Archive for April, 2011
Carl Alexander and Carol Asbury bet big on Versailles real estate deals.
This week, they lost big, indicted for their part in alleged mortgage fraud in the upscale Wellington community.
They join 24 others who have been indicted or charged in Versailles schemes worth millions, first outlined in a Palm Beach Post series in 2009.
Posted in Around the Web | No Comments »
[Update 1: Clarifies at end of article that there is another Michael Pines practicing law in same region.]
California attorney Michael T. Pines, a foreclosure defense attorney who advised his clients who had lost homes to foreclosure to break in to their former homes, will be disbarred.
Pines views himself "as a modern-day Henry David Thoreau, who encouraged civil disobedience to effect universal societal benefits, including ending slavery and war," said an 18-page ruling signed by Richard Honn, judge of the State Bar Court of California. "But respondent is not Thoreau, and his cause is not slavery or war. (Pines) sought a few minutes of fame in front of reporters or the television cameras while he violated the law, or encouraged his clients to do so."
The disbarment takes effect May 1.
Pines "poses a substantial threat of harm" to his clients and the public, the order notes. No one answered the phone at Pines' law office when HousingWire called seeking comment, and Pines did not immediately return a message left for him. The Los Angeles Times quoted a defiant Pines saying the ruling meant "absolutely nothing" and quoted him saying that he would "go right on doing what I have always done, and it won't affect me at all, or my clients."
Pines was Member No. 77771 of the California State Bar for more than 30 years, according to bar records, having been admitted in 1977 after going to law school at the University of San Diego. But despite that longevity, the court noted that he had trouble properly filing court documents and following basic rules of civil procedure in acting in his own defense. Despite two extensions to allow him to correct improperly filed paperwork, Pines twice re-filed and twice had the documents rejected due to procedural errors.
While some homeowners who have lost their homes during the nation's lingering housing crisis suffered "inappropriate or overreaching actions by lenders," such homeowners had legal remedies to seek justice for improper lender conduct, the order noted.
Instead of pursuing those legal remedies, Pines told his clients to break into their former homes and take them back from the new owners. On three occasions, he went with his clients to help them break in.
In one case, Pines assisted Jim and Danielle Earl in their Oct. 9, 2010, break-in at a Simi Valley, Calif., home that they lost to foreclosure by using a locksmith to pick the locks. The Earls moved in and stayed several days in the property, which had been purchased 10 months earlier by Conejo Capital Partners at a public auction. As a result of the break-in and media attention, there is now a cloud over the property and Conejo has been unable to sell it, according to the order.
Just days later, Pines orchestrated another break-in involving Hector Zepeda who had lost a property to foreclosure in Newport Beach, Calif. Zepeda ultimately broke a window at the house and was arrested along with Pines at the house, which had been repossessed by JPMorgan Chase (JPM: 37.29 -0.53%).
A third case involved a house formerly owned by Benjamin and Sara Valenzuela in Carlsbad, Calif. It was sold on Dec. 1, 2010, but remained occupied by the Valenzuelas until they were evicted on Feb. 18, 2011. Pines confronted the new homeowner on the day of the eviction and later returned while the new owner was moving in and attempted to change the locks. The new owner called police, and Pines was arrested. Pines was later arrested two more times for returning to the property.
Judge Honn said Pines "propelled his clients into volatile and even dangerous situations, with apparently little concern for their wellbeing."
The judge also chastised him for harming the legal profession, which he said has been at the forefront of the war against injustice and corruption in a battle waged in the courtroom, not the streets.
"Attorneys are litigators, not vigilantes," the order said, noting that Pines somehow lost his ability to distinguish between zealous advocacy and lawlessness.
(Michael T. Pines is not associated with Michael Pines, 53, a personal injury attorney practicing in San Diego/La Jolla, Calif. The other Pines does not use a middle initial and his firm is the Law Offices of Michael Pines.)
Write to Kerry Curry.
Follow her on Twitter @communicatorKLC.
Tags: California, California State Bar, disbar, disbarment, foreclosure, Henry David Thoreau, JPMorgan Chase, Michael T. Pines, mortgage
Posted in Servicing/Default, Top Stories | 3 Comments »
Investors in mortgage-related structured finance products are being given a leg-up in their courtroom challenges to representations and warranties now that Bank of America (BAC: 7.22 -1.10%) settled with Assured Guaranty last week, claim analysts at Barclays Capital.
The government-sponsored enterprises and private investors claim some lenders violated representation and warranties contracts when the companies wrote now defaulted mortgages, and now claim the banks should buy them back. BofA settled reps and warrants claims with the monoline insurer a couple of weeks ago.
BofA is providing $1.1 billion for deals made using home equity lines of credit as collateral. The settlement should cover 80% of Assured's paid-out losses on 21 first lien transactions.
The deal will likely increase the chance other monolines will get a settlement. It's a concept not far removed from what investor swould like to get in similar lawsuit brought by firms such as Gibbs And Bruns and Talcott Franklin's eponymous lawfirm.
Barclays analysts said "this does seem to raise the probability of an eventual settlement with non-agency investors."
Subordinate holders in deals involving the settlement might be able to argue that they were hurt by rep- and warrant-related breaches, much as Assured Guaranty was and should therefore be compensated.
Follow him on Twitter @JacobGaffney.
Tags: Assured Guaranty, Bank of America, reps and warrants
Posted in Secondary Market/Investors, Top Stories | No Comments »
Spreads in the commercial mortgage-backed securities space are expected to tighten, as positive news infiltrates the market despite a spate of recent negative headlines.
Barclays Capital said in a note to investors Friday that secondary trading volume picked up substantially this week, up to $1.9 billion from $1.2 billion last week, "with most of the activity concentrated in the duper space."
Although recent spreads are widening due primarily to global macroeconomic concerns, the research firm commented that the AJ sector is attractive for investors, as it lagged other sectors slightly during the most recent wave of tightening. Most 2007 AJs are trading in the high-500s area, with some better names quoted in the mid-500s, Barclays said.
"As more positive news of improving property fundamentals and better credit performance reaches the market, we expect a renewal of interest in this space to result in spread tightening," the research note said. However, it noted that this trade should be viewed as a longer-term investment.
Analysts at Barclays Capital reported Tuesday that they expect investors to flock to the CMBS 2.0 market in 2011. CMBS 2.0 refers to commercial securities issued after the financial crisis. The analysts said the securities market could reach as high as $35 billion during the year and that they expect investors to maintain a healthy appetite for riskier deals.
The CMBS 2.0 market recently experienced its first delinquency. The U.S. Geological Survey Regional headquarters in Austin, Texas, which is backed by a $5.2 million loan, was 30 days past due as of last week.
Find out more about the market for CMBS 2.0 in the upcoming edition of HousingWire magazine. Take a sneak preview here.
Write to Christine Ricciardi.
Follow her on Twitter @HWnewbieCR.
Tags: Barclays Capital, commercial mortgage-backed securities, U.S. Geological Survey Regional
Posted in Secondary Market/Investors, Top Stories | 1 Comment »
All but one of the 12 Federal Home Loan Banks reported a gain in the first quarter, evidence of the systems' great efforts to stabilize finances.
The FHLBs are considered government-sponsored enterprises like Fannie Mae and Freddie Mac. These companies provide wholesale funding housing and community developments. The FHLB of Seattle was the only one to report a loss in the first quarter. Combined net income for the 12 FHLBs totaled $358 million in the quarter, up 10% from one year ago.
Total assets at the banks dropped to $848.7 billion in the first quarter, down 3% from the fourth quarter.
Advances declined 7% during the first quarter, and demand among members decreased, as well.

"Advance demand remained subdued because of continued availability of alternative funding sources as well as high deposit balances and low demand for loans at member institutions," according to the FHLB Office of Finance.
In a note to clients, FTN Financial said downsizing the FHLBs in the financial system would be "a mistake."
"Raising the cost of term funding to regional banks simply improves the market position of larger banks. You don’t shrink systemic risk by reducing the Federal Home Loan Banks. You shrink systemic risk by diversifying assets across a broad range of business models in different financial intermediaries," according to FTN. "FHLB has a major role in facilitating that diversification for banks, insurance companies, and credit unions."
Write to Jon Prior.
Follow him on Twitter @JonAPrior.
Tags: Fannie Mae, FHLB, first quarter, freddie mac, FTN financial, housing, income, mortgage, Seattle
Posted in Secondary Market/Investors, Top Stories | 1 Comment »
The still forming Consumer Financial Protection Bureau listed $36 million in expenditures as of March 31, the agency said Friday.
The Dodd-Frank Act stipulates the CFPB to be built and ready by July 21. The agency will become the de facto federal regulator for the entire mortgage market, from origination through servicing. While the agency continues to add to its staff, there is still no director or nomination for one from the White House.
In the meantime, Elizabeth Warren is serving as the special adviser to the Treasury, and is in charge of organizing the agency. The CFPB has spent two quarters in development.
According to the agency, the spending so far consists of $13 million in outlays and $23 million in gross obligations.
Most of the spending was for building staff and administrative services provided by other federal agencies, including the Treasury. The largest expenditure during its second quarter of development was a $3 million contract for human resources support.
According to Dodd-Frank, the Fed will supply 10% of its expenses to the formation of the CFPB through the first year. That goes up to 11% in the second year and 12% every year after, up to roughly $500 million. If that's not enough, the Fed can go to Congress for an additional $200 million.
The CFPB received three funding transfers totaling $60.7 million from the Fed so far. They stem from an initial request for $18 million in August 2010 and another $14.3 million in December. The agency requested another $27.9 million in March 2010.
Write to Jon Prior.
Follow him on Twitter @JonAPrior.
Tags: CFPB, Dodd-Frank, Elizabeth Warren, mortgage, spends, Treasury
Posted in Origination/Lending, Top Stories | No Comments »
Mortgage Electronic Registration Systems announced the appointment of former chairman and CEO of CitiMortgage, Bill Beckmann, as president and chief executive officer of MERSCORP.
MERS provides a national national, real-time database that tracks mortgages.
Previously Beckmann lead Beckmann Insights, his independent consulting firm.
Beckman will replace interim head Paul Baganno. Bognanno recently served as chairman of private mortgage insurer Radian Guaranty.
The former MERS president and CEO R.K. Arnold retired in January.
During Beckman's tenure at CitiMortgage, the company had four million residential mortgage customers, representing over $800 billion in serviced assets.
In a statement, Beckman said he is "looking forward to leading an organization that provides a unique and vital service to the nation’s housing finance system."
Follow him on Twitter @JacobGaffney.
Tags: MERS
Posted in Secondary Market/Investors, Top Stories | No Comments »
Altisource Portfolio Solutions (ASPS: 54.02 -0.20%) more than doubled its first-quarter income as revenue rose 45% from a year earlier.
The Luxembourg-based company, which provides services and technology for real estate and mortgage portfolios, earned $14.8 million, or 57 cents a share, up from $6.3 million, or 25 cents a share, a year earlier. Revenue for the quarter increased to about $88.7 million from nearly $61 million the prior year.
Altisource said earnings for the three months ended March 31 rose mostly on the back of new mortgage services and the growth of Ocwen Financial's (OCN: 13.80 +0.36%) servicing portfolio in 2010.
Altisource was spun off from Ocwen in August 2009 and the company remains Altisource's largest customer. Ocwen substantially expanded its residential loan portfolio in 2010 by acquiring HomEq Servicing from Barclays Bank.
Analysts at investment-banking firm Stephens Inc. said Altisource's earnings came in slightly lower than expected. Stephens projected the company would earn 58 cents to 61 cents a share for the quarter on revenue of $89.3 million to $93.7 million.
"Revenue timing around the HomEq acquisition and a weak REO sales environment pressured the top line," according to Stephens. "However, we believe that the six- to nine-month lag on REO sales from the HomEq acquisition, coupled with a spring selling season lift and continued new product rollouts, will drive strength" in the second quarter and rest of 2011.
Stephens said mortgage services revenue of $59.7 million for the quarter was "a little light" despite climbing 84% from $32.4 million a year earlier. Analysts said Altisource is capable of rapidly expanding its mortgage unit if Ocwen purchases more servicing rights.
"Additionally, new products in title and non-legal back office will help to further expand revenue penetration within (Ocwen)," the analysts said.
Stephens maintained an overweight rating on Altisource with a target stock price of $36.
Write to Jason Philyaw.
Tags: Altisource, Barclays Bank, HomEq Servicing, ocwen financial, Stephens Inc.
Posted in Servicing/Default, Top Stories | No Comments »
The Michigan Court of Appeals recently ruled Mortgage Electronic Registration Systems cannot initiate a foreclosure in the state by simply advertising the property is available via a sheriff's sale.
Instead, MERS, as the mortgagee, must pursue a foreclosure on a property in Michigan secured by a seriously delinquent loan through the courts. The state normally uses a nonjudicial foreclosure process.
The appellate court ruled MERS neither owned the debt nor held any interest in it and therefore could not be the foreclosing party in two cases, in which Michigan circuit courts affirmed district court decisions to allow the eviction process to proceed. The Appeals Court ruling reverses the lower court decisions and vacates the foreclosures.
The plantiff in the cases – Residential Funding Co. and Bank of New York Trust Co. – claimed MERS interest in the mortgage as nominee for the lender was sufficient under state law to begin the foreclosure. In a 2-1 split decision, the Court of Appeals said this claim "is without merit."
"Pursuant to the mortgages, defendants were the mortgagors and MERS was the mortgagee," the court ruled. "However, it was the plaintiff lenders that lent defendants money pursuant to the terms of the notes. MERS, as mortgagee, only held an interest in the property as security for the note, not an interest in the note itself."
After the judges decided MERS' interest in the mortgage wasn't sufficient, "it (became) obvious that MERS did not have the authority to foreclose by advertisement on defendants’ properties."
The mortgage documents allow for MERS as mortgagee, but the court ruled the company held "only legal title to the interest granted" by the defendants.
"The contention that the contract between MERS and (the lenders) provided MERS with an ownership interest in the note stretches the concept of legal ownership past the breaking point," the Michigan Court of Appeals ruled. "While the term may be used very loosely in some popular contexts, such as the expression to 'own a feeling,' such use refers to some subjective quality or experience."
And that's not what the Michigan statute means, according to the judges. The state Legislature "used the word 'owner' because it meant to invoke a legal or equitable right of ownership," the judges said in the opinion. And while MERS "owns" the mortgage, it doesn't own any interest in the debt nor is it secondary beneficiary.
MERS said the ruling upholds its legal right as mortgagee of the security instrument and nominee of the lenders and successors.
"The court recognizes that MERS may exercise its interests in the mortgage by assigning the mortgage to the note holder so that the note holder may avail itself of the foreclosure by advertisement process," said Janis Smith, vice president of corporate communications at MERS. "Title companies should not have any concerns about closing loans with MERS as the mortgagee."
"This decision does not impact the MERS business model or the ability of its members to foreclose on mortgages held by MERS as the mortgagee," Smith said.
In February, MERS told members not to foreclose in its name and to instead obtain an assignment of the mortgage from the company.
Write to Jason Philyaw.
Tags: Bank of New York Trust Co., MERS, Michigan Court of Appeals, Mortgage Electronic Registration Systems, Residential Funding Co
Posted in Servicing/Default, Top Stories | 2 Comments »
Former Taylor, Bean and Whitaker CEO Lee Farkas was convicted in April for orchestrating a $3 billion bank fraud scheme that lasted nearly a decade. But investigators said in a report this week they only caught on to him when he went after federal bailout money.
Ocala, Fla. – based TBW originated, serviced and sold mortgages in pools to Freddie Mac and leaned on various financing vehicles, usually with Colonial Bank and Ocala Funding, to fund the loans. According to U.S. prosecutors, Farkas and co-conspirators at Colonial Bank devised a scheme in early 2002 to cover up cash flow problems. The scheme led to the bankruptcy of TBW and the closing of Colonial, one of the most complicated and disastrous bank failures in U.S. history.
Teams at the Special Inspector General for the Troubled Asset Relief Program originally identified the massive scheme – one of the largest and longest-running ever – when Farkas reached into the bailouts sent to Colonial.
The bank applied for $570 million in bailouts through TARP's Capital Purchase Program. The Treasury Department launched CPP in 2008 to provide funding to troubled banks by purchasing preferred stock in these firms. Colonial was approved for $553 million in CPP funding, as long as $300 million in private capital could be raised.
But when SIGTARP looked into it, investigators found Farkas and his co-conspirators caused Colonial to falsely claim it secured the private cash.
"SIGTARP quickly determined that the private capital supposedly raised by Colonial Bank, by and through Farkas and his co-conspirators, did not originate from private investors but instead appeared to be money that the co-conspirators had improperly diverted from Ocala Funding, a mortgage lending facility controlled by TBW," according to the report.
Paul Allen, another former CEO of TBW pled guilty to the conspiracy charges as well in April. Allen admitted he kept Farkas informed of the inadequate assets backing Ocala Funding's commercial paper, which he referred to as "a hole."
Farkas told him the "hole" had been moved to Colonial and directed Allen to secure funding from a private-equity investor to meet the TARP requirements. When Allen couldn't, Farkas took over and claimed the investor had put up enough cash for Colonial to report the requirement met. But the only money that moved was $5 million Farkas diverted from Ocala to that private-equity investor, unnamed in the report.
The Department of Justice, the FBI, the U.S. Attorney's Office and others soon joined the pursuit. According to evidence presented at Farkas' trial, Colonial submitted false information in its financial data and filings related to mortgages and securities held by the bank as a result of the scheme. Senior executives at both companies concealed TBW's overdrawn account "through a pattern of sweeping overnight money from one TBW account to another," according to the report.
Conspirators also made fictitious sales of mortgages to Colonial, knowing the loans either didn't exist or that TBW had already sold them to someone else.
SIGTARP said, in the end, because the program dealt with already toxic mortgage products, it was unsurprising to find some executives who approved the loans in the first place to be found committing fraud in unloading them – even onto taxpayers.
"This is the most significant criminal prosecution to date rising out of the financial crisis," SIGTARP said in the report. "The convictions in this case are a result of the dedicated and selfless work of the staff of SIGTARP and its law enforcement partners."
Write to Jon Prior.
Follow him on Twitter @JonAPrior.
Tags: bailout, Colonial, Farkas, mortgage, Ocala, SIGTARP, TARP, TBW
Posted in Secondary Market/Investors, Slider, Top Stories | 3 Comments »











