KeNo's Housing and Economic Portal: Friday October 8 Housing and Economic stories

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Comerica bank delaying deposits to generate fines? - (slycapital.wordpress.com) Comerica bank may be heading for bankruptcy. We have heard a few interesting stories regarding extremely aggressive fee behavior that is a big red flag when it comes to solvency issues. What they are doing is holding deposits for longer than usual and then slapping on overdraft fees against their unsuspecting clientèle who think they have cleared deposits in their account. So a Comerica customer behaving in the way they have always done can now result in hundreds of dollars in fee income for the bank. This kind of sting can only be run once on savvy customers but will really hurt people with sub-par money management skills (which, let's face it, is most people). Fees are a major source of income for banks. Up until now customers have always had to actually overdraw their account to incur fees. Comerica’s new policy of dinging people who actually do have the money in their account is definitely a new twist!

Fort Lauderdale man's paid-off house sold in foreclosure mistake - (www.sun-sentinel.com) When Jason Grodensky bought his modest Fort Lauderdale home in December, he paid cash. But seven months later, he was surprised to learn that Bank of America had foreclosed on the house, even though Grodensky did not have a mortgage. Grodensky knew nothing about the foreclosure until July, when he learned that the title to his home had been transferred to a government-backed lender. "I feel like I'm hanging in the wind and I'm scared to death," said Grodensky. "How did some attorney put through a foreclosure illegally?" Bank of America has acknowledged the error and will correct it at its own expense, said spokeswoman Jumana Bauwens. Grodensky's story and other tales of foreclosure mistakes started popping up recently across South Florida. This week, GMAC Mortgage, one of the nation's largest mortgage servicers and a major mortgage lender, told real estate agents to stop evicting residents and suspend sales of properties that had been taken from homeowners in foreclosure. The company said it might have to "correct" some of its foreclosures, but was not halting those in process.

Amid mountain of paperwork, shortcuts and forgeries mar foreclosure process - (www.washingtonpost.com) The nation's overburdened foreclosure system is riddled with faked documents, forged signatures and lenders who take shortcuts reviewing borrower's files, according to court documents and interviews with attorneys, housing advocates and company officials. The problems, which are so widespread that some judges approving the foreclosures ignore them, are coming to light after Ally Financial, the country's fourth-biggest mortgage lender, halted home evictions in 23 states this week. During the housing boom, millions of homeowners got easy access to mortgages while providing virtually no proof of their income or background. Now, as millions of Americans are being pushed out of the homes they can no longer afford, the foreclosure process is producing far more paperwork than anyone can read and making it vulnerable to fraud.

Retirees Duped by Derivatives With Structured Notes Sale Surge - (www.bloomberg.com) Leona Miller, an 84-year-old retired beautician, says she was seeking safe and steady income from bonds two years ago when her Wachovia Corp. broker recommended she buy securities paying 9 percent interest. Within six months, Miller had lost about 30 percent of her $20,000 investment and the bonds were converted into shares of Merck & Co. in a falling stock market. The San Diego resident, who still doesn’t understand what happened to her money, had purchased bonds known as structured notes that include built-in derivatives. Sales to Miller and thousands of other individuals have driven structured note offerings up 58 percent to $31.9 billion through August, according to data compiled by Bloomberg. With U.S. interest rates near zero percent, investors are snapping up bonds such as reverse-convertible notes with knock-in put options or Leveraged CMS Curve and S&P 500 Index Linked Callable Notes, some with face values of as little as $10. “People develop a product which makes a modicum of sense, then they extend it to the point of ludicrousness until it blows up,” said Satyajit Das, a former Citigroup Inc. derivatives banker. Das, the Sydney-based author of “Traders, Guns & Money” (FT Press, 2006), said investors are often “seduced” into purchases without understanding the risks.

Investors cheer indictment of L.A. real estate mogul - (www.latimes.com) A federal grand jury accuses Ezri Namvar of misappropriating $23 million held in escrow by one of his companies. 'I am happy because he deserves it,' said one man who lost $700,000. This week's indictment of Los Angeles real estate mogul Ezri Namvar on criminal fraud charges was welcome news to local investors who say the Iranian immigrant preyed on their shared ethnic ties and bilked them out of hundreds of millions of dollars. Namvar has agreed to surrender to federal authorities Monday to face charges that he stole $23 million from clients of his company, Namco Financial Exchange Corp., which safeguarded proceeds from commercial real estate transactions, said Thom Mrozek, a spokesman for the U.S. attorney's office in Los Angeles. A federal grand jury indicted Namvar on Tuesday.