Academics Want Congress to Give Chapter 14 a Chance
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Wells Fargo Morgan Stanley Faulted on RMBS Servicing
A law firm that won an $8.5 billion settlement from Bank of America Corp. tied to faulty mortgage bonds said that Wells Fargo & Co. and Morgan Stanley failed to service $73 billion of similar securities, creating a default, Bloomberg News reported yesterday. Gibbs & Bruns LLP cited at least $15 billion of Wells Fargo's residential mortgage-backed securities and $5 billion from Morgan Stanley where holders have 25 percent or 50 percent or more of the voting rights, according to the Houston-based law firm. The dispute also covers $23 billion of Morgan Stanley-issued RMBS and $30 billion of Wells Fargo's RMBS where holders "have significant voting rights, but less than 25 percent or 50 percent," the firm said.
Former Mortgage Executive Convicted of Fraud
A former sales executive at Washington Mutual Inc.'s subprime lending unit Long Beach Mortgage was convicted of fraud yesterday by a federal court jury, Bloomberg News reported yesterday. Joel Blanford was found guilty yesterday of six counts of mail fraud for his involvement in a scheme to falsify loan documents that earned him more than $1 million in commissions from 2003 to 2005, said U.S. Attorney Benjamin Wagner. Blanford paid a loan coordinator in cash and checks to falsify documents, provide false verification of borrowers’ employment or professional licensing status, and to turn a blind eye to fraudulent representations contained in loan applications and other documents submitted to Long Beach Mortgage, prosecutors said. His commissions were based on the number of loans the bank processed.
BofA Seeks to Dismiss FHFA Suit over Mortgage Securities
Bank of America Corp.'s Countrywide Financial unit is asking a judge to throw out claims for "billions of dollars" in damages by the Federal Housing Finance Agency for mortgage-backed securities bought by Freddie Mac and Fannie Mae, Bloomberg News reported yesterday. The agency's federal and state securities law claims are time-barred, lawyers for Countrywide said in a Sept. 7 filing in support of their request to have the claims dismissed. The Federal Housing Finance Agency sued Countrywide last year as conservator of Freddie Mac and Fannie Mae, the government-sponsored enterprises created to support the housing market by buying residential mortgages in the secondary market. It alleges negligent misrepresentations and fraud related to the offerings of Countrywide mortgage-backed securities.
Mortgage Lending Slid to 16-Year Low in 2011
Mortgage lending declined to its lowest level in 16 years in 2011 amid weak demand for mortgages and tighter lending standards, according to a report released by federal regulators yesterday, the Wall Street Journal reported today. Banks funded about 7.1 million mortgages in 2011, down 10 percent from the year before, and the lowest tally since banks issued 6.2 million mortgages in 1995. The Federal Reserve analyzed data submitted by more than 7,600 lenders under the Home Mortgage Disclosure Act. Loans funding home purchases fell by 5 percent last year and stood 64 percent below the level of 2006, when the housing market reached its peak. Refinances, which are more sensitive to modest swings in interest rates, fell by 13 percent in 2011 from 2010 but rebounded at the end of the year after the average 30-year fixed-rate mortgage dropped below 4 percent.
Analysis Feds Latest Stimulus May Have Little Impact on Mortgage Borrowers
The Federal Reserve took aim at the nation’s wobbly housing market last week with its biggest stimulus action in two years, but that firepower is doing little to lower mortgage rates or make home loans more available for Americans, the Washington Post reported today. Instead, banks are set to see a windfall since the Fed’s actions will immediately lower the cost of issuing loans. It may take months or longer for benefits to trickle down to consumers, analysts say. The emerging scenario highlights the limitations of the Fed’s ability to jump-start the housing market on demand: Rather than intervene directly with consumers, the Fed must rely on banks, brokers and other industry actors to offer borrowers better terms. Banks say that they are keeping rates high right now because lowering them any further would overwhelm them with customers. They say that over time, as volume thins out, rates could come down to attract new borrowers. Critics argue that banks are simply maximizing profits at the expense of consumers. Mortgage bankers are recording higher gains from home loans as the gap widens between the interest rate they charge consumers and the rate they must pay investors who finance the loans by buying mortgage securities.
Survey U.S. Cities Still Face Fiscal Strain
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Analysis New Jersey Housing Suffers as Defaults Exceed Nevada
New Jersey’s judicial review of all foreclosures, which delays seizures to help borrowers, threatens to hold down prices for years as properties remain subject to repossession and then may be sold at a discount, according to a Bloomberg News analysis today. The state passed Nevada in the second quarter in the rate of homeowners with seriously delinquent loans -- those 90 days late or in foreclosure -- according to the Mortgage Bankers Association. Only Florida had a higher rate of serious delinquencies, and that fell 1.2 percentage points from a year earlier to 17.5 percent of mortgages. In comparison, New Jersey’s rose 1.3 percentage points to 12.7 percent. While home values increased in July from a year earlier in 42 states, New Jersey prices fell 0.8 percent, according to CoreLogic, a real estate services company based in Santa Ana, Calif.
Fannie Mae Did Not Overpay BofA for Servicing Rights Audit Finds
The Federal Housing Finance Agency (FHFA) Inspector General said that Fannie Mae did not give Bank of America Corp. special consideration when it agreed to pay the lender more than $500 million to transfer the servicing of 384,000 high-risk mortgages to firms more likely to prevent their foreclosure, Bloomberg News reported today. Still, the taxpayer-owned company paid more than legally required to Bank of America and 12 other lenders when it spent $1.5 billion in termination fees for servicing rights on 1.1 million loans between 2008 and 2011, according to the inspector general's report released today. The transfers were part of a Fannie Mae initiative designed to reduce losses on mortgages considered at greatest risk of default. The specialty servicers that Fannie Mae hired to handle the loans, including Ocwen Financial Corp. and Nationstar Mortgage LLC, typically do more outreach to distressed borrowers than regular servicers and have a better track record of keeping loans current. "The amount Fannie Mae paid was consistent with the amounts it had paid to other servicers from which it had purchased mortgage-servicing rights under the program," the inspector general reported. Bank of America ultimately received $421 million in the 2011 deal because some of the loans were paid off or refinanced by the time it was completed.
Real Estate Firm Gets Citigroup Loan to Buy Properties to Turn Into Rentals
Waypoint Real Estate Group LLC, a major investor in U.S. foreclosed homes, has secured a $65 million loan from Citigroup Inc. to help add to its portfolio of properties, the Wall Street Journal reported today. Bankers and investors said that the debt-financing deal is a milestone for the burgeoning business of renting out houses that were previously in foreclosure. Waypoint, an Oakland, Calif., investment firm, is working with Citigroup on a bigger, longer-term financing deal that is expected to close in the coming weeks. Investors have spent billions of dollars in recent months snapping up foreclosed homes, betting that they will profit from the rental income the properties produce.