by Ryan Smith | Aug 07, 2014
Bank of America’s board of directors support a proposed settlement of more than $16 billion to end government probes into its sale of toxic mortgage-backed securities. The settlement will be the largest federal settlement with a single corporation in U.S. history.
The bank’s directors have okayed the broad strokes of the settlement, according to a CNBC report. Fine details are expected to be decided upon in the next few days. The final deal will most likely include $9 billion in cash penalties and between $7 billion and $8 billion in consumer relief, CNBC reported.
The settlement comes after months of contentious talks between Bank of America and the government. The bank initially suggested a settlement of around $13 billion, while the Justice Department insisted on $17 billion and refused to budge. Last month, Attorney General Eric Holder snubbed BOA head Brian Moynihan when the latter asked to meet. Holder said the talks hadn’t progressed far enough to make meeting worthwhile.
The bank, which had the biggest legal exposure to fraud claims over mortgage-backed securities in the wake of the financial crisis, has already agreed to pay $60 billion to settle numerous other claims of fraudulent sales of mortgage-backed securities, CNBC reported.
If the settlement is finalized, it will break the previous record of $13 billion, set when JPMorgan settled with the government last year over its sale of shoddy mortgage bonds..
July 28, 2014
By Mortgage Daily staff
Monthly government-insured mortgage originations moved up but could retreat based on new applications. Delinquency on government home loans worsened.
May 2014 saw 68,040 residential loans endorsed by the Federal Housing Administration for $11.687 billion, monthly operational data from the agency indicated.
Business was minimally better than a month earlier, when endorsements totaled 66,108 loans for $11.400 billion.
But FHA business was just a shadow of the 129,788 mortgages endorsed for $21.937 billion in the same month during 2013.—–More than 50% down
From Jan. 1 through May 31, endorsements amounted to 314,537 loans for $55.331 billion, while activity since FHA started its fiscal-year 2014 on Oct. 1, 2013, totaled 537,556 loans for $94.536 billion.
May 2014 activity included 62,959 single-family loans for $10.542 billion, 4,493 home-equity conversion mortgages for $1.134 billion and 588 Title I loans for $0.011 billion.
Upcoming business appears poised for a drop based on new single-family and HECM applications, which fell to 105.300 from 109,499 in April.
As of May 31, FHA had insurance in force on 8,477,648 loans for $1.2405 trillion.
Outstandings were 8,479,954 loans for $1.2418 trillion at the end of April and 8,454,988 loans for $1.2408 trillion at the same point during 2013.
The most recent balance reflected 7.8 million single-family loans for $1.091 trillion, 0.6 million HECMs for $0.1489 trillion and fewer than 0.1 million Title I loans for $0.001 trillion.
Thirty-day delinquency, including loans in foreclosure and bankruptcy, was 12.92 percent, worsening from 12.79 percent as of April 30..
July 26, 2014
By Mortgage Daily staff
SunTrust Banks Inc., its banking subsidiary and its mortgage unit have agreed to a $160 million penalty in conjunction with a previously issued consent order tied to its servicing practices.
The Atlanta-based company was among several large mortgage servicers that were hit with consent orders in April 2011 from banking regulators.
The consent orders were the result of shoddy handling of foreclosures and loan modifications and required the servicers to correct deficiencies outlined in the Interagency Review of Foreclosure Policies and Practices.
On Friday, the Federal Reserve Board issued a consent assessment order against SunTrust, SunTrust Bank and SunTrust Mortgage Inc.
Included in the order is a civil money penalty in the amount of $160,000,000.
“Except as provided for in this consent assessment order, the Board of Governors hereby releases and discharges SunTrust, the bank, SunTrust Mortgage, and their affiliates, successors, and assigns from all potential liability that has been or might have been asserted by the Board of Governors based on the conduct that is the subject of this consent assessment order, to the extent known to the Board of Governors as of the effective date of this consent assessment order,” the order stated. “The foregoing release and discharge shall not preclude or affect any right of the Board of Governors to determine and ensure compliance with the consent order or this consent assessment order, or any proceedings brought by the Board of Governors to enforce the terms of the consent order or this consent assessment order.”
As part of the order, SunTrust waives its rights to a hearing for the purpose of taking evidence on any matters set forth in the order, a judicial review of the order and any challenge to the validity or enforceability of the order.
SunTrust agreed to a $968 million settlement with the U.S. Department of Justice on June 17 to resolve False Claims Act liability for alleged abuses in its servicing, foreclosure processing and Federal Housing Administration lending.
Another $320 million settlement reached this month with the Justice Department resolved a criminal investigation into claims over its administration of the Home Affordable Modification Program..
Author: Derek Templeton July 22, 2014
In accordance with the terms of its settlement with the government, JPMorgan has begun the process of providing debt forgiveness and other mortgage relief to struggling homeowners.
Joseph A. Smith Jr., who received a joint appointment from the bank and the government to monitor compliance with the terms of the agreement released his initial report Tuesday outlining the first steps taken in what will be a long process of the bank disbursing $4 billion in loan aid.
Under the terms of the agreement struck in 2013, the bank obtains credit for relief that it provides in four major categories: modification, rate reduction/refinancing, low income and disaster area lending, and anti-blight lending.
Some categories are worth more to the settlement than others so the credit given is not dollar for dollar. The report asserted that the bank has amassed $6.3 million in credit so far.
To get the credit, JPMorgan submitted 100 loans for review. Much more is still to come. Smith characterized the first steps as a “dry run”.
The bank has until 2017 to fulfill the requirements under the settlement and Mr. Smith maintains that there is not yet enough information to determine whether the bank is on schedule to complete them on time. A more thorough report is due out later this year.
The settlement was negotiated through the Residential Mortgage-Backed Securities Working Group, a joint state and federal unit formed in 2012 by President Obama to investigate wrongdoing within the mortgage-backed securities market that helped to trigger, contribute to, or exacerbate the U.S. financial crisis.
The settlement requires the bank to submit quarterly reports that include a limited random sample of loans as test cases for Mr. Smith to make the determination of whether they are living up to their obligations..
A major mortgage servicing company has been ordered to pay a California man more than $16 million in a mortgage modification fraud case.
A Yuba County, Calif., jury awarded Phillip Linza $513,902 in compensatory damages and $15.7 million in punitive damages in the case, which dates to 2010, according to a News 10 ABC report.
Linza said that in 2010, he reached out to PHH for a loan modification, and the company agreed to reduce his payment from $2,100 per month to just over $1,500.
“I made the payments for months,” Linza told News 10. “Then I get a letter in the mail that says, ‘Oops, we made a mistake. Your payments aren’t $1,530, they’re $2,300.”
“They jacked it up, never explained why,” Linza’s attorney, Andre Chernay, told News 10. “They sent another letter demanding $7,000, never explained why.”
Linza testified in court that he made every effort to straighten things out, but only got a substantive response when he threatened to sue the company.
Linza said PHH told him, “’We’re a multibillion-dollar company. Stand in line because we’ve got a busload of attorneys that are on retainers.’”
Those attorneys didn’t end up doing the company much good. The judgment is one of the largest of its kind ever awarded in California, according to News 10.
Linza told News 10 that the verdict sends a message to the mortgage servicing industry.
“You people have been taking advantage of enough people and the country’s tired of it,” he said. “I mean, society’s tired of it.”
PHH is no stranger to legal woes. In January, the company was accused of orchestrating a massive kickback scheme. The company is also being investigated by the US Attorney’s Office for allegedly overcharging the government for foreclosure expenses on federally backed mortgages.
The U.S. economy added 288,000 jobs in June, but this latest federal jobs report also contains a less widely reported fact: These job gains came from a surge in part-time jobs, which are unlikely to boost mortgage originations and drive home sales.
The added jobs — an average of 272,000 over the last three months according to the latest upwardly revised numbers from the U.S. Department of Labor — are not the type of high-paying, stable positions needed to support the housing recovery, according to analysts.
“The jobs report was really anything but rosy,” Anthony Sanders, a finance professor at George Mason University, told Scotsman Guide News on Monday. “We actually had shrinkage of full-time jobs. From a mortgage-origination standpoint that was very bad news. You really can’t have a ramp up in mortgage originations when it is all part-time jobs being created.”
The U.S. economy saw a net decline of 523,000 in full-time jobs in June while part-time jobs as defined by 34 hours or less surged by 799,000, according to Department of Labor statistics. Sanders said June’s employment numbers continued a trend of the economy adding mostly lower-wage jobs.
Sanders said that incomes have “flatlined.” Average hourly wages have increased at around 2 percent, roughly the rate of inflation, he said.
“It is better than no jobs being added but the fact of the matter is that it was a lot of low-wage, part-time jobs. We are still seeing this big surge in [such jobs as] bartenders, wait staff at restaurants and clerical jobs,” Sanders said. “We are not seeing the growth in the high-end numbers, which is what you need to see to have some sort of economic recovery.”.
SunTrust Mortgage has agreed to a $320 million settlement with the Justice Department that resolves a criminal investigation of the lender’s administration of the Home Affordable Modification Program.
The DOJ alleged that SunTrust misled mortgage servicing customers looking for mortgage modifications through HAMP. “Specifically, SunTrust made material misrepresentations and ommissions to borrowers in HAMP solicitations, and failed to process HAMP applications in a timely fashion,” the DOJ said in a release. “As a result of SunTrust’s mismanagement of HAMP, thousands of homeowners who applied for a HAMP modification with SunTrust suffered serious financial harms.”
“Instead of helping distressed homeowners, SunTrust’s mismanagement drove up foreclosures, decimated individual credit and increased costs for hardworking men and women across our nation,” said Attorney General Eric Holder. “This resolution will provide much-needed restitution for victims. It will make available substantial funds to help other homeowners avoid foreclosure. And it will result in the kinds of systemic changes needed to ensure that this will not happen again. This outcome demonstrates yet again that the Justice Department will never waver in its ongoing pursuit of those whose reckless and willful actions harm the American people and undermine our financial markets.”
As part of the settlement, SunTrust will pay $179 million in restitution to compensate borrowers. The money will be distributed to borrowers in eight pre-determined categories. If more is needed, the bank will also guarantee an additional $95 million. SunTrust will also pay $10 million directly to Fannie Mae and Freddie Mac.
Additionally, the lender will pay $16 million in forfeiture and $20 million to establish a fund for organizations that provide counseling to distressed homeowners..
The Obama administration’s Making Home Affordable initiative is being extended. In addition, the administration is taking steps to reignite non-agency securitizations.
The Homeowner Affordability and Stability Plan was unveiled in early 2009 by the U.S. Department of the Treasury.
Part of the plan was the Making Home Affordable initiative that includes government-subsidized loan modifications and refinances.
Through the Home Affordable Modification Program, servicers have permanently modified 1,364,674 mortgages as of April 30.
The Home Affordable Refinance Program has enabled 3,154,578 borrowers — including many who are in a negative equity position — to refinance as of the end of April.
Both HAMP and HARP were originally scheduled to end last year. But HARP was subsequently extended until the end of 2015, while HAMP was extended until the end of this year.
On Thursday, a joint announcement from the Department of Housing and Urban Development and the Treasury Department indicated that the Making Home Affordable initiative will be extended until at least Dec. 31, 2016.
The statement also indicated that HUD and the Treasury Department are partnering to support a multifamily mortgage risk-sharing program.
“With the new HUD-Treasury partnership, the Federal Financing Bank will use its authority to finance FHA-insured mortgages that support the construction and preservation of rental housing,” the statement said. “The first partnership — announced today — with the New York City Housing Development Corp. will help restore affordable rental housing damaged by Superstorm Sandy in Far Rockaway, Queens.”
The announcement additionally highlighted how many of the largest investors have not returned to the private-label mortgage-backed securities market. The lack of a vibrant PLS market has limited home buyers to agency loans..
Massachusetts Attorney General Martha Coakley alleged that Ocwen failed to send state-mandated notices to homeowners in default and failed to execute proper mortgage assignments. An Ocwen-owned company, Litton Home Servicing Limited Partnership, is also alleged to have initiated foreclosures on homes to which it did not hold mortgages.
“Massachusetts homeowners faced unnecessary challenges due to these companies’ failure to provide proper notices and by initiating illegal foreclosures,” Coakley said. “This agreement provides for direct relief for affected borrowers and requires that Ocwen undertake efforts to repair problem titles in the Commonwealth.”
Under the settlement, the state of Massachusetts will be paid $700,000, while $3 million will be paid to homeowners.
The latest settlement is small potatoes compared to Ocwen’s other legal troubles. Plagued with allegations that it has mishandled its customers’ loans, the company is currently the subject of a class-action lawsuit and is being investigated by the state of New York for alleged servicing violations. In December, Ocwen reached a settlement with the Consumer Financial Protection Bureau in which it agreed to provide $2 billion in consumer relief after a CFPB probe found that the company “took advantage of borrowers at every stage of the process.”
by Charles Hugh Smith • June 11, 2014
The middle class happily accepts high risk in return for temporary gains in the asset bubble of the day, guaranteeing a steady progression of losses.
It’s well known that a major reason why the middle class is in decline is the stagnation of wages, a topic I have covered many times, most recently in What’s the Source of Soaring Corporate Profits? Stagnant Wages.
But another often overlooked source of middle class decline is the erosion of middle class wealth. The dynamic behind this long-term trend was indirectly described in The Stock Market Is Like a Fish Tank: the middle class is the majority of fish in the wealth tank that arrive after the gains have been reaped.
In effect, the few who skim most of the financial gain need the middle class to pony up the liquidity and wealth to be skimmed.
In terms of risk, the middle class is always late to the asset class feeding frenzy, meaning that the middle class invests its capital when the opportunities for outsized gains is long-gone and the risk of loss has risen to levels that guarantee declines.
Moving with the majority offers an illusion of low risk. Following the crowd into real estate, tech stocks, tulips, etc. seems like a safe bet because “everybody’s making money,” but like the fish in the pond, what the middle class is seeing is not “everybody making money” but the relative few who invested early making money and selling to the middle class to reap their outsized gains.
The illusory safety of following the crowd feeds the wealth-destroying dynamic of taking on high risk for either zero gains or huge losses once the asset bubble du jour pops.
The 10 million homeowners who are still underwater (their mortgage debt exceeds the value of their home once selling transaction commissions and fees are subtracted) provide an example of this dynamic. Despite the inflation of an echo-housing bubble (a second bubble in housing valuations, driven by cash buyers), around 25% of all homeowners have no home equity or too little home equity to buy another house should they sell their current home.
Another significant percentage of middle-class homeowners is trapped in their current house by the enormity of their debt and their stagnant income: they no longer qualify for a mortgage or refinance.
There are now three asset bubbles to choose from: housing, stocks and bonds. In each asset class, the majority is convinced that there can only be further gains from here. Risk is seen as low and complacency is high, the classic signs that the outsized gains have already been reaped and all that’s left in the tank to divvy up are the risks and losses.
No wonder the wealth of the middle class keeps declining: every temporary gain from joining the investing feeding frenzy sets up staggering losses when the bubble du jour pops and there’s nobody left to sell to.
Meanwhile, those who bought early have long since sold out and are now buying outlier assets that are viewed as “risky” by the majority who happily accept high risk in return for temporary gains in the asset bubble of the day, guaranteeing a steady progression of losses and an erosion of real wealth.