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Four of the largest U.S. mortgage servicers have rectified failures to comply with parts of a $25 billion landmark national mortgage settlement, the watchdog overseeing the process said yesterday, the Wall Street Journal reported today. Bank of America Corp., JPMorgan Chase & Co., Citigroup Inc. and Wells Fargo & Co. passed all tests reviewing their compliance with the National Mortgage Settlement during the third and fourth quarters of last year, said the monitor for the settlement, Joseph A. Smith. In December, Smith had released a report saying that Bank of America, J.P. Morgan and Citigroup had each failed at least two of 29 metrics that measure standards over how to provide relief to homeowners under threat of foreclosure. In total, the three banks failed on seven metrics in the first half of 2013. Meanwhile, Wells Fargo was deemed to have failed on one metric tied to its loan modification program in a report released in June of last year. The latest report said that mortgage servicer Ocwen Financial Corp. also fully implemented all the servicing standards for the portion of the portfolio it acquired from Residential Capital LLC, or ResCap.

Sallie Mae, the giant student lender, and Navient, previously a loan servicing unit of Sallie Mae, have agreed to pay $97 million to settle allegations by federal regulators that military service members were charged excessive interest and fees on student loans, the New York Times reported today. The Justice Department said yesterday that beginning in 2005, the companies failed to cap interest on loans to military personnel at 6 percent — a ceiling they are entitled to as part of the Servicemembers Civil Relief Act. The department also asserted that the companies improperly obtained default judgments against service members.
http://www.nytimes.com/2014/05/14/your-money/sallie-mae-to-pay-fine-ove…

For more information on the Servicemembers Civil Relief Act, be sure to check out Bankruptcy and Debt under the Servicemembers Civil Relief Act available in the ABI Bookstore.
http://bookstore.abi.org/bankruptcy-and-debt-under-servicemembers-civil…

Ex-U.S. Treasury Secretary Timothy Geithner must comply with Standard & Poor’s demand that he provide documents related to its claim the U.S. sued the company in retaliation for downgrading government debt, Bloomberg News reported today. Harold W. McGraw III, chairman of S&P parent McGraw Hill Financial Inc., said in a court statement that Geithner called him days after S&P downgraded the U.S. debt in August 2011 and told him that the company would be held accountable for it. McGraw said Geithner told him there would be a “response” for the downgrade, which the government said was based on an error. Geithner is the highest former government official S&P has pursued for information to support its allegations. S&P, the only credit rating company sued by the Justice Department for allegedly giving fraudulent ratings to mortgage-backed securities, has said that it was singled out because of the downgrade.

Negotiations between industry, consumer groups and universities on U.S. rules for banking services aimed at college students have stalled over a Department of Education proposal to ban most account fees, Bloomberg News reported today. Financial companies say that if the proposal is adopted it could upend the multimillion-dollar marketing deals between universities and firms including Wells Fargo & Co., U.S. Bancorp and Huntington Bancshares Inc. Advocacy groups maintain that the banks are deliberately painting a worst-case scenario. The Education Department is writing the regulation under a negotiated rulemaking. According to a draft distributed by the department, the rule would protect students from “any costs” associated with opening, maintaining or closing a “sponsored account,” and would guarantee them at least four free withdrawals a month from any cash machine in the state.

Banks that operate inside Wal-Marts reap among the highest fees from customers of any banks in the nation, according to a Wall Street Journal analysis yesterday. The Journal’s analysis of federal filings found that the five banks with the most Wal-Mart branches, including Woodforest, ranked among the top 10 U.S. banks in fee income as a percentage of deposits in 2013. Most U.S. banks earn the bulk of income through lending. Among the 6,766 banks in the Journal's examination, just 15 had fee income higher than loan income — including the five top banks operating at Wal-Mart. Some of the leading banks at Wal-Mart pitch accounts to people who otherwise might not have access to banks, including those with bad credit histories. Woodforest's chief executive, Robert E. Marling Jr., said his bank provides convenient hours, free financial education and unusually forgiving account features, often for riskier customers previously shut out of the banking system. The bank lets clients overdraw, in some cases up to $500, for a fee. About 78 percent of Woodforest's fee income is from overdrafts, Marling said, including fees on unpaid items such as bounced checks.

The Justice Department's effort to secure a guilty plea from Credit Suisse Group AG in coming days is expected to kick off a number of multibillion-dollar bank settlements, in what may be Attorney General Eric Holder's last push to pursue Wall Street for past conduct, the Wall Street Journal reported today. Justice Department officials met with Bank of America Corp. last Thursday in a bid to hammer out a multibillion-dollar settlement related to the bank's handling of mortgage-backed securities in the run-up to the 2008 financial crisis. Later this month, Citigroup Inc. will meet with department lawyers to discuss a settlement stemming from an investigation into mortgage-backed securities that racked up large losses. Holder earlier this month listened to entreaties from European government officials weighing in on behalf of their home-country banks. On May 2, the attorney general met with a minister from Switzerland to talk about the case against Credit Suisse for allegedly helping wealthy Americans evade taxes. Later that same day, he took a phone call from France's finance minister about the U.S. investigation of BNP Paribas SA for allegedly evading U.S. sanctions on such nations as Iran.

Lehman Brothers Holdings Inc.'s brokerage wants court approval to set aside more money for creditors, the Wall Street Journal reported on Saturday. In a Thursday bankruptcy court filing, brokerage trustee James W. Giddens said that he needs to create a reserve account for holders of secured and priority claims against the brokerage. Those claims, which include fees incurred during Lehman's bankruptcy and other claims, are currently estimated at about $624 million. If Giddens gets that approval, he said that he wants to turn his attention to paying out more than $4 billion still owed to general unsecured creditors of the brokerage, a group that includes former employees and others.

Two of the world’s biggest banks, facing the threat of criminal charges, are mounting final bids for leniency, the New York Times DealBook blog reported yesterday. To avoid the fallout from pleading guilty — no giant bank has done so in more than two decades — BNP Paribas and Credit Suisse made last-ditch appeals to prosecutors and regulators in recent weeks. The private meetings came after prosecutors sought guilty pleas from the parent companies of both banks: BNP of France over doing business with countries like Sudan that the U.S. has blacklisted, and Credit Suisse for offering tax shelters to wealthy Americans. While BNP and Credit Suisse proposed more modest guilty pleas from their subsidiaries rather than parent companies, prosecutors appeared to balk at those overtures, challenging broader public concerns that banks have grown so important to the economy that they are effectively “too big to jail.”

U.S. consumer credit recorded its largest increase in a year in March, boosted by growing demand for student loans and household borrowing to buy automobiles, Reuters reported yesterday. Total consumer credit increased by $17.53 billion to $3.14 trillion, the Federal Reserve said on Wednesday. That was the largest rise since February 2013. February 2014's consumer credit figure was revised lower to show a $12.99 billion increase rather than the previously reported $16.49 billion advance. Revolving credit, which mostly measures credit-card use, rebounded by $1.13 billion after falling by a revised $2.73 billion in February. The failure in March to recoup the prior month's decline suggests that households remain cautious about assuming too much debt. Non-revolving credit, which includes auto loans as well as student loans made by the government, rose $16.40 billion in March. February's figure was revised to show a $15.71 billion increase instead of the previously reported $18.91 billion surge.

Federal Deposit Insurance Corp. Vice Chairman Thomas Hoenig said yesterday that bankruptcy is the preferred path for resolving the largest U.S. banks when they collapse and firms should make fundamental changes to make that possible, Bloomberg News reported yesterday. Hoenig called on banks and regulators to finish work on Dodd-Frank Act “living wills” to lay out how companies can be shut down under court supervision. Relying on a separate rule that lets the FDIC unwind bank holding companies could lead to taxpayer-funded bailouts, he said. “Each systemically important financial firm must provide a credible plan for orderly resolution through bankruptcy,” Hoenig said. “If a credible plan is not produced, supervisors should be prepared to require an institution to sell assets and simplify operations until it shows itself to be bankruptcy compliant.” Eleven banks, including Goldman Sachs Group Inc. and JPMorgan Chase & Co., submitted a second annual round of the wind-down plans in October to the FDIC and Federal Reserve. The regulators must decide whether the plans are credible, which Hoenig said is unlikely given that “there are no international bankruptcy laws sufficient to sort out cross-border creditor rights.”