{"id":6404,"date":"2017-10-07T11:49:44","date_gmt":"2017-10-07T18:49:44","guid":{"rendered":"http:\/\/occupysf.net\/?p=6404"},"modified":"2017-10-07T11:49:44","modified_gmt":"2017-10-07T18:49:44","slug":"special-investigation-americas-biggest-bank-paid-fine-2008-mortgage-crisis-phony-mortgages","status":"publish","type":"post","link":"http:\/\/occupysf.net\/index.php\/2017\/10\/07\/special-investigation-americas-biggest-bank-paid-fine-2008-mortgage-crisis-phony-mortgages\/","title":{"rendered":"Special Investigation: How America\u2019s Biggest Bank Paid Its Fine for the 2008 Mortgage Crisis \u2014 With Phony Mortgages!"},"content":{"rendered":"
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Alleged fraud put JPMorgan Chase hundreds of millions of dollars ahead; ordinary homeowners, not so much.<\/h2>\n

BY\u00a0DAVID DAYEN<\/a><\/strong>\u00a0| OCTOBER 6, 2017 (BillMoyers.com)<\/p>\n<\/header>\n

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James “Jamie” Dimon, chairman, president and CEO of JPMorgan Chase & Co., during testimony before the Financial Crisis Inquiry Commission in Washington, DC, on Jan. 13, 2010. (Photo by Jay Mallin\/Bloomberg<\/em>\u00a0via Getty Images)<\/p>\n<\/div>\n<\/figure>\n

This post originally appeared on<\/em>\u00a0The Nation<\/a>.<\/p>\n

You know the old joke: How do you make a killing on Wall Street and never risk a loss? Easy \u2014 use other people\u2019s money. Jamie Dimon and his underlings at JPMorgan Chase have perfected this dark art at America\u2019s largest bank, which boasts a balance sheet one-eighth the size of the entire US economy.<\/p>\n

After JPMorgan\u2019s deceitful activities in the housing market helped trigger the 2008 financial crash that cost millions of Americans their jobs, homes and life savings, punishment was in order. Among a vast array of misconduct, JPMorgan engaged in the routine use of \u201crobo-signing,\u201d which allowed bank employees to automatically sign hundreds, even thousands, of foreclosure documents per day without verifying their contents. But in the United States, white-collar criminals rarely go to prison; instead, they negotiate settlements. Thus, on Feb. 9, 2012, US Attorney General Eric Holder announced the National Mortgage Settlement, which\u00a0fined<\/a>\u00a0JPMorgan Chase and four other megabanks a total of $25 billion.<\/p>\n

JPMorgan\u2019s share of the settlement was $5.3 billion, but only $1.1 billion had to be paid in cash; the other $4.2 billion was to come in the form of financial relief for homeowners in danger of losing their homes to foreclosure. The settlement called for JPMorgan to reduce the amounts owed, modify the loan terms and take other steps to help distressed Americans keep their homes. A\u00a0separate 2013 settlement<\/a>\u00a0against the bank for deceiving mortgage investors included another $4 billion in consumer relief.<\/p>\n

A\u00a0Nation<\/em>\u00a0investigation can now reveal how JPMorgan met part of its $8.2 billion settlement burden: by using other people\u2019s money.<\/p>\n

Here\u2019s how the alleged scam worked. JPMorgan moved to forgive the mortgages of tens of thousands of homeowners; the feds, in turn, credited these canceled loans against the penalties due under the 2012 and 2013 settlements. But here\u2019s the rub: In many instances, JPMorgan was forgiving loans\u00a0on properties it no longer owned<\/em>.<\/p>\n

The alleged fraud is described in internal JPMorgan documents, public records, testimony from homeowners and investors burned in the scam and other evidence presented in a blockbuster lawsuit against JPMorgan, now being heard in US District Court in New York City.<\/p>\n

JPMorgan no longer owned the properties because it had sold the mortgages years earlier to 21 third-party investors, including three companies owned by Larry Schneider. Those companies are the plaintiffs in the lawsuit; Schneider is also aiding the federal government in a related case against the bank. In a bizarre twist, a company associated with the Church of Scientology facilitated the apparent scheme. Nationwide Title Clearing, a document-processing company with close ties to the church, produced and filed the documents that JPMorgan needed to claim ownership and cancel the loans.<\/p>\n

If the allegations are true, JPMorgan screwed everybody.<\/p>\n

\u2014 FORMER CONGRESSMAN BRAD MILLER<\/h4>\n<\/div>\n

JPMorgan, it appears, was running an elaborate shell game. In the depths of the financial collapse, the bank had unloaded tens of thousands of toxic loans when they were worth next to nothing. Then, when it needed to provide customer relief under the settlements, the bank had paperwork created asserting that it still owned the properties. In the process, homeowners were exploited, investors were defrauded and communities were left to battle the blight caused by abandoned properties. JPMorgan, however, came out hundreds of millions of dollars ahead, thanks to using other people\u2019s money.<\/p>\n

\u201cIf the allegations are true, JPMorgan screwed everybody,\u201d says Brad Miller, a former Democratic congressman from North Carolina who was among the strongest advocates of financial reform on Capitol Hill until his retirement in 2013.<\/p>\n

In an unusual departure from most allegations of financial bad behavior, there is strong evidence that Jamie Dimon, JPMorgan\u2019s CEO and chairman, knew about and helped to implement the mass loan-forgiveness project. In two separate meetings in 2013 and 2014, JPMorgan employees working on the project were specifically instructed not to release mortgages in Detroit under orders from Dimon himself, according to internal bank communications. In an apparent public-relations ploy, JPMorgan was about to invest $100 million in Detroit\u2019s revival. Dimon\u2019s order to delay forgiving the mortgages in Detroit appears to have been motivated by a fear of reputational risk. An internal JPMorgan report warned that hard-hit cities might take issue with bulk loan forgiveness, which would deprive municipal governments of property taxes on abandoned properties while further destabilizing the housing market.<\/p>\n

Did Dimon also know that JPMorgan, as part of its mass loan-forgiveness project, was forgiving loans on properties it no longer owned? No internal bank documents confirming that knowledge have yet surfaced, but Dimon routinely takes legal responsibility for knowing about his bank\u2019s actions. Like every financial CEO in the country, Dimon is obligated by law to sign a document every year attesting to his knowledge of and responsibility for his bank\u2019s operations. The law establishes punishments of $1 million in fines and imprisonment of up to 10 years for knowingly making false certifications.<\/p>\n

Dimon signed the required document for each of the years that the mass loan-forgiveness project was in operation, from 2012 through 2016. Whether or not he knew that his employees were forgiving loans the bank no longer owned, his signatures on those documents make him potentially legally responsible.<\/p>\n

The JPMorgan press office declined to make Dimon available for an interview or to comment for this article. Nationwide Title Clearing declined to comment on the specifics of the case but said that it is \u201cmethodical in the validity and legality of the documents\u201d it produces.<\/p>\n

Federal appointees have been complicit in this as well. E-mails show that the Office of Mortgage Settlement Oversight, charged by the government with ensuring the banks\u2019 compliance with the two federal settlements, gave JPMorgan the green light to mass-forgive its loans. This served two purposes for the bank: It could take settlement credit for forgiving the loans, and it could also hide these loans \u2014 which JPMorgan had allegedly been handling improperly \u2014 from the settlements\u2019 testing regimes.<\/p>\n

\u201cNo one in Washington seems to understand why Americans think that different rules apply to Wall Street, and why they\u2019re so mad about that,\u201d said former congressman Miller. \u201cThis<\/em>\u00a0is why.\u201d<\/p>\n

Lauren and Robert Warwick were two of the shell game\u2019s many victims. The Warwicks live in Odenton, Maryland, a bedroom community halfway between Baltimore and Washington, DC, and had taken out a second mortgage on their home with JPMorgan\u2019s Chase Home Finance division. In 2008, after the housing bubble burst and the Great Recession started, 3.6 million Americans\u00a0lost their jobs<\/a>; Lauren Warwick was one of them.<\/p>\n

Before long, the Warwicks had virtually no income. While Lauren looked for work, Robert was in the early stages of starting a landscaping business. But the going was slow, and the Warwicks fell behind on their mortgage payments. They tried to set up a modified payment plan, to no avail: Chase demanded payment in full and warned that foreclosure loomed. \u201cThey were horrible,\u201d Lauren Warwick told\u00a0The Nation<\/em>. \u201cI had one [Chase representative] say, \u2018Sell the damn house \u2014 that\u2019s all you can do.\u2019\u201d<\/p>\n

Then, one day, the hounding stopped. In October 2009, the Warwicks received a letter from 1st<\/sup>\u00a0Fidelity Loan Services, welcoming them as new customers. The letter explained that 1st<\/sup>Fidelity had purchased the Warwicks\u2019 mortgage from Chase, and that they should henceforth be making an adjusted mortgage payment to this new owner.<\/p>\n

The alleged shell game put JPMorgan hundreds of millions of dollars ahead \u2014 with federal permission.<\/div>\n

Lauren Warwick had never heard of 1st<\/sup>\u00a0Fidelity, but the letter made her more relieved than suspicious. \u201cI\u2019m thinking, \u2018They\u2019re not taking my house, and they\u2019re not hounding me,\u2019\u201d she said.<\/p>\n

Larry Schneider, 49, is the founder and president of 1st<\/sup>\u00a0Fidelity and two other mortgage companies. He has worked in Florida\u2019s real-estate business for 25 years, getting his start in Miami. In 2003, Schneider hit upon a business model: If he bought distressed mortgages at a significant discount, he could afford to offer the borrowers reduced mortgage payments. It was a win-win-win: Borrowers remained in their homes, communities were stabilized and Schneider still made money.<\/p>\n

\u201cI was in a position where I could do what banks didn\u2019t want to,\u201d Schneider says. In fact, his business model resembled what President Franklin Roosevelt did in the 1930s with the Home Owners\u2019 Loan Corporation, which\u00a0prevented nearly 1 million foreclosure<\/a>s while turning a small profit. More to the point, Schneider\u2019s model exemplified how the administrations of George W. Bush and Barack Obama could have handled the foreclosure crisis if they\u2019d been more committed to helping Main Street rather than Wall Street.<\/p>\n

The Warwicks\u2019 loan was one of more than 1,000 that Schneider purchased without incident from JPMorgan\u2019s Chase Home Finance division starting in 2003. In 2009, the bank offered Schneider a package deal: 3,529 primary mortgages (known as \u201cfirst liens\u201d) on which payments had been delinquent for over 180 days. Most of the properties were located in areas where the crisis hit hardest, such as Baltimore.<\/p>\n