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The nation's largest mortgage servicers are desperate to put the robo-signing scandal behind them, American Banker reported today. At least two of the servicers say that they are close to being released from consent orders dating back to 2011, when the Office of the Comptroller of the Currency ordered 14 bank servicers to clean up their servicing practices. The consent orders were issued after bank employees were found to have improperly signed and processed foreclosure documents following the housing bust. Two of the banks have fulfilled the OCC’s requirements and expect to be released from the consent order as early as next month, their lawyers said this week. Several of the banks were given a Sept. 30 deadline to comply with the terms of the enforcement order.

A congressional subcommittee is taking a closer look at the Justice Department’s recent multi-billion-dollar settlements with the big banks, the Wall Street Journal reported today. At a hearing scheduled for Friday, the regulatory subcommittee of the House Judiciary Committee will examine details of how the settlements required banks to offer assistance to struggling homeowners and neighborhoods, according to committee aides. Representatives of the Republican-controlled committee are expected to ask whether the banks are passing some of the consumer-relief costs to investors, and to take a closer look at how some of the banks are ordered to make donations to consumer groups. The Justice Department’s recent settlements with Bank of America Corp., Citigroup Inc., and JPMorgan Chase & Co., over accusations that the banks sold shoddy mortgage securities in the run-up to the financial crisis, mandate that the banks expend billions of dollars on consumer assistance.

Virginia Attorney General Mark R. Herring on Tuesday announced a $1.15 billion lawsuit against 13 of the nation’s biggest banks, accusing them of misleading a state retirement fund about the quality of bonds made up of residential mortgages, the Washington Post reported yesterday. The lawsuit, unsealed in Richmond Circuit Court, is the largest financial fraud action ever brought by the state of Virginia. It mirrors legal actions being taken across the country by attorneys general seeking redress for state pension funds that were ravaged by the financial crisis. Herring said that the banks — including JPMorgan Chase, Citigroup and Credit Suisse — knowingly packaged faulty home loans into securities they sold to the Virginia Retirement System (VRS). The pension fund, which counts 600,000 members on its rolls, purchased 220 residential-mortgage-backed securities starting in 2004. When the financial markets tanked and the value of those bonds took a nose dive, the fund was forced to sell the vast majority of the securities and lost $383 million.

The Senate Banking Committee will hold a hearing today at 11 a.m ET titled “Assessing and Enhancing Protections in Consumer Financial Services.” The witnesses will be: Travis B. Plunkett, Senior Director, Family Economic Stability, The Pew Charitable Trusts; Sheri Ekdom, Director, Center for Financial Resources, Lutheran Social Services of South Dakota; Oliver I. Ireland, Partner, Morrison & Foerster; and Hilary Shelton, Washington Bureau Director and Senior Vice President for Advocacy, National Association for the Advancement of Colored People. For more information, including prepared witness testimony, please click here:
http://www.banking.senate.gov/public/index.cfm?FuseAction=Hearings.Hear…

Citibank N.A. is set to tell an appeals court it faces “grave sanctions” from Argentina unless it defies a U.S. judge’s order blocking it from making payments to holders of $8.4 billion of the country’s bonds, Bloomberg News reported today. U.S. District Judge Thomas Griesa in Manhattan barred Citibank’s Argentina branch from forwarding a $5 million interest payment due Sept. 30 to the bondholders if the South American nation continues to refuse to make payments on its defaulted debt. If it doesn’t pay, Citibank claims, the branch and its executives face possible criminal and civil penalties, including the loss of its banking license and takeover by Argentina. “Citibank cannot comply with both of these directives — one from a United States court and one from the sovereign state in which its branch operates,” the bank, a unit of New York-based Citigroup Inc., said in a filing with the U.S. Court of Appeals in Manhattan. Griesa’s July 28 order is one in a series barring Argentina from making payments on its performing debt unless it also pays $1.5 billion to a group led by Paul Singer’s NML Capital that owns its defaulted bonds. Argentina’s refusal to make that payment triggered a July 30 default when it was blocked from making a $539 million interest payment on its restructured debt.

Attorney General Eric Holder yesterday called on the government to increase rewards for those who blow the whistle on financial crimes, arguing that greater incentives are needed to induce people to come forward with insider information, Legal Times reported today. In a speech at New York University School of Law, Holder said that the maximum payout — $1.6 million — for tips under Financial Institutions Reform, Recovery, and Enforcement Act is a “paltry sum in an industry in which, last year, the collective bonus pool rose above $26 billion, and median executive pay was $15 million and rising.” Although DOJ has brought more than 60 cases against financial institutions since 2009, resulting in recoveries totaling more than $85 billion, Holder said that the “department recognizes the inherent value of bringing enforcement actions against individuals, as opposed to simply the companies that employ them.”
But they’re hard cases to bring without cooperation on the inside. “Many financial criminals are savvy enough to avoid using email, which may leave a trail for investigators to follow,” Holder said.

Two fraudulent online payday lending operations based in the Kansas City area have been temporarily shut down after being sued by federal authorities, Collections & Credit Risk reported today. Combined, the two schemes allegedly bilked at least $36 million, and likely substantially more, from consumers nationwide, officials from the Consumer Financial Protection Bureau and the Federal Trade Commission said yesterday. In both cases, the companies are accused of using sensitive personal information that they purchased about individual consumers to access their bank accounts, deposit $200 to $300 in payday loans, and make withdrawals of up to $90 every other week, despite the fact that many of the consumers never agreed to take out a payday loan. The firms are also accused of generating phony loan documents after the fact to make it appear that the loans were legitimate.

Credit Suisse Group AG is under fire from U.S. regulators over concerns the bank isn't heeding warnings to stop making loans regulators see as risky, the Wall Street Journal reported today. The Swiss bank in recent weeks received a letter from the Federal Reserve demanding that the bank immediately address problems with its underwriting and sale of leveraged loans, or high-interest-rate loans used by private-equity firms and others to finance purchases of companies, among other uses. The letter to Credit Suisse found problems with the bank's adherence to guidance issued last year, warning banks to avoid deals that included too much debt or too few protections for the lenders in case of a default.

Borrowers who want to lower the interest rate on their federal student loans have a new option, the Wall Street Journal reported today. Citizens Financial Group announced yesterday that it is accepting applications from both parent and student holders of federal loans to refinance into private loans at the Providence, R.I.-based bank. Some borrowers who have good credit scores could get a lower interest rate than what they’re currently paying. Citizens’ fixed interest rates start as low as 4.74 percent, while variable-rate loans, whose rates can change each month, have rates as low as 2.31 percent. The lowest rates are given to borrowers with very high credit scores and long-term employment and who also have a Citizens checking account and set up automatic bill payments for their loan. In contrast, parents who signed up for a federal Plus loan to help their kids pay for college would have received a fixed interest rate between 6.41 percent and 8.5 percent since the 2006-07 academic year. Before then, Plus loans carried variable rates. Undergraduate student borrowers of unsubsidized Stafford loans—the most commonly used federal loans—pay fixed rates ranging from 3.86 - 6.8 percent.

An unorthodox campaign by a handful of cities hardest hit by the housing crash to use the power of eminent domain to write down large mortgage debts has stirred a backlash in Washington, D.C., the Wall Street Journal reported today. Republicans passed in June a budget bill that included language to bar federal agencies from refinancing loans that been seized by cities via eminent domain. The provision would be a poison pill for plans such as one floated last year in Richmond, Calif., to forcibly write down mortgage debt. In New Jersey, two cities, Newark and Irvington, have voted to consider the eminent-domain gambit, and the plan attracted support this summer from council members in New York City. Mortgage bond investors have long opposed the plan, which first surfaced two years ago. Under the plan, the city would purchase the mortgage at whatever a court determines is fair value, and then the city would write down the loan and refinance it through the Federal Housing Administration, which has a program that allows such refinances for borrowers with very little equity. Bond investors say that the plan only works if the city, working with a private firm, can purchase the loan at enough of a discount to refinance into the government-backed loan.