Category Archives: Investing

Morgan Stanley completes $400M consumer relief obligation for $3.2B mortgage settlement

Morgan Stanley recently completed its $400 million consumer relief obligation that is part of the $3.2 billion mortgage bond settlement it reached last year.

The settlement covers Morgan Stanley’s “deceptive” mortgage bond practices in the run-up to the financial crisis and requires the company to provide $400 million in consumer relief for New York residents affected by the company’s alleged actions.

A new report from Eric Green, the independent monitor of the consumer-relief portion of the settlement, shows that Morgan Stanley provided $28,337,123 in consumer relief for the period ending Oct. 30, 2017. That brought Morgan Stanley’s consumer relief total to $401,690,163, surpassing the company’s $400 million obligation.

“My professionals and I have determined that Morgan Stanley’s submissions and calculations for its consumer-relief credit are correct, and that it has complied with all the terms of the settlement agreement,” Green said in a statement.

According to Green’s office, Morgan Stanley provided consumer relief in the following ways:

  • $205,012,079 in financing to support critical-need housing developments
  • $126,672,501 in donations to support community stabilization, either by financing the acquisition and remediation of non-performing loans or by making grants for certified community land banks or housing quality improvement and enforcement programs
  • $70,005,583 for forgiveness of first-lien and second-lien loan balances owed by individual homeowners

In his report, Green’s office praised the settlement’s structure, which was devised by New York Attorney General Eric Schneiderman’s office and designed to ensure that the consumer relief went to the New Yorkers that needed it most.

“Unlike some other residential mortgage-backed securities settlements, this settlement agreement was conceived as a program to help individuals largely by focusing on blighted and struggling communities,” Green said.

“Morgan Stanley executed its consumer-relief obligations in a manner that achieved this objective,” Green continued. “Grants and other funding to support community revitalization and affordable rental housing accounted for 83% of the total consumer-relief credit earned by Morgan Stanley.”

Green’s office also complimented Morgan Stanley for completing its consumer relief obligation quickly, as the company provided all the required relief in “well under two years.”

Article source: https://www.housingwire.com/articles/42163-morgan-stanley-completes-400m-consumer-relief-obligation-for-32b-mortgage-settlement

Mini-Madoff? SEC accuses Robert Shapiro of running $1.2 billion real estate Ponzi scheme

Robert Shapiro, the founder of the Woodbridge group of companies, bilked thousands of investors out of hundreds of millions of dollars by running a $1.2 billion real estate Ponzi scheme, the Securities and Exchange Commission claimed in a recent court filing.

Late last week, the SEC sued Shapiro, a well-known luxury real estate developer, for allegedly running a Ponzi scheme that defrauded more than 8,400 investors by promising high returns on real estate investments.

According to the SEC, many of Shapiro’s alleged victims were seniors who invested their retirement savings into the supposed Ponzi scheme.

“Shapiro promised investors they would be repaid from the high rates of interest Shapiro’s companies were earning on loans the companies were purportedly making to third-party borrowers,” the SEC claimed in its lawsuit. “However, nearly all the purported third-party borrowers were actually limited liability companies owned and controlled by Shapiro, which had no revenue, no bank accounts, and never paid any interest under the loans.”

According to the complaint, Shapiro’s companies received more than $1 billion in investor funds, but only generated approximately $13.7 million in interest income from “truly unaffiliated” third-party borrowers.

The lawsuit states that without true income from the supposed investments, Shapiro allegedly used new investor money to pay the returns owed to earlier investors – the hallmark of a Ponzi scheme.

But, according to the filing, Shapiro didn’t only use investor funds to repay previous investors, he and his family also “lived in the lap of luxury” and spent “exorbitant amounts of investor money in alarming fashion, on items such as luxury automobiles, jewelry, country club memberships, fine wine, and chartering private planes.”

Shapiro’s alleged scheme collapsed earlier this month, when the companies were unable to repay interest payments to certain investors.

Then, fundraising from investors stopped, Shapiro resigned, and most of his companies filed for Chapter 11 bankruptcy.

“The effect of Shapiro and his companies’ actions will leave investors with substantial losses, as they are owed at least $961 million in principal,” the SEC complaint states. “At least 2,600 of these investors unknowingly placed their retirement savings into Shapiro’s Ponzi scheme.”

According to the SEC complaint, Woodbridge advertised its primary business as issuing loans to supposed third-party commercial property owners paying that were paying Woodbridge 11-15% annual interest for “hard money loans,” short-term financing.

In return, Woodbridge allegedly promised to pay investors returns of between 5% and 10% annually.

The SEC complaint alleges that Shapiro and Woodbridge used at least $328 million of investor money to repay principal and interest to other investors and spent at least another $172 million on operating expenses, including $64.5 million on sales agent commissions and $44 million on payroll.

Shapiro also allegedly spent at least $21 million of investor funds on “extravagant personal expenditures,” the SEC claims.

“Woodbridge’s business model was a sham-the vast majority of the purported Third-Party Borrowers were hundreds of Shapiro owned and controlled LLCs, which had no source of income, no bank accounts, and never made any loan payments to Woodbridge, all facts Woodbridge and Shapiro concealed from investors,” the SEC claimed in its lawsuit. “Rather, Shapiro and Woodbridge continued its ruse for the past several years by supporting its business operations nearly entirely by raising and using new investor funds, in classic Ponzi scheme fashion.”

The judge overseeing the lawsuit granted the SEC’s request for a temporary asset freeze against Shapiro and a group of his unregistered investment companies, and ordered Shapiro and the companies to provide an accounting of all money received from investors.

Click here to read the SEC’s full complaint.

Article source: https://www.housingwire.com/articles/42165-mini-madoff-sec-accuses-robert-shapiro-of-running-12-billion-real-estate-ponzi-scheme

RBS reaches $125 million mortgage bond settlement with California

Earlier this year, the Royal Bank of Scotland finally reached a $5.5 billion settlement with the Federal Housing Finance Agency over alleged violations of federal and state securities laws in connection with private-label residential mortgage-backed securities trusts purchased by Fannie Mae and Freddie Mac from 2005 to 2007.

But RBS’ legacy issues are not done and dusted yet.

Late last week, California Attorney General Xavier Becerra announced that California reached a $125 million settlement with RBS over mortgage bond issues that took place during that same time period.

According to Becerra’s office, the settlement covers “misrepresentations” about the underlying mortgages in a number of mortgage bonds sold to California’s public employee and teacher pension funds, CalPERS and CalSTRS.

Becerra’s office said that an investigation found that descriptions of the RMBS in question “failed to accurately disclose the true characteristics of many of the underlying mortgages” to investors.

The investigation also found that “due diligence to remove poor quality loans from the investments was not adequately performed.”

Becerra’s office said that RBS was aware of the misrepresentations but “failed to correct them.”

Those issues led to “millions” in losses to both CalPERS and CalSTRS.

“RBS decided to mislead California’s pension funds in order to line its own pockets – plain and simple,” Becerra said in a statement. “Today’s settlement returns to our pension funds, which hardworking Californians rely on upon retirement, money that RBS wrongfully took from them.”

In a statement provided to HousingWire, RBS Chief Executive Ross McEwan said that settling these “legacy” issues is highly important to the company.

“We have been very clear that putting our remaining legacy issues behind us is a key part of our strategy,” McEwan said.

“I am pleased that we have reached this settlement with the California State Attorney General in relation to RMBS issues which date back to 2004-2008,” McEwan continued. “Settling these issues is a stark reminder of the heavy price we continue to pay for the global ambitions pursued by the bank in the run up to the crisis.”

Article source: https://www.housingwire.com/articles/42156-rbs-reaches-125-million-mortgage-bond-settlement-with-california

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