Bloomberg-

Wells Fargo & Co. directors must face investors’ claims that largest U.S. mortgage lender failed to properly disclose details of its foreclosure practices to government investigators, a judge ruled.

U.S. District Judge Susan Illston in San Francisco rejected Wells Fargo’s request to dismiss shareholders’ allegations that directors wrongfully failed to disclose their opposition to a government probe of the bank’s mortgage lending and foreclosure policies.

“The fact that the company was allegedly stymieing the government regulators is certainly material to stockholders when considering whether to authorize a more serious internal investigation,” Illston said in Feb. 9 ruling.

[BLOOMBERG]

Business Insider-

Yet another class action suit with the potential to reap millions for consumers has been filed against a pair of the country’s biggest mortgage lenders.

This time, Wells Fargo and Chase have been fingered over allegedly deceptive mortgage default fee practices, law firm Baron and Budd announced. 

The suit claims the lenders charged homeowners over inflated fees once they began to fall behind on mortgage payments

[BUSINESS INSIDER]

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION

THERESE DICKOW,
on behalf of herself and a class of persons
similarly situated,
Plaintiffs,

vs.

JPMORGAN CHASE BANK, N.A,
Successor in interest from the Federal Deposit
Insurance Corporation, as receiver for
Washington Mutual Bank; BOARD OF GOVERNORS
OF THE FEDERAL RESERVE SYSTEM; and
OFFICE OF COMPTROLLER OF THE CURRENCY
(federal bank regulators),
Defendants.

__________________________________________________________/]

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Alison Frankel:

Asking investors in mortgage-backed securities to trust the banks that issued them is like asking Charlie Brown to trust Lucy van Pelt. MBS noteholders are so convinced they’ve been duped by the folks that packaged and sold shoddy mortgage loans that it’s little wonder the banks’ $25 billion settlement with federal and state regulators has been greeted with a tsunami of skepticism. Sure, MBS investors understand that the settlement doesn’t preclude them or regulators from suing over deficient securitizations. But their fear, in the absence of the actual settlement documents, is that the loan modifications the deal calls for will reduce the revenue stream to MBS trusts.

It’s an understandable fear. The five banks that agreed to the settlement — Bank of America, JPMorgan Chase, Citigroup, Wells Fargo, and Ally Financial — carry some troubled mortgage loans on their own books. Others were bundled into MBS trusts, in which the banks transfer ownership of the mortgages and remain as servicers. MBS noteholders are supposed to receive a stream of income from the principal and interest payments on the underlying mortgage loans. So if a bank agrees to reduce the unpaid principal a homeowner owes on a mortgage that’s been securitized, less money flows to the trust and into MBS investors’ hands.

[REUTERS LEGAL]

VII. Release of Claims

The proposed Release contains a broad release of the banks’ conduct related to mortgage loan
servicing, foreclosure preparation, and mortgage loan origination services. Claims based on
these areas of past conduct by the banks cannot be brought by state attorneys general or banking
regulators.

The Release applies only to the named bank parties. It does not extend to third parties who may
have provided default or foreclosure services for the banks. Notably, claims against MERSCORP, Inc.
or Mortgage Electronic Registration Systems, Inc. (MERS) are not released.
Securitization claims, including claims of state and local pension funds, and including investor
claims related to the formation, marketing or offering of securities, are fully preserved. Other
claims that are not released include violations of state fair lending laws, criminal law enforcement,
claims of state agencies having independent regulatory jurisdiction, claims of county recorders for
fees, and actions to quiet title to foreclosed properties. Of course, the Release does not affect the
rights of any individuals or entities to pursue their own claims for relief.

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What GAO Found

During fiscal year 2011, OFS addressed several of the internal control issues related to the significant deficiency we reported for fiscal year 2010 concerning its accounting and financial reporting processes. However, remaining uncorrected control deficiencies along with other control deficiencies that we identified in this area in fiscal year 2011 collectively represented a continuing significant deficiency in OFS’s internal control over its accounting and financial reporting processes. Specifically, while OFS improved its review and approval process for preparing its financial statements, notes, and Management Discussion and Analysis (MD&A) for TARP for fiscal year 2011, we continued to identify incorrect amounts and inconsistent disclosures in OFS’s draft financial statements, notes, and MD&A that were significant, but not material, and that were not detected by OFS. For fiscal year 2011, we also identified deficiencies in other OFS accounting and financial reporting procedures related to: (1) recording of noncash transactions, (2) recording of warrant adjustments, and (3) accounting for Public-Private Investment Fund (PPIF) equity distributions.

OFS had other controls over TARP transactions and activities that reduced the risk of misstatements in its financial statements resulting from these deficiencies. For significant errors and issues that were identified, OFS revised the financial statements, notes, and MD&A, as appropriate.

In addition to the significant deficiency, we identified a less-significant control deficiency relating to key patches8 that were not in place for the server9 supporting OFS’s subsidiary ledger. During fiscal year 2011, OFS addressed the three less-significant control deficiencies that existed as of September 30, 2010, and that we reported in our April 2011 management report.10

We are making three new recommendations related to OFS’s continuing significant deficiency and one related to the less-significant control deficiency. Further, our work showed that OFS had completed corrective action on 10 of the 13 recommendations that remained open at the end of the fiscal year 2010 audit, and corrective actions were in progress on the three remaining recommendations.

Why GAO Did This Study

The Emergency Economic Stabilization Act of 2008 (EESA) requires that we annually audit the financial statements of the Troubled Asset Relief Program (TARP), which are prepared by the Department of the Treasury’s (Treasury) Office of Financial Stability (OFS). On November 10, 2011, we issued our audit report including (1) an unqualified opinion on OFS’s financial statements for TARP as of and for the fiscal years ended September 30, 2011 and 2010, and (2) an opinion that OFS maintained effective internal control over financial reporting as of September 30, 2011. We also reported that our tests of OFS’s compliance with selected provisions of laws and regulations for the fiscal year ended September 30, 2011, disclosed no instances of noncompliance.

Our November 2011 audit report concluded that although certain internal controls could be improved, OFS maintained, in all material respects, effective internal control over financial reporting as of September 30, 2011, that provided reasonable assurance that misstatements, losses, or noncompliance material in relation to the financial statements would be prevented or detected and corrected on a timely basis. Our audit report also identified a continuing significant deficiency

in OFS’s internal control over its accounting and financial reporting processes.

This report presents (1) detailed information concerning underlying new control deficiencies that contributed to the continuing significant deficiency identified in our audit report, along with related recommendations for corrective actions; (2) a less-significant control deficiency that we identified during our audit, along with a related recommendation for corrective action; and (3) the status, as of November 4, 2011, of corrective actions taken by OFS to address the 13 recommendations that remained open at the end of the fiscal year 2010 audit and were detailed in our April 2011 management report. While the deficiencies we identified are not considered material weaknesses, they nonetheless warrant management’s attention and action.

What GAO Recommends

The four new recommendations presented in this report are in addition to those we have made as part of the series of reports issued on our ongoing oversight of TARP.

For more information, contact Gary T. Engel at (202) 512-3406 or engelg@gao.gov.

Recommendations for Executive Action

Money News-

The government’s deal with banks over their foreclosure practices after 16 months of investigations is cheap for the loan servicers while costly for bond investors including pension funds, according to Pacific Investment Management Co.’s Scott Simon.

In what the U.S. called the largest federal-state civil settlement in the nation’s history, five banks including Bank of America Corp. and JPMorgan Chase & Co. yesterday committed $20 billion in various forms of mortgage relief plus payments of $5 billion to state and federal governments.

“This was a relatively cheap resolution for the banks,” said Simon, the mortgage head at Pimco, which runs the world’s largest bond fund. “A lot of the principal reductions would have happened on their loans anyway, and they’re using other people’s money to pay for a ton of this. Pension funds, 401(k)s and mutual funds are going to pick up a lot of the load.”

Read more: Pimco: $25 Billion Foreclosure Deal to Hit Pensions Harder Than Banks

Bain v. Metropolitan is set for hearing on March 15. This is an amicus from attorney Shawn Timothy Newman for Organization United for Reform (OUR) – Washington.

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