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30 DEPARTMENT OF JUSTICE MAY SEEK CRIMINAL CHARGES AGAINST RBS, CHASE EXECS e U.S. may be following through on promise made a few months ago to target individual executives from the Royal Bank Scotland (RBS) and JPMorgan Chase for their alleged criminal role in financial crisis. In September, the Department of Justice (DOJ) issued a memo to all U.S. state attorneys general stating that it will pursue the prosecution of individuals whose actions brought on the Great Recession of seven years ago. Deputy attorney general Sally Q. Yates stated in the memo that, "One of the most effective ways to combat corporate misconduct is by seeking accountability from the individuals who perpetuated the wrongdoing. Such accountability is important for several reasons: it deters future illegal activity, it incentivizes changes in corporate behavior, it ensures that the proper parties are held responsible for their actions, and it promotes the public's confidence in our justice system." e DOJ is reportedly standing by its word and pursuing criminal cases against executives at these two banking institutions for allegedly selling flawed mortgage securities after being warned by associates of their wrongdoings. e Wall Street Journal (WSJ) reported that government officials are placing the case that bankers "ignored warnings from associates that they were packaging too many shaky mortgages into investment offerings and are weighing whether they can prove that constituted fraud," the WSJ noted that people familiar with the criminal probe said. A $2.2 billion deal in which RBS repackaged home mortgages into bonds back in 2007 is being scrutinized by prosecutors, the Wall Street Journal reported. e SEC noted in a 2013 settlement with RBS that the lead banker on that transaction (whom it didn't name) was trying to push the deal despite concerns of the bank's diligence department. Prosecutors are focusing on two individuals at JPMorgan who worked on a different residential mortgage- backed securities transaction. According to the Wall Street Journal, these two probes are the most concrete criminal investigations the DOJ is currently conducting regarding the financial crisis. ough some DOJ officials said they believe they have a viable case in the RBS probe, a decision on whether or not charges will be brought is not expected until early next year, according to the report. Chris J. Turner, head of media relations at RBS, declined to comment on the matter. J.P. Morgan's Andrew S. Gray also declined to comment beyond their 10Q filing, which revealed the existence of a criminal investigation. Rebecca Mairone, former COO of one of Bank of America's Countrywide lending divisions, has been the only person to date that was charged with civil fraud for high-risk mortgages originated by Countrywide through a program known as High Speed Swim Lane (HSSL, or Hustle) and then sold off to Fannie Mae and Freddie Mac. Bank of America was also found liable on one charge of fraud in the civil case. Mairone has appealed the charges against her. Since the crisis, the Department has settled with several large banks, including JPMorgan Chase (a then-record $13 billion in November 2013), Citi ($7 billion in July 2014), and Bank of America (a record $16.65 billion in August 2014) for selling toxic-mortgage backed securities to investors in the run-up to the crisis. "Once again, the Obama Administration is proving that it is more interested in re-litigating issues related to the near decade old financial crisis versus pursuing programs that reduce urban blight and educate future homebuyers," Five Star Institute President & CEO Ed Delgado said. "is move reeks of politically driven scapegoating, geared more towards feigning toughness on the banking industry than the pursuit of justice." Delgado continued, "Despite hundreds of billions paid in fines and penalties, the threats to our industry now turn personal. e Administration has moved on from threatening large, faceless organizations to launching personal attacks. No other industry in the history of our great nation has sustained this level of relentless persecution." Editor's note: e Five Star Institute is the parent company of DS News and DSNews.com. CITIGROUP PLANS TO ISSUE $421 MILLION SECURITIZATION BUNDLE Citigroup is planning to issue a securitized bundle of reperforming residential mortgage loans totaling close to half a billion dollars from its Citigroup Mortgage Loan Trust (CMLT), according to credit ratings agency DBRS. is bundle of loans, CMLT 2015-PS1, is the third securitization issued by Citigroup in 2015 and comes with an unpaid principal balance (UPB) of $421 million. While the first two included loans that had previously been modified or were in foreclosure, the latest securitization includes only loans that are reperforming, meaning they were seriously delinquent (90 days or more overdue) at one point but then payments were resumed by the borrower (although the payments that were missed may or may not have been made up). e notes in the securitization have been place in two groups—one featuring adjustable- rate mortgages and one featuring fixed-rate. e first group includes 646 ARM loans with a UPB of $197.4 million that are due in 2048, and the second group includes 1,104 fixed-rate loans with a UPB of $236.6 million that are due in 2042. e loans backing the two groups in CMLT 2015-PS1 are all 100 percent current, and most of them have been current for the past 36 months. None of them have been delinquent in the past 24 months, and none of them have ever been in foreclosure or have been modified. When contacted by DS News, a Citigroup spokesman had no comment on the securitization being issued. Citigroup reported in mid-October that its Citi Holdings segment reported e decline in net income of 81 percent from Q2 to Q 3, from $212 million to $31 million. Citi Holdings also reported a decline in net credit losses of 46 percent down to $218 million, reflecting "continued improvement in the North America mortgage portfolio as well as the impact of divestiture activity." The number of bankruptcy filings nationwide in October 2015, almost half of the October peak total of 133,507 reached in October 2010. Source: AACER bankruptcy data reported by Epiq Systems. STAT INSIGHT 70,211

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