Mortgage lenders have become so risk-averse and sensitive to potentially punitive judicial or regulatory overkill that they’re demanding near-pristine credit histories and imposing their own credit overlays on top of existing underwriting standards that are already considerably tougher than they were during the years of the mortgage boom. And that’s unlikely to change and may in fact get worse unless federal policymakers make dramatic changes to the legislative and regulatory landscape. That was the main take-away that Paul Miller, managing director and group head of financial services research at...

MBS investors continue to sweat over the impact of the $25 billion multistate servicing settlement, especially regarding potential conflicts of interest when banks own a second mortgage while servicing a securitized first lien. “The minimum requirement is that every time you modify a first lien, you have to modify the second lien to the same degree, or you have to write off the second lien entirely,” explained Shaun Donovan, secretary of Housing and Urban Development, at a housing conference earlier this week. Donovan characterized the treatment of home-equity loans in the settlement as a positive...

There are additional signs of emerging investor interest – and perhaps more importantly, actual capital – for plowing into mortgage-related bonds, residential and commercial alike. Earlier this week, the Federal Reserve Bank of New York used a competitive process to sell off the remaining $6.0 billion of securities in the Maiden Lane II portfolio to Credit Suisse Securities. The New York Fed said the move will result in full repayment of the $19.5 billion loan it extended to ML II and generate a net gain for the U.S. taxpayer of about $2.8 billion, including $580 million in accrued interest on the loan...

Bank of America won a favorable ruling this week on its proposed $8.5 billion settlement with a group of non-agency mortgage-backed securities investors. With the settlement likely to be decided in state court, analysts suggest that the deal will serve as a model for other non-agency MBS disputes. Baupost Group, a distressed debt fund that has challenged the settlement under the name “Walnut Place,” succeeded in October in having the settlement moved to federal court. However, the Second Circuit Court of Appeals determined this week that the settlement should be overseen by the Manhattan State Supreme Court ...

Wells Fargo sucked up more than half of the correspondent business Bank of America left on the table after deciding to get out of the business of aggregating closed loans from correspondent lenders, according to an Inside Mortgage Trends analysis. Wells Fargo increased its sales of correspondent loans to Fannie Mae and Freddie Mac by $14.1 billion during the fourth quarter, slightly more than half of the total increase in correspondent deliveries to the government-sponsored enterprises. Wells increased its correspondent mortgage sales to the GSEs by 87.4 percent during the fourth quarter, while...

The departure of MetLife from the residential mortgage market in early January has been a boon for Caliber Funding, a national wholesale and retail mortgage lender looking to expand its presence in existing markets across the country and entering new markets. As MetLife exited, Caliber Funding quickly scooped up approximately 300 former retail loan officers in MetLife’s Home Loan division and announced the addition of four new regional markets. Combining MetLife’s former LOs with newly hired wholesale producers and support staff, the Dallas-based lender is set to enhance its presence in California, Arizona...

Citigroup, Inc. this week agreed to settle a civil fraud lawsuit with the Manhattan U.S. Attorney’s Office and the Department of Housing and Urban Development alleging reckless mortgage lending practices. The $158.3 million settlement was reached on Feb. 15, hours after Preet Bharara, the U.S. Attorney for the Southern District of New York, filed a civil fraud lawsuit against CitiMortgage, a subsidiary of Citibank. The suit sought treble damages and civil penalties under the Financial Institutions Reform, Recovery and Enforcement Act of 1989 and the False Claims Act, a federal Civil War-era statute Congress passed to ...

While the multistate servicing settlement reached by 49 states, federal officials and the nation’s five largest servicers gets the state and federal attorneys off the banks’ backs in regards to servicing and foreclosure, the banks are still wide open to servicing lawsuits from individuals, criminal charges and litigation over their securitization activities. “This is only one part of a long resolution process,” said Richard Andreano, practice leader of Ballard Spahr’s mortgage banking group. Despite complaints from a wide swath of consumer protection groups that the $25 billion in penalties to be...

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...

The boom in mortgage origination activity in the fourth quarter of 2011 carried mortgage banking profits to their highest level in nearly two years, according to a new Inside Mortgage Trends analysis of earnings reports from 22 companies. The group, which includes all the top originators and servicers, reported a combined $5.10 billion in mortgage banking income during the fourth quarter of 2011. That was up 20.0 percent from the previous three-month period and represented the most profitable quarter for the group since the first quarter of 2010. On a full-year basis, the results don’t...(Includes one data chart)