Bank of America and the Department of Justice recently agreed to the largest residential fair lending settlement in history – for $335 million. The DOJ claimed that Countrywide Financial allowed pricing discrimination against minority borrowers as well as unchecked steering to subprime loans. The settlement, which is subject to court approval, will mark the first time that the DOJ has obtained relief for borrowers who were steered into loans based on race or national origin. The DOJ said the practice “systematically placed borrowers of color into subprime mortgage loan products while placing non-Hispanic white borrowers with similar creditworthiness in prime loans.” ...

The government-sponsored enterprises’ increased subprime activity in the mid-part of the last decade was driven by compensation incentives for former executives, the Securities and Exchange Commission claims. The allegations were included in recent lawsuits filed by the SEC regarding Fannie Mae’s and Freddie Mac’s disclosure of non-prime activity. In December, the SEC filed securities fraud lawsuits against six former GSE executives. The SEC claims the executives – including former Fannie CEO Daniel Mudd and former Freddie CEO Richard Syron – knew of and approved misleading statements in 2007 and 2008 claiming that the companies had minimal holdings of higher-risk mortgages. ...

There’s a very good chance the final disposition of securities fraud charges leveled by the Securities and Exchange Commission against six former Fannie Mae and Freddie Mac top executives could be determined at trial rather than by a pre-trial settlement, thanks in part to a recent adverse SEC court decision, according to one legal expert. On Dec. 16, the SEC filed suit in the U.S. District Court for the Southern District of New York, alleging that former Fannie and Freddie executives made material misstatements to the public, investors and the media about the two government-sponsored...

Bank of America reached a landmark $335 million agreement with the Department of Justice to settle allegations that Countrywide systematically discriminated against African-American and Hispanic borrowers during the housing boom, manipulating them into taking subprime loans when they were qualified for prime financing. It’s the largest settlement ever for a residential fair lending claim. The case also marks the first time the Justice Department has alleged and obtained relief for borrowers who were steered into mortgages on the basis of their race or national origin, a practice that placed...

The outcome of the securities fraud case leveled against six former top executives of Fannie Mae and Freddie Mac could hinge on what exactly is considered a subprime loan. At least one defendant is prepared to argue that there is no standard definition.In fact, the GSEs appear to still be reporting their subprime and Alt A exposure in much the same way they did in the period covered by the Securities and Exchange Commission lawsuits.Late last week, the SEC pulled the trigger on its three-year investigation of claims that the two GSEs failed to disclose to investors the companies’ exposure to subprime mortgages prior to the 2008 housing market crash.

California Attorney General Kamala Harris filed suit this week against Fannie Mae and Freddie Mac, taking up a notch her probe of the two GSEs’ mortgage lending and foreclosure practices.The lawsuits, filed in California Superior Court in San Francisco, seek to compel the companies to turn over documents the AG’s office had sought through a subpoena served to the two companies on Nov. 15.The Federal Housing Finance Agency directed Fannie and Freddie not to respond to the subpoenas.The subpoenas sought information about how Fannie and Freddie are handling thousands of foreclosed properties, as well as details about the GSEs’ mortgage-servicing and home-repossession practices.

The U.S. Solicitor General and a group of state attorneys general filed pro-borrower briefs in Freeman v. Quicken Loans, a case in which the U.S. Supreme Court will decide whether a plaintiff has to prove that an unearned fee for a real estate settlement service was divided between two or more persons.The court’s ruling is expected to determine the ability of the mortgage lending industry to decide on its own what to charge borrowers at the point of origination.At issue is Section 8(b) of the Real Estate Settlement Procedures Act, 12 U.S.C. §2607(b), which states that no person “shall give and no person shall accept any portion, split or percentage of any charge made or received for the rendering of a real estate settlement service in connection with a transaction involving a federally related mortgage loan other than for services actually performed.”

The Supreme Court of the United States considered oral arguments recently in its second high-profile case this session that addresses key issues under the Real Estate Settlement Procedures Act.The case is First American Financial v. Edwards, in which the fundamental question is whether a private purchaser of real estate settlement services has standing under Article III, §2 of the U.S. Constitution to maintain an action in federal court in the absence of any claim that the alleged violation affected the price, quality or other characteristics of the settlement services provided. In this case, respondent Denise Edwards purchased a home in Cleveland in September 2006, obtaining title insurance through Tower City, which issued policies on behalf of First American. Edwards paid $455.43 towards the purchase of the policies (one for her lender and one for herself); the seller of the home paid $273.42.

Weeks after bringing the first criminal charges to be filed in a “robo-signing” related case, the Nevada State Attorney General’s office has filed suit against Lender Processing Services, the nation’s largest provider of default mortgage services, and some of its subsidiaries for engaging in allegedly deceptive practices against consumers in the state. The lawsuit, filed Dec. 15, 2011, in the 8th Judicial District of Nevada, follows the state AG’s investigation into LPS’ default servicing of residential mortgages in Nevada, especially loans in foreclosure. The lawsuit includes allegations of widespread document execution fraud, deceptive statements made by LPS about efforts to correct document fraud, improper control over foreclosure attorneys and the foreclosure process, misrepresentations about LPS’ fees and services, and evidence of an overall press for speed and volume that prevented the necessary and proper focus on accuracy and integrity in the foreclosure process.

California Attorney General Kamala Harris and her counterpart in Nevada, Catherine Cortez Masto, have launched a “joint investigation alliance” into misconduct and fraud in the mortgage industry. The joint probe will combine investigative resources, including litigation strategies, information, and evidence gathered through their respective ongoing investigations, assisting each state as it pursues independent prosecutions, the officials said. “This alliance will link the offices’ civil and criminal enforcement teams, speeding along the full, fair and adequate investigation of wrongdoing in the two states, which have experienced similar foreclosure and mortgage fraud crises,” the AGs said.