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2. Monitor reports mortgage settlement violations

These days, The Walking Dead might be seen as a reality series in the private equity industry.

Prequin has coined the term, "zombie private equity funds," to refer to the growing numbers of funds run by general partners who are simply sitting on shares in more than 1,700 companies, with no signs that they would like to realize any gains or losses or that they would like to raise more funds. In the words of Preqin's Jessica Duong, "When there are no portfolio realizations, the dead will walk among us." Their research estimates that $116 billion in assets is trapped in such funds, which aren't completely dead in that they are still charging management fees, according to ValueWalk.

Unfortunately for limited partners, the fees outweigh the returns. Prequin found that "typically a zombie fund has not returned cash to its investors according to industry's standard. The survey analyzed funds managed with a 2001-2006 vintage, and found that while a 'living' private equity fund with a 2003 vintage had distributed 99 percent of paid-in capital to investors, the 'living-dead' funds had only distributed back 39 percent of capital."

The secondary market offers the best hope for reviving these funds quickly. More funds are sensing opportunity and are committed to buying whole portfolios from private equity firms, living or dead. There may be some bargains to be had if the sellers are suitably motivated.

For more:
- here's the article

Read more about: Zombie Private Equity Funds
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By Jim Kim

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3. Bank of America: Incompetent or evil?

Recall that the $26 billion national mortgage settlement---which was announced amid great fanfare in February 2012---was supposed to correct the nasty foreclosure policies of big banks. State attorneys general and federal regulators had figured out that the processes were way out of control and in sore need of some standards. Unfortunately, imposing order on that chaos has not been simple.

Indeed, a report by an independent monitor, appointed by a court, has found that Bank of America, Citigroup, JPMorgan Chase and Wells Fargo have "dragged their feet in processing homeowners' requests for lower monthly loan payments," according to the Washington Post.

"The deal was supposed to ensure that struggling homeowners would not have to endure the same miscommunication, delays and botched paperwork that was commonplace after the housing bust. But, according the monitor, some things haven't changed.

"Four out of five banks failed at least one of the 29 metrics the monitor used to measure their compliance with the 304 servicing standards outlined in the settlement."

The most common violation? Apparently, it was the failure to notify homeowners of any missing documents in their modification requests within five days of receipt.

There are two ways to spin all this, as I suggested elsewhere. The harsh view is that banks are deliberately frustrating customer attempts at modifications in order to push them into foreclosure and/or charge them various fees. The more benign view is that banks are so overwhelmed with requests and so poorly staffed that they simply can't process all the paperwork correctly.

Either way, the banks look bad. Very bad.

For more:
- here's the article

Read more about: National Mortgage Settlement
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By Jim Kim

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In the wake of the lawsuit against Bank of America for its dubious modification and foreclosures programs, one has to wonder: was the bank merely incompetent or was it affirmatively doing harm to its customers?

The testimony from former employees of the bank, all of whom were in the HAMP and foreclosure processing trenches, paints an ugly picture.

From a recap in Salon: "Employees, many of whom allege they were given no basic training on how to even use HAMP, were instructed to tell borrowers that documents were incomplete or missing when they were not, or that the file was "under review" when it hadn't been accessed in months. Former loan-level representative Simone Gordon says flat-out in her affidavit that 'we were told to lie to customers' about the receipt of documents and trial payments. She added that the bank would hold financial documents borrowers submitted for review for at least 30 days. 'Once thirty days passed, Bank of America would consider many of these documents to be 'stale' and the homeowner would have to re-apply for a modification,' Gordon writes."

Other employees testified in affidavits that they simply tossed out applications by the hundreds, even if the customer had successfully concluded a trial period, entitling them to a modification. The litany of abuses is rather lengthy.

So is this the artful work of plaintiffs' attorney and whistleblowers bent on making a buck? The bank says that the portrayal is inaccurate. Still, unless the employees are lying outright, the testimony is quite unnerving.

The process would appear quite broken, justifying the saber-rattling by attorneys general in Illinois, New York and Florida. Bank of America may be forced to argue that its modification efforts were simply incompetent rather than willful compliance violations and carefully structured attempts to gouge higher fees from customers.

For more:
- here's the article

Read more about: Bank of America, Hamp
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4. Carl Icahn now on Twitter

By Jim Kim

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5. Banks face upcoming stress tests

Forbes notes that Twitter has a new must-follow account for anyone interested in the wacky world of activist hedge fund investing. Carl Icahn, "the world's most active, activist investor is the latest billionaire to join the Twittersphere." His handle is @Carl_C_Icahn, and so far he has Tweeted just once. But it was memorable: "Twitter is great. I like it almost as much as I like Dell." He's not following anyone yet, but has amassed more than 2,000 followers.

Part of me wondered at first if this was one of those hoax accounts, which have proven so popular, but as of now people seem to think it is the real deal. It remains to be seen, however, if Icahn turns into a truly committed Tweeter.

This is not his first foray into social media. Recall that way back in 2008, Icahn was bent on becoming a blogger. He went so far as to launch The Icahn Report. He soon developed plans to turn the site into something much more ambitious. He even hired a journalist from Thomson Reuters, apparently aiming to add reportage to supplement his take on the world.

In the end, the experiment proved all too short-lived. The Icahn Report went dormant the next year, with the last entry posted on April 16, 2009.

We'll see if he intends to use his Twitter account actively over the long-term, something many would welcome, or if this is another short-term endeavor.

For more:
- here's the Forbes story

Read more about: Carl Icahn, Twitter
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By Jim Kim

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