PricewaterhouseCoopers (PwC) has settled a lawsuit accusing the auditing firm of failing to detect the fraud that brought down Taylor, Bean & Whitaker Mortgage Corp. in 2009, a lawyer for the mortgage lender's bankruptcy trustee said on Friday, Reuters reported. The settlement ends a civil trial in Miami-Dade County Circuit Court in Florida in which the trustee had sought more than $5.5 billion in damages from PwC. Terms are confidential, a lawyer for the trustee said. The case stemmed from PwC's auditing work for Montgomery, Ala.-based Colonial BancGroup Inc, where Taylor Bean, among the nation's largest privately held mortgage lenders, was a major customer. The lawsuit accused PwC of missing a massive fraud in which Taylor Bean Chairman Lee Farkas and others hid losses by shuffling money among Colonial accounts and by selling nonexistent or worthless mortgages. Taylor Bean filed for bankruptcy in August 2009. Colonial filed for bankruptcy that same month, days after regulators seized its banking operations. It was the sixth-largest bank failure in U.S. history.
First National Bank of Omaha will pay more than $35 million in restitution and fines for deceptive marketing practices and illegal billing of add-on products, the Lincoln (Neb.) Journal Star reported today. The bank, the largest in Nebraska with $18.4 billion in assets, agreed to consent orders levied by the Consumer Financial Protection Bureau and the Office of the Comptroller of the Currency, which were made public yesterday. The bank will pay a $3 million civil penalty to the OCC, a $4.5 million civil penalty to the CFPB and nearly $27.8 million in restitution to roughly 257,000 customers. The orders stem from First National's use of debt cancellation add-on products and credit-monitoring services between 1997 and 2012. According to the CFPB, First National disguised its sales tactics, failed to make it clear customers were purchasing a product, made it hard to cancel debt cancellation products and billed them for credit protection services they never received.
A Long Beach, Calif., pastor admitted this week to running a mortgage scam that collected nearly $3 million from distressed property owners who paid him fees while he delayed foreclosures on their homes, according to federal prosecutors, the Long Beach Press-Telegram today. Karl Robinson pleaded guilty on Tuesday in federal court to one count of bankruptcy fraud related to the scheme, the U.S. Attorney’s Office in Los Angeles announced Thursday. Robinson’s attorney could not immediately be reached for comment. He faces up to five years in prison at his sentencing scheduled for Nov. 28. Prosecutors said Robinson’s scheme targeted homeowners who had defaulted on their mortgages. If the homeowners paid Robinson, he would stall their evictions by filing fake documents related to the foreclosure proceedings, according to the U.S. Attorney’s office. Robinson would start by filing paperwork that appeared to show a third party owned a stake in the property that was being foreclosed on, according to prosecutors. Authorities said Robinson would then file a bankruptcy petition in the fake third party’s name.
A new report released yesterday by the U.S. Census Bureau that shows that more new homes were sold in July than in nearly a decade, the New York Times DealBook blog reported. Buyers purchased single-family houses at the annual rate of 654,000, the highest rate since October 2007, the government said. That is 31 percent higher than a year earlier. Those numbers are volatile and include a wide margin of error, but combined with other evidence, the United States housing market seems to be solidly on the mend in 2016. Builders have started work on new housing units at a pace of more than 1 million homes a year every month since April 2015, more than doubling from a low of 478,000 in the spring of 2009. In the new Census Bureau report, the median sale price for new homes actually fell, to $294,600 from $310,500 in June.
The Justice Department filed a lawsuit accusing several California loan modification companies of violating federal housing protection laws by discriminating against Hispanic homeowners, MorningConsult.com reported yesterday. The defendants named in the suit are The Home Loan Auditors LLC, Century Law Center LLC, SOE Assistance Center Inc. and Spieker Law Office, along with principals Omar Alcaraz, Araceli Castro, Oralia Gutierrez, Hortencia Leon, Raul Luna, Elena Ramirez and David Spieker. The mortgage servicers violated the Fair Housing Act and Equal Credit Opportunity Act by limiting Hispanic homeowners’ access to financial assistance and targeting them for predatory loan modification services, the Justice Department said in a release. The complaint, filed in federal district court in Northern California, alleges that the servicers encouraged Latino homeowners to pay about $5,000 for unnecessary loan audits, according to DOJ.
Freddie Mac shareholders cannot force the mortgage finance company to allow them to inspect its records, a federal court ruled yesterday, the Wall Street Journal reported today. The U.S. District Court for the Eastern District of Virginia yesterday dismissed a lawsuit brought by Timothy Pagliara, a shareholder of Freddie Mac. Pagliara had asked the court to order Freddie to allow him to inspect its books and records. Virginia law gives shareholders of companies the right to inspect company records so long as they have a legitimate purpose for doing so. Freddie Mac was chartered by the federal government but it is subject to Virginia corporate law. The court held that Freddie shareholders no longer possess a right to inspect the company’s records because those rights had been transferred to the Federal Housing Finance Agency when the company entered into conservatorship in 2008.
Puerto Rico has another debt problem — beyond the $70 billion the island owes bondholders. Even as other parts of the U.S. have bounced back from the recession, the commonwealth is still recording “stubbornly high” mortgage delinquency rates and anemic rates of household borrowing, according to a blog post this month by the New York Fed, the Wall Street Journal reported yesterday. In 2010, 8 percent of Puerto Rico mortgages were 90 or more days past due — about the same percentage as in the U.S. as a whole, the Fed analysts wrote. But while U.S. mortgage delinquency rates have fallen back to 2 percent, Puerto Rico’s remain stubbornly at 7 percent. About 20 percent of Puerto Rico mortgages are subprime, compared to 8 percent for the U.S. as a whole. Puerto Rico’s commercial banks have also pulled back both their commercial and consumer lending, or at least what they’re holding on their books, according to analysts’ review of Puerto Rico banking sector data. The outstanding balances on commercial loans held by Puerto Rico’s commercial banks has shrunk to about $15 billion from about $35 billion in 2006, the analysts found. Four commercial banks have failed and subsequently been acquired since the beginning of 2010. Read more. (Subscription required.)
For more news and analysis of Puerto Rico's debt crisis, be sure to visit ABI's "Puerto Rico in Distress" webpage.
American International Group Inc. struck a deal to sell its mortgage-guarantee unit for about $3.4 billion, as the insurer speeds up the return of cash to restive shareholders, the Wall Street Journal reported today. AIG had disclosed plans early this year to stage an initial public offering of the mortgage business, known as United Guaranty, while retaining a majority stake. Selling the unit outright to Bermuda-based insurer and reinsurer Arch Capital Group Ltd. helps it more quickly meet a goal of returning $25 billion to shareholders. According to the terms of the deal, Arch will pay $2.2 billion in cash, plus $975 million in Arch preferred stock and $250 million in another type of preferred stock, dividends or cash. AIG will also keep mortgage-insurance business under an existing agreement between United Guaranty and AIG subsidiaries involving years 2014 through 2016, meaning it retains some of the earnings from the profitable unit.
Mortgage originations are expected to hit $2 trillion in 2016 for the first time in four years, according to Freddie Mac’s Outlook report, HousingWire.com reported yesterday. Freddie Mac credits low interest rates with spurring an increase refinances. In fact, they forecasted more than 6 million homes will be sold, the highest level since 2006, according to the report. At the current pace, we're likely to see the mortgage market top $2 trillion in originations for the first time since 2012,” said Freddie Mac Chief Economist Sean Becketti. “And unlike in 2012, when the market was driven largely by refinances, today's market is more balanced between home refinances and purchases, nearly 50-50.”
