Manhattan District Attorney Cyrus Vance has charged Abacus Federal Savings Bank and a group of its former employees in a massive mortgage fraud scheme for allegedly originating and selling fraudulent mortgage loans to Fannie Mae over a five-year period. The Manhattan-based bank, which provides loans and other banking services in New York City’s Chinatown, as well as 19 former employees, were charged with residential mortgage fraud, securities fraud, grand larceny, conspiracy and falsifying business records. Eleven of the bank’s employees were indicted in state court two weeks ago, while eight waived indictment and admitted guilt, according to the DA’s 184-page indictment.

Mortgage companies reported strong gains in income from loan production and secondary marketing activity during the first quarter of 2012, according to a new Inside Mortgage Trends analysis of earnings reports filed by nine major lenders. Although the servicing business remained profitable during early 2012, income was down slightly from the fourth quarter of last year. All nine companies reported increased earnings on loan production and secondary marketing. As a group, they generated $4.84 billion in income from these activities, up 76.9 percent from...(Includes one data chart)

The FHA Mutual Mortgage Insurance Fund, which has been below the levels mandated by Congress for the past two years, appeared to come under more pressure in the first quarter of 2012. The Department of Housing and Urban Development reported that total capital resources available to the MMIF declined by $1.0 billion to $32.3 billion as of the end of March. Total MMIF capital has hit lower marks over the past two years – it fell to $31.6 billion in the first quarter of 2011 – but the fund’s total exposure has been climbing steadily. HUD reports the financial health of the MMIF only at the end of its fiscal year...

With an enormous volume of unresolved mortgage buyback demands continuing to hang menacingly over the industry’s head, vendor providers are hustling to develop viable solutions to help lenders get a handle on the risk and reduce their liability. The latest case in point is a new Quality Control Service for Correspondents from Melbourne, FL-based ISGN Corp., which provides end-to-end technology solutions and services to the U.S. mortgage industry. The company’s new offering is aimed at correspondent lenders with warehouse lines of credit, and it reviews and assesses all quality control points in...

A working paper authored by two Federal Reserve Bank of New York economists found that refinancing can be “fruitfully employed” as a tool for loss mitigation by investors and lenders. In their paper, “Payment Changes and Default Risk: The Impact of Refinancing on Expected Credit Losses,” Fed economists Joseph Tracy and Joshua Wright found that the relationship between borrowers’ monthly payments and future credit performance is important for the design of an initiative such as the Home Affordable Refinance Program. The authors used a competing risk model to estimate the sensitivity of default risk...

Is the end near for thrifts? Analysts at Keefe, Bruyette & Woods seem to think so. This week’s announcement by federal banking regulators of three proposed rules that would revise capital requirements may be the death blow to thrifts as we know them, said KBW equity analysts Frederick Cannon, Brian Kleinhanzl and Matthew Dinneen. The analysts contended that regulatory changes following the financial crisis and the announcement of new capital requirements have ended the viability of the thrift industry. Issued jointly by the Federal Reserve Board, the Federal Deposit Insurance Corp. and the Office of the...

Banks reported higher fair market values on their mortgage servicing rights assets during the first quarter of 2012, according to a new Inside Mortgage Trends analysis of call report data. Financial institutions filing bank call reports said they serviced $5.786 trillion of single-family mortgages for other investors – mostly through mortgage securitization activities – as of the end of March. They put a fair market value on these MSR assets of $48.69 billion, or 0.841 percent of the unpaid principal balance. At the end of December, the ratio of MSR fair value to mortgages...(Includes one data chart)

An ambitious public-private partnership hopes to harness the legal standing of the state and private money to solve the issue of negative equity by condemning underwater homes. Mortgage Resolution Partners is a San Francisco-based firm that works to, in words from its own website, “keep as many homeowners with underwater mortgages in their homes as possible, aiding in the stabilization of local housing markets and economies.” To create stability, however, Mortgage Resolution Partners intends to shake things up. According to a Reuters report, MRP proposes to partner with local governments and...

Since the start of conservatorship in 2008, government wards Fannie Mae and Freddie Mac have completed more than 2.3 million foreclosure prevention actions, according to the Federal Housing Finance Agency. These actions include 1.1 million permanent loan modifications. Nine months after modification, less than 15 percent of the loans modified in the second quarter of 2011 had missed two or more payments, while half of all borrowers who received loan mods in 1Q12 had their monthly payments reduced by more than 30 percent. Consumer credit performance deteriorated in May largely because of mortgages, according to...

The three federal banking agencies over the past week released proposed rules to implement the Basel III regulatory capital reforms and changes required by the Dodd-Frank Act that many observers predict will influence bank participation in the mortgage market. The proposed changes would increase bank capital requirements and re-calibrate risk-based capital charges. One of the key changes stemming from the Basel III accord reached by international bank regulators would limit the amount of mortgage servicing rights, along with investments in certain non-consolidated entities and deferred taxes, to no more...