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Some private investors are betting that reverse mortgages, an investment product aimed at older people in need of cash, will make a resurgence as more homeowners reach retirement age in the coming years, the New York Times DealBook blog reported yesterday. A reverse mortgage start-up based in New Jersey has raised about $230 million in a private offering managed by the investment banking boutique FBR Capital Markets. Investors in the private sale of shares of Reverse Mortgage Investment Trust included hedge funds, wealthy individual investors and customers of the investment firm. The private placement in February sets the stage for a potential initial public offering for the company, which operates under the name Reverse Mortgage Funding. A public offering would make Reverse Mortgage Funding, which opened its doors last summer, one of the first stand-alone publicly traded companies to specialize in reverse mortgages, which provide government-guaranteed loans to homeowners based on the equity value in their homes in exchange for fees and interest payments that are paid when the loan comes due.

Prospects for a bipartisan housing-finance overhaul dimmed as Democrats on a U.S. Senate panel struggled to reach consensus on how to replace Fannie Mae and Freddie Mac, Bloomberg News reported yesterday. After a year of delicate bipartisan negotiations on a bill, Democrats on the 22-member Senate Banking Committee remained divided on issues including lending in disadvantaged communities, big-bank dominance of the mortgage market and the powers of a new regulator. Senate Banking Chair Tim Johnson (D-S.D.) and Sen. Mike Crapo (R-Idaho), the ranking Republican on the committee, yesterday postponed a vote on the housing measure after negotiating its provisions late into Monday night. A lobbying visit to the Senate floor on Monday by U.S. Housing and Urban Development Secretary Shaun Donovan also failed to produce more commitments from the panel’s six undecided Democrats.

Two years after Lynn Szymoniak helped the U.S. recover $95 million from Bank of America Corp. and other lenders for mortgage-fraud tied to the housing bubble, the whistle-blower said the government is ignoring a chance to collect more money for identical claims against other banks, Bloomberg News reported today. Szymoniak got $18 million when the U.S. Justice Department intervened in her foreclosure-fraud lawsuit. The government negotiated a settlement with five lenders including Bank of America and JPMorgan Chase & Co. The other banks accused of the same behavior, including Deutsche Bank AG and HSBC Holdings Plc (HSBA), are still fighting Szymoniak’s suit, saying that she isn’t a true whistle-blower. And the U.S., while continuing its crackdown on banks that packaged risky loans for sale as securities, hasn’t joined with her this time, leaving her to fight the banks alone. U.S. District Judge Joseph Anderson in Columbia, S.C., today is set to consider their bid to throw the case out.

Mortgage lending declined to the lowest level in 14 years in the first quarter as homeowners pulled back sharply from refinancing and house hunters showed little appetite for new loans, the Wall Street Journal reported today. Lenders originated $235 billion in mortgage loans during the January-March quarter, down 58 percent from the same period a year ago and down 23 percent from the fourth quarter of 2013, according to industry newsletter Inside Mortgage Finance. The average 30-year fixed-rate mortgage stood at 4.5 percent last week, up from 3.6 percent last May, when interest rates shot up in reaction to the Federal Reserve's initial indication that it might reduce a bond-buying campaign that was, in part, designed to keep a lid on long-term rates like mortgages.

U.S. prosecutors are seeking more than $13 billion from Bank of America Corp. to resolve federal and state investigations of the lender’s sale of bonds backed by home loans in the run-up to the 2008 financial crisis, Bloomberg News reported today. The settlement would come on top of the $9.5 billion the bank agreed last month to pay to resolve Federal Housing Finance Agency claims, and a deal could come within the next two months. If the Justice Department gets its way, the case against Bank of America will eclipse JPMorgan Chase & Co.’s record $13 billion global settlement over similar issues in November. That settlement, which included a $4 billion agreement with the FHFA, encompassed loans JPMorgan took over with its purchases of Washington Mutual Inc. and Bear Stearns Cos.

Mortgage lenders are beginning to ease the restrictive lending standards enacted after the housing boom turned to bust, a sign of their rising confidence in the housing market, the Wall Street Journal reported today. While standards remain tight by historical measures, lenders have started to accept lower credit scores and to reduce down-payment requirements. One such lender is TD Bank, Toronto-Dominion Bank's U.S. unit, which on Friday began accepting down payments as low as 3 percent through an initiative called "Right Step," geared toward first-time buyers and low- and moderate-income buyers. TD initially launched the program last year with a 5 percent down payment. It keeps the product on its books and doesn't charge for insurance. Borrowers also don't need to put down any of their own cash if a family, state or nonprofit group provides a down-payment gift.

Bank of America Corp. said today that it settled mortgage-backed securities claims with the monoline insurer Financial Guaranty Insurance Co. (FGIC), the Wall Street Journal reported today. The bank said that it had settled seven of the nine trust settlements and expected to pay a total of about $950 million. The bank also said that the expenses were covered by legal reserves. Legal expenses pushed Bank of America to a first-quarter loss. The bank said it had a $6 billion litigation expense for the quarter, up from $2.2 billion in the same period a year ago. Of that, about $3.6 billion was related to the bank's settlement last month with the Federal Housing Finance Agency, where the bank agreed to pay some $9.5 billion to settle accusations that it had misled Fannie Mae and Freddie Mac about the quality of mortgage-backed securities it was selling. The bank had previously estimated that the FHFA settlement would cut earnings by about $3.7 billion before taxes. The bank has now settled with four of the five monoline insurers that had sued the bank over mortgage-backed securities.

As the rest of the housing industry recovers, a little-known firm with a key role in U.S. mortgage finance remains stuck in limbo, wrestling with regulators, lawsuits and the departures of senior employees, Bloomberg News reported today. The turbulence feeds uncertainty about the fate of Mortgage Electronic Registrations Systems Inc. (MERS), which documents the ownership and resale of about half of U.S. home loans. A breakdown could force clients such as Fannie Mae and Bank of America Corp. to make costly changes to their loan businesses. Management hasn’t completed fixes promised in a broad 2011 U.S. settlement designed to stop foreclosure abuses, according to two people briefed on MERS’ operations. Regulators rejected one of the firm’s consultants as unqualified and are examining why four employees hired to help with reforms — including the chief legal officer — recently quit. The closely held Reston, Va.-based firm, a unit of Merscorp Holdings Inc., is also facing scores of lawsuits and state probes that challenge its business model as well as the legality of its filings in hundreds of county courthouses.

Allstate Corp. and Bank of America Corp.’s Merrill Lynch unit agreed to end a lawsuit by the insurer over $167 million in mortgage-backed securities as the second-largest U.S. lender continues to resolve litigation tied to the financial crisis, Bloomberg News reported yesterday. The parties agreed to end the suit, filed in New York State Supreme Court in Manhattan in March 2011, according to a court filing dated yesterday. Terms weren’t revealed. Allstate, based in Northbrook, Ill., accused Merrill Lynch of selling it mortgage bonds that were riskier than promised.

A lawsuit has been unsealed accusing OneWest Bank FSB, a lender once known as IndyMac Bancorp Inc., of causing the U.S. government to improperly pay out $206 million under a federal program to help struggling homeowners avoid foreclosure, Reuters reported yesterday. According to a whistleblower complaint made public yesterday, OneWest violated the 2009 Home Affordable Modification Program (HAMP) by routinely tacking on thousands of dollars of debt to borrowers' principal balances, without providing required disclosures of terms such as payment amounts, interest rates, finance charges and late payment policies. The complaint said that OneWest would "virtually always" loan new amounts of principal, averaging $17,000 per contract, and fail to itemize as required under the federal Truth in Lending Act, making it impossible to tell whether the sums were proper. As a result, the lawsuit says the government paid $206 million of incentives under HAMP to help homeowners avoid foreclosure because of OneWest's false statements, including $58.3 million to OneWest.