Two O.C. loan officers indicted in Las Vegas foreclosures case

In what appear to be the first criminal charges to stem from the fracas over improper foreclosures last year, two Southern California title loan officers have been indicted by a Nevada grand jury for allegedly filing tens of thousands of improper documents related to Las Vegas-area foreclosures.

The Clark County grand jury charged Gary Trafford, 49, of Irvine and Geraldine Sheppard, 62, of Santa Ana on 606 counts, alleging that the two headed up a vast “robo-signing” operation that resulted in the filing of tens of thousands of fraudulent foreclosure documents.

The documents were filed with the Clark County recorder’s office between 2005 and 2008, according to the indictment. The two title loan officers worked for the firm Lender Processing Services, a foreclosure processing company based in Florida that has been used by most of the largest banks in the nation to process home repossessions.

"I am not allowed to speak with you. I have no comment at this time," Sheppard said when reached by phone. Trafford could not be reached for comment.

The two have not been arrested, a spokeswoman for Nevada Atty. Gen. Catherine Cortez Masto told The Associated Press. LPS said in a statement that it is working with the authorities.

The company, in its statement, acknowledged that some of its documents were flawed but said the documents did not result in wrongful foreclosures.

“I am deeply committed to ensuring that LPS meets rigorous standards of professional conduct and operating excellence,” LPS Chief Executive Hugh Harris said in the statement. “I have full confidence in the ability of our leadership team and over 8,000 dedicated employees to deliver on that commitment."

Trafford is charged with 102 counts of offering false instruments for recording, a felony; false certification on certain instrument, a felony; and notarization of the signature of a person not in the presence of a notary public, a misdemeanor.

Sheppard is charged with 100 counts of offering false instruments for recording, a felony; false certification on certain instruments, a felony; and notarization of the signature of a person not in the presence of a notary public, a misdemeanor.

The indictment says that two title loan officers directed the fraudulent notarization and filing of paperwork used to initiate foreclosure on homeowners in the Las Vegas area. Nevada alleges that the two directed their employees to forge foreclosure documents, notarize the signatures on the documents they had forged and then file the fraudulent paperwork with the Clark County recorder's office in order to begin foreclosures on homes throughout the county.

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-- Alejandro Lazo

twitter.com/alejandrolazo

Photo: A foreclosure sign in front of a bank-owned home for sale in Las Vegas. Credit: Robyn Beck / AFP/Getty Images

Study: In some areas, risky loans punished the rich more than the poor

 

Five years into the housing bust, are rich or poor homeowners more likely to suffer foreclosure?

It all depends on which part of the country you're in, according to a Center for Responsible Lending study.

Low- and moderate-income borrowers have been most affected in cities such as Detroit, Cleveland and St. Louis, where weak economies meant home prices didn't rise much even while much of the nation was caught up in the housing bubble, the nonprofit CRL said.

However, in areas that had strong housing appreciation before the collapse, such as California and Nevada, the opposite is true. In these areas, middle- and higher-income borrowers have been most likely to fall into foreclosure, according to CRL's study of 27 million mortgages over five years.

The explanation, CRL said Thursday, is that higher-income borrowers in expensive boom states wound up with a disproportionate number of high-risk loans, as did the lower-income residents of cities with weak economies and housing markets.

The rich borrowers were stretching to buy homes by using supposedly prime adjustable-rate loans requiring interest-only payments at first, or pay-option mortgages that allowed them to pay so little that their loan balance rose instead of fell. 

Overall, the CRL said, there was remarkably little difference in foreclosure rates between low- and high-income people who took out home loans from 2004 to 2008.

Among lower-income borrowers in that group, 15.9% had been foreclosed on or were seriously delinquent (meaning 60 days or more in arrears) by February 2011, the CRL study found.

Among middle-incomes borrowers, 14.7% fell into those categories, with 14.6% of high-income borrowers in the same straits.

But those slight differences contrasted with big gaps when researchers sorted troubled borrowers by type of housing market.

In weak markets, more than 10% of low-income borrowers had lost their homes to foreclosure, while less than 4% of higher-income borrowers had homes repossessed.

In the topsy-turvy world of the boom housing markets, more than 9% of higher-income borrowers had lost their homes, compared to less than 4% of low-income homeowners.

The study also found that:

-- Among homeowners who received loans from 2004 to 2008, 2.7 million households, or 6.4%, had lost their homes to foreclosure as of February 2011. Another 8.3%, or 3.6 million households, were at serious risk, defined as in the foreclosure process or more than 60 days past due on their mortgages.

-- The majority of people affected by foreclosures have been non-Latino white families. However, African American and Latino borrowers are more than twice as likely to lose their home to foreclosure as non-Latino white households -- 25% compared to 12%.

-- Racial and ethnic disparities in foreclosures persist even among higher-income groups. About 10% of higher-income African American borrowers and 15% of higher-income Latino borrowers have lost their home to foreclosure, compared with 4.6% of higher-income non-Latino white borrowers, the CRL said.

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 Photo: Foreclosed homes behind padlock in North Las Vegas. Credit: Jewel Samad / AFP/Getty Images

Fewer home loans going bad but foreclosures on rise

Far fewer borrowers are delinquent on their home loans these days, a Mortgage Bankers Assn. report shows, but new foreclosure actions are on the rise in states like California, showing the nation still has much pain to endure before the housing crisis subsides.

Private analysts say the nation is only halfway through the wrenching grip of the foreclosure epidemic. And that's reflected in the housing market, where home sales and prices continue to sag in many areas despite record low interest rates.

Five years into the crisis, 7.99% of all U.S. home loans were behind by at least one payment in the third quarter but not yet in foreclosure, the mortgage trade group said Thursday. That's down by nearly half a percentage point from the second quarter and more than a percentage point from a year earlier.

But the group's statistics showed how banks are reasserting themselves against troubled borrowers after slowing the process for nearly a year amid increased scrutiny from regulators.

The percentage of loans on which foreclosure actions were started during the third quarter was 1.08%, up from 0.96% in the second quarter. California had the nation's fifth-highest rate of new foreclosures: nearly 1.5% in the latest quarter.

The percentage of U.S.loans somewhere in the foreclosure process at the end of the third quarter was 4.43%, up slightly from a year earlier. The rate of homes in foreclosure was highest in Eastern and Midwestern states that route all home repossessions through the courts, with Florida at more than 14% and New Jersey at 8%.

California, which for years had one of the highest rates of loans in foreclosure, has fallen to 19th on the list because its foreclosure process doesn't normally require court action and is among the most streamlined in the nation. In other words, even as the rate of new foreclosures increases, the repossessions are being handled quickly.

Of states that handle foreclosures without going through court procedures, Nevada was the only one high on the total foreclosure-rate list, with nearly 8% of its mortgages in foreclosure.  

In a separate report Thursday, mortgage finance giant Freddie Mac said the typical rate on a 30-year fixed-rate home loan early this week was an even 4.0%, a statistically insignificant rise from 3.99% a week earlier. The 15-year fixed loan rates rose to 3.31% from 3.30%.

Expressing some optimism, Frank Nothaft, an economist for the trade group, said the economy "is showing potential for further gains in the near term" as the near-record low mortgage rates persist.

Retail sales rose for the fifth straight month in October, consumer confidence rose for the third straight month in early November to the highest reading since June, and home-builder confidence exhibited a back-to-back monthly increase in November to the strongest level since May 2010, Nothaft said, citing various surveys.

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-- E. Scott Reckard

Photo: San Jose protesters target Bank of America. Credit: Paul Sakuma / Associated Press

Federal financial fraud prosecutions tumble to lowest level in 20 years

Financial criminals are facing the lowest number of federal prosecutions in at least 20 years, according to a new report.

The government has filed 1,251 new prosecutions against financial institution fraud so far this fiscal year, according to the Transactional Records Access Clearinghouse at Syracuse University. If the same pace holds, federal attorneys will file 1,365 such cases by the end of the year –- the lowest number since at least 1991.

The report, compiled from Justice Department data gleaned through the Freedom of Information Act, considers crimes involving crooked mortgage brokers, bank executives with something to hide and accounts hiding illegal activity.

The expected volume of prosecutions by the end of 2011 would be 2.4% smaller than that of last year, 28.6% thinner than that of five years ago and less than half the amount from a decade ago. The number of federal bank fraud cases has slipped every year since 1999.

While U.S. Attorneys kept busy in districts such as Miami, Manhattan and Seattle, six of the country’s 90 districts, including Indianapolis and Baton Rouge, filed no financial fraud cases at all.

But that doesn’t mean the government isn’t keeping busy with other types of criminal prosecutions, which have nearly doubled in two decades.

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Photo credit: Jorge Silva / Reuters

A rebel in the ranks: Mike Mayo on Wall Street

Stock analysts are not known for being a rebellious sort -– their jobs generally involve writing up dry technical reports on public companies. But Mike Mayo is not your typical stock analyst. Since joining the industry nearly 25 years ago, he has shaken up the financial world with his bold and forthright analysis of the banks he researches.

In 1999, he told investors to sell all bank stocks. In 2007, he was ahead of the pack in downgrading Bear Stearns and Citigroup. (A fuller record of those calls is here.) Perhaps predictably, this hasn't earned him a lot of love, given that he has worked at banks himself and that his employers wanted to do business with many of the banks he was analyzing. This led to often short and stormy tenures at UBS, Credit Suisse and Lehman Bros. before he landed in his current position at Credit Agricole Securities.

Now, after a financial crisis for which banks have taken much of the blame, Mayo has written a book, "Exile on Wall Street," chronicling the problems he sees with the current system in place for monitoring the financial system. He argues that regulators, accountants and credit ratings agencies do not have the right incentives to serve as good watchdogs. He slams his fellow stock analysts for providing misleadingly positive portrayals of public companies due to conflicts of interests. Money & Company connected with Mayo to talk about his views.

Money & Company: What is the basic issue you are confronting here?

Mike Mayo: Less than 5% of stock ratings on Wall Street are a negative rating. Any first-year business school student can tell you that not 95% of stocks are worth buying.

M&C: You say that there is pressure on analysts to write positive things about the companies they are covering. What is your own experience with that?

MM: I had some of the best stock calls at Lehman. But the deal-makers -- the investment bankers at the firm at the time -- didn't like what I had to say. 

I thought my goal was to serve the people putting their money into the stocks of these companies, whereas the deal-makers wanted me to be nicer to the big banks so that they might be able to raise stocks or raise debts or advise on some sort of merger.      

Eventually when I left the firm, I was literally escorted out of the office.

M&C: The idea that Wall Street analysts are afraid to say sell, how does that impact ordinary investors?

MM: The rose-colored lenses –- the positive bias to the markets –- I think contributed to some of the excess in the markets. Having Wall Street analysts and other market overseers do more of their job –- and to call a spade a spade -- can help reduce the degree of the huge swings that we've seen.

M&C: What are the problems at banks that analysts and executives are downplaying today?

MM: This year will show the slowest revenue growth for U.S. banks since 1938, and this decade will be the slowest decade of revenue growth since the Great Depression. I think the banks are downplaying just how much revenue pressure they are likely to feel, and as a result, they have been slow to better position their companies for that environment.

You saw in the case of MF Global what happens if you don't accept the slower growth. Either you accept the slower growth or you reach for revenues and risk failing.   

M&C: Banks have said that the new financial reform laws go too far, while the public seems to think they didn't go far enough. Which is it?

MM: I'm not so sure that the size of legislation is what makes difference. I think you could have less legislation as long as it is actually enforced. We haven't had it enforced. Right now, we have the worst of both worlds, and I still see that in place, even after the crisis.

M&C: Where does Occupy Wall Street come into all of this?

MM: I do research on Occupy Wall Street because I wonder if that could be extra motivation for regulation on the banks.

When I go to Occupy Wall Street, or Occupy San Francisco today, I'm the banker in the dark blue suit.

I go to the table with the anarchists. It’s a table like you'd have at a bake sale. I engage the people behind the table in a discussion. 

I disagree when you start talking anarchy -- or some real socialist form of government -– but I do believe in the idea that we should have more alternatives within our capitalism system than what we’ve had, that we should not just accept the status quo. Enough already with what hasn't worked.

M&C: How widely is that sentiment shared on Wall Street?

MM: A lot of people on Wall Street are very frustrated with parts of Wall Street. Different operators operated on steroids -- and some of those operators blew up and tainted the industry. 

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-- Nathaniel Popper in New York
Twitter.com/nathanielpopper

Photo: Mike Mayo. Credit: Wiley

Falling prices mean rising affordability, California Realtors say

Call it the silver lining of falling home prices.

With low interest rates and cheaper housing throughout the Golden State, the percentage of homebuyers who could afford to purchase a home increased in the third quarter, a real estate group said Thursday.

The number of households who could afford a home priced at the statewide median of $292,120 rose in the third quarter, according to an index produced by the California Assn. of Realtors. Fifty-two percent of California households could afford that price, compared to 51% in the second quarter.

Now if these households would only buy.

Beth L. Peerce, president of the group, said in the news release that one problem potential homebuyers could face is tight credit. Many first-time buyers don’t qualify for a loan, she said. Indeed, some analysts have noted that banks have tightened their loan criteria since the housing crash. But it was those loose lending standards that caused the real estate bubble in the first place, so many other analysts also argue that more carefully scrutinizing borrowers is appropriate.

The federal government has been providing enormous support to the mortgage market through loans backed by the Federal Housing Administration, though it has recently taken steps to scale back that support.

In California, potential buyers needed to earn at least $61,530 a year per household to qualify for the median-priced home. The median is the point at which half the homes in the state sold for more and half for less.

The real estate group calculated the monthly payment for a mortgage on such a home to be $1,540, including taxes and insurance, and assuming a 20% down payment and a 4.63% effective composite interest rate.

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Photo: A home on the market in Altadena features a sign of the times. Credit: Associated Press

 

Freddie Mac: 30-year mortgage rate back below 4%

The typical rate that lenders are offering on a standard 30-year mortgage is back below 4% for the second time this year, Freddie Mac says.

The rate fell from an even 4% in Freddie's survey last week to 3.99% in the survey released Thursday. The 3.94% recorded in the Oct. 6 report was the lowest in the 40 years that Freddie Mac has been asking lenders across the country about the rate they are offering on the 30-year loan.

The typical interest rate on the 15-year fixed home loan dropped from 3.31% to 3.30% in the latest survey. Borrowers would have paid less than 1% of the loan balance in fees to obtain the loans, Freddie Mac said.

Solid borrowers who shop around often find slightly better rates than those in the survey, and paying additional points upfront to lenders also can lower the rate.

The mortgage rates are a huge boon for home buyers and refinancers with solid credit and income, 20% down payments or 20% home equity -- the kind that would qualify for the loans of up to $417,000 that the survey focuses on.

But they are available at a cloudy time. Foreclosures are rising again, and the rates are scraping bottom mainly because investors are so spooked by the European debt crisis. That has increased demand for U.S. debt securities, still presumed to be a safe haven.

That demand has depressed the yield on Treasury securities, and mortgage rates tend to track Treasury yields. And there is too little in the recent mixed economic news to suggest that inflation could reassert itself in the United States, driving interest rates higher.

"The economy added 80,000 net jobs in October, below the market consensus forecast, but employment gains over the prior two months were revised up by 102,000 and the unemployment rate fell to 9.0 percent, the lowest in six months," Freddie Mac economist Frank Nothaft said. "Factory orders improved in September, yet the expansion in the service industry slowed in October."

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--E. Scott Reckard

Photo: Freddie Mac headquarters, McLean, Va. Credit: Pablo Martinez Monsivais / Associated Press

Wells Fargo settles bid-rigging case

Wells Fargo & Co. has agreed to pay at least $37 million to settle accusations that it and Wachovia Corp., which Wells acquired in 2008, paid kickbacks to win business from municipal governments.

In its regular quarterly filing with the Securities and Exchange Commission, made Tuesday, the San Francisco bank said it would pay the greater of the $37 million or "65% of the restitution amount of a future settlement, if any, with the various state attorneys general of their investigation of Wachovia."

The agreement, which Wells said was reached Oct. 21, stems from litigation with various municipal governments around the country and consolidated in a federal lawsuit in Manhattan.

The suit accused many investment banks of conspiring to rig the bidding process, “sharing their illegal gains through kickbacks to one another, and making other secret, undisclosed arrangements.”

A Wells spokeswoman said the case mainly involved events at Wachovia that occurred before Wells took over the Charlotte, N.C., bank.

Bank of America, JPMorgan Chase and UBS previously agreed to much larger settlements in the case.

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Photo: A Wells Fargo stagecoach in the bank's history museum in L.A. Source: Wells Fargo & Co.

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Dick Bove is sick of all the bad news

Richard X. Bove is sick of all the bad news.

The widely quoted Rochdale Securities analyst –- who makes frequent appearances on cable news shows -- is now taking aim at what he views as the media's doomsday-like interpretation of financial events.

In an analyst's research note (a medium best-known for its staid commentary on specific companies or economic events) Bove on Tuesday delivered a sarcastic missive titled "Is It Possible That the World Is Not Ending?"

"Like most people every morning I wake up, look at the news on TV and scan three newspapers," he wrote. "The message is always the same. It is time to slit my throat and leave this morass of misery."

From the European debt crisis to the U.S. housing market, Bove laments, the focus is overwhelmingly negative.

Bove is known for being unusually frank in his commentary.

His point is that perhaps things are not as bad as “the media” would make them seem.

"The GDP figures for the third quarter were up by 2.5%. Just about every banking company that reported earnings beat their estimates and some had record revenues. Approximately 73% of the S&P companies reporting beat earnings estimates at last count,” he continued. “In October, the S&P 500 rose 10.8%; bank stocks were up by 13.4%."

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Banker bonuses falling amid new calls to ban them all together

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-- Alejandro Lazo

Photo: Richard X. Bove

 

Banker bonuses falling amid new calls to ban them all together

For a Wall Street trader looking forward to her or his end-of-year bonus, this is not a good morning.

In the near term, it looks as though bonuses this year will be down as much as 20% to 30% from last year, according to a survey out today from a leading industry compensation consultant.

In the longer term, Nassim Taleb, author of "The Black Swan" and one of the most respected prognosticators in the financial world, wrote in the New York Times that bonuses should disappear all together, at least for firms that could be bailed out by the government. 

Taleb repeated the somewhat familiar argument that bonuses create incentives for bankers to take big risks while not punishing them when those risks go bad. He throws in a comparison to the pay arrangements in other risky fields:

Consider that we trust military and homeland security personnel with our lives, yet we don’t give them lavish bonuses. They get promotions and the honor of a job well done if they succeed, and the severe disincentive of shame if they fail. For bankers, it is the opposite: a bonus if they make short-term profits and a bailout if they go bust. The question of talent is a red herring: Having worked with both groups, I can tell you that military and security people are not only more careful about safety, but also have far greater technical skill, than bankers.

Bankers are certainly grumbling over their granola this morning. But the most immediate public response came from the economics blogger at the Atlantic magazine, Daniel Indiviglio, who said that following Taleb's prescription might actually increase risk-taking. According to Indiviglio, if bonuses were banned, bankers would simply receive all of their compensation in a fixed salary that could not be clawed back. At least under the current system, Indiviglio said, bankers get some of their bonus in stock, which goes down in value if the bank does poorly.

Think about it: if trades go bad, then shareholders will suffer by seeing dividends cut or shares diluted when more capital must be acquired. But every time banks have a good year, bankers will get a nice salary bump -- and that amount will be guaranteed even in bad years. Remember those guaranteed bonuses everybody was angry about a few years ago? If you were to pay a guaranteed bonus out over the course of a year in semimonthly installments, you could call it something else: a "salary."

Whatever the result of this debate, bankers are already looking at shrinking bonuses. The compensation consultancy Johnson Associates said in its survey that new regulations and slow economic growth will lead to smaller bonuses, especially in the traditionally lucrative bond- and stock-trading operations. 

Even with all the gloom, at least one group is getting higher bonuses than might be expected. The Daily Telegraph reported today that MF Global, the trading firm that went bankrupt last week, gave bonuses to its employees in London just hours before the company declared bankruptcy.

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Jefferies suffers as investors look for the next MF Global

As investors wonder which Wall Street firm might be the next to catch the cold that brought down MF Global last week, most of the suspicion has fallen on one originally founded in Los Angeles, Jefferies.

Investors have sent Jefferies stock down nearly 20% from before MF Global's bankruptcy, leading the firm to spend much of the last week beating off rumors that it may soon suffer from the same problems with European sovereign debt that brought down MF Global.

MF Global took a series of ultimately fatal bets on the bonds of struggling European nations, causing clients to worry that MF Global would find itself unable to sell those bonds and unable to carry out other customer business. That fear proved contagious and ultimately sunk MF Global, according to industry experts.

Just this morning, Jefferies announced that it took the highly unusual step over the weekend of selling off 50% of its holdings of European bonds, just to show that it could.

"We undertook this reduction in our holdings solely to demonstrate the liquid nature of this market-making trading book,” Jefferies Chief Executive Richard Handler said in a statement explaining the move. 

The big bets on European bonds at MF Global were part of a strategy -- initiated by its recently hired chief executive, Jon Corzine -- to expand the firm through risky bets made with the company's own funds.

Jefferies has had a similar business model to MF Global's -- at least before Corzine took over -- but Jefferies executives have been trying to convince investors that they did not take the kind of bets that Corzine pushed for at MF Global.

Last week, Handler released a full accounting of Jefferies' holdings of European bonds. 

"We decided the only way to conclusively dispel rumors, misinformation and misplaced concerns is with unprecedented transparency about internal information that is rarely, if ever, publicly disclosed," Handler said in a statement on Nov. 4.

That was not enough to calm worried investors. The stock price continued to sink, leading to the unusual moves over the weekend. This morning, those moves gave Jefferies stock an initial boost, but it has recently sunk down again almost to the level where it closed Friday afternoon. It is currently trading up 1.6%, or 19 cents, to $12.26.

A columnist at the Wall Street Journal this morning wrote evocatively that Jefferies is "being strip-searched at gunpoint by the markets."

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-- Nathaniel Popper in New York
Twitter.com/nathanielpopper

More big bank customers jumping to credit unions, reports say

Even as big banks begin to back off proposed fees, disgruntled consumers may be jumping ship to credit unions, according to new reports this week.

The Credit Union National Assn. said that at least 650,000 customers have opened new accounts at credit unions this month –- more than the 600,000 total who joined in 2010. That equates to $4.5 billion in new savings accounts over about four weeks.

The trade group attributed much of the growth to customer flight from institutions such as Bank of America Corp., which announced a new $5 debit-card fee in late September only to claw back the plan this week after heavy consumer backlash.

A poll Thursday from research firm Harris Interactive found that Bank of America customers are more likely to abandon the company than patrons of other banks and credit unions.

Nine percent of consumers using Bank of America said they were “not at all likely” to continue, compared with 6% of Wells Fargo & Co. users, 3% of JPMorgan Chase & Co. users and 2% of credit union users.

Fifteen percent of Bank of America customers said they don’t feel valued by the bank, compared with just 0.5% of credit union customers. Three quarters of credit union users said they had a “trustworthy relationship” with their institution, compared with a quarter of Bank of America customers.

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Photo: Tim Boyle / Getty Images

Jon Corzine steps down as investigations mount

As the scrutiny of MF Global's bankruptcy continues to mount, the trading firm's chief executive, Jon Corzine, stepped down and reportedly hired a criminal defense attorney.

Corzine, who had previously served as a U.S. senator and as the chief executive of Goldman Sachs, announced the resignation Friday morning, five days after MF Global filed for bankruptcy.

In a statement, Corzine said: "I feel great sadness for what has transpired at MF Global and the impact it has had on the firm’s clients, employees and many others."

Corzine said that he would not seek any severance payments as he steps away from the company.

The move is the latest stage in Corzine's descent from the loftiest heights of power. Corzine took over MF Global last year after losing a bid to be reelected as New Jersey governor. He promised to help MF Global grow by making bigger bets with the firm's own money.

That strategy backfired after the firm made a series of large bets on the sovereign debt of struggling European countries.

Now, a growing list of regulators and prosecutors are probing MF Global's actions as it encountered difficulty. Friday morning, the New York Post reported that the U.S. attorney in Manhattan, Preet Bharara, is taking a look at whether the company mishandled customer funds. This is a subject the FBI has already been reported to be looking at.

To help deal with these inquiries, Corzine hired a criminal defense attorney, Andrew Levander of Dechert LLP, according to the Wall Street Journal.

On the regulatory side, it seems as though every lawyer at the Securities and Exchange Commission could get drawn into looking at some potential misdeed related to the firm. The SEC added to its workload when it began looking into possible insider trading in MF Global's bonds during its last days in operation, Bloomberg reports. And the Wall Street Journal gave it yet another potential topic Friday morning when it reported that MF Global may have taken steps to hide from investors its true levels of risk.

Given all these problems, Corzine's statement in stepping down -- and the lack of any mention of remorse -- is coming under fire from industry watchers like Reuters columnist Felix Salmon:

I’m sure you’re sad — that often happens, when you become the living embodiment of the destructive greed of the 1% and a hate figure for millions. But are you sorry? Or are you going to pull a Dick Fuld and live in denial, convinced “until they put me in the ground” that you’re a victim rather than a perpetrator?

This kind of thing is why there’s so much anger aimed at the 1%. Chances are, Corzine will never be prosecuted, let alone convicted, and that he’ll enjoy the comfortable retirement of a centimillionaire for decades to come. He deserves much worse. But right now, when it matters, he can’t even bring himself to say he’s sorry.

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-- Nathaniel Popper

twitter.com/nathanielpopper

Photo: MF Global's Jon Corzine. Credit: Rich Schultz / Associated Press

Consumer Confidential: Bank Transfer Day, hoodia settlement

Here's your fight-the-power Friday roundup of consumer news from around the Web:

--Have any plans for Saturday? How about sticking it to your bank? Nov. 5 is Bank Transfer Day, organized by Kristen Christian, an art-gallery owner in California who is using Facebook to invite people to shift their funds from for-profit banking institutions to not-for-profit credit unions. As of Thursday, nearly 36,000 Facebook users "like" the concept while more than 73,000 indicated they will be taking matters into their own hands. An estimated 650,000 consumers have joined credit unions nationwide since Sept. 29, according to a statement from the Credit Union National Assn., a credit-union advocacy group. That’s the day Bank of America announced its now-aborted $5 debit-card fee.

--If you've been thinking about taking hoodia to help lose weight, don't bother. The Federal Trade Commission says it's settled a case against two companies which hyped weight-loss products based on hoodia, a substance derived from the Hoodia gordonii cactus of southern Africa. The FTC complaint alleged executives at Nutraceuticals International and Stella Labs falsely marketed hoodia products as effective weight-loss and appetite-suppression supplements, even though there was no scientific evidence of such benefits. David Romero, a principal at both companies, was assessed a $22.5-million fine for his role in the marketing claims. Romeo forfeited to the FTC a Vermont vacation home and $635,000 in business loans as part of his settlement. A $4-million judgment was also assessed against Deborah Vickey, a marketing executive at Nutraceuticals International.

-- David Lazarus

Photo: Frustrated consumers are being encouraged to switch banks on Nov. 5. Credit: Ted S. Warren / Associated Press

 

Senators want banks to simplify checking account fee disclosures

Emboldened by Bank of America's decision to abandon a proposed $5 monthly debit card fee, two senators on Thursday asked regulators to require banks to provide customers with a simple, one-page form listing all their checking account fees.

The goal is to give consumers a standardized, easy-to-understand disclosure form to make it easier to  compare fees charged by banks.

"When consumers are informed and can make choices, that's when the free market is at its best and strongest," said Sen. Dick Durbin (D-Ill.), who was joined by Sen. Jack Reed (D-R.I.) at a Capitol Hill news conference.

The two want banks to voluntarily adopt such a disclosure. But they also wrote to Raj Date, the acting head of the new Consumer Financial Protection Bureau, requesting that the agency act quickly to require banks and credit unions to post such a disclosure form on their websites.

Durbin and Reed touted a one-page disclosure form proposed by the Pew Charitable Trust. The form lists all basic checking account terms and conditions, including interest rate, ATM fees, overdraft penalties and account closing fees.

Susan Weinstock, director of the project, said the form was developed after analyzing 250 types of checking accounts last year.

"A hundred and eleven pages -- that's the median length of disclosure documents from the 10 largest banks in the United States," she said at the news conference. "These documents are not user-friendly, with highly technical and dense text."

Pew tested its form with consumers in Los Angeles, Philadelphia and Minneapolis. Two of the nation's three largest credit unions -- the Pentagon Federal Credit Union and the North Carolina State Employees' Credit Union -- have agreed to use the form to post fees on their websites, she said.

Durbin led the fight to enact new limits on the fees that banks charge to retailers to process debit card payments. BofA proposed its monthly debit card fee to offset money it expects to lose because of the limit, which took effect Oct. 1. Some other large banks were testing a fee as well.

Strong consumer backlash led the banks to abandon those plans. BofA, which triggered much of the ire, announced its decision Tuesday. 

Durbin, who had urged BofA customers to switch to other banks, said a simple checking account disclosure was the logical next step to empower consumers after they beat back the debit card fees.

Date, of the CFPB, said the agency would push in the coming months for more transparency on checking account fees.

"A checking account is a critical, valuable product for millions of Americans," he said Thursday. "But checking accounts and debit cards often come with unexpected costs and fees that can quickly add up. With upfront and easy-to-understand information, consumers can comparison shop for the best deal for them."

Date did not indicate whether he would push for a rule, which could take up to two years to enact, or seek a voluntary agreement by banks to adopt a simpler disclosure.

Richard Hunt, president of the Consumer Bankers Assn., said his members "support clear and easy to understand disclosures" and would work with the CFPB, as they have been doing recently on a new simplified mortgage disclosure form.

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-- Jim Puzzanghera in Washington

 Photo: Sen. Dick Durbin (D-Ill.). Credit: Associated Press.

Jon Corzine caught up as MF Global inquiries escalate

Each morning this week has brought a new batch of revealing details about what brought down MF Global, the trading firm run by former U.S. senator and Goldman Sachs Chief Executive Jon Corzine.

Since the firm declared bankruptcy  Monday morning, we have learned the Commodity Futures Trading Commission and then the Federal Bureau of Investigation were investigating allegations of misused customer funds.

Today, it is the Securities and Exchange Commission that is reported to be opening a probe, according to the Wall Street Journal. The SEC is said to be looking at whether Corzine misled its investors as the company's share price was in freefall.

The case has raised questions about why regulators did not notice MF Global problems sooner. After all, critics say, MF Global was done in by the type of highly leveraged bets that regulators should have been very familiar with from the demise of Lehman Brothers and Bear Stearns in 2008.

Reuters reports today that Wall Street's industry funded regulator, the Financial Industry Regulatory Authority, started asking questions back in June, but that it was not enough to get MF Global to scale down its bets on the sovereign debt of struggling European nations. 

At a conference in San Francisco on Wednesday, the chief investment strategist at Schwabs, Liz Ann Sonders, said, "It may show that we don't have adults manning the regulatory store."

At the same conference, PIMCO bond guru Bill Gross said the bankruptcy was another sign that Wall Street had "lost its way."

"We need a banking system that is attractively and conservatively capitalized," Gross said.

The most scathing new criticism of the situation, though, may have come in the form of a fable about Corzine and MF Global, penned by Financial Times columnist John Gapper. Gapper imagines Corzine as an emperor with no clothes, or in this case, an emperor with Goldman clothes, in reference to his previous employment at Goldman Sachs:

    Some of the traders wondered if they should heed the emperor. He was oddly attired and his beard     was gray. Perhaps he is just reliving past glories, they thought to themselves. But the emperor     showed them the label sewn inside his worn-out suit. “Goldman,” they said admiringly. “They are the     finest of weavers. We were wrong to doubt him.”

    Shortly afterward, a messenger arrived from far-off lands with tales of great events. The grand     emperors of France and Germany had settled an argument and lent florins to the southern kingdoms     that had debased their currency. "We should load up," Emperor Corzine cried. “We must trade in     size. Here,” he told the treasurer. “Borrow 40 more bags of coins like this one. Wear my cloak and no one will refuse you."

Corzine himself is contending not only with embarrassment and investigations, but also with the prospect that his $12-million golden parachute may not launch, according to Fortune.

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-- Nathaniel Popper

twitter.com/nathanielpopper

Photo: File photo of MF Global CEO Jon Corzine. Credit: Rich Schultz / Associated Press

30-year mortgage rate drops to 4%, Freddie Mac says

Investor worries over the European debt crisis helped drive the average rate for a 30-year fixed home loan down to 4% this week, according to Freddie Mac.

The figure, down from 4.1% last week, was the second lowest in the 40 years Freddie has been conducting a weekly survey of the terms being offered by home lenders. The lowest average rate recorded was 3.94% four weeks ago.

Freddie Mac said lenders were offering 15-year loans, a popular choice for homeowners who are refinancing, at an average rate of 3.31%, down from 3.38% a week earlier. That rate was below 3.3% for three weeks in late September and early October.

To obtain the loans at the rates being offered this week, a borrower would have to pay upfront fees averaging 0.7% of the amount borrowed.

Worried about the possibility of defaults on European debt, investors rushed to buy U.S. Treasury securities early this week, driving down interest rates.

The low mortgage rates have created an opportunity for some homeowners who are current on their loans to trade them in for new mortgages, often lowering their interest costs dramatically.

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— E. Scott Reckard

Photo: Foreclosures like this one in Miami clog the market with homes. Credit: Joe Raedle / Getty Image

Bank of America abandons plan to charge $5 debit card fee

Bowing to a national flood of protests, Bank of America Corp. is calling off its plan to charge customers $5 a month for using its debit cards to make purchases -- a strategy that proved a public relations disaster for what once was America's biggest bank.

Analysts had believed the rest of the banking industry would follow BofA in imposing similar fees to make up for new rules restricting the fees banks charge merchants for accepting debit cards.

But instead, the Charlotte, N.C., banking giant finds itself following the lead of a host of rivals who decided last week not to incur the wrath of the American public with debit-card fees.

Bank of America lost its No. 1 ranking in asset size to JPMorgan Chase & Co. at the end of September, though it still has the most total deposits. It announced its decision on the debit fee Tuesday morning in a two-paragraph statement citing "customer concerns and the changing competitive marketplace."

“We have listened to our customers very closely over the last few weeks and recognize their concern with our proposed debit usage fee,” David Darnell, BofA's co-chief operating officer, said in the statement.

“Our customers’ voices are most important to us. As a result, we are not currently charging the fee and will not be moving forward with any additional plans to do so.”

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-- E. Scott Reckard

Photo: Bank of America headquarters in Charlotte, N.C. Credit: Getty Images / Davis Turner 

Wealthy can declare support for Occupy Wall Street on new website

While members of the so-called 99% take part in Occupy Wall Street protests, a new website lets some of the wealthy 1% declare their support for the movement.

The site, called "We are the 1 percent, We stand with the 99 percent," lets people post photos of themselves pronouncing their solidarity with the Occupy protesters in New York, Los Angeles and elsewhere.

"When I was 18 my father won $9 million in the California lottery," one person posted on the site, along with a photo of him holding his message written on two pieces of white paper. "With that money I now have no college debt. When my father dies I will inherit a 3rd of his money. I am committed to using it to help those less fortunate. Due to sheer luck, I am the 1%. I stand with the 99%."

The posts contain no names, but similarly show people holding up handwritten notes on pieces of paper, index cards or cardboard explaining why they back the movement. (Although there is a link to a YouTube video of singer Willie Nelson publicly backing the protests).

Organizers of the site identified two of the people with posts on the site, including Carl Schweser, who created a study program that now is part of Kaplan Schweser, a company that helps people prepare for financial exams.

"I made millions studying the math of mortgages and bonds and helping bankers pass the Chartered Financial Analyst Exam," Schweser wrote on the site. "It isn’t fair that I have retired in comfort after a career working with financial instruments while people who worked as nurses, teachers, soldiers, etc. are worried about paying for their future, their healthcare, and their children’s educations."

"They are the backbone of this country that allowed me to succeed," he continued. "I am willing to pay more taxes so that everyone can look forward to a secure future like I do. I am the 1%. I stand with the 99%. (Which equals 100% of America.) Tax me.”

Many of the posts are from children of wealthy parents or people who have inherited money.

"Being born to the right family at the right time made me a millionaire," one man writes. "Giving most of the money away made me happy."

A woman posted that, "I can afford to work my dream job at an arts non-profit because my husband works for Google. We should all be able to afford following our dreams."

The site was created by two organizations: Resource Generation, which organizes wealthy young people to work for social change, and Wealth for Common Good, a group of wealthy people and business executives that advocate for what they call fair taxation, such as higher tax rates on millionaires.

The groups said they were inspired by the “We are the 99 percent” blog, which posts similar declarations from people participating in the Occupy protests.

“Those of us with more than we need and who believe in a more just distribution of resources can stand up and tell the truth about how the deck has been stacked in our favor," said Elspeth Gilmore, co-director of Resource Generation. "We need to say that we think it’s wrong too.”

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-- Jim Puzzanghera

Photo: A wealthy supporter of the Occupy Wall Street protests. Credit: Westandwiththe99percent.tumblr.com

Banks, regulators start massive review of foreclosures

Some people who lost their homes to a foreclosure system wrought with error and misconduct may now request their cases be independently reviewed and potentially may be compensated.

A large-scale review of foreclosures that occurred in 2009 and 2010 began on Tuesday with federal regulators requiring the nation’s largest mortgage servicers to start mailing letters to potential victims. Independent consultants that the banks were ordered to hire in April will conduct the assessments. More than 4 million borrowers could be eligible.

“The independent foreclosure review is a significant component of the mortgage servicers’ compliance with our enforcement actions,” said John Walsh, acting Comptroller of the Currency, who along with the Federal Reserve and Office of Thrift Supervision ordered the reviews. “These requirements help ensure that the servicers provide appropriate compensation to borrowers who suffered financial harm as a result of improper practices identified in our enforcement actions.”

The actions affect 14 large mortgage servicers that were required to correct the shortcomings and errors in their foreclosure processes. The outreach effort that began Tuesday is a first step.

Each mortgage servicer is required to mail one letter to each customer who is eligible for the review. An advertising campaign will also begin shortly to get the word out to people potentially harmed by the errors, federal officials and bank representatives said Tuesday.

A financial compensation schema for borrowers found to have been foreclosed on improperly has not been developed yet, and neither banking officials nor regulators gave an estimate for how much the actions would cost the banks.

The actions by the federal regulators come after it was revealed last year that banks employed so-called robo-signers, people who signed foreclosure documents en masse without properly reviewing them; took back their homes even though they were being reviewed for a loan modification; and made other errors in the foreclosure and servicing processes.

The enforcement orders are separate from work being done by a committee of attorneys general that also hope to reach a settlement with the nation’s largest banks over faulty foreclosure practices. Those negotiations remain ongoing, even though some states have voiced concern over the direction of the negotiations, and California has dropped out altogether.

A website for borrowers who want to learn more about the federal claims process has been created, IndependentForeclosureReview.com, as has a toll-free phone line, (888) 952-9105.

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-- Alejandro Lazo

twitter.com/alejandrolazo

Photo: A foreclosure notice hangs in the window of a home on Sand Pine Trail in the gated Willow Walk community in Hemet. Credit: Gina Ferazzi / Los Angeles Times