%1

Mortgage lender Residential Capital LLC is facing a number of objections from the U.S. Trustee Program, its pension insurer and other creditors to the outline of its plan to exit bankruptcy protection, Dow Jones Newswires reported on Friday. U.S. Trustee Tracy Hope Davis took aim at "impermissible payments" earmarked for some bondholders' and investors' lawyers and financial advisers, in a court filing on Thursday. Davis is also concerned about the broad releases from civil lawsuits granted to Ally Financial Inc. and its managers as part of its bankruptcy deal with its mortgage subsidiary. Ally, which isn't under chapter 11 protection, has agreed to pay $2.1 billion to its mortgage subsidiary and its creditors in return for protection from litigation over ResCap's mortgage business. The broad scope of those releases has caught the attention of several U.S. government officials.

UBS AG, Switzerland’s largest bank, agreed to pay $120 million to settle claims by investors in Lehman Brothers Holdings Inc. securities in a lawsuit tied to the investment bank’s 2008 collapse, Bloomberg News reported on Friday. UBS was accused of violating federal securities laws in underwriting and selling the securities to investors, who claimed that offering materials contained misleading information about Lehman Brothers’ financial condition. The settlement, disclosed on Thursday in a court filing, compares “favorably” with other recoveries stemming from the credit crisis, the plaintiffs said. Lehman Brothers filed for bankruptcy in September 2008. The settlement, which requires court approval, represents a recovery of 13.4 percent of the total face value of securities at issue, or about $896 million, without taking into account UBS’s defenses and rights of offset, according to the court filing.

President Barack Obama’s administration significantly overstated statistics from a year-long mortgage-fraud initiative, including total number of victims, their losses suffered and number of individuals criminally charged, according to an FBI memo, Bloomberg News reported on Friday. The Federal Bureau of Investigation, in the document sent on Friday, asked the members of the administration’s Mortgage Fraud Working Group to correct and update any public materials related to the results released in October of a year-long law enforcement initiative targeting fraud schemes aimed at vulnerable homeowners. The FBI restated the number of people criminally charged to 107 from 530. Agencies were asked to correct victims’ total losses to $95 million from an estimated $1 billion, and the number of victims found to 17,185 from more than 73,000.

The U.S. may announce charges as early as this week against former London-based JPMorgan Chase & Co. employees related to allegations they tried to conceal losses last year, Bloomberg News reported yesterday. The investigation has centered on whether employees attempted to inflate the value of trades on the bank’s books by mismarking them. Federal officials are considering charges related to mismarking books and falsifying documents. JPMorgan first disclosed losses in its Chief Investment Office’s London unit in May 2012 after what Chief Executive Officer Jamie Dimon called “egregious mistakes” in managing credit-derivative positions. The trades by Bruno Iksil, nicknamed the London Whale because of the size of his holdings, eventually lost more than $6.2 billion for the bank.

SAC Capital Advisors LP, which is facing federal insider-trading charges and a money-laundering lawsuit, was granted court approval to continue operating until the cases are resolved, Bloomberg News reported yesterday. U.S. District Judge Richard Sullivan yesterday signed an order to protect the Stamford, Conn.-based fund’s legitimate operations from being impeded by the government while the case is pending. The indictment of SAC, the New York hedge fund owned by Steven A. Cohen, and the related laundering case were announced July 25 by Manhattan U.S. Attorney Preet Bharara, who called SAC “a veritable magnet for market cheaters.” Bharara said that SAC reaped hundreds of millions of dollars in illicit profits through separate insider-trading schemes by at least eight former SAC fund managers and analysts.

Wells Fargo & Co. was cleared by a jury of claims it misrepresented a securities-lending program to Blue Cross Blue Shield of Minnesota and other institutional investors and a demand it pay for $8.2 million of losses, Bloomberg News reported today. A federal court jury yesterday returned a verdict rejecting allegations in the plaintiffs’ 2011 lawsuit that the bank marketed a risky program as safe, leading to losses the bank blamed on the financial crisis alone. The case is one of at least five filed in Minnesota against Wells Fargo over the securities-lending program, which was based in the state. Under the program, Wells Fargo held its clients’ securities in custodial accounts and made temporary loans of the instruments to brokers. The brokers used the securities to support trading activities such as short sales and option contracts.

The criminal investigation of JPMorgan Chase & Co.’s mortgage-backed securities practice is evidence a U.S. Justice Department task force set up to investigate causes of the financial crisis is finally getting some traction against banks blamed for ruining the economy, Bloomberg News reported yesterday. The probe, disclosed this week in the bank’s quarterly filing, is the latest enforcement effort to emerge from the Residential Mortgage Backed Securities Working Group. It was set up last year on orders of President Barack Obama to coordinate prosecutions of fraudulent underwriting activity by banks that contributed to the financial crisis. In February, as the government’s financial fraud task force started what would become a series of financial crisis-related cases, the Justice Department filed a civil suit against Standard & Poor’s, a ratings company, alleging that the firm committed fraud by blessing a series of mortgage-backed securities with top-quality ratings in 2007. Federal and state investigators alleged S&P should have known that the securities were well below investment grade. The government has asked the firm to repay $5 billion in losses.

Federal regulators are seeking to level civil charges against JPMorgan Chase and extract a rare admission of wrongdoing from the nation’s biggest bank as an investigation into a multibillion-dollar trading loss enters its final stage, the New York Times DealBook blog reported yesterday. If JPMorgan concedes to some wrongdoing in a settlement, such an admission would set an important precedent for the Securities and Exchange Commission, coming after decades of allowing defendants to “neither admit nor deny wrongdoing.” The losses in the case — which have now swelled to more than $6 billion — stemmed from outsize derivatives wagers made by traders at JPMorgan’s chief investment office in London.

The share of homeowners behind on their mortgage payments or facing foreclosure fell to a five-year low during the second quarter, though they are still well north of historical levels, the Wall Street Journal reported today. The Mortgage Bankers Association said yesterday that 5.9 percent of mortgages on one-to-four-unit homes were 90 days or longer past due or in the foreclosure process at the end of the June, representing around 2.8 million households, down from a peak of 4.5 million. The second-quarter figure was down from 7.3 percent one year earlier and a high of 9.7 percent in late 2009. Delinquencies and foreclosures have returned closer to their pre-crisis levels in states such as California and Arizona that don’t require mortgage companies to take back homes by appearing before a judge. By contrast, in so-called “judicial” foreclosure states, such as Florida, New York, and New Jersey, foreclosures have declined much more slowly. Read more.

A U.S. appeals court ruled that Wells Fargo & Co. must face lawsuits by home loan borrowers over claims the bank refused to offer them permanent mortgage modifications for which they assert they qualified, Bloomberg News reported yesterday. The federal government’s 2009 Home Affordable Modification Program requires the bank to offer permanent adjustments to homeowners who met the terms of a trial-period modification, a three-judge panel of the U.S. Court of Appeals in San Francisco ruled. Reversing a lower-court dismissal of two separate lawsuits, the panel rejected the conclusion Wells Fargo was only bound if it had actually offered the borrowers a fully-executed copy of a modification agreement. The terms of the trial period plan “cannot convert a purported agreement setting forth clear obligations into a decision left to the unfettered discretion of the loan servicer,” the panel said.