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Wells Fargo & Co. asked a judge to dismiss a suit by the U.S. government claiming the bank made reckless mortgage loans that caused losses for a federal insurance program, Bloomberg News reported yesterday. The U.S. suit alleges more than a decade of misconduct by Wells Fargo in connection with a Federal Housing Administration program. Wells Fargo argued that the government's suit, which was filed in October, should be dismissed because it fails to adequately allege facts that would allow the case to go forward. The U.S. claims that the FHA paid hundreds of millions of dollars in insurance claims on defaulted mortgages in connection with the FHA’s Direct Endorsement Lender Program as a result of false certifications by Wells Fargo. In the hearing today, Wells Fargo argued that the U.S. released claims against it in a settlement last year. The bank also said that the government's claims for conduct before June 25, 2006, were filed too late and that the U.S. failed to allege specific facts showing that the bank engaged in fraud.

The Senate Banking Committee’s Housing, Transportation, and Community Development Subcommittee will be holding a hearing at 10 a.m. ET titled, "Helping Homeowners Harmed by Foreclosures: Ensuring Accountability and Transparency in Foreclosure Reviews, Part II." To view the witness list and prepared witness testimony, please click here.

U.S. District Judge Berle Schiller ruled that Bank of America Corp., the second- largest U.S. lender by assets, must face claims by homeowners that it took kickbacks from private insurers, Bloomberg News reported yesterday. Judge Schiller denied the bank’s request to toss the lawsuit because the statute of limitations had expired on the claims. Homeowners who sued should have the opportunity to develop their argument that the claims should be allowed because the bank intentionally concealed its behavior, Schiller said. "Plaintiffs' allegations that defendants dressed up an illegal scheme to appear as a legitimate transaction is sufficient to deny defendants' motion to dismiss," Schiller said.

Mark Zandi, a prominent economist, has emerged as a leading candidate to head the regulator of mortgage-finance companies Fannie Mae and Freddie Mac amid signs that he would likely attract support from Senate Republicans, the Wall Street Journal reported today. The White House has not yet decided who to nominate as the next director of the Federal Housing Finance Agency, a position it has struggled to fill. Along with Zandi, the Obama administration has also been considering Rep. Mel Watt (D-N.C.). The FHFA director has become an increasingly important economic-policy position in Washington, because the agency serves as the warden of Fannie and Freddie, which own or guarantee half of all the nation's mortgages. Zandi, co-founder of an economic-forecasting firm that was purchased by Moody's Corp. in 2005, serves as chief economist of Moody's Analytics. He speaks frequently on the economy, fiscal issues and housing—testifying before Congress at least nine times in the last two years—and played a key role advising congressional Democrats on the 2009 economic-stimulus bill. The FHFA's current director, Edward DeMarco, took the job four years ago in an acting capacity after his predecessor left for the private sector. DeMarco has at times clashed with the Obama administration over homeowner aid, and left-leaning groups have campaigned to replace him. The agency, created five years ago, has never had its own director confirmed by the Senate because of Republican opposition to an earlier nomination.

Residential Capital LLC's creditors want the right to sue ResCap parent Ally Financial Inc. over dealings between the entities before and since ResCap's bankruptcy filing, which, if successful, could put government-controlled Ally on the hook for all $20 billion to $25 billion in ResCap's liabilities, Dow Jones Daily Bankruptcy Review reported today. In a court filing on Thursday, ResCap's unsecured creditors' committee said that its investigation into the relationship between the two companies "paints a stark picture" of Ally's "domination, control, and abuse" of ResCap. A hearing on whether the creditors can sue over the matter is set for April 30.

Mortgage rates are low, but home values compared with annual incomes are greater than before the housing bubble, the Washington Post reported today. In the fourth quarter of 2012 alone, homeowners spent almost 37 percent less on the payments than they did in the years before the housing bubble, according to real estate tracking firm Zillow. But this saving has a flip side: As home values rise, paychecks are not keeping up. At the end of 2012, buyers bought homes that were three times their annual income, on average, up from 2.6 times before the housing bubble.

The vast majority of borrowers being compensated for mortgage-related abuses will get $1,000 or less apiece, a sobering conclusion to a protracted attempt to help those who may have been placed into foreclosure as a result of banks' mistakes, the Wall Street Journal reported today. About 4 million borrowers will share $3.6 billion in cash as part of a settlement between federal regulators and banks accused of foreclosure-processing mistakes. U.S. regulators said yesterday that banks wrongfully took away homes from 1,082 borrowers who were members of the U.S. military. Another 53 borrowers were found to have lost their homes despite not actually defaulting on their loans. Those 1,135 individuals will receive checks of $125,000. Most borrowers, however, will see far less, with about 80 percent receiving checks ranging from $300 to $1,000, according to data released by the Office of the Comptroller of the Currency and the Federal Reserve.

Residential Capital LLC wants to keep using the cash securing the claims of parent Ally Financial Inc. and bondholders, which ResCap says is necessary to complete the "great deal of work" that remains in its bankruptcy case, Dow Jones Newswires reported yesterday. In a court filing on Monday, ResCap asked Bankruptcy Judge Martin Glenn if it could continue using that cash as it works toward resolving the issues in its chapter 11 and filing a reorganization plan. The judge has already approved ResCap's prior requests to use the cash, which is secured by loans. ResCap said that it wants to use the cash to maintain certain loan portfolios, as well as to sell those loans.

The U.S. Trustee's office said in court papers that Residential Capital LLC must prove that proposed bonuses valued at $7.8 million are appropriate given that some of the money would be paid to the bankrupt mortgage company's insiders, Bloomberg News reported yesterday. The proposed payments would go to 163 individuals, with two insiders getting 14 percent of the total and six others receiving another 32 percent, the U.S. Trustee said. ResCap, based in New York, filed for bankruptcy in May with plans to sell most of its assets and resolve legal claims related to residential mortgage-backed securities. The company is owned by Detroit-based auto lender Ally Financial Inc.

A federal regulator set up after the financial crisis to protect consumers announced enforcement actions against four insurance companies yesterday, asserting that the firms paid kickbacks to mortgage lenders for more than 10 years, the New York Times DealBook blog reported yesterday. The accusations by the Consumer Financial Protection Bureau (CFPB) focus on mortgage insurance, a product that many borrowers were required to purchase if they did not make a sizable down payment when buying a house. The bureau claims that, because of the kickbacks, home buyers may have had to pay more for the mortgage insurance.