Cities and Neighborhoods Catch a Break in Beating Banks

New Orleans   In a rare surprise over the dozen years that conservative US Supreme Court Chief Justice John Roberts has run the nation’s highest court, he joined the four more liberal justices on an issue, delivering a 5-3 vote. Even more shocking the decision was a slap in the face to big banks, in this case Bank of America and Wells Fargo, on a complaint brought by the City of Miami. The court ruled that Miami had standing to sue and to further pursue its claims concerning the discriminatory lending practices of these banks and their allegation that such practices led to decreased property values in neighborhoods, and therefore reduced property tax revenue to the city as well as increasing blight in the community.

This is big, really big, because it powerfully opens the door to a broader interpretation of the Fair Housing Act and its prohibitions against racial discrimination in preventing different standards between one neighborhood and another in cases like redlining, but it also speaks to differing and discriminatory standards in mortgage lending because of income as well, which was at the heart of broker driven exploitation that fueled abuse and outright fraud in the subprime market. There can’t really be too much doubt that Bank of America and Wells Fargo didn’t pause to even take a breath in lower income neighborhoods as they altered their supervision and standards willy-nilly to drive volume on refinancing as well as new purchases much as often as new purchases. Wells Fargo has already become poster child for not supervising its sales staff, but neither does the record of Bank of America and Wells improve when examining the way that they mishandled mortgages underwater during the Great Recession, exacerbating foreclosures.

There’s settled evidence that property values decrease when homes are abandoned in communities, and foreclosures in Miami and other cities led to increased abandonment. The scandalous disregard that big banks showed in refusing to modify the mortgage terms to prevent foreclosures as well as paying little attention to managing and maintaining the properties where they were foreclosing directly lowered values in those properties and whole neighborhoods. Miami has the lead role in proving this now that the Supreme Court has sent the case back down to Atlanta and the 11th Circuit Court of Appeals, and clearly the odds are still stacked against the city and favor the banks, but the door is open and common knowledge and a drive-by to any lower income community establishes the facts on the ground.

The banks are hoping they can prove that they were just one of many crooks, and not the ones pulling the trigger to rob the neighborhoods of their value. In criminal courts this might be a case where the banks might not get a sentence for murder, but they would definitely do time for manslaughter, because there is no doubt that they hurt these communities and the people who live there, whether they were driving the getaway car, acting as the lookout, or holding the gun.

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Bad Boy Banks Running Wild While Creating Credit Desert

New Orleans  Rather than learning something about proper corporate behavior in the banking meltdown they triggered with their housing securitization schemes and unwillingness to supervise mortgage brokers, the gazillion dollar bailout seems to have taught the banking establishment that they could act in all ways with impunity. As we move towards the ten year mark of this national and community disaster, there are too many examples that come readily to mind.

One of the most disturbing is the way banks are now flaunting the Community Reinvestment Act of 1975 by creating a credit desert in lower income and minority neighborhoods. We are now reading regularly about complaints being filed against banks for outright racial discrimination.

The giant Wells Fargo was finally called to account in a rare exercise by the Office of the Controller of the Currency of its authority in reviewing the annual CRA records of all regulated lending institutions. Wells Fargo was given a “needs to improve,” and given the watered down nature of the CRA now, a bank really has to mess up to get such a negative rating by the OCC. The CEO said he was disappointed, but to quote one banking newsletter:

10 government inquiries over the past decade prompted the OCC to lower its overall score of the company’s compliance with community banking laws to “needs to improve.” Enforcement cases cited by the OCC faulted the bank’s treatment of minority neighborhoods, military personnel and women who had recently given birth. “Bank management instituted policies, procedures and performance standards that contributed to the violations for which evidence has been identified,” the OCC wrote in a report. Abuses occurred in “multiple lines of business,” the regulator said.

This will hurt Wells Fargo because it is a critique of the pervasive and arrogant culture of the bank. Whether it will get them to modify their behavior is uncertain.

Another case in point with another giant based North Carolina this time rather than based in California, found a bankruptcy judge administering a beat down to the Bank of America for its thuggish handling of a foreclosure in California.

A bankruptcy judge in California fined Bank of America $45 million over the bank’s mistaken foreclosure on a family’s home and mishandling of the loan modification process on their mortgage calling it “brazen” and “heartless.”

In this case Bank of America’s standard trick of losing the loan mod paperwork was exposed for the duplicity that has been infamous in their handling of modifications and ruthless, and sometimes, incorrect foreclosures.

If this is the way the big letter, top of the list banks are handling loans to lower income and imperiled families across the country, is it any wonder that hedge funds and other financial vultures are swooping into our neighborhoods with one predatory lending instrument after another, feeling confident that they can rob and steal without any consequences, preferring to pay the fines, rather than do right?

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Wells Fargo, Criminal Enterprise

ct-wells-fargo-settlement-questions-oversight-20160910New Orleans   I’ve never been a fan of Wells Fargo. We fought them endlessly over predatory lending practices in mortgages and subprime products. They don’t listen, they obfuscate, stonewall, and hide behind layers of lawyers in stubborn refusal even when faced with evidence of clear misdeeds. We were able to fight Citicorp, Bank of America, HSBC, and a ton of subprimes, even Countrywide, and succeed in reforming practices and achieving decent settlements, but Wells Fargo, even when they settled did so narrowly and without conviction. I was clear for ACORN and our members, you just can’t trust a bank like that with your money.

It is some relief that now everyone in the United States is getting a crash course in learning that Wells Fargo is not the community banker it has claimed to be, but a criminal enterprise.

Let’s review the facts, now being widely reported. For five years employees of Wells Fargo opened up to 2 million bank and credit card accounts willy-nilly without any permission from anyone. Often the accounts were closed fairly quickly which is why the penalties now being paid by the bank are less than $200 million. It was a penny ante, amateur scam with employees making up email addresses and sometimes virtually opening up the accounts from Wells Fargo internet domains. The bank has now fired 5300 employees who were involved in this fraud. As the New York Times’ columnist, Andrew Sorkin, points out, “that’s not a few bad apples.”

Wells Fargo has taken out ads apologizing and taking responsibility, but they clearly, as usual, have their fingers crossed behind their backs. A couple of months ago before all of this criminality became public, they allowed Carrie Tolstedt, a 27-year veteran and their head of “community banking,” to retire and walk away with over a $120 million going away present. Various banking analysts are calling for a “clawback” since Wells has rules allowing them to recover monies from executives where there were ill-gotten gains. The Wall Street Journal was so grossed out by all of this that they reported the calls for clawbacks and showed a picture of Ms. Tolstedt, but couldn’t bring themselves to mention the $120 million she took away with her office plants for fear that all of us Visigoths would be clamoring at the gates.

What will they learn? Likely nothing.

But, it’s easy to explain how this happens, and it is the same way that it happened when mortgage brokers were writing fictitious so-called, “lair’s loans,” where many observers of the 2008 financial meltdown are still confused and some think it was the borrower fibbing, rather than the underwriter. In the current Wells Fargo case on cards and accounts, as well as their own and many other situations previously on loans, it is crystal clear that once you link pay to simple production, you can guarantee there will be fraud. The only question will be how long it takes you to be caught, and how much money the bank makes in the interim.

For managers there, just like Carrie Tolstedt, there is a disincentive to impose the kind of controls that would weed out these problems. Top dogs get paid on the numbers, just like the runts of the litter. In bank after bank, once you get them across the table for all of their talk about protection using sophisticated algorithms, risk management, and blah, blah, blah, they simply are culturally and systemically unable to tightly manage on performance and standards, once production is all, and pay is linked to such incentives.

They are all smart enough to know this, but it’s the nature of capitalism in some ways to ignore it. You can only conclude that they didn’t care or thought that they wouldn’t be caught. None of which recommends a bank like Wells Fargo as a place to trust your money, since they are clearly committed to themselves first and their customers last, as little more than numbers being crunched in their back rooms somewhere.

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Please enjoy Phish’s Breath and Burning. Thank you KABF.

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Wells Fargo Caught Again in Predatory Lending Scheme

WellsFargocolorFLYERLittle Rock       We need to get rid of the three strikes program for people and institute it for banks, whose criminal conduct continues to rage unabated. Wells Fargo, the West Coast based banking center, is a serial abuser of mortgage borrowers using predatory practices. Cook County, home of Chicago, and 5 million good people, has sued the bank under the Fair Housing Act for racially discriminatory practices targeting African-American and Latino families from the point of origination past the point of payment and even foreclosure to make sure they always get theirs in a practice Cook County called equity stripping.

According to Bloomberg News,

“Equity stripping is an abusive form of ‘asset based lending’ that maximizes lender profits based on the value of the underlying asset and onerous loan terms, while in disregard for a borrower’s ability to repay,” according to the complaint. Aimed also at minority women, the bank’s fee structure and its practice of bundling mortgages to sell as securities allowed the lender to make money off loans even in the event of a foreclosure, the county said.

Who is surprised anymore?

Cook County is asking for $300 million in relief from Wells Fargo. The bank of course denies everything, but they can’t possibly have any credibility left with anyone. As always, they were obnoxious and combative in their response, having a spokesman say that it would be better if Cook County kept wasting its time trying to work with them rather than getting justice for their citizens.

Cook County is not the first metro area to push forward to protect its citizens these days with a Fair Housing claim. Earlier similar suits have been filed in Miami and Los Angeles against banks for similar practices. Miami’s suit was dismissed as untimely and is on appeal, but attempts to throw out the California claim have been unsuccessful.

Banks have been paying billions to settle mortgage abuse suits in record fines, yet little seems to have led them to stop such predatory practices. Suits have also been brought recently in other cities under the Community Reinvestment Act for direct discrimination in lending.

The New York Times and others continue to argue that the only proven path to citizen wealth is home ownership, and there is some merit to the claim, but with prices outstripping any possibility of ownership in many cities, and banks, like Wells Fargo, arguably targeting the very working people trying to create income security through home ownership, there seems to be a giant “L” for loser on the foreheads of low-and-moderate income families throughout the country. Recently Massachusetts Senator Elizabeth Warren announced her refusal to vote for approval of an undersecretary in the Treasury Department saying that the President and others needed to get the message that Wall Street should no longer be allowed to set the economic policy for the United States.

As long as banking and its allies play “throw the rock and hide the hand” in a persistent criminal conspiracy, working families can’t build wealth, and Warren and Cook County are right that we need more protection from these crooks.

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Banks Shirking Responsibility for Foreclosed Property Maintenance

bank-owned-foreclosures-12New Orleans  I woke up to headlines indicating that the National Fair Housing Alliance has accused Minneapolis-based U.S. Bank of effectively “red lining” blight into largely African-American and Latino neighborhoods in 35 different cities in 15 metropolitan areas.  Recently the alliance added New Orleans, Dallas, New Haven, and Hampton Roads, Virginia to an amended complaint charging that US Bank had not maintained foreclosed properties in minority neighborhoods compared to what it does in white areas.  Similar complaints have been filed against Bank of America and Wells Fargo, though reportedly Wells Fargo settled with the group.

            So, what says U.S. Bank?  Their defense is that they are simply the corporate trustee for a security pool of investors and claim that they have no legal right to maintain the properties.   Well, I’ve been there and heard that, so at best U.S. Bank and the rest of these banks are hiding behind half-truths.   They are the legal trustee for the properties though and it’s their name on the property titles.  In reality at best U.S. Bank is trying to have its cake and eat it too.  They get paid to be the holder of the investment pool and the named owner of the mortgage properties, but they are essentially trying to sing a verse with the old rock group, Dire Straits, and “get money for nothing and get their chicks for free.” 

ACORN struggled with this problem for years and interestingly in negotiating with Deutsche Bank, which at the time in 2007-2008 was a trustee for a huge number of mortgage security pools, we learned quite a bit about how it really works. The bottom line is that the banks know the owners, and in a wink-and-nod in those days, Deutsche agreed to give us the information on specific properties that were problems in our neighborhoods when they became issues.  My point in that U.S. Bank and the other bankers are in effect earning their money by allowing the real owners and their lack of maintenance to hide behind their corporate veil, so they deserve to go down.

And, their problem just gets bigger when the fair housing alliance and others do the ground work around the country and bust them for not lifting a finger to take care of properties that are foreclosed in black and brown neighborhoods, while in fact making sure that properties are maintained in white areas. 

Call it redlining or just flat out racial discrimination, U. S. Bank and the boys can keep whining about it, but they are just shucking and jiving for the real owners and it is past time for them to do right and stop ruining our neighborhoods with callous disregard, while they count their money for doing nothing.  They can either name out the real owners or take the weight and step up.

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How About a Better Deal for Philippines Disaster Relief from US Banks & MTOs?

Q113_Wu_Com_Typhoon_V1_Facebook_1200x627_EN_USNew Orleans  The typhoon that devastated large parts of the Philippines, in a Hurricane Katrina like disaster many are seeing as part of what we can expect regularly in the future from climate change,  is inspiring protests by poor countries at the UN Climate Change Conference and some corporate social responsibility, but, sadly nowhere near enough, especially in the United States.  

            Some banks have stepped up to do the right thing and have waived all transfer fees, most for a month from mid-November until mid-December.   There may be more on the honor roll, but from what I’ve found so far, it includes two banks in Canada, the BMO Bank of Montreal and the Royal Bank of Scotland, there and presumably elsewhere, Wells Fargo is the only bank in the US that has stepped up, and the Noor Islamic Bank in Dubai, United Arab Emirates.   That’s all ACORN International has been able to locate.

Of the scores of money transfer organizations, Western Union has been the surprising hero here, though with exceptions.   In Canada, they are doing transfers to the Philippines for $1.00.   Interestingly, the Western Union website in the US seems to have waived fees completely, though it’s a mystery to me why they are charging a loony in Canada and nada in the States.  Regardless, cheers to them for doing what they are doing since MoneyGram, the other huge MTO, is charging $5 for a $100 transfer, which is hardly a bargain, and shows little heart in this crisis.

But, what’s up with US-based banks?  Why is Wells Fargo the only one of the big boys standing tall in the face of this tragedy?  Where are Chase, Bank of America, Citi, and the rest?

And, even more puzzling, especially in wake of the $1 charge by Western Union in Canada, are we starting to find out the real cost for these folks to do transfers?  

But, I digress.   The important thing now is for all of us to ask our banks to waive all transfer fees to the Philippines so that there can be real resources and financial help for typhoon victims.   Raise your voice for lowering the fees!

 

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