How Allstate Used Sampling To Confirm JPMorgan/WaMu Lied About Virtually Everything When Selling Mortgages

Tyler Durden's picture

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Misean's picture

"What happens after the next crash is a different story."

Paper and cotton and CPU cycles cost more than a trillion Weimar Benny Bucks?

The Axe's picture

Banks don't have to tell you the truth!!!!  Wells fargo doesn't even have to tell the SEC why their CFO left.....ha ha 

Zero Govt's picture

the WS bwankers don't want the truth but matters not the sack of shit that is mortgages will come back to haunt them in non-stop legal cases from the investors they shafted, the State Law they pissed all over and the mortgage owners they tried to shaft with fraudulent documentation ... this shit stinks too much to cover up and will be the end of them a few years down the road be assured

Ponziconomy's picture

Manhattan: The GITMO of finance (without the fence).

 

Temporalist's picture

There is no fraud.  There is no inflation.  Gold is in a bubble.  Politicians are only concerned about their constituents.

USA 2.0

Maybe it's time to put Martha Stewart back in jail...

whisperin's picture

I know that folks from allstate are reading ZH. If you really are serious about gettinting your money back you need to read the piece that Matt Taibbi wrote and ask yourself who else would be vunerable. That is the federal officials and employees who are supposed to be investigating this stuff. If in the due course of your litigation you find that certain individuals of our fine federal/state entities failed to act or acted in such an aggregious manner as to subvert, hinder or help perpetuate a fraud then you need to sue them individually as well. I know that they are covered by federal tort protections. This does not extend to such actions. The only way the exec's stay out of jail is if the minions escape as well. So far it's been all gain and no pain for them as well. Just like Lloyd going to jail a minion who loses all will put a cold chill into regulator tailpipes. 

Tic tock's picture

Why cannot the President sue this case?

New_Meat's picture

He could, but that would call into question the unerlying "fairness" that the Community Reinvestment Act was intended to enforce.  Remember that Janet Reno and ACORN were picketing and threatening institutions that didn't issue mortgages.  Pressure got too much.  So the safety valve was to re-sell crap mortgages to an enhanced Fannie and Freddie, who did their new duty by scrapping all but the AAA brand to put on all of the critters who came through their pipe.  Fannie and Freddie had certain excellent political help, e.g. Rahm:

http://abcnews.go.com/Blotter/story?id=6201900&page=1 and

Raines made like almost $100MM, e.g.: http://www.seattlepi.com/business/204744_raines22.html

(We long suspected that Our Dear Governor Deval Patrick was angling for one of these sweet posts, but, well, the bottom fell out so he had to be Pluffe's trial run for the 'hopey-changey' thing.)

Did I mention that the AG is Eric Holder?

Horizon3's picture

Exactly the reason, mortgages should NOT be sold by the originating bank, the whole housing collapse debacle was caused by it.

Granted it was a device created to accomidate the stupid laws passed by Congress that basically made it mandatory to lend to anyone, irregardless of heir ability to repay.

In the "Good Old Days" banks and loan companies made a mortgage, and they held the paper untill it was paid off.

Another thing that led to it, was the propensity of fools paying $300k or more for a $80k house just because they wanted it more than some other dufus that was driving up the price, "Bidding War".

If Congress really wanted to stop this idotic mortgage trading scam, they could pass a bill that makes it illegal .. will they do it? probably not .. they will save that for a future "Look We Fixed What We Broke Moment".

topcallingtroll's picture

I WISH A SMART AMBITIOUS LAWYER WOULD READ THIS COMMENT.  THIS SHOULD BE EASY MONEY IF THE DATA CAN BE OBTAINED.  WE KNOW THE SEC WILL DO NOTHING ABOUT THIS.  THERE ARE OTHER AREAS WHERE THIS CAN BE APPLIED TO DETERMINE MISATTRIBUTED TRADES.

 

ANOVA is great because it also can give you the difference between the populations so that the damages are easily calculated as is shown in the tables as well as the possibility that chance alone gave the results.  A one percent chance that the data was random, versus a 99 percent chance that the data difference is a deliberate difference should be good enough for "proponderance of evidence."  In such a case your P <0.01

This same technique could be used by CALPERS on their lawsuit regarding best pricing of trades.  It can be used by anyone who wants to prove that credit card companies systematically gave the worst pricing in foreign exchange to credit card customers who used their cards overseas.  It can be used to determine any time traders systematically mis attribute trades or systematically give worse pricing to certain clients.

I am confident that if a smart lawyer took on the big banks and got the data for just a single day of foreign exchange transactions, that it would be apparent that credit card holders got the worst pricing all throughout the day.  This pads the premiums from flow trading and hedging.  If you were delta hedging and trading around an order book you would show excessive profits.  They would stick out like a sore thumb.  ANOVA would be able to show any systematic bias in how foreign exchange trades were attributed, or any systematic bias in hedging around order flow to goose the profits illegally by systematically giving worse pricing to some and better pricing to others.. 

Just get a quant and explain you want to break the daily trading data into several populations.  Large hedge fund traders, retail traders, proprietary traders, and then just grab the data for the trades done on a single day.  In determining if banks deliberately gave the worst pricing throughout the day to credit card foreign exchange transactions then divide the population into credit card foreign exchange transactions and non credit card foreign exchange transactions.  Better yet do a MANOVA a multivariate analysis of variance and break the data down into bank proprietary trading, large clients, etc, and you can see where the gains went that were cheated out of the credit card customers.  I hope I explained this well enough  Anybody is welcome to help clarify.

Agent P's picture

"I hope I explained this well enough  Anybody is welcome to help clarify"

Statistical significance, bitchez!

topcallingtroll's picture

I didn't get to work on a second draft before it locked, but this can be used for any trading where there is a systematic bias in how trades are attributed, otc derivatives, foreign exchange, retail stock trading, and if somebody would look at how hillary turned 1000 dollars into 100,000 dollars in a commodity account it would be clear the pattern of misrepresented trades, since it is doubtful this is the only time that particular broker did someone a favor.

Withdrawn Sanction's picture

The watermen of the Eastern Shore know a thing or 2 about blue crabs.  After the first crab you catch, when you place it in the bushel basket, you have to put the lid on the basekt, else it'll climb up the basket sides and escape.  But put the second crab in along w/the first and the lid need not be replaced.  Either crab, seeing the other trying to escape, will pull the potential escapee back down into the basket.

The key to the mortgage fraud is not to rely on inept or corrupt financial policemen to prosecute but rather to count on the self-interests of the wealthy investors who have been scammed or on those who no longer want to participate in the scam.  Thus, Allstate, the CFO of Wells, and others are the second and later crabs in the mortgage basket and they seem unlikely to allow the other crabs (JPM/BSC, BAC, etc.) to escape.

le_cinque's picture

This has seriously put doubts in my mind about the soundness of statistical analysis. I think it is voodoo science and should be banned.

BofA, I can see it, but JMP, come on, this cannot be true.

topcallingtroll's picture

if someone could convince you that there was a 99 percent chance that the differences in the actual loan components versus the represented loan components was a real difference and could not have been just random or accident, would that be enough evidence?  Remember in a civil judgment it is preponderance of the evidence, not reasonable doubt.

Lapri's picture

Why would Allstate think their certificates are actually backed by those mortgages?

Zero Govt's picture

Round up sub-prime pigs and take pigs ear (dodgy high risk mortgage)

'Transform' pigs ear into AAA-rated silk purse using CRA fraud factory

Sell AAA-rated silk purse to pension and sovereign funds

Usurp State Law using butchers factory called MERS

Pocket vast bonuses for selling pigs ears as silk purses

Short pigs ears and pocket additional pig swill bonuses 

When pigs ears (shit) hits the fan call fellow snorter buddies in Washington

Washington and Fed bails out and buys your steaming pig shit with US citizens money  

Increase Exec bonuses with taxpayer money, give speech at NY Uni on how 'astute' you are

Maintain pretence you're a genius, everyone else was born yesterday and Washington, The Fed and Regulators will continue to be so corrupt you'll be safe from criminal prosecution 

Dirtt's picture

A+

You might have added at the end confiscate retirement accounts in exchange for "universal" "healthcare."

Zero Govt's picture

ah yes the pensions industry, sure to become another 'hot topic' ...here in Europe you may have heard the Hungarian Govt tried to rob private pensions to bailout their own bankrupt public pensions, the French Govt robbed their own long-term pension savings to bailout short term social security bankruptcy while in Britain the Labour Party already raided private pensions 3 times turning a once decent industry into a shambles. Seems politicians, like bwankers, can't do their sums very well, ho hum! 

Thinking Bulldog's picture

This is by far the most cogent summary of subprime I have yet read.  Zero Gov't Score. Well played Sir.

whatz that smell's picture

god bless the bernank!- building a ponzi to heaven.

i heart you man! may your descendants ascend!

eatthebanksters's picture

The owners of the certificates have a much bigger problem based upon recent legal decisions...that is do they own the note (and have standing to foreclose).  I have been researching this heavily as my home is underwater and my loan is supposedly in a WAMU Certificate (I won't say which one).  The problem is there is no record of my note being properly assigned and in fact the the REMIC requirements may have been violated.  Then there are issues with the pooling and servicing agreement which have been found to be invalid in court.  This may not help me, but it certainly adds strength to the put back cases the investors are filing.  I'm happy to see our legal system working where our criminal prosecution and governmantal system has failed.

topcallingtroll's picture

In a recourse state it is possible this might get so snarled up in a few cases that they can't take the house to satisfy a default, but they could still go after you personally and any other assets you have.  That is a problem that people in recourse states haven't thought about. 

PulauHantu29's picture

"JPM lied about every mortgage..."

Do you see something wrong here? Is this unusual? I thought it is the "industry norm."

Ted K's picture

Surprised this didn't get more comments, this is outstanding data.  Great stuff Tyler & Company, please be persistent on this type stuff and keep it up.  Absolutely awesome.  You guys put WSJ to shame.  WSJ is a joke.