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The two largest U.S. home lenders are feeling the bite of competition from smaller firms as mortgage originations tumble at the fastest rate since 2011, Bloomberg News reported yesterday. New loans at Wells Fargo & Co. fell 38 percent to $50 billion in the fourth quarter from the third quarter, the bank said on Tuesday. At JPMorgan Chase & Co. originations decreased 42 percent to $23.3 billion, outpacing the 27 percent fourth-quarter drop forecast by the Mortgage Bankers Association for the industry. Big banks are facing dual challenges of increased competition and a plunge in home loan refinancing after the Federal Reserve said that it planned to reduce monthly bond purchases, which sent mortgage rates soaring. Smaller lenders are helped because the market is shifting to one led by mortgages for home purchases, favoring firms that can capture the buyers’ attention, said Clifford Rossi, a former Citigroup Inc. risk manager who now teaches at the University of Maryland’s Robert H. Smith School of Business.

The House Financial Services Financial Institutions and Consumer Credit Subcommittee will hold a hearing today at 10 a.m. ET titled "How Prospective and Current Homeowners Will Be Harmed by the CFPB’s Qualified Mortgage Rule." To view the witness list and prepared witness testimony, please click here: http://financialservices.house.gov/calendar/eventsingle.aspx?EventID=36…

Wall Street could pay nearly $50 billion to buy peace from federal authorities who are taking aim at the banks over their role in the mortgage crisis, according to interviews and a confidential analysis of the industry’s potential legal exposure, the New York Times reported today. Bracing for a potential reckoning, the banks and their outside lawyers are quietly using JPMorgan Chase’s record $13 billion mortgage settlement in November to do the math and determine just how much each bank might have to pay to move beyond the torrent of government mortgage litigation that has dogged them since the financial crisis. If the settlements materialize, they could yield, according to analysts, $15 billion in relief for consumers — a mixture of cash payments and other assistance, like reductions in the size of homeowners’ loan payments. A payment of $50 billion, made up of a string of separate deals, would amount to roughly half the total annual profit of large American banks in 2012. The $50 billion figure does not include JPMorgan’s $13 billion payout, which means the ultimate industry tab could exceed $60 billion.

Six years after the housing meltdown exposed fissures in the system, new mortgage rules that will take effect Friday stand to remodel the market, the Washington Post reported today. The reforms written by the Consumer Financial Protection Bureau aim to protect Americans in the process of buying a home and if they run into trouble paying their mortgages. Lenders will have to verify borrowers’ income, assets and debt before signing them up for home loans. The CFPB has created a category of home loans that offer lenders broad legal protections against borrower lawsuits, provided they adhere to certain criteria. These “qualified mortgages” limit upfront fees and bar risky features such as no-interest periods that can leave homeowners stuck with unsustainable loans. The loans are available to consumers who have a debt burden that is no more than 43 percent of income.

The criminal trial of Jesse C. Litvak in federal court in New Haven, Conn., next month will help to shine a light on the line between savvy sales tactics and securities fraud in the murky world of mortgage-bond deals, the Wall Street Journal reported today. It could also have a big impact on a wide-ranging probe into whether banks cheated mortgage-bond clients in the years after the financial crisis, legal experts said. Prosecutors allege Litvak, a former Jefferies LLC trader, cheated his clients out of a total of more than $2 million. Litvak is accused of using dishonest sales tactics to inflate the prices the clients were willing to pay for the bonds, including inventing imaginary sellers, and lying about how much Jefferies had paid for the bonds.

U.S. mortgage rates rose to the highest since September, increasing borrowing costs for homebuyers as prices climbed across the country, Bloomberg News reported yesterday. The average rate for a 30-year fixed mortgage was 4.53 percent this week, up from 4.48 percent, according to a statement today from Freddie Mac. The average 15-year rate climbed to 3.55 percent from 3.52 percent, the McLean, Va.-based mortgage-finance company said. While a jump in mortgage rates since May has slowed demand, buyers drove up prices for a limited supply of properties that included fewer discounted foreclosures. Home prices in 20 U.S. cities rose 13.6 percent in October from a year earlier, the biggest gain since February 2006, according to the S&P/Case-Shiller index.

Wells Fargo & Co., the largest U.S. home lender, agreed to pay Fannie Mae $591 million to resolve repurchase demands on loans that originated before 2009 and were sold to the government-backed firm, Bloomberg News reported yesterday. Wells Fargo paid $541 million in cash to Fannie Mae after adjusting for prior repurchases, the San Francisco-based lender said yesterday. The firm had set aside funds to cover the full cost as of Sept. 30, according to the statement.

Home prices have zipped back into record territory in a handful of American cities, a milestone that comes seven years after the housing bust ravaged the market and the broader economy, the Wall Street Journal reported today. Values are up more than 13 percent from their 2007 high in Oklahoma City and by more than 6 percent in the Denver metro area. Prices are back to all-time highs in 10 of the nation's 50 largest metropolitan areas, according to a Wall Street Journal analysis of price data from Zillow, an online real estate-information service. Prices nationally remain below the highs of the past decade, and many of the cities that have seen the biggest gains largely escaped a boom and bust.

Illinois Gov. Pat Quinn (D) on Thursday signed into law a measure extending the time period to protect Illinois homeowners from losing their homes to foreclosure while seeking federal assistance to modify their mortgages, the Chicago Tribune reported today. The measure extends to Dec. 31, 2015, protections that allow homeowners to prevent a lender or loan servicer from selling their homes if they have applied for a loan modification under the federal Home Affordable Modification Program. The latest measure builds on a 2010 state law that gave homeowners the right to block a judicial sale of foreclosed property if they could prove that they had applied under the federal loan-modification program but the property was sold in violation. The new effort effectively extends Illinois law to match the deadline for the federal home loan modification program.

Mortgage rates moved up slightly heading into the end of the year, according to the latest data released yesterday by Freddie Mac, the Washington Post reported today. The 30-year fixed-rate average nudged up to 4.48 percent, and it was 4.47 percent a week ago and 3.35 percent a year ago. Since spiking to 4.58 percent in late August, the 30-year fixed rate has bounced between 4.57 and 4.1 percent. The 15-year fixed-rate average ticked up to 3.52 percent, and was 3.51 percent a week ago and 2.65 percent a year ago. Before rising above 3.5 percent last week, the 15-year fixed rate had remained below that mark since late September.