WASHINGTON — The public should expect to see results within weeks from an effort to document criminal and civil violations at the root of the housing bubble, New York Attorney General Eric Schneiderman said Friday.
“Americans lost close to $7.5 trillion in home equity over the last five years,” Schneiderman said. “That’s where the wealth of the working class and the wealth of the middle class was. And that’s why we have to make sure we hold people accountable.”
Schneiderman, New York’s top law enforcement official, wouldn’t predict when any the architects of the housing bubble might go to jail.
“I can’t comment on the specifics of the investigation,” he said.
The investigation is being undertaken as part of a collaboration, announced Friday, among state attorneys general and federal agencies.
Schneiderman joined U.S. Attorney General Eric Holder and other officials Friday at a news conference to discuss the formation of the Residential Mortgage-Backed Securities Working Group.
Federal and state officials will target the creation, promotion and sale of the financial instruments that provided fuel for the overheated housing market and the run-up in prices. They will share information and staff while deciding which agency has the most appropriate jurisdiction to pursue criminal or civil charges.
“Mortgage-backed securities were, in many ways ground zero,” Robert Zhuzami, director of enforcement at the U.S. Securities and Exchange Commission, said at Friday’s news conference.
The promoters of these securities lied, cheated and misled investors, although not all of their actions broke the law, Zhuzami said.
The mortgage-based securities market is dominated by the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac), which have been partly blamed for the housing bubble.
But the higher-risk mortgages, including interest-only loans, were packaged in private-label securities issued by firms incorporated as trusts, mainly in New York and Delaware.
Schneiderman and Delaware Attorney General Beau Biden have been leading the investigation into these instruments.
President Barack Obama announced during Tuesday’s State of the Union address that he asked Holder to form what he described as “a special unit of federal prosecutors and leading state attorneys general.”
Schneiderman, who serves as co-chairman, said the group will operate separately from negotiations to reach a financial settlement over abuses by the mortgage servicing industry — including making harassing phone calls demanding payments and filing false documents — after the housing market crashed.
Those abuses, involving homeowners who were behind on mortgage payments and faced foreclosure, involved hundreds of thousands of New Yorkers, according to Schneiderman. The abusive practices were most concentrated in Brooklyn, Queens, Nassau and Suffolk counties.
The formation of the Residential Mortgage-Backed Securities Working Group gives Schneiderman and other state attorneys general an assurance the pending settlement won’t pre-empt their investigation of the mortgage securities industry.
The Associated Press reported that the pending settlement involves the Bank of America, JPMorgan Chase, Wells Fargo, Citibank and Ally Financial.
Tumulty is a staff writer at the Gannett Washington Bureau.
But after closely studying the faded script and seeing the scrawled signature of Babe Ruth, the viewer senses a glow around the ball. Smaller than a regulation-size ball, the old orb inspires awe.
”He could’ve blown the cover off this one,” said Joseph M. Accetta, a lawyer on the staff of Westchester County Surrogate Court Judge Albert Emanuelli, who is hearing a lawsuit involving the 1938 baseball.
”He was one of the top five players who ever played the game. He hit 60 home runs with a dead ball,” said Mr. Accetta, who is responsible for the ball’s safekeeping.
For Mr. Accetta, a baseball fan whose office is hung with framed mementos of baseball’s greats, the lawsuit is a joy. He rattles off statistics and anecdotes without pause. For example, he cited the 1932 World Series game between the Yankees and the Chicago Cubs when Ruth, the Sultan of Swat, with two strikes against him, pointed to center field with his bat and proceeded to place the ball there.
”He had great agility for a guy his size, tremendous power; he was a great athlete,” said Mr. Accetta, a 30-year-old with a reverential attitude toward baseball history. He acquired his love of the game’s past growing up in Queens, where he listened to older men talk about baseball in New York during the 1940’s and ’50’s.
”I had expected a shiny white ball with the Babe’s signature on it,” said Mr. Accetta, who retrieved the baseball from a safe in the judge’s chambers. ”At first, it’s a letdown when you see it. It’s not in terrific shape. The cover is split in two places.”
Mr. Accetta, who coaches Little League and plays in two softball leagues, added, ”It was even played with.” But the baseball in question was not played with by Ruth. Boys of long ago played with it at least once, Mr. Accetta said.
The autographed baseball is most likely a novelty item of the kind sold in gift shops and candy stores for play by youngsters, said Greg Schwalenberg, curator of the Babe Ruth Birthplace and Museum in Baltimore. ”Today’s ball is the same dimension and weight as back then.”
Even though Ruth played in what is known as the ”dead-ball era,” evidence to support that contention is hard to come by, Mr. Schwalenberg said. A baseball, which is still hand-stitched, is a cushioned cork center with a leather cover held together with 108 stitches and is 3 inches in diameter, 9 to 9 1/4 inches in circumference and 5 to 5 1/4 ounces in weight.
”Later, the ball became livelier, apparently it had more of a pop to it; it may be that they were wound tighter inside,” Mr. Schwalenberg said.
Paul Ventry, a doctor in Potomac, Md., was a 10-year-old in 1938 when he stopped with his father, Victor, at the Peekskill train station.
Standing there waiting for a train was Babe Ruth. Young Paul ran to a nearby store and bought a baseball. He got back in time to get the Babe’s autograph.
For the next half-century or so, the ball sat in a breakfront in the Ventry’s Peekskill living room. According to court documents, Dr. Ventry claims that the baseball was a gift to him from his father, who died in 1973. At that time, Dr. Ventry took the ball to his home. After their mother, Catherine R., died in 1992, his sister, Catherine V., claimed the baseball was family property and ought to be sold. A legal wrangle has ensued.
”I delivered the baseball,” said Joseph A. Scutieri, a lawyer for Dr. Ventry, referring to handing it over to Mr. Accetta. When asked whether he felt it in the palm of his hand, Mr. Scutieri said, ”No, I didn’t even do that.”
But like Mr. Accetta, Mr. Scutieri’s work is more fun these days. ”This case combines two things that I love, sports and my job,” Mr. Scutieri said. ”I’d love to make a living playing baseball. That’s what I do in my free time, and here I get paid to argue what a Babe Ruth baseball is worth.”
This particular ball may not be worth very much, however.
”It’s a little dirty and worn,” Mr. Scutieri said. ”It’s not in the shape the collectors want it to be, mint condition, whether it’s baseball cards or baseballs. They don’t want you touching anything or handling it. They want it in plastic wrap.”
For comparison, Mr. Scutieri offered information on a 1927 baseball, a memento from the same year Babe Ruth hit 60 home runs.
”There’s a 1927 baseball signed by the Yankee team, Babe Ruth, Lou Gehrig, the best team ever,” Mr. Scutieri said. ”That one is worth $14,000.”
He added, ”The numbers on this ball are as high as $10,000, but it’s not in very good shape.” Despite the baseball’s ”priceless sentimental value,” as stated in court papers, Dr. Ventry claims the baseball is worth about $100.
Born George Herman Ruth in 1895, the Baltimore native played from 1920 to 1934 for the Yankees, in the House That Ruth Built, otherwise known as Yankee Stadium. In 1935, he played for the Boston Braves, retiring after one season.
In 1938, the year the baseball was signed, he coached at first base for the Brooklyn Dodgers from June 19 to the end of the season. He hoped to be hired as manager of the team, but Leo Durocher got the job. It was the last time the Babe wore a baseball uniform. Before his death in 1948, from throat cancer at 53, he played golf tournaments and went on fishing and hunting trips.
”The exact reason he was in Peekskill is not known,” Mr. Schwalenberg said.
Both lawyers say that the baseball became a focal point after a dispute arose between the brother and sister — who is a lawyer in the town of New Windsor in Orange County — over the mother’s insurance policies. A third sibling, Barbara Ventry Magee, is not named in the dispute.
Last summer Judge Emanuelli ruled that the baseball was part of the Ventry estate. But Mr. Scutieri persuaded the judge to reopen the case after he proved that his client was improperly served with the original court documents and did not have enough time to reply. Judge Emanuelli is expected to rule on the motion soon.
For Mr. Accetta, the day the baseball leaves his care could be a sad one. ”At some point, it has to go,” he said.]]>
“Increased longevity means that more couples who are in their 60’s, 70’s and even their 80’s are marrying for the second or third time, and they want to make sure that their assets go to their own children and grandchildren and nowhere else,” said James C. Kahn, a partner in the White Plains law firm of Kahn & Kahn, which specializes in matrimonial law. “It may not be romantic, but it’s a fact of contemporary life to put something in writing, and most older couples deal with the issue realistically.”
Putting something in writing is not confined solely to older couples, though. Younger couples are also signing prenuptial agreements, especially when one of the partners has considerable assets and the other has none, said Joseph A. Scutieri, who is also a partner in Kahn & Kahn.
“It’s usually the parents of the one who has the assets to protect who insist on the prenuptial agreement even though it puts a tremendous strain on the young couple,” Mr. Scutieri said. “When you start out a marriage with the assumption that there will be a divorce, it can be the kiss of death.” ‘The Timing Was Awful’
Nevertheless, Mr. Kahn added, many parents still think it is worth the risk. “A typical example is with one of our clients who is a successful businessman with a string of retail outlets,” Mr. Kahn said. “He put his son, the one who is getting married and who is in his 20’s, into his business and signed over one of the company’s retail units to him. The father, who wants to protect the company, insisted that the son’s fiancee relinquish any claims to the business by signing a prenuptial agreement just in case the marriage doesn’t work out.”
Mr. Kahn continued: “The girl came to us for advice on the eve of the marriage. The timing was awful. She was very upset. What should she do? We advised her against signing the prenup because we felt that it was not in her best interest. But she was so upset and fearful of the consequences and the thought of postponing the wedding and all the other complications that she signed anyway. What was especially troubling to me was the time frame. By signing the prenup, she literally waived her rights away throughout the entire life of the marriage. I felt that marriage was off to a bad start.”
But when older couples are involved, a prenuptial agreement can actually increase the chances that the marriage will be successful, said Susan Pollet, a lawyer who has her own practice in Chappaqua and specializes in family, labor and employment law. “By discussing finances openly and outlining their positions, especially regarding their adult children, older couples work out the particulars upfront amiably before they get a formal written agreement,” Ms. Pollet said, adding that in order to draw up a sound financial agreement, “it is absolutely essential that each of them have their own attorney.”
Even when there are no children to take into consideration, older professionals who have accumulated substantial assets want to make sure that their assets are protected before they enter into marriage, said Denise S. D’Ambrosio, a lawyer in the White Plains office of Hall, Dickler, Lawler, Kent & Friedman.
“With one out of two marriages ending in divorce today, people with means who are thinking about marriage are very cautious about shifting their assets to joint ownership,” Ms. D’Ambrosio said. “I have clients in their late 40’s, for example, who are getting married for the first time who are using a prenuptial agreement just as they would an insurance policy or as a good financial planning device. They have a lot to lose and they have seen people who have had their entire marital wealth reduced to almost nothing through the legal costs of divorce. So naturally they are cautious.”
Mr. Scutieri added that divorce has increased during the last five years, especially among middle-age people. “The recession is taking its toll, especially in Westchester, where corporate cutbacks have hit middle-age couples who have had to alter their life styles drastically,” he said. “Money problems lead to fighting and eventually divorce, even though financially, couples would be better off not divorcing.”
An added benefit of a prenuptial agreement, said Jean Carlson, a financial planner in Mamaroneck, is that it gives a couple an opportunity to work out their financial future before marriage.
“Prenuptial agreements are not only for the rich,” Ms. Carlson said, adding that average-income people also need them. For those with average incomes, for instance, their largest asset is probably their pension or their home, and that leads to questions. How will pension money be divided? Does each partner own his or her own home? How will the property each spouse brings to the marriage be held? What about property acquired or money earned after the marriage? Will that be considered separate or marital property?
Couples about to marry for the second time would be well advised to plan for the marriage just as they would plan for retirement, Ms. Carlson said. “They should sit down and review such things as insurance policies, individual retirement accounts and pension options. And they certainly should make out new wills.”
Some couples avoid the whole procedure by choosing to live together without being married.
Mr. Scutieri said: “There are numerous elderly couples who decide not to get married for various reasons. One of them is that they want to keep both of their Social Security benefits. Their total benefits would be reduced should they marry. There are also those who don’t marry for fear of the future. They know they would be financially responsible for paying the bills if their new spouse, for instance, had to go into a nursing home. For example, in Westchester good nursing homes cost about $4,000 a month and a half-million-dollars’ worth of assets can vanish quickly when the state is dunning a spouse for payment.”
And then there are those romantics who prefer not to sully relationships with talk of money. Take the couple aged 68 and 70 that recently sold their individual houses in Scarsdale and decided to live together.
“We are both very well fixed,” said Dan P., a retired executive who insisted on anonymity. “I am a widower. My companion has been divorced and widowed. She has four children and six grandchildren. I have two children and three grandchildren. We have had a very close relationship for a number of years, ever since our respective spouses died. We have been on a number of trips together, but we only recently decided to live together.”
Although the couple had seriously contemplated marriage several times, he said, they eventually decided against it. “It got much too complicated,” he said. “When we started discussing assets, it began to sound like a cold business deal. We stopped before any real harm was done. Society is much more permissive today, and at our age who cares if we get married or not? A few people have criticized us, but our children haven’t. I think they are relieved.”
The couple, who share expenses, rent a condominium in Rye Brook. “But we have looked at a vacation house we like in Maine where we spent last summer,” he said. “We are seriously thinking of buying the place as equal partners. It has enough bedrooms for all our visiting children and grandchildren, who seem to get along surprisingly well.”]]>
WASHINGTON (MarketWatch) — Big banks struggling with stalled mortgage modifications face a new hurdle — tighter standards due to take effect in just over two months from housing giants Fannie Mae and Freddie Mac.
Servicers will be required from January to meet tougher rules from Fannie and Freddie, which own or guarantee more than two-third’s of all new single family mortgages, or face fines.
The new standards, which went into effect on a voluntary basis Oct. 1, come in the wake of revelations about foreclosure-documentation errors at big banks and a delayed application process for many troubled borrowers seeking to modify their mortgages and stay in their homes.
Bank servicers collect a fee for administering all aspects of a loan, including sending monthly payments to mortgage investors, maintaining records and collecting and paying taxes.
Under the new rules, after a mortgage is more than 30 days delinquent, the servicer is required to send a package of foreclosure mitigation alternatives to the borrower, who has 30 days to consider it and respond.
Once the servicer receives a complete package from the borrower they have another 30 days to consider all foreclosure alternatives, taking into account the borrower, servicer and investor, and make a decision.
The servicer must consider whether the borrower can reinstate the loan or eliminate the delinquency by setting up a repayment plan. If that doesn’t work, a servicer would determine if the borrower is eligible for a government modification program and if not, if they qualify for a private modification program, a Making Home Affordable short-sale program or private short-sale process.
“In that 30-day time period the borrower is going to be evaluated for the best alternative,” said Freddie Mac servicing director Robert Kimble.
Those new tight response times are expected to be a major headache for the top four U.S. mortgage servicers, Bank of America Corp. BAC +0.17% , Wells Fargo WFC +0.45% , J.P. Morgan Chase & Co. JPM +0.20% , and Citigroup Inc. C +0.31% . These four companies are also top securitizers of mortgage loans.
The banks for their part say they will meet the new rules.
“We are working closely with Fannie and Freddie to get up to full compliance with their servicing alignment,” said Chase spokesman Patrick Linehan.
“We expect to meet the compliance requirements deadline set by the FHFA agencies,” added Wells Fargo spokesman Vickee Adams. Citigroup and Bank of America declined to comment.
The new standards are known as the servicer alignment initiative because Fannie and Freddie worked together to create a unified approach. Previously, they had different approaches. The new rules might also set the template for mortgages that aren’t purchased or guaranteed by the two firms that are under government conservatorship.
Philadelphia Unemployment Project Director John Dodds said he is worried that big bank servicers aren’t structured to make “good, intelligible decisions” about whether borrowers qualify for modifications in the short time-frame set out by the standards.
“If they have to do it that quickly they would be more likely to deny someone because they don’t have enough time to consider it,” Dodd said.
Manoj Singh, formerly senior vice president of pricing and securitization at Freddie Mac, said the two mega-firms can easily take enforcement actions if needed. He questioned whether the same sort of standards could be applied to mortgages not purchased or backed by the two housing giants.
“Here you have the agencies closely monitoring the performance of the servicers,” Singh said. “With private securities, whose role is it to monitor whether servicing is being done in this uniform mechanism?”
Fines can be handed out if the new standards aren’t met. Freddie Mac, for example, has set performance benchmarks using a formula designed to get servicers to help distressed borrowers quickly.
While the servicers could get a bonus of $500 per application if over 60% of troubled mortgage modification requests are handled at a high standard, the lenders also face $500-per-application fines for those handled below standard.
Those $500 hits could add up for the big banks. Between June 2010 and June 2011, about 6.6 million mortgages were originated by U.S. lenders, the largest part of which was issued by the biggest banks, according to CoreLogic.
Ronald D. Orol is a MarketWatch reporter, based in Washington.]]>
A new bill to improve the process for approving short sales may soon bring relief to distressed home owners who are unable to keep their homes and hope to avoid foreclosure. The bill, introduced in the U.S. House yesterday and strongly supported by the National Association of Realtors®, would impose a deadline of 45 days on lenders to respond to short sale requests.
The legislation, the “Prompt Decision for Qualification for Short Sale Act of 2011,” was offered in Congress by U.S. Reps. Tom Rooney (R-Fla.) and Robert Andrews (D-N.J.).
“The current short sale process can be time-consuming and inefficient, and many would-be buyers end up walking away from a sale that could have saved a home owner from foreclosure,” said NAR President Ron Phipps, broker-president of Phipps Realty in Warwick, R.I.
“Realtors® and consumers continue to raise issues about delays in the short sale process, because lenders are unable to decide whether to approve a short sale. After many months of delays, and with no response from lenders, potential buyers are losing patience and cancelling their contracts, often resulting in the property entering foreclosure. A short sale minimizes the negative impact on sellers and generally costs the lender less than a foreclosure,” said Phipps.
NAR has been actively pushing the lending industry to improve the process for approving short sales, which represent about 13 percent of recent home sales according to NAR data. Phipps praised Reps. Rooney and Andrews for their efforts on the bill and urged Congress to pass the bill quickly.
“As the leading advocate for home ownership and housing issues, Realtors® want to help more home owners avoid foreclosure by facilitating a short sale when a family is absolutely unable to keep their home; however, that can only happen if lenders and servicers approve short sale offers in a reasonable amount of time,” said Phipps. “Streamlining short sales transactions will reduce the amount of time it takes to sell the property, improve the likelihood that the transaction will close and reduce the overall number of foreclosures. This benefits sellers, lenders, buyers and the entire community.”
The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1.1 million members involved in all aspects of the residential and commercial real estate industries.]]>