would certainly appear to be a prima facie arguable case that any attempt to require a clearing house, located in the EU but outside of the eurozone, to relocate inside the eurozone breaches EU Treaty free movement requirements.”

Two US exchange groups, CME Group and IntercontinentalExchange, recently set up clearing houses in London to serve as their beachhead in Europe as they take advantage of post-2008 crisis regulations pushing more clearing of derivatives – instruments in which London acts as Europe’s main hub. However their euro denominated business is minimal at this stage.

The ECB policy also said: “Given its mandate to promote the ‘smooth operation for payment systems’, the Eurosystem has major concerns with regard to the development of major euro area financial market infrastructures that are located outside of the euro area”.

In 2009 a confidential memo by the Banque de France was leaked, in which the bank called for the establishment of a Paris-based clearing house for credit default swaps, a type of derivative instrument, to prevent the business being dominated by London.

U.S. Sues 17 Big Banks Over Mortgages

Πηγή: FoxBusiness

By Ronald D. Orol
September 02, 2011

WASHINGTON -- A federal U.S. agency on Friday afternoon sued seventeen major banks, arguing that they misrepresented the quality of mortgage securities they put together and sold in the run-up to the bursting of the housing bubble. The Federal Housing Finance Agency sued the banks over soured mortgages including charges against Bank of America Corp. over $6 billion in soured mortgages. It also sued Citigroup Inc. [S: C] over $3.5 billion in mortgages, Barclays over $4.98 billion in loans.
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Judge allows American to sue Rumsfeld over torture

Πηγή: AP

By NEDRA PICKLER 

Aug 4, 6:33 AM EDT

WASHINGTON-- A judge is allowing an Army veteran who says he was imprisoned unjustly and tortured by the U.S. military in Iraq to sue former Defense Secretary Donald H. Rumsfeld personally for damages.

The veteran's identity is withheld in court filings, but he worked for an American contracting company as a translator for the Marines in the volatile Anbar province before being detained for nine months at Camp Cropper, a U.S. military facility near the Baghdad airport dedicated to holding "high-value" detainees.

The government says he was suspected of helping get classified information to the enemy and helping anti-coalition forces enter Iraq. But he was never charged with a crime and says he never broke the law.

Lawyers for the man, who is in his 50s, say he was preparing to come home to the United States on annual leave when he was abducted by the U.S. military and held without justification while his family knew nothing about his whereabouts or even whether he was still alive.

Court papers filed on his behalf say he was repeatedly abused, then suddenly released without explanation in August 2006. Two years later, he filed suit in U.S. District Court in Washington arguing that Rumsfeld personally approved torturous interrogation techniques on a case-by-case basis and controlled his detention without access to courts in violation of his constitutional rights.

Chicago attorney Mike Kanovitz, who is representing the plaintiff, says it appears the military wanted to keep his client behind bars so he couldn't tell anyone about an important contact he made with a leading sheik while helping collect intelligence in Iraq.

"The U.S. government wasn't ready for the rest of the world to know about it, so they basically put him on ice," Kanovitz said in a telephone interview. "If you've got unchecked power over the citizens, why not use it?"

The Obama administration has represented Rumsfeld through the Justice Department and argued that the former defense secretary cannot be sued personally for official conduct. The Justice Department also argued that a judge cannot review wartime decisions that are the constitutional responsibility of Congress and the president. And the department said the case could disclose sensitive information and distract from the war effort, and said the threat of liability would impede future military decisions.

But U.S. District Judge James Gwin rejected those arguments and said U.S. citizens are protected by the Constitution at home or abroad during wartime.

"The court finds no convincing reason that United States citizens in Iraq should or must lose previously declared substantive due process protections during prolonged detention in a conflict zone abroad," Gwin wrote in a ruling issued Tuesday.

"The stakes in holding detainees at Camp Cropper may have been high, but one purpose of the constitutional limitations on interrogation techniques and conditions of confinement even domestically is to strike a balance between government objectives and individual rights even when the stakes are high," the judge ruled.

In many other cases brought by foreign detainees, judges have dismissed torture claims made against U.S. officials for their personal involvement in decisions over prisoner treatment. But this is the second time a federal judge has allowed U.S. citizens to sue Rumsfeld personally.

U.S. District Judge Wayne R. Andersen in Illinois last year said two other Americans who worked in Iraq as contractors and were held at Camp Cropper, Donald Vance and Nathan Ertel, can pursue claims that they were tortured using Rumsfeld-approved methods after they alleged illegal activities by their company. Rumsfeld is appealing that ruling, which Gwin cited.

The Supreme Court sets a high bar for suing high-ranking officials, requiring that they be tied directly to a violation of constitutional rights and must have clearly understood their actions crossed that line.

The case before Gwin involves a man who went to Iraq in December 2004 to work with an American-owned defense contracting firm. He was assigned as an Arabic translator for Marines gathering intelligence in Anbar. He says he was the first American to open direct talks with Abdul-Sattar Abu Risha, who became an important U.S. ally and later led a revolt of Sunni sheiks against al-Qaida before being killed by a bomb.

In November 2005, when he was to go on home leave, Navy Criminal Investigative Service agents questioned him about his work, refusing his requests for representation by his employer, the Marines or an attorney. The Justice Department says he was told he was suspected of helping provide classified information to the enemy and helping anti-coalition forces attempting to cross from Syria into Iraq.

He says he refused to answer questions because of concern about confidentiality, and the agents handcuffed and blindfolded him, kicked him in the back and threatened to shoot him if he tried to escape. He was then transferred to an unidentified location for three days before being flown to Camp Cropper.

For his first three months at Camp Cropper he says he was held incommunicado in solitary confinement with a hole in the ground for a toilet. He says he was then moved to cells holding terrorist suspects hostile to the United States who were told about his work for the military, leading to physical attacks by his cellmates that left him in constant fear for his life.

He claims guards tortured him by repeatedly choking him, exposing him to extreme cold and continuous artificial light, blindfolding and hooding him, waking him by banging on a door or slamming a window when he tried to sleep and blasting music into his cell at "intolerably loud volumes."

He says he always denied any wrongdoing and truthfully answered questions but interrogators continued to threaten him. Both sides say a detainee status board in December 2005 determined he was a threat to the multinational forces in Iraq and authorized his continued detention, but he says he was not allowed to see most of the evidence against him. Documents the government filed with the court only say he is suspected of a crime, without providing details.