A bank foreclosure and eviction goes horribly wrong when the former homeowner took four firefighters hostage in a suburban Atlanta, Georgia neighborhood on Wednesday.

The gunman who took four Georgia firefighters hostage Wednesday has been shot and killed, reportedly by SWAT-team members. One police officer was wounded, and all four firefighters have been taken to the hospital for minor injuries. The hostage scene erupted Wednesday afternoon after firefighters responded to a 911 call from a man saying he was having a heart attack at a home near Atlanta, police said. The gunman reportedly was holding the firefighters hostage over demands his utilities and cable be turned back on.

Initially five firefighters were held, but the gunman released one in order to move the fire truck.

NBC Atlanta 11 Alive:

According to authorities, police used a "flash bang grenade" to distract the suspect when they felt their officers were in "immediate danger" on the scene.

All four of the firefighters taken hostage are safe and sustained superficial wounds during their recovery effort and one Gwinnett County officer was injured. According to authorities, the officers injuries are non-life threatening.

A sheriff's deputy said the gunman is upset that the house is in foreclosure, The Atlanta Journal-Constitution reported.

According to property tax records, the home where the firefighters were being held was foreclosed on in November 2012 by Wells Fargo, and the mortgage then sold to Fannie Mae.

Gwinnett County Police Cpl. Edwin Ritter said the unidentified gunman was facing eviction and wanted the power turned back on.

The identity of the deceased has not yet been released pending notification of next of kin.

[Photo Credit: Joshua Roberts/Bloomberg]

By Paul Kiel, ProPublica

An executive who the Justice Department says facilitated a scheme to defraud Fannie Mae and Freddie Mac is now spearheading JPMorgan Chase's role in the government's program to compensate victims of the big banks' abusive foreclosure practices.

The executive, Rebecca Mairone, worked at Countrywide and Bank of America from 2006 until earlier this year, when she left for JPMorgan Chase, according to her LinkedIn profile.

In a lawsuit filed last month in federal court in New York, Justice Department attorneys allege that Countrywide, which was bought by Bank of America in 2008, perpetrated a two-year scam to foist shoddy home loans on Fannie and Freddie. Neither Mairone nor any other individuals are named as defendants in the civil suit, and no criminal charges have been filed against her or anyone else in connection with the alleged misconduct. But Mairone is one of two bank officials cited in the suit as having repeatedly ignored warnings about the "Hustle," as the alleged scheme was called inside the company, and she prohibited employees from circulating some of those warnings outside their division.

Mairone was chief operating officer of the Countrywide lending division that allegedly carried out the "Hustle." She took the helm of JPMorgan Chase's involvement in the Independent Foreclosure Review this summer, according to a former Chase employee.

The review, overseen by federal banking regulators, requires the nation's biggest banks to compensate victims for harm they inflicted on borrowers. Victims can receive up to $125,000 in cash or, in some cases, get their homes back. But the review has already been marred by evidence that the banks themselves play a major role in identifying the victims of their own abuses, raising the question of whether the review is compromised by a central conflict of interest.

Mairone's role raises additional questions about the Independent Foreclosure Review.

The review "never seemed designed to place first the interests of those who were supposed to be helped u2014 victimized homeowners," said Neil Barofsky, the former federal prosecutor who served as the special inspector general for the Troubled Asset Relief Program, better known as the bank bailout.

"Finding out that the person running it for JPMorgan Chase is a person whose conduct in the run-up to financial crisis was allegedly so egregious that she somehow managed to be one of the only people actually named in a case brought by the Department of Justice goes beyond irony," he continued. "It speaks volumes to the banks' true intent and lack of concern for homeowners when addressing the harm that they caused during the foreclosure crisis."

In response to ProPublica's questions about Mairone's role in the foreclosure review and the suit's allegations, Chase issued a brief statement confirming that Mairone is a managing director who is "working on the Independent Foreclosure Review process." The statement added, "It would not be appropriate for us to discuss another firm's litigation."

Chase declined to make Mairone available for comment, and she did not return a message left at her home number.

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Federal prosecutors hit Bank of America with a $1 billion lawsuit Wedesday, accusing the bank of mortgage fraud that contributed to the housing crisis. Bank of America became entangled in the scheme -- known as “High-Speed Swim Lane” or “Hustle” -- when it purchased Countrywide Financial in July 2008, just as the economy was slipping into recession. Countrywide, a mortgage lending giant, was already known for approving risky loans when it introduced its “Hustle” program to churn out more loans, effectively eliminating a system that ensured the mortgages were being made to buyers who could afford them. A top U.S. attorney said the bank’s fraud was “spectacularly brazen in scope.”

Via:

Wednesday's case, originally brought by a whistleblower, is the U.S. Department of Justice's first civil fraud lawsuit over mortgage loans sold to the big mortgage financiers, which were bailed out in 2008.

It also compounds the legal problems that Bank of America Chief Executive Brian Moynihan faces over the second-largest U.S. bank's disastrous July 2008 purchase of Countrywide Financial Corp, once the nation's largest mortgage lender.

According to a complaint filed in Manhattan federal court, Countrywide in 2007 invented and Bank of America continued a scheme known as the "Hustle" to speed up processing of residential home loans.

Operating under the motto "Loans Move Forward, Never Backward," mortgage executives tried to eliminate "toll gates" designed to ensure that loans were sound and not tainted by fraud, the government said.

This led to "defect rates" that approached 40 percent, roughly nine times the industry norm, but Countrywide concealed this from Fannie Mae and Freddie Mac, and even awarded bonuses to staff to "rebut" the problems being found, it added.

Defaults and foreclosures soared, yet the bank has resisted buying back many of the defaulted loans from the scheme, which ran through 2009, the government added.

Much more at Reuters.

"Fannie Mae, you can't hide, we can see your greedy side," chanted over 200 homeowners and renters from across the country, who protested recently in front of Fannie Mae headquarters in Northwest, Washington D.C.. The protestors gathered to demand the resignation of acting Federal Housing Authority Director Edward DeMarco, whose agency oversees twin Government-backed mortgage regulators Fannie Mae and Freddie Mac.

By Cora Currier, ProPublica, Sept. 26, 2012

Mortgage giant Freddie Mac did not keep homeowners trapped in high-interest loans in order to boost profits on billions of dollars' worth of complex financial bets it had made. That's the conclusion reached in a report released today by the inspector general that oversees the agency in charge of Freddie Mac.

Last January, ProPublica and NPR reported that Freddie had dramatically expanded its holdings of mortgage-backed securities that would profit if homeowners stayed in their existing high-interest-rate loans. At the same time, the company had taken steps that made it harder for homeowners to refinance at lower interest rates. Our report stated that there was no evidence of a coordinated attempt to bet against homeowners' ability to refinance. The inspector general's report concludes that there was none.

But the inspector general left a key stone unturned: It did not independently evaluate the firewall within Freddie Mac designed to keep Freddie's investment arm from profiting from insider information about the mortgage giant's plans to tighten or loosen homeowners' access to credit. Instead, the inspector general relied on the word of employees it interviewed and conducted no further investigation. It also reported that the agency that oversees Freddie has not tested the firewall's integrity.

Freddie Mac and its sister company Fannie Mae were bailed out by taxpayers after the financial crisis and are now controlled by the Federal Housing Finance Agency. Freddie and Fannie guarantee most of the mortgages in the U.S., and they have a mission to make home loans more affordable. But Freddie also has a massive investment portfolio and has to protect against losses. Sometimes, those two goals can conflict.  

Beginning in 2010, Freddie Mac expanded its portfolio of a particular kind of mortgage-backed security known as an "inverse floater." The company offered investors a relatively safe bond with a floating interest rate. It then kept on its books what is called an "inverse floater," which pays out the highest returns if borrowers stay in their mortgages. When interest rates dropped (as they did during that period), Freddie Mac stood to profit on its inverse floaters, because the rates being paid by the pool of borrowers were higher than the prevailing market rates. Inverse floaters lose that advantage the more that homeowners in the pool refinance at the lower rates. 

The report says that Freddie's investment wing increased its holdings in inverse floaters merely because investors were demanding the floating rate bonds linked to them — not because of any strategy to exploit homeowners trapped in high-interest-rate mortgages.

Freddie Mac has an  "information wall" designed to separate the employees running Freddie Mac's investment strategy from those designing and carrying out its policies that impact the mortgage market, such as programs aimed at helping people refinance or making it more difficult for them to do so. The inspector general's report says that it found "no evidence" that the wall had been breached.

Yet, the inspector general noted that FHFA has not conducted any independent testing of Freddie's information wall. And the inspector general limited its own investigation of the wall to interviewing Freddie executives and FHFA officials and reviewing policy documents. The inspector general "did not independently evaluate the efficacy of Freddie Mac's information wall policy," the report states.

The report emphasizes that there are indeed "tensions between policies aimed at homeowners refinancing and Freddie Mac's retained investments." But it says that such tensions are not unique to inverse floaters but are "inherent throughout [Freddie and Fannie's] various business lines."

At the end of 2011, Freddie held about $5 billion worth of inverse floaters, according to the report, or less than one percent of its $653 billion investment portfolio.

The report also notes that the company hedges to balance its interest-rate risk, meaning that it places many different bets so that no matter whether interest rates rise or fall, its investments will be close to "net flat" — stay roughly the same, recording neither large profits nor large losses. Freddie does not try to balance the risk of each individual investment, but rather hedges "on its portfolio as a whole."   The report explains:

In the context of inverse floaters, although Freddie Mac may on the one hand benefit from a trend of low interest rates and reduced prepayments by homeowners, on the other hand, Freddie Mac's other investments may equally suffer from such a trend. Thus, the end result, if perfectly hedged on interest rates, is that Freddie Mac's overall position will remain the same regardless of prepayments.  

The inspector general did not independently evaluate Freddie's hedging strategies. When ProPublica and NPR first reported on these deals, it was unclear what kind of hedging, if any, Freddie Mac had performed.

The company is also supposed to be reducing its investment portfolio as part of the terms of its government bailout. In a footnote, the inspector general's report mentions that Freddie Mac told the Securities and Exchange Commission that selling the floating rate securities was a way to reduce its balance sheet. But most Freddie and FHFA officials interviewed by the inspector general said that reducing its balance sheet was not the motivation for Freddie to create inverse floaters, even if that was the result.

Separately, the way Freddie structured the inverse floaters leaves Freddie with nearly all of the risk of the assets that no longer show up on its balance sheet. The reason: As the guarantor of the mortgages that back the securities, Freddie is already on the hook if the homeowner defaults. With inverse floaters, it also retains the risks that homeowners might refinance and that overall interest rates might rise. Indeed, independent analysts told ProPublica and NPR in January that Freddie may actually have increased its risk, because inverse floaters are illiquid and hard to sell.

In its written response to the inspector general's report, the FHFA did not address Freddie Mac's statements to the SEC. When contacted by ProPublica, an FHFA spokesperson declined to comment.

The report said that FHFA issued misleading statements to the public on when it ordered Freddie to stop creating inverse floaters. According to the report, in the spring of 2011, the FHFA began a review of Freddie Mac's mortgage securities operation, in large part to determine whether the company held too many complex and risky mortgage products, including inverse floaters.

But an executive at Freddie didn't suspend inverse floaters and certain other complex securities deals until January 6, and FHFA didn't explicitly order Freddie Mac to stop selling inverse floaters until January 30, 2012, after ProPublica's story was published. In fact, according to the report, that day marked "the first time that FHFA's senior leadership met to discuss the Agency's position with respect to inverse floaters."

By then, however, Freddie had long since stopped selling floating rate securities — not because of any order from FHFA but because the market for them dried up in spring 2011 when Federal Reserve chairman Ben Bernanke indicated that interest rates would remain low for at least another year.

That's not how FHFA described what happened after our story broke. In a statement released in response to ProPublica and NPR's reports, the agency said that staff met with Freddie in December 2011 and came to an agreement then to suspend inverse floater trades. The inspector general's report concludes that statement was misleading: "prior to January 2012, neither Freddie Mac nor FHFA made a decision to halt Freddie Mac's creation and investment in inverse floaters; the market for reciprocal floating rate bonds simply disappeared. Had the market reappeared and Freddie Mac found the economics were again profitable, [Freddie] would have been free to structure floating-rate and inverse floating-rate investments."

In a response to the report, the FHFA disputed the inspector general's reading of the public statement, saying that it did not claim "that there was a specific, well-articulated FHFA policy and agreement" in December. The agency also emphasized that it did not take a position on inverse floaters only in reaction to media reports. While acknowledging that "the key stakeholders" had met together for the first time on January 30th, the day ProPublica and NPR released their original stories, the FHFA emphasizes that it had been in communication with Freddie on inverse floaters over the previous year.

The inspector general's report was requested by Senator Robert Menendez, D-NJ, last January, after our story brought the issue to light.

CBS Atlanta 46

Members of Occupy Our Homes Atlanta and demonstrators from across the region marched to Fannie Mae's regional office to demand that they help homeowners having difficulties making their monthly payments.

The Federal National Mortgage Association, commonly known as Fannie Mae, the nation's largest mortgage holder, and The Federal Home Loan Mortgage Corporation, Freddie Mac, the second-largest mortgage buyer, received nearly $200 billion in federal bailout money during the worst economic crisis since The Great Depression.

Protestors want the lending giants to loosen their purse strings and reduce the principal payments on mortgages for homeowners whose houses are underwater, allow people to rent their homes after foreclosure or sell foreclosed properties back to the occupants or non-profit developers.

Robert Anderson, a protestor whose home is underwater, meaning he owes more on his mortgage than what this home is worth, said he has tried to modify with Freddie Mac but with no luck.

"I want the investors to step down and talk to us," Anderson. "I've been going through anxiety."

Security officers stood between protestors and the Fannie Mae offices as demonstrators demanded officials come outside and take a letter requesting a meeting.

"They have the power to turn the key to economic recovery," said Tim Franzen, one of the protest organizers, who added that it is time for Fannie and Freddie to start giving back. "We're here to encourage them to turn the key, to stop holding our neighborhoods hostage."

Protesters were not permitted to speak to Fannie Mae officials, and even CBS asked a spokesman if a meeting would be possible. The spokesman said that he couldn't say for certain if there would be a meeting with the group, but added "we absolutely want to work with homeowners who are having difficulty making payments, who want to work with us to prevent foreclosure."

The spokesman also encouraged Fannie Mae mortgage holders who are experiencing difficulties to contact them for assistance.

If you have a mortgage with Fannie Mae and need help, call Fannie Mae at (866) 442-8573 or go to knowyouroptions.com.

Jennifer Britt of Detroit’s Rosedale Park is like thousands of homeowners pushed to foreclosure by economic disaster and personal loss. Financial difficulties occurred about 6 years ago when Jennifer's husband was killed by a drunk driver as he was crossing the street near his home. Jennifer assumed the moragage payments but the bank, Flagstar Bank, refused to negotiate the debt since the morgage was only in her husband's name. Jennifer exhausted her life savings and paid Flagstar more than $45,000 to keep her home after the death of her husband and the loss of her job, but Flagstar refused to modify the mortgage and foreclosed. Jennifer is working again, but Flagstar has sold the mortgage to Fannie Mae, with taxpayers footing the bill. Eviction is imminent.

Occupy will distribute flyers reminding festival goers that Flagstar is not a “community bank,” but is owned and controlled by Matlin Patterson of New York, a “Vulture Investor,” as Forbes Magazine describes it. Flagstar has confessed to mortgage fraud and has not paid back the taxpayer bailout it was gifted in 2009. It should take back the mortgage and modify the loan to keep Jennifer and her family in their home.

Evictions play a crucial role in the devastating visual landscape of Detroit's inner city. Vacant, crumbling structures destroy neighborhoods, property values plummet, neighboring homes are put at risk by the threat of arson and other criminal activity. Jennifer's story is not unique. Unfortunately, there are many Detroit residents facing home foreclosure and eviction.

[Via]

On Thursday, I posted about Lilly Washington, the woman who was visiting her son in a military hospital in Germany and returned to find her home had been foreclosed, and all her belongings sent to the city dump, including her son's Purple Heart. As part of the Home Defenders League launch, she hosted a barbecue at her home for 70 people, including her local City Council Member and news crews from four local TV stations. The above video is her local NBC affiliate coverage.

This is from Lilly's letter to HDL partner LUCHA in May 2012:

They took my home. Evicted me twice. Helped put me in the hospital six times. Threw everything I owned in the city dump. And when they sold my house out from under me back in 2010, I was in a military hospital in Germany, helping care for my son, who was in a coma from injuries suffered in combat in Afghanistan.

That’s crazy, right? But I never gave up. After Bank of America sold my home – I was already negotiating with them for a loan modification and they even told me that they would put the negotiations on hold while I cared for my son – I decided I wasn’t leaving and I reoccupied it.

The Home Defenders League fills in a lot of details here that weren't available in earlier reports:

Here’s what happened to Lilly when she came back from Afghanistan (her son, thankfully, emerged from his coma). She found a ‘for sale’ sign in the yard and a new lock on the front door. Her house had been completely emptied; the furniture acquired over years, the Purple Heart her son had earned when he was shot during an earlier tour in Iraq: all gone. Bank of America had illegally and fraudulently sold her house to Fannie Mae only days after she’d left the country. And, they’d thrown all of her belongings in the city dump.

So like David confronting impossible odds, she stood up and fought. She moved back in, fought the eviction in court, and replaced her furniture with donations from her church. When the Sheriff’s deputies came in January 2012 to evict her, Lilly won a stay of eviction. Then in April she found a judge who finally recognized that she had been robbed by Wall Street bankers and let her legally possess her home again.

The fight has cost her, though. Fighting the Sheriff’s deputies gave her a slipped disk. The stress caused her a heart attack. She’s gone to the hospital six times and is facing yet another surgery. She’s on disability. But she’s outraged that the banks can break the law, steal her house, throw away everything she’s ever owned, ruin her health without facing any consequences whatsoever. She’s headed back to court to force Bank of America and Fannie Mae to give her title to the house free and clear and make them pay damages.

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A Phoenix, Arizona woman is taking on two mortgage giants, Bank of America and Fannie Mae, and the case is making its way through federal court. Lilly Washington is representing herself, and seeking ownership of her home and compensation for belongings that were thrown out when her home was wrongfully foreclosed.

Washington was in the middle of a loan modification with Bank of America when her son who is in the military was wounded and sent to a hospital in Germany. She informed the bank that she needed to go be with her son, and BoA assured her in a letter that they were aware of her trip and: "will await your return so that we can finish the loan modification process." She thought everything would be fine until her return.

But just days after leaving, the bank foreclosed, and Fannie Mae took ownership of her home:

Via:

"Everything was empty. Everything. Upstairs, downstairs everything was empty," says Lilly Washington.

Washington was stunned when she returned home and found a "for sale" sign in her yard. She managed to get back into the home and immediately started making calls.

"I said 'where did you put my stuff from the house. Which storage.' They said, 'we don't put in storage, it is at the city dump.'"

Washington had just returned from visiting her wounded son in Germany. She was gone for a month and half. Her son's Purple Heart was thrown away too.

"I said, my gosh how can you take that. He is fighting for this country. And you steal from his home, everything," says Washington.

Washington's church helped her refurnish the home as she wasn't able to recover any of her belongings, and she has been fighting for two years now to regain ownership.

Update after the jump...

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Fannie Mae was repeatedly warned about mortgage and foreclosure fraud - years before their financial collapse - but did absolutely nothing to stop it.

Via:

Like most people, Nye Lavalle had little interest in the mortgage industry until things got personal. Raised in comfortable surroundings in Grosse Pointe, Mich., just outside Detroit, he began his business career in the 1970s, managing professional tennis players. In the 1980s, he ran SMG, a thriving consulting and research firm.

Then he tried to pay off a loan on a home his family had bought in Dallas in 1988. The balance was roughly $100,000, and the property was valued at about $175,000, Mr. Lavalle said. But when he combed through figures provided by his lender, Savings of America, he found substantial discrepancies in the accounting that had inflated his bill by $18,000. The loan servicer had repeatedly charged him late fees for payments he had made on time, as well as for unnecessary appraisals and force-placed hazard insurance, he said.

Mr. Lavalle refused to pay. The bank refused to bend. The balance rose as the bank tacked on lawyers’ fees and the loan was deemed delinquent. The fight continued after his mortgage was allegedly sold to EMC, a Bear Stearns unit.

Unlike most people, Mr. Lavalle had the time and money to fight. He persuaded his family to help him pay for a lawsuit against EMC and Bear Stearns. Seven years and a small fortune later, they lost the house in Dallas. Back then, judges weren’t as interested in mortgage practices as some are now, he said.
...
...Mr. Lavalle pointed out legal lapses by some of its representatives. Among them was the law offices of David J. Stern, in Plantation, Fla., which was handling an astonishing 75,000 foreclosure cases a year — more than 200 a day. In 2005, Mr. Lavalle warned Fannie Mae that some judges had ruled that the Stern firm was submitting “sham pleadings.” Nonetheless, Fannie continued to do business with the firm until it closed its doors last year, after evidence emerged of rampant forgeries and fraudulent filings.

O.C.J. Case No. 5595 found that Stern wasn’t the only firm working for Fannie that seemed to be cutting corners. It also found that lawyers operating in seven other states — Connecticut, Georgia, New York, Illinois, Louisiana, Kentucky and Ohio — had made false filings in connection with work for Fannie Mae or the Mortgage Electronic Registration System, or MERS, a private mortgage registry Fannie helped establish in 1995.

An attorney with Baker & Hostetler - a firm hired by Fannie Mae to investigate Mr. Lavelle's claims - Mark A. Cymrot, a partner who led the investigation disregarded Lavelle's warning that Fannie could stand to lose billions if misconduct by its lawyers and servicers led to substantial numbers of foreclosures needing to be undone.

The report simply concluded that not many people have the financial means to challenge a foreclosure, as Mr. Lavelle had, and that's where it ended. The mortgage giant counted on the average American being too broke to fight a foreclosure.

But one more shocking item from the report to note, "Mr. Lavalle warned Fannie years ago that MERS couldn’t legally foreclose because it didn’t actually own notes underlying properties." How's that for a kick in the pants from the mortgage giants that cost $150 billion of your hard-earned tax dollars?

Be sure to read the entire article at the New York Times.