A $95 million settlement with the nation’s four largest mortgage servicers – Bank of America, JP Morgan Chase, Wells Fargo and Citigroup – was announced last week by U.S. Attorney Bill Nettles of the District of South Carolina, the largest False Claims Act settlement in the history of the state, according to Justice Department officials. The settlement is part of the $25 billion global resolution announced in February between major banks and state attorneys general to settle claims of abusive mortgage practices, including robo-signing of foreclosures...

Mortgage lenders that provide sensitive, confidential or proprietary information to the Consumer Financial Protection Bureau will be able to breathe easier when doing so under a rule the bureau proposed last week that would codify protections for privileged information submitted to the agency by financial institutions. Early this year, the CFPB told institutions it supervises that submitting privileged information to the CFPB does not waive any applicable privilege with respect to third parties. The proposed rule, published in the March 15 Federal Register, is intended to provide ...

The emerging consensus among industry analysts and attorneys who are reviewing the finalized documentation of the $25 billion servicing settlement is that state and federal government law enforcement officials are just getting started in their efforts to hold the industry’s feet to the fire over flawed foreclosure practices. Last week, the Department of Justice finally made public the official complaint and consent judgments for the $25 billion servicing settlement that had been announced the month before, the details of which seem to be largely in line with expectations...

Origination of FHA-insured mortgage loans exceeding $417,000 were concentrated mostly in five states in 2011 even as jumbo loan production dropped further on both monthly and year-to-year bases, according to Inside FHA Lending’s analysis of the latest FHA data. California, New York, Virginia, New Jersey and Maryland accounted for 85.7 percent of the FHA jumbo market in 2011, with lenders reporting $18.2 billion in total originations, down 34.9 percent from 2010 and 2.5 percent from the third to the fourth quarter. California led all states in 2011 in FHA jumbo origination ($8.73 billion) and market share (48.0 percent). Production on a quarterly basis was ... [Two charts]

Failure by the five largest FHA mortgage servicers to establish effective controls and to comply with FHA foreclosure procedures resulted in improper servicing practices that may have exposed them to liability under the False Claims Act, the Department of Housing and Urban Development’s Office of the Inspector General concluded in separate, recently released audits. The HUD-OIG audits of the top five FHA servicers – Bank of America, Ally Financial, Wells Fargo, CitiMortgage and JPMorgan Chase – revealed a variety of questionable foreclosure practices involving the use of foreclosure “mills” and robo-signing of sworn documents in thousands of foreclosures throughout the country. The audits were ...

Flagstar Bank’s recent $133 million settlement with the Department of Justice to resolve fraudulent FHA lending practices could increase lender overlays on the FHA product, resulting in fewer borrowers being able to qualify for an FHA-insured loan, according to analysts. The Flagstar settlement, which came in the wake of the $25 billion national settlement between servicers and state and federal agencies, exacerbates the situation for lenders that already have previous concerns about the severity of FHA fines, including treble damages, for violations of FHA’s highly complex and technical rules, analysts said. Whatever relief FHA lenders may have drawn from the robo-signing settlement was ...

RPM Mortgage announced last week that it is offering jumbos with balances of up to $2.5 million for no-limit cash-out refinances or home purchase. Fully amortized and interest-only payment options are available. The lender said it will hold the loans in portfolio. “Between extremely low interest rates and smart prices for homes, either on the move-up market or creating liquidity for investment purposes, this product has the ability to serve both types of borrowers,” said Rob Hirt, CEO of RPM Mortgage. “This exclusive RPM product was eleven months in the making and is our contribution toward helping the real estate market to get back on its feet.” [Includes three briefs]

The Treasury Department announced last week that it will restore Home Affordable Modification Program incentive payments previously withheld from Bank of America and JPMorgan Chase. The move was prompted by the servicers agreeing to participate in the proposed $25.0 billion servicing settlement and not necessarily by improved HAMP performance. In fact, the consent judgments filed against BofA and Chase specifically cite deficiencies in the servicers’ HAMP performance. “The United States contends that it has certain civil claims based on conduct of the company and its affiliated entities in servicing of mortgage loans,” the complaint against each servicer states, later citing implementation of the Making Home Affordable Program and all of its components, among other deficiencies ...

The Securities and Exchange Commission this week filed a lawsuit against three former executives of Thornburg Mortgage regarding disclosure and accounting issues in early 2008. The former executives of the now bankrupt jumbo lender denied the charges and vowed to prevail in court. “Thornburg’s executives schemed to drop a disingenuous annual report into the public realm at the most opportune moment possible while knowing it was merely the calm before the next storm,” said Donald Hoerl, director of the SEC’s Denver regional office. Larry Goldstone and Clay Simmons, the former CEO and chief financial officer of Thornburg, respectively, countered that ...

The documents governing a proposed $25.0 billion settlement involving five major banks include greater incentives for principal reduction loan modifications on portfolio loans rather than loans in non-agency mortgage-backed securities. However, non-agency MBS investors remain concerned that they could take losses due to the settlement. The consent judgments against Ally Financial, Bank of America, Citigroup, JPMorgan Chase and Wells Fargo were filed in federal court this week, a month after the settlement was announced by 49 state attorneys general and the federal government ...