State probe of forced mortgage insurance heats up

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A probe by New York State’s top financial services cop into possible fraud in the sale of pricey mortgage insurance is being stonewalled by a pair of Wall Street firms who refuse to turn over data, The Post has learned.

Ben Lawsky, the Superintendent of the state’s new Department of Financial Services, was rebuffed by Citigroup’s mortgage unit, Citimortgage, and insurance agent Assurant Inc. — both of which are maintaining that they don’t have to comply with the state requests, according to sources familiar with the situation.

Lawsky subpoenaed the two companies in an attempt to get information about their policies of assigning the costly mortgage insurance on certain home loans.

The so-called forced-insurance practices has become a major cause celebre for Lawsky, who issued more than 30 subpoenas to a number of insurance agents and mortgage subsidiaries of JPMorgan Chase, Morgan Stanley and Wells Fargo as far back as October.

At this point, Citigroup is claiming that the DFS does not have the authority to subpoena certain information from Citimortgage prior to the passage of Dodd-Frank, which went into effect on July 21.

“As Citimortage well knows, we are conducting a large-scale, intensive investigation into all aspects of the forced placed insurance industry. Citimortgage should immediately cooperate and desist in any efforts to thwart the scope of our investigation,” Lawsky said in a letter to Citi today, a copy of which was obtained by The Post.

In a letter to Assurant officials, Lawsky’s office accuses the insurance agent of destroying e-mails, despite receiving an Oct, 3 subpoena for documents.

Since being confirmed in May as the head of the newly-minted DFS, Lawksy has publicly announced that he is probing whether banks steered homeowners into such pricey insurance policies in exchange for kickbacks.

"Assurant respectfully disagrees with the New York Department of Financial Services position regarding the Company’s document retention practices," said an Assurant spokesman. "In an effort to address the Department’s concerns, however, while this matter is pending, we are modifying our records retention practices."

Officials at Citigroup were unable to comment. A spokesman for Lawsky’s office declined to comment.

During the mortgage crisis, forced-placed insurance became a hot industry as more and more homeowners were forced to pay high premiums imbedded in their mortgage payments originated by banks even as the housing market crashed and their houses plummeted in value.

Federal Home Loan Bank of New York Announces Fourth Quarter and Full-Year 2011 Operating Highlights

NEW YORK, Feb. 13, 2012 /PRNewswire via COMTEX/ -- The Federal Home Loan Bank of New York (the "Bank") today released its unaudited financial highlights for the quarter and year ended December 31, 2011.

In the fourth quarter of 2011, the Bank earned $84.5 million in net income, a decrease of $1.9 million, or 2.2 percent, from net income of $86.4 million for the fourth quarter of 2010. The Bank's net income for 2011 was $244.5 million, a decrease of $31.0 million, or 11.2 percent, from net income of $275.5 million for 2010.

"The Federal Home Loan Bank of New York had a solid 2011 as the Bank and our members continued to navigate through challenging markets to lay the groundwork for our nation's economic recovery," said Alfred A. DelliBovi, President and CEO of the Bank. "Amid prolonged volatility in both the global and domestic economies, the Home Loan Bank has remained a reliable and accessible source of funding for our members and the communities they serve. We have continued to provide a reasonable dividend to our members and fulfill the mission of our cooperative. Our region's strong community banks continue to make the responsible and suitable loans that will build our nation's recovery from the local level, and we are proud to partner with them to strengthen cities and towns across New Jersey, New York, Puerto Rico and the U.S. Virgin Islands."

As of December 31, 2011, total assets were $97.7 billion, a decrease of $2.5 billion, or 2.5 percent, from total assets of $100.2 billion as of December 31, 2010. The decrease in total assets was the result of a decline in advances during the period. As of December 31, 2011, advances were $70.9 billion, a decrease of $10.3 billion, or 12.7 percent, from $81.2 billion as of December 31, 2010. This decrease in member demand for advances was driven by economic factors such as continued growth in members' deposit bases and the availability of other liquidity options.

As of December 31, 2011, total capital was $5.0 billion, a decrease of $98 million, or 1.9 percent, from $5.1 billion as of December 31, 2010. The Bank's unrestricted retained earnings increased during 2011 by $10 million to $722 million as of December 31, 2011. At December 31, 2011, the Bank met its regulatory capital-to-assets ratios and liquidity requirements.

The Bank set aside $27.4 million for the Affordable Housing Program for the year ended December 31, 2011, a decrease of $3.7 million, or 11.6 percent, from $31.1 million for the year ended December 31, 2010.

The Bank will publish its 2011 audited financial results in its Form 10-K filing with the Securities and Exchange Commission, which is expected to be filed by March 30, 2012.

About the Federal Home Loan Bank of New YorkThe Federal Home Loan Bank of New York is a Congressionally chartered, wholesale Bank. It is part of the Federal Home Loan Bank System, a national wholesale banking network of 12 regional, stockholder-owned banks. The FHLB of New York currently serves over 330 financial institutions in New Jersey, New York, Puerto Rico, and the U.S. Virgin Islands. The mission of the Federal Home Loan Banks is to support the efforts of local members to help provide financing for America's homebuyers.

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995This report contains forward-looking statements within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. These statements are based upon our current expectations and speak only as of the date hereof. These statements may use forward-looking terms, such as "projected," "expects," "may," or their negatives or other variations on these terms. The Bank cautions that, by their nature, forward-looking statements involve risk or uncertainty and that actual results could differ materially from those expressed or implied in these forward-looking statements or could affect the extent to which a particular objective, projection, estimate, or prediction is realized. These forward-looking statements involve risks and uncertainties including, but not limited to, regulatory and accounting rule adjustments or requirements, changes in interest rates, changes in projected business volumes, changes in prepayment speeds on mortgage assets, the cost of our funding, changes in our membership profile, the withdrawal of one or more large members, competitive pressures, shifts in demand for our products, and general economic conditions. We undertake no obligation to revise or update publicly any forward-looking statements for any reason.