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  • Special Inspector General for TARP highlights MHA threat

    Federal Issues

    On January 30, the Office of the Special Inspector General (SIG) for the Troubled Asset Relief Program (TARP) delivered a report to Congress, which identified unlawful conduct by certain of the 130 financial institutions in TARP’s Making Home Affordable Program (MHA) as the top threat to TARP and, thus, the SIG’s top investigative priority. The SIG explained that “significant oversight [of MHA] is required because of the risk of waste, fraud, and abuse” that occurs by participants. Indeed, the report highlights specific instances of mismanagement of MHA by a select number of large financial institutions. Close to one million homeowners still participate in MHA initiatives. Accordingly, the risk of unlawful conduct by financial institutions in this area can destabilize the market and jeopardize other participants in MHA such as Fannie Mae, Freddie Mac, FHFA, and the VA.

    Federal Issues TARP Mortgages MHA Fannie Mae Freddie Mac FHFA Department of Veterans Affairs

  • Treasury Department Releases Report on Troubled Asset Relief Program (TARP)

    Lending

    On April 10, the Treasury Department released the March 2017 Monthly Report to Congress on the status of its Troubled Asset Relief Program (TARP). Among other things, the report provides updates on TARP programs such as the Capital Purchase Program, the Community Development Capital Initiative, and the Making Home Affordable Program, among others. Additionally, the report highlights, among other things, administration obligations and expenditures, insurance contracts, transaction reports, and projected costs and liabilities. On May 1, the Treasury issued a monthly TARP update noting principal, investment, income, and revenue totals affecting certain TARP programs.

    Lending Department of Treasury TARP Mortgages

  • Treasury Department Releases Reports on “Troubled Asset Relief” and “Making Home Affordable” Programs

    Lending

    On March 10, the Treasury Department (Treasury) released the February 2017 edition of its Monthly Report to Congress on the status of its Troubled Asset Relief Program (TARP). Among other things, the report provides updates on TARP programs such as the Capital Purchase Program and the Community Development Capital Initiative, as well as administration obligations and expenditures, insurance contracts, and transaction reports.

    That same day, Treasury also published its fourth quarter 2016 “Making Home Affordable” Program Performance Report. According to the report, the housing market has made "significant progress" towards recovery since the beginning of the financial crisis. From 2009 through 2016, the number of homeowners who are 30-plus days delinquent on mortgage loans decreased from 6.1 million to 2.7 million, and the number of reported homeowners underwater also dropped significantly from 10.2 million to 3.2 million. A decline was also seen in the number of initiated foreclosures. To date, “approximately 10 million homeowners have received help through government programs and additional private sector efforts,” and “more than 2.8 million Homeowner Assistance Actions have taken place under Making Home Affordable programs.” Also provided in the report are fourth quarter 2016 servicer assessment results.

    Lending Department of Treasury TARP Mortgages

  • GAO Issues Report on TARP Housing Programs

    Federal Issues

    On January 11, the GAO announced the release of its report providing an update on the status and condition of Treasury’s TARP-funded housing programs as of October 31, 2016. According to the report, Treasury had disbursed nearly 60 percent or $22.6 billion of the $37.51 billion assigned to TARP for the purpose of helping struggling homeowners avoid foreclosure. The report also notes that the GAO’s latest review yielded no new recommendations and that only five of the 29 recommendations GAO has previously made related to the TARP-funded housing programs remain open or not fully implemented. The report states that the GAO will continue to monitor and assess the status of these recommendations.

    Federal Issues Mortgages Department of Treasury TARP GAO

  • Special Inspector General for TARP Issues Report on "Hardest Hit Fund"

    Federal Issues

    On January 12, the Special Inspector General for the Troubled Asset Relief Program (SIGTARP) announced the release of its report on TARP’s “Hardest Hit Fund” (HHF). Created in 2010, the HHF provides a temporary safety net to help save the homes of unemployed and underemployed Americans in 19 states deemed to be the hardest-hit areas of the country. Among other things, the report noted that a majority of the more than 160,000 people denied funds through the program earned less than $30,000. The report notes that SIGTARP is unable to determine why denial rates for homeowners making less than $30,000 are so high, in part, because state agencies' records are non-existent, missing, or incomplete. Indeed, according to the report, some state agencies were unable to provide “even basic aggregate information about why homeowners were denied, let alone a specific reason for each person turned away.” The report emphasized, among other things, the need for all such records-related deficiencies be “immediately remedied.” The report also recommended that state agencies “remove unnecessary restrictions for participation in the program.”

    Federal Issues Mortgages TARP

  • Former Chief Credit Officer Sentenced to Over Eight Years in Prison for Role in Securities Fraud Scheme

    Securities

    On September 1, Ebrahim Shabudin, the former Chief Credit Officer of a San Francisco-based bank, was sentenced to 97 months in prison for his involvement in a securities fraud scheme stemming from the bank’s 2009 financial collapse. In 2008, the Troubled Asset Relief Program (TARP) gave the bank roughly $298 million in federal funds. The FDIC took over the bank in 2009 and stated that it was “the ninth largest failure since 2007 of a bank insured by the FDIC’s Deposit Insurance Fund.” In 2013, the FDIC estimated that the bank would accrue losses exceeding $1.1 billion; however, with the United States’ economic recovery, the estimated loss dropped to approximately $677 million.

    The DOJ charged Shabudin with “conspiring with others within the bank to falsify key bank records as part of a scheme to conceal millions of dollars in losses and falsely inflate the bank’s financial statements.” Shabudin allegedly falsified records filed with the SEC and the FDIC pertaining to the bank’s 2008 third and fourth quarters and year-end earnings per share. On March 25, 2015, Shabudin was found guilty on seven charges: (i) conspiracy to commit securities fraud; (ii) securities fraud; (iii) falsifying corporate books and records; (iv) false statements to accountants; (v) circumventing internal accounting controls; (vi) conspiracy to commit false bank entries; and (vii) false bank entries. In addition to the prison sentence, U.S. District Judge White ordered the former Chief Credit Officer to undergo three years of supervised release and pay $348,000 in restitution. Both the bank’s CFO and Senior Vice President pleaded guilty to similar charges last year and currently await sentencing.

    FDIC SEC DOJ TARP

  • Former Bank Executive Sentenced to 30 Months in Prison for Role in TARP Fraud Scheme

    Consumer Finance

    On August 20, former bank executive Charles Antonucci was sentenced to 30 months in prison for his role in organizing a scheme involving self-dealing, bank bribery, embezzlement of bank funds, attempting to fraudulently obtain more than $11 million from the Troubled Asset Relief Program (TARP), and participating in a $37.5 million fraud scheme that left an Oklahoma insurance company in receivership. Antonucci pled guilty to the charges in 2010 pursuant to a cooperation agreement with the government. He was the first defendant convicted of fraud of TARP funds, which was a program established in 2008 to provide liquidity to troubled financial institutions during the financial crisis. The judge also ordered Antonucci to forfeit $11.2 million to the United States and to provide $54.6 million in restitution to the victims of his crimes, including, among others, the bank’s shareholders and the FDIC. Antonucci’s plea and sentencing was before U.S. District Judge Naomi Reice Buckwald of the Southern District of New York. The case was handled by the Southern District of New York’s Office of Complex Frauds and Asset Forfeiture Units, with investigative assistance from the Office of the Special Inspector General for TARP.

    DOJ TARP SDNY

  • GAO Recommends Better Data Analysis to Improve TARP Housing Programs

    Lending

    On October 6, the GAO released a report recommending that the Treasury Department improve its analysis of data it collects on HAMP. As of June, Treasury has disbursed only about one-third of the $38.5 billion in TARP funds allocated to housing programs and fewer borrowers have received first-lien modifications under HAMP than Treasury originally estimated. Treasury does collect data on HAMP denial and redefault rates, but its evaluation of data to help explain differences in these rates between servicers is limited. For example, some variations may be caused by differences in servicer practices that would not necessarily be caught by Treasury’s compliance reviews or analyses of reporting errors. The GAO report recommends more sophisticated analysis of the data in order to identify the reasons for variations in denial rates and redefaults among servicers. The GAO hopes more robust data analysis will help Treasury increase oversight and transparency, improve its policies and guidance, and ensure that HAMP reaches the greatest number of eligible borrowers.

    Department of Treasury HAMP TARP GAO

  • Mortgage Company Resolves HAMP-Related Criminal Allegations

    Financial Crimes

    On July 3, the DOJ announced the resolution of a multi-agency criminal investigation into the way a large mortgage company administered the federal Home Affordable Modification Program (HAMP). According to a Restitution and Remediation Agreement released by the company’s parent bank, the company agreed to pay up to $320 million to resolve allegations that it made misrepresentations and omissions about (i) how long it would take to make HAMP qualification decisions; (ii) the duration of HAMP trial periods; and (iii) how borrowers would be treated during those trial periods. In exchange for the monetary payments and other corrective actions by the company, the government agreed not to prosecute the company for crimes related to the alleged conduct. The investigation was conducted by the U.S. Attorney for the Western District of Virginia, as well as the FHFA Inspector General—which has authority to oversee Fannie Mae’s and Freddie Mac’s HAMP programs—and the Special Inspector General for TARP—which has responsibility for the Treasury Department HAMP program and jurisdiction over financial institutions that received TARP funds. This criminal action comes in the wake of a DOJ Inspector General report that was critical of the Justice Department’s mortgage fraud enforcement efforts, and which numerous members of Congress used to push DOJ to more vigorously pursue alleged mortgage-related violations. In announcing the action, the U.S. Attorney acknowledged that other HAMP-related investigations are under way, and that more cases may be coming.

    Freddie Mac Fannie Mae FHFA DOJ Enforcement HAMP TARP Financial Crimes

  • Federal Government, Illinois AG Team Up to Bring First TARP Criminal Charges

    Financial Crimes

    On August 6, the Special Inspector General for the Troubled Asset Relief Program (TARP), the FDIC Office of Inspector General, and Illinois Attorney General Lisa Madigan announced criminal charges against former members of the board of directors and senior executives at a bank that received funds under the TARP program. The authorities allege that the former directors and officers concealed the bank’s financial condition from state regulators, while the board chairman allegedly solicited and demanded bribes in exchange for business loans and lines of credit. The authorities charge that over a six year period, the officers submitted numerous fraudulent reports to their Illinois regulator and used money from third parties to make payments on several bank loans that were pasts due. During this period, the bank applied for and obtained TARP funds that were used to further the officers’ criminal scheme.

    FDIC State Attorney General Department of Treasury TARP

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