%1

Credit Suisse Group AG was ruled by a judge to be liable for all damages that could be awarded to noteholders suing the bank over fraud at National Century Financial Enterprises Inc., a figure investors’ lawyers put at more than $2 billion, Bloomberg News reported on Saturday. U.S. District Judge James Graham said on Friday that because New York law governs apportionment of fault in the case, Credit Suisse will be liable for 100 percent of former Chief Executive Officer Lance Poulsen’s share of damages. “If the jury finds at trial that Credit Suisse and Poulsen each committed fraud that caused plaintiff’s losses, then under New York law Credit Suisse will be liable, as to plaintiffs, for 100 percent of Poulsen’s share,” judge Graham said. Noteholders claim the bank, the placement agent, knew or should have known of a $2.9 billion fraud that led to National Century’s collapse in 2002. Ten executives of the Dublin, Ohio- based health-care financer were convicted of crimes, including Poulsen, who is serving 30 years in prison.

Residential Capital LLC, the mortgage company liquidating assets in bankruptcy, agreed to pay $297.6 million to end opposition by government-run loan investor Fannie Mae to the sale of ResCap’s main business, Bloomberg News reported yesterday. The Federal National Mortgage Association agreed to drop its objection to the $3 billion sale of ResCap’s mortgage servicing unit to Ocwen Financial Corp., according to a court filing on Wednesday. Fannie Mae, as Federal National is known, is the biggest owner of loans generated by ResCap. Fannie Mae had demanded the so-called cure payment as compensation for any losses that may be caused by ResCap’s bankruptcy filing.

Residential Capital LLC, the bankrupt mortgage company whose parent is owned by the U.S. government, won court approval to try to sell a pool of defaulted loans with a balance of about $130 million, Bloomberg News reported yesterday. The mortgages are the best of about $1 billion in bad loans that ResCap was forced to repurchase after borrowers quit paying, according to papers the company filed in bankruptcy court earlier this month. ResCap picked about 650 loans that have the best information about the value of the homes.

Less than two years after embarking on a painful retreat from home lending, Bank of America Corp. is girding for a new run at the U.S. mortgage business, the Wall Street Journal reported today. The Charlotte, N.C.-based company aims to sell more mortgages through its 5,000-plus branches, executives said. The fourth-biggest U.S. mortgage lender, after Wells Fargo & Co., JPMorgan Chase & Co. and U.S. Bancorp, is intent on "growing that business," Chief Executive Brian Moynihan said. Bank of America's $2.5 billion purchase of Countrywide Financial Corp. in 2008 briefly made it the top U.S. home lender before the housing market crash saddled the company with billions of dollars in losses.

Since the summer of 2011, the insurance giant American International Group has been battling Bank of America over claims that the bank packaged and sold it defective mortgages that dealt AIG billions of dollars in losses, the New York Times reported today. Now AIG wants to be able to sue other banks that sold it mortgage-backed securities that plunged in value during the financial crisis. It has not said which banks, but possibilities include Deutsche Bank, Goldman Sachs and JPMorgan Chase. But to sue, AIG first must win a court fight with an entity controlled by the Federal Reserve Bank of New York, which the insurer says is blocking its efforts to pursue the banks that caused it financial harm. According to a lawsuit filed Friday, AIG is seeking a declaration from a New York state judge that it has the right to pursue “billions of dollars of fraud and other tort claims that exist against numerous financial institutions,” even though Fed officials have said AIG gave up that right.

The House of Representatives yesterday approved (241-180) a $50.5 billion aid package to help Northeastern states rebuild after superstorm Sandy—a major victory for hard-hit parts of New York and New Jersey, the Wall Street Journal reported yesterday. The bill contains funds for a range of projects that Northeastern officials say are vital to the region's recovery. Money would go to help rebuild mass-transit systems, housing and damaged coastal areas. The region would receive $16 billion in Community Development Block Grants from the Department of Housing and Urban Development, an especially flexible stream of funding that can be directed to an array of rebuilding needs.

Bank of America Corp. agreed to pay $62.5 million to resolve investor claims that the bank’s directors mishandled the acquisition of Merrill Lynch & Co., Bloomberg News reported yesterday. U.S. District Judge Kevin Castel in New York on Friday approved Bank of America’s offer to add $42.5 million to a $20 million settlement of shareholder lawsuits alleging the bank’s board allowed executives to overpay for Merrill Lynch in 2009. Castel indicated in a Jan. 4 order that he had questions about the “fairness, reasonableness and adequacy” of the original accord, according to court filings. Resolution of the claims against Bank of America’s board clears the way for Castel to focus on whether to bless a more than $2.4 billion settlement of other investors’ securities-fraud claims over the Merrill Lynch deal.

Bank of America Corp. has been fighting in a New York court this week to avoid as much as $3 billion in liability for defaulted Countrywide mortgage securities, the Wall Street Journal reported today. In a two-day hearing Wednesday and yesterday, Bank of America argued that it structured its 2008 deal with Countrywide Financial Corp. in a way that allowed it to avoid liability for certain Countrywide assets, branded "too toxic" in one internal bank email. MBIA maintained the deal was a merger in which Bank of America absorbed 19,000 Countrywide employees, technology and operations to enhance its mortgage capabilities. The insurer introduced videotaped deposition testimony from executives including former Chief Executive Ken Lewis and current CEO Brian Moynihan to bolster its case.

Federal banking regulators are trumpeting an $8.5 billion settlement this week with 10 banks as quick justice for aggrieved homeowners, but the deal is actually a way to quietly paper over a deeply flawed review of foreclosed loans across America, according to current and former regulators and consultants, the New York Times reported today. To avoid criticism as the review stalled and consultants collected more than $1 billion in fees, the regulators, led by the Office of the Comptroller of the Currency, abandoned the effort after examining a sliver of nearly four million loans in foreclosure, the regulators and consultants said. Because they have no idea how many borrowers were harmed, the regulators are spreading the cash payments over all 3.8 million borrowers — whether there was evidence of harm or not. As a result, many victims of foreclosure abuses like bungled loan modifications, deficient paperwork, excessive fees and wrongful evictions will most likely get less money.

New mortgage rules set to be unveiled today by the Consumer Financial Protection Bureau will spell out how lenders must ensure that borrowers can repay their home loans, the Wall Street Journal reported today. The rules, which go into effect next January, were designed to enhance consumer safety without tightening credit standards beyond current levels. The 2010 Dodd-Frank financial-regulation overhaul changed lending rules to make banks legally responsible for determining that a borrower is able to repay a mortgage. The CFPB's rules are intended to implement that change. The upshot is that banks are likely to narrow their loan offerings and rely more on the 30-year, fixed-rate mortgage, a product unique to the U.S. and one that has required a government guarantee. Many lenders had expressed concerns that the ability-to-repay mandate would create open-ended legal liability that would lead to more-stringent lending standards. But regulators, sharing those concerns, said that they opted for rules that would not significantly restrict credit.