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The Consumer Financial Protection Bureau said yesterday that Michigan-based Flagstar Bank will be required to pay $37.5 million in restitution and fines over regulatory allegations it blocked struggling homeowners from receiving foreclosure relief, CollectionsCreditRisk.com reported yesterday. In a consent order issued by the agency, the CFPB said that the $9.9 billion-asset Troy, Mich.-based bank violated mortgage servicing rules that took effect in January. Flagstar was cited for, among other things, taking too long to process applications for foreclosure relief and finalizing permanent loan modifications; failing to inform borrowers when their application was incomplete; and denying loan modifications to qualified borrowers. Flagstar has agreed to pay $27.5 million to about 6,500 consumers affected by these practices and another $10 million penalty to the CFPB.
http://www.collectionscreditrisk.com/news/ccr_regulation/cfpb-hits-flag…

The Somerset Inn in Troy, Mich., will be the site of ABI’s 10th Annual Consumer Bankruptcy Conference on Nov. 11 Featured programming will include a session on court-facilitated loan modifications. For more information and to register, please click here:
http://www.abiworld.org/DETROIT14/

The trial to consider claims by Maurice “Hank” Greenberg’s against the U.S. government in AIG’s 2008 bailout begins today as David Boies, Greenberg’s litigator, will question the architects of the bailout, including Ben Bernanke, Henry Paulson and Timothy Geithner, Bloomberg News reported today. According to Greenberg’s claims, the $182 billion taxpayer bailout that saved American International Group Inc. and perhaps all of Wall Street during the 2008 financial collapse was a government rip-off. Greenberg’s Starr International Co., AIG’s largest shareholder when the financial crisis struck, sued the government, calling its assumption of 80 percent of the insurer’s stock an unconstitutional “taking” of property that requires at least $25 billion in compensation. The complaint by Starr International, Greenberg’s Swiss-based investment company, doesn’t question the necessity of a rescue that began under Republican President George W. Bush and continued under Democrat Barack Obama. Rather, Starr claims AIG was singled out for punitive treatment that violated shareholders’ constitutional rights to due process and just compensation for their property.

As Washington, D.C., and Wall Street sound early alarms on a potential tech bubble, a Morning Consult poll shows those living on the West Coast, the home of Silicon Valley, are the most confident that the historic spending is happening on solid ground. Federal Reserve chairwoman Janet Yellen warned in July that some tech start-ups were potentially overvalued. Earlier this month, prominent venture capitalist Bill Gurley and some other top investors agreed the tech industry was nearing a turning point. But when asked if conditions were better, worse or the same when compared to the 2000 tech bubble, those who are most likely to be impacted by a bubble popping are also the most confident about the current market. People making over $100,000 said that things are better now at a rate nearly 20 percent higher than the entire sample. People living in the Pacific region were even more confident, saying things are better now at a rate nearly 30 percent higher than the sample. Morning Consult polling also shows that concern over tech sector inflation is seeping into the public consciousness. Sixty-three percent said that they believed conditions in the tech sector are the same or worse than they were during the dotcom bust, versus only 37 percent who said that conditions are better today. But many experts say that any effects of a tech bubble bursting now would be isolated.

Lehman Brothers Holdings Inc. is suing Raymond James Financial Inc. to recover more than $2 million it says it is owed related to an old swap agreement, the Wall Street Journal reported on Saturday. The lawsuit is part of an effort by the failed investment bank to recover funds lost when firms on the other end of complicated swap agreements terminated them in the wake of Lehman's September 2008 collapse. Lehman Brothers says that Raymond James took over Iowa Telecom's swap position in late 2008 and "took charge of the process…in order to gain a much larger financial advantage that would leave Iowa Telecom unaffected — but would directly deprive Lehman of the value of the terminated interest rate swap." Lehman Brothers says that ultimately, through a series of actions, the amount that Iowa Telecom should have paid it was instead paid to Raymond James. The lawsuit seeks to recover that amount, which is roughly $1.9 million plus interest and fees.

Aiming to restrict lenders who prey on members of the military, the Obama administration on Friday moved to close legal loopholes that have placed hundreds of thousands of service members at risk of excessive payday and other short-term loan fees, the Associated Press reported. The Defense Department proposed new rules to toughen a 2006 law that limits interest rates for certain types of credit available to service members and their dependents. Under current law, lenders cannot charge members of the military more than 36 percent interest. But the loans covered by the law are so narrowly defined that lenders, many of them located near military bases, can make simple adjustments to get around its provisions. The proposed rules would broaden the definition of consumer credit so that more loans would fall under the provisions of the 2006 law. Final rules likely won't take effect until next year; the public and interest groups have 60 days to comment on the plan. Currently, transactions covered by the 36 percent cap on interest are limited to payday loans of $2,000 or less with terms of no more than 91 days, loans that are secured by a personal vehicle with terms of no more than 181 days, and tax refund anticipation loans. But the Consumer Financial Protection Bureau and the Pentagon have found that in some cases lenders slightly altered the loans, adding $1 to the loan or one day to the terms to bypass the interest cap.

For more on financial protections under the Servicemember Civil Relief Act, be sure to pick up a copy of ABI’s Bankruptcy and Debt under the Servicemembers Civil Relief Act from the ABI Bookstore.
http://bookstore.abi.org/bankruptcy-and-debt-under-servicemembers-civil…

General Motors Co. Chief Financial Officer Chuck Stevens said that the company plans to take advantage of its return to investment grade, which could lower borrowing costs, by strengthening its lending arm, Bloomberg News reported today. Standard & Poor’s Ratings Services upgraded both GM and General Motors Financial Co. to BBB- yesterday, citing progress in Europe, healthy cash flow and limited reputational and market-share damage as a result of the company’s record recalls. The upgrade is another step in the recovery of the onetime symbol of America’s industrial might as it rebuilds with a new finance unit focused on helping drive vehicle sales. GM was forced to sell control of its former GMAC lending unit to a hedge fund in 2006 to raise money to stay in business, and risky home loans ultimately forced that lender into bankruptcy. Now it has a smaller, more strategic finance arm that is getting stronger. The new GM Financial was formed out of the $3.5 billion purchase in 2010 of subprime lender AmeriCredit Corp. The GM lending unit bought Ally Financial Inc.’s international operations in South America and Europe in 2012 and is working to acquire the rest of Ally’s joint-venture operations in China, said Jim Cain, a GM spokesman.

U.S. Bancorp, the nation’s largest regional lender, agreed to pay $57 million to settle regulatory claims that some of its account holders were unfairly billed for identity-theft protection products, Bloomberg News reported today. The lender’s U.S. Bank unit will provide $47.9 million in restitution for more than 420,000 customers, the Office of the Comptroller of the Currency and Consumer Financial Protection Bureau said yesterday. The bank, which settled without admitting or denying wrongdoing, also will pay fines of $4 million to the OCC and $5 million to the CFPB, they said. Customers were illegally billed from 2003 to 2012 for protection offered through Affinion Group Holdings Inc.’s Trilegiant unit, the agencies said. The accords require U.S. Bancorp to improve its oversight of such third-party vendor relationships.
http://www.bloomberg.com/news/2014-09-26/u-s-bancorp-settles-bhp-probe-…

For more on the intersection of privacy, security and the Internet, register today for ABI’s Winter Leadership Conference to hear former White House CIO Theresa Payton of Fortalice LLC deliver her keynote, “Privacy in the Age of Big Data.” Click here for more information and to register.
http://www.abiworld.org/WLC14/

The U.S. Treasury Department signed off on General Motors Co. pay packages that broke a pledge to cap cash salaries at $500,000 in most cases at companies bailed out by the federal government, according to a watchdog report, Bloomberg News reported yesterday. Sixteen top employees at GM and the automaker’s former lending unit, Ally Financial Inc., were approved cash salaries of $525,000 to $1.7 million last year, the Special Inspector General for the Troubled Asset Relief Program (SIGTARP) said in a report yesterday, though it didn’t identify the executives. The report sheds more light on the decision-making behind the government’s 2009 rescue of the automobile industry during the recession and efforts to retain executives to run the companies. The Office of the Special Master for TARP pay, or OSM, was under pressure by the companies it oversaw to provide competitive pay packages or risk losing top executives. The Treasury-approved salaries exceeded pledged limits even after it was clear taxpayers wouldn’t recover all the bailout money injected into GM and Ally, the inspector general said. Even when taking into account those making less than $500,000, cash salaries last year for 25 of the highest paid workers at GM and Ally exceeded TARP’s agreed upon market median for those positions, according to the report.
http://www.bloomberg.com/news/print/2014-09-24/gm-salaries-busted-u-s-b…

The Treasury responded that the report contained "many inaccuracies and omissions," saying the department balanced limits on executive compensation "with allowing companies to repay taxpayer assistance,” Reuters reported yesterday. Treasury said that executive pay packages for the top executives at GM and Ally were "restricted" while those companies were receiving government funds from the Troubled Asset Relief Program, known as TARP. In April, Treasury said it lost $11.2 billion on the $49.5-billion GM bailout.
http://www.reuters.com/article/2014/09/24/usa-treasury-gm-idUSL2N0RP18J…

Bankers are hungry for new types of assets to package and sell to investors and peer-to-peer (P2P) loans are an attractive prospect as sales of more traditional securitizations — such as mortgage-backed securities — remain subdued after the housing bust, the Financial Times reported today. Peer-to-peer lenders, also known as marketplace lenders, use internet technology to directly connect borrowers with lenders. To date, the sector has focused on smaller consumer loans to high-quality borrowers, but lenders are expanding rapidly in size and style thanks to an influx of professional cash. While the industry initially started with the goal of disintermediating banks, the biggest P2P players are now far more likely to team up with Wall Street than eschew it. About 80 percent of the loans originated through Prosper and Lending Club — the two largest P2P lenders — are estimated to be bought by big institutional investors rather than the individual retail investors that once dominated.

Defaults on federal student loans declined from a year earlier, as the U.S. government bolsters programs to prevent borrowers from skipping payments, Bloomberg News reported yesterday. The rate, measured over the first three years that borrowers are required to pay their loans, was 13.7 percent, down from 14.7 percent last year, the Education Department said yesterday. The data encompasses borrowers who would have begun paying in 2011. The data covers student borrowers through Sept. 30, 2013, and shows the share that haven’t made required payments for at least 270 consecutive days. It includes both those who graduated from their programs and those who dropped out. President Barack Obama and the Education Department have tried to stem defaults by publicizing several income-based repayment plans for those who are struggling. Under the programs, borrowers pay a certain percentage of their discretionary income. The Department last November began a campaign to e-mail about 3.5 million borrowers about repayment options.