The Federal Housing Finance Agencys own data prove that reducing the principal owed on underwater Fannie Mae and Freddie Mac loans would actually save taxpayers money, contrary to the agencys position that writedowns are against taxpayer interests, according to House Democrats. In a letter last week to FHFA Acting Director Edward DeMarco, Reps. Elijah Cummings, D-MD, and John Tierney, D-MA, labeled the agencys report justifying its policy against principal reduction as seriously deficient and misleading. We understand that the FHFA is not part of the Obama administration, and that you do not take...
Industry insiders are cautiously expressing optimism about widespread reports that the Federal Housing Finance Agency is having second thoughts about implementing its proposed overhaul of mortgage servicing compensation in the face of massive lender pushback.Numerous published reports have fueled the industrys expectation that the FHFA is working to tactfully back away from proposed alternatives for a government-sponsored enterprise compensation model intended to benefit servicers, consumers and investors.The Finance Agencys September discussion paper set out two alternatives for changing the current 25 basis-point minimum fee compensation method for mortgage loan servicers. One alternative would reduce the minimum-servicing fee to as low as 12.5 bps payment with a 5 bps reserve fund, and the second alternative would institute a fee-for-service method whereby the loan servicer would be compensated with a flat fee per month for each performing loan they service.
The five large mortgage servicers that agreed to a $25 billion settlement with 49 state attorneys general this week have already established more than enough reserves to cover their costs, analysts say. Bank of America, Wells Fargo, JPMorgan Chase, Citigroup and Ally Financial agreed to pay $20.0 billion in financial relief to homeowners and $5.0 billion to federal and state governments, of which $1.5 billion will be used to compensate some borrowers who have gone through foreclosure. Both the Federal Reserve Board and the Office of the Comptroller of the Currency levied separate monetary penalties...
A number of small to mid-size mortgage firms appear to be taking a second look at holding onto their newly created mortgage servicing rights. There are a handful of forces at work driving this dynamic for smaller companies. First, some big servicers such as Bank of America are dumping their MSRs, in some cases because of the increasingly unattractive legal environment, while others are trying to align their portfolios for the upcoming Basel III capital framework or reacting to hedging strain in a low interest-rate environment. Additionally, the economics are developing in such a way as to encourage smaller...
One potential coup for the mortgage industry in the landmark multistate robosigning settlement announced this week is the detailed look at national servicing standards at a time when the states are racing to implement their separate foreclosure and servicing reforms. The terms for the $25 billion deal reached by 49 states, federal officials and the five major banks Bank of America, Wells Fargo, JPMorgan Chase, Citigroup and Ally Financial have yet to be released. However, one document that immediately made its way onto the settlements new website was an overview of the new servicing...
The mortgage settlement agreement between state and federal law enforcement agencies and the countrys five largest loan servicers will unleash a new foreclosure wave that will cause real estate-owned properties and distressed home sales to increase, according to market observers. Having the Federal Housing Finance Agencys REO Initiative ready will be useful when the foreclosure and REO tsunami comes rolling in, academics, economists and analysts agree. The number of properties classified by banks as real estate-owned, or REO, has declined over the past year. The reason: the robosigning scandals...
State attorneys general and federal officials this week announced a massive legal settlement with five major mortgage servicers, finally concluding a torturous 16-month-long negotiation. Some 49 states including New York, California and Florida agreed to the $25 billion settlement with JPMorgan Chase, Bank of America, Wells Fargo, Ally Bank and Citigroup. The agreement does not provide blanket immunity for the lenders, which can still face criminal charges and are subject to claims over securitization practices and claims brought by individual borrowers. The agreement is based on investigations by...
The New York Attorney General filed a lawsuit last Friday against Mortgage Electronic Registration Systems and three banks that own major stakes in it, another in a long line of legal assaults on MERS and its users. MERS members, including defendant servicers, have brought over 13,000 foreclosures against New York homeowners naming MERS as the plaintiff/foreclosing party, read the lawsuit. However, MERS often lacked standing to foreclose, and representations in court submissions that MERS owned and/or held the promissory note in such proceedings were often false and deceptive. The defendant...
The newly announced $25 billion settlement over foreclosure servicing practices is not expected to have much impact on MBS investors because most of the principal reductions that the five banks agreed to make will involve unsecuritized mortgages they hold in portfolio. The settlement involves all states except Oklahoma, two federal agencies and five major servicers, and requires the banks to work off up to $17 billion in principal reduction and other forms of loan modification relief nationwide, according to a summary of the agreement. Although the actual settlement had not been released as...
New York Attorney General Eric Schneiderman filed a lawsuit late last week against Bank of America, JPMorgan Chase and Wells Fargo, claiming that their use of MERSCorps Mortgage Electronic Registry System resulted in a wide range of deceptive and fraudulent foreclosure filings in New York state and federal courts, harming homeowners and undermining the integrity of the judicial foreclosure process. Among its specific accusations, the NY AGs office says that, out of the 13,000-plus foreclosure actions against New York homeowners in which MERS listed itself as the plaintiff, in many ...