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Wells Fargo & Co. yesterday lost an appeal made to the U.S. Court of Appeals in Washington, D.C. that aimed to bar the government from suing it for “reckless” lending and leaving a federal insurance program to pick up the tab, the Wall Street Journal reported today. The U.S. government in October 2012 sued Wells Fargo, seeking “hundreds of millions of dollars” in damages on behalf of the Federal Housing Administration, a government agency that doesn’t make loans but insures those made by lenders that meet its standards. That complaint alleged nearly a decade of misconduct dating back to May 2001 and contended that Wells engaged in the “regular practice of reckless origination and underwriting” of government-backed loans. Wells in turn had said it acted in good faith and denied the allegations. While several other big banks have settled with the FHA, Wells Fargo has argued that it should not be sued on this matter as it is protected by a previous settlement. The bank — along with four other large banks — had struck a deal in March 2012 with federal agencies and 49 state attorneys general agreeing to settle certain foreclosure processing abuses.

Bank of America and the Justice Department have reached an impasse in negotiations over a multibillion-dollar settlement deal, raising the stakes in an investigation into the bank’s role at the center of the mortgage crisis, the New York Times reported today. The talks stalled on Monday after the bank’s latest offer — more than $12 billion to resolve state and federal investigations into its sale of mortgage investments that later imploded — fell far short of prosecutors’ demands. The Justice Department, which had imposed a Monday evening deadline for the bank to deliver its near-final offer, has sought a settlement worth roughly $17 billion, which would be the largest payout by any bank to date. As Bank of America yesterday sought to continue negotiations, the Justice Department moved to put the finishing touches on a civil complaint against the bank. The lawsuit would accuse the bank of selling mortgage investments that led to billions of dollars in losses. A suit, however, is not imminent. Bank of America, which is torn between a desire to put the mortgage crisis behind it and a resistance to paying penalties it considers overly punitive, could still raise its offer to avert a suit. The bank’s resistance to a deal stems partly from a dispute over mortgage securities sold by Merrill Lynch, the investment house Bank of America bought during the depths of the financial crisis. Bank of America has said it felt pressured by the Federal Reserve and Treasury Department to go through with the acquisition in late 2008, though the bank was the one to pursue the purchase.

Bank of America Corp. is in talks to pay at least $12 billion to settle civil probes by the Justice Department and a number of states into the bank's alleged handling of shoddy mortgages, an amount that could raise the government tab for the bank's pre-crisis conduct to more than $18 billion, the Wall Street Journal reported today. At least $5 billion of that amount is expected to go toward consumer relief — consisting of help for homeowners in reducing principal amounts, reducing monthly payments and paying for blight removal in struggling neighborhoods. As the negotiations with the government heat up, the bank is being pressed to pay billions more than the $12 billion it is offering. The North Carolina bank's total tab to end government probes and lawsuits related to its conduct in the runup to the financial crisis is increasingly likely to surpass the record $13 billion that JPMorgan Chase & Co. paid last year to settle similar allegations. Bank of America has already struck a $6 billion settlement, by the Justice Department's measure, with the Federal Housing Finance Agency.

Fannie Mae and Freddie Mac were sued by Massachusetts for failing to comply with a state law that lets nonprofit organizations buy foreclosed homes to sell them back to their former owners, Bloomberg News reported today. Massachusetts Attorney General Martha Coakley yesterday sued the two government-backed finance companies and the Federal Housing Finance Agency, the U.S. regulator that oversees them, in a bid to force them to comply with the state law, passed in August 2012. Fannie Mae and Freddie Mac require nonprofits that buy foreclosed homes and re-sell them to their former owners to pay the full amount of the mortgages or the properties' fair market value, whichever is higher, according to a complaint filed yesterday in state court in Boston. That policy runs afoul of a state law that allows a foreclosed-home purchase at the lesser price, Coakley said.

A record number of Americans are using that equity to pay cash for properties, avoiding a mortgage process that has become even more onerous in the wake of the 2007 housing collapse, Bloomberg News reported yesterday. In the first quarter, 29 percent of non-investment homebuyers used cash, the highest on record for the period, according to data compiled by Bloomberg. The majority of people making all-cash deals are baby boomers mostly because America’s largest-ever generation is beginning to retire, said Lawrence Yun, chief economist of the National Association of Realtors. In 2012, there were a record 61.8 million Americans over the age of 60, according to the Census. That compares with 46.6 million in 2000.

Melvin Watt, the overseer of Fannie Mae and Freddie Mac, broke five months of silence to help boost lending as slowing sales threatens the housing recovery, Bloomberg News reported today. Watt, in his first speech as director of the Federal Housing Finance Agency, announced new rules to reduce the risk that lenders will have to repurchase bad mortgages. The changes, designed to allow banks to relax credit standards, probably will increase housing sales by 5 percent this year, said Stephanie Karol, an economist at Englewood, Colorado-based research firm IHS Inc. A combination of tight credit, rising home prices and a retreat by investors has dragged down the market. Sales of existing homes fell to a 20-month low in March, according to the National Association of Realtors.

Nearly 10 million U.S. households remain stuck in homes worth less than their mortgage and a similar number have so little equity they can't meet the expenses of selling a home, the Wall Street Journal reported today. At the end of the first quarter, nearly 18.8 percent of U.S. homeowners with a mortgage — 9.7 million households — were "underwater" on their mortgage, according to a report scheduled for release today by real estate information site Zillow Inc. While that is an improvement from 19.4 percent at the end of last year and a peak of 31.4 percent 2012, those figures understate the problem. In addition to the homeowners who are underwater, roughly 10 million households have 20 percent or less equity in their homes, which makes it difficult for them to sell their homes without dipping into their savings. Most move-up homeowners typically use their home equity to cover broker fees, closing costs and a down payment for their next home.

Residential Capital LLC, the defunct mortgage company, sued Bank of America NA, RBC Mortgage Co. and other lenders, claiming they sold it poor-quality loans that led to its bankruptcy, Bloomberg News reported yesterday. ResCap filed for bankruptcy protection in May 2012 after investors who bought mortgage-backed bonds claimed they were loaded with faulty loans. It was liquidated to resolve more than $100 billion in potential lawsuits. In lawsuits filed on Tuesday in bankruptcy court, ResCap said that it is seeking to recover “billions of dollars in liabilities and losses” over the “defective” loans. It wants the banks held responsible for more than 24 lawsuits alleging ResCap securitized bad loans, as well as for hundreds of claims, including securities fraud and breach of warranty, that it faced in bankruptcy.

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.

Talks between top lawmakers on the Senate Banking Committee and a group of Democrats seen as key swing votes to advance a bipartisan overhaul of Fannie Mae and Freddie Mac broke down yesterday, raising the prospect that the bill won't advance beyond the committee this year, the Wall Street Journal reported today. Lawmakers last week postponed a committee vote on the overhaul bill, unveiled in March by Sens. Tim Johnson (D-S.D.) and Mike Crapo (R-Idaho), the heads of the committee, to wrest more support from the 22-member panel. Lawmakers said last week they could have passed the bill with a narrow majority, but many analysts believe a larger "supermajority" would be needed to compel Sen. Majority Leader Harry Reid (D-Nev.) to bring the bill up for a floor vote ahead of the November midterm elections. Efforts over the past week had focused on winning three of six uncommitted Democrats on the panel: Sens. Elizabeth Warren (Mass.), Charles Schumer (N.Y.) and Robert Menendez (N.J.). Consumer and civil-rights groups had raised a series of objections to the proposed bill.