The latest economic and policy trends facing mortgage servicers

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2021 RealTrends Brokerage Compensation Report

For the study, RealTrends surveyed all the firms on the 2021 RealTrends 500 and Nation’s Best rankings, asking for annual compensation data for the 2020 calendar year.

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The non-QM market is making a comeback following a pause in 2020. As lenders rush to implement, Angel Oak is helping them adopt these new lending products.

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Justice Department finally sets sights on Wall Street executives

Changes could lead to prosecution for individuals

In the years since the financial crisis, the Department of Justice secured massive settlements with some of the nation’s largest banks for the wrongdoing, and misconduct the institutions perpetrated before, during and after the financial crisis.

Despite securing multi-billion dollar settlements against Bank of America (BAC), JPMorgan Chase (JPM), and Citigroup (C), among others, many observers have openly questioned why the DOJ and the federal government didn’t also target the individuals within each bank who were responsible for the corporate malfeasance.

Now, in a move that will undoubtedly have some shouting “finally!” and others saying it’s “too little, too late,” the Department of Justice announced that it will begin to target individual employees for corporate misconduct in addition to the companies themselves.

In a memo authored by Deputy Attorney General Sally Yates and addressed to all other assistant attorney generals as well as all U.S. attorneys, Yates said that the DOJ is taking “six key steps” to strengthen its pursuit of individual corporate wrongdoing, including requiring companies to provide the DOJ with all information related to misconduct, including the individuals involved, in order to qualify for any cooperation credit.

In the memo, which obtained by the New York Times and can be seen here, Yates lays out series of new policies that will prioritize the criminal and civil prosecution of individuals over the prosecution of companies.

“Corporations can only commit crimes through flesh-and-blood people,” Yates told the New York Times on Wednesday. “It’s only fair that the people who are responsible for committing those crimes be held accountable. The public needs to have confidence that there is one system of justice and it applies equally regardless of whether that crime occurs on a street corner or in a boardroom.”

In the years since the crisis, the DOJ reached a $ $16.65 billion settlement with Bank of America to resolve claims over toxic residential mortgage-backed securities, collateralized debt obligations and an origination release on residential mortgage loans sold to Fannie Mae and Freddie Mac.

Last year, Citigroup officially announced a $7 billion dollar settlement with the DOJ, several state attorneys general, and the Federal Deposit Insurance Corporation to settle residential mortgage-backed securities and collateralized debt obligations.

And back in November 2013, JPMorgan Chase signed an agreement with government agencies to end all existing legacy mortgage-backed securities issues for $13 billion.

But in each of those settlements, the DOJ did not prosecute the individuals responsible, causing many to wonder if the DOJ would ever go after the people actually behind the alleged crimes.

According to the DOJ, that changes now.

In the memo, Yates writes, “One of the most effective ways to combat corporate misconduct is by seeking accountability from the individuals who perpetrated the wrongdoing. Such accountability is important for several reasons: it deters future illegal activity, it incentivizes changes in corporate behavior, it ensures that the proper parties are held responsible for their actions, and it promotes the public’s confidence in our justice system.”

Yates writes that there are many “substantial” challenges to holding individuals responsible for corporate misdeeds, including difficulty in determining if someone had the knowledge and criminal intent necessary to establish their guilt beyond a reasonable doubt, which Yates says can be especially difficult to determine with high-level executives, who may be insulated from the day-to-day activities of the company.

But Yates writes that the new measures established by the DOJ should help the Feds hold individuals responsible for their actions.

According to the DOJ memo, which applies to all future investigations of corporate wrongdoing, companies now cannot “pick and choose” the fact that they disclose to the DOJ.

“To be eligible for any credit for cooperation, the company must identify all individuals involved in or responsible for the misconduct at issue, regardless of their position, status or seniority, and provide to the Department all facts relating to that misconduct,” Yates writes in the memo.

Yates writes that the new requirement does not mean that investigators should wait for companies to provide the information and then “merely accept” what the companies say.

“To the contrary, Department attorneys should be proactively investigating individuals at every step of the process – before, during and after any corporate cooperation,” the memo continues.

Additionally, the DOJ memo establishes five other guidelines for investigating and prosecuting for corporate wrongdoing, including:

  • Requiring that both criminal and civil corporate investigations should focus on individuals from the inception of the investigation
  • Requiring criminal and civil attorneys handling corporate investigations to be in “routine communication” with each other
  • Establishing that “absent extraordinary circumstances,” no corporate resolution will provide protection from criminal or civil liability for any individuals
  • Stating that corporate cases should not be resolved without a clear plan to resolve individual cases before the statute of limitations expires
  • Stating that civil attorneys should “consistently focus” on individuals as well as the company and evaluate whether to bring suit against an individual regardless of the individuals ability to pay a fine

“The Department makes these changes recognizing the challenges they may present,” the memo concludes. “But we are making these changes because we believe they will maximize our ability to deter misconduct and to hold those who engage in it accountable.”

(h/t Rob Chrisman)

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