BLOOMBERG

The 14 largest U.S. mortgage servicers must pay back homeowners for losses from foreclosures or loans that were mishandled in the wake of the housing collapse, according to a consent decree released today.

The agreement between the servicers and U.S. regulators imposes more substantial penalties than early reports of the deal indicated. It could also help the U.S. Justice Department determine the size and scope of any future fines for the flawed practices, regulators said.

Hear No Evil, See No Evil, Speak No Evil

The banks didn’t admit or deny regulators’ findings, according to the orders.

From Fed Press Release:

The Federal Reserve will closely monitor progress at the firms in addressing these matters and will take additional enforcement actions as needed.

In addition to the actions against the banking organizations, the Federal Reserve on Wednesday announced formal enforcement actions against Lender Processing Services, Inc. (LPS), a domestic provider of default-management services and other services related to foreclosures, and against MERSCORP, Inc. (MERS), which provides services related to tracking and registering residential mortgage ownership and servicing, acts as mortgagee of record on behalf of lenders and servicers, and initiates foreclosure actions. These actions address significant compliance failures and unsafe and unsound practices at LPS and its subsidiaries, and at MERS and its subsidiary. The action requires LPS to address deficient practices related primarily to the document execution services that LPS, through its subsidiaries DocX, LLC, and LPS Default Solutions, Inc., provided to servicers in connection with foreclosures. MERS is required to address significant weaknesses in, among other things, oversight, management supervision, and corporate governance. The LPS action is being taken jointly with the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, and the Office of Thrift Supervision, while the MERS action is being taken jointly with those agencies and the Federal Housing Finance Agency.

The Federal Reserve Board based its enforcement actions on the findings of the interagency reviews of the major mortgage servicers, LPS, and MERS. A summary of the findings from the reviews of the mortgage servicers is available in the Interagency Review of Foreclosure Policies and Practices, which is simultaneously being released by the Federal Reserve Board and the other agencies.

• Interagency Review of Foreclosure Policies and Practices (461 KB PDF)
• Consent Order for Bank of America Corp. (34 KB PDF)
• Consent Order for Citigroup Inc. and CitiFinancial Credit Co. (28 KB PDF)
• Consent Order for Ally Financial, Inc., ResCap, GMAC Mortgage, and Ally Bank (87 KB PDF)
• Consent Order for HSBC North America Holdings, Inc. and HSBC Finance Corp. (76 KB PDF)
• Consent Order for JPMorgan Chase & Co. and EMC Mtge. (39 KB PDF)
• Consent Order for MetLife, Inc. (25 KB PDF)
• Consent Order for PNC Financial Svs. Group, Inc. (25 KB PDF)
• Consent Order for SunTrust Banks, Inc., SunTrust Bank, and SunTrust Mortgage (76 KB PDF)
• Consent Order for U.S. Bancorp (25 KB PDF)
• Consent Order for Wells Fargo & Co. (25 KB PDF)
• Consent Order for LPS (47 KB PDF)
• Consent Order for MERS (48 KB PDF)

Credit Slips.org

The rule of law is not even worth 20 basis points.  That’s the ultimate message in a recent paper by Charles Calomiris, Eric Higgins, and Joseph Mason evaluating the proposed AG mortgage servicing settlement. Calomiris et al. estimate that the settlement will raise mortgage costs at least 20bps, and they think that’s too much.

Recognize what they’re really saying:  that 20-45bps is too high a price to pay for the rule of law. They value the rule of law at less than 20bps. At present conversion rates, that’s about 30 shekels of silver.

The whole Calomiris et al. document is rather strange, as it’s hard to do any serious evaluation of the settlement without knowing the terms. We’ve seen a proposed servicing standards term sheet from the AGs and we’ve seen a CFPB analysis of disgorgement of wrongful profits and the costs of potential principal reductions, but it’s way premature to attempt any sort of real evaluation of a settlement. Unless, of course, the goal is not a serious evaluation of a settlement, but an attempt to forestall a settlement. Which is what this paper is.

Full Disclosure:

Funding for this research was provided in part by the financial services industry, including entities affected by the proposed settlement.

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The Economics of the Proposed Mortgage Servicer Settlement

Charles W. Calomiris, Eric J. Higgins, and Joseph R. Mason1

[ipaper docId=52894340 access_key=key-bxx3cj688ghgdck8kt8 height=600 width=600 /]

Federal banking regulators have not officially imposed their new rules for the top mortgage servicers, but criticism is already being heard. A wide coalition of consumer and housing groups is denouncing the legal agreements, which are likely to be published within a few days. ?

[…]

The problem, said Alys Cohen of the National Consumer Law Center, is the agreements “do not in any way require the servicers to stop avoidable foreclosures, and that is what we need.”

It’s going to get really interesting to see how this all plays out with the AG’s role.

According to the New York Times, the the servicers, which violated state and local laws and regulations governing foreclosures, are agreeing to improve their methods in numerous ways. They will be required to have more layers of oversight and proper training of their foreclosure staff. The oversight will extend to third party groups, including the law firms that do much of the actual work of eviction.

[…]

The investigators reviewed the policies and procedures, structure and staffing of the top servicers, as well as their use of law firms and other third parties. They examined 2,800 foreclosures in various stages.

The banks examined were Bank of America, Citibank, GMAC, JPMorgan Chase, Wells Fargo and nine others. The examination found critical deficiencies and shortcomings in foreclosure preparation and oversight, resulting in violations of state and local foreclosure laws, regulations and rules.

The servicers will probably be assessed fines at a later point.

More and more proof the whole Fraudclosure Settlement “leaders” are discombobulated.  Just last week, AG Tom Miller said “We have a long way to go.”

Now.. according to the Wall Street Journal …

Regulators including the Office of the Comptroller of the Currency, Federal Reserve and Office of Thrift Supervision could announce the agreements with the banks and thrifts as early as next week, though a date wasn’t final, according to people familiar with the matter.

The regulators are likely to act ahead of state attorneys general, who are also in talks with the banks. Those discussions are moving at a slower pace amid disputes among several state officials.

Seriously, why aren’t they all working together? Lefty doesn’t know what the right is doing.

Here’s the banks’ counterproposal for a servicing fraud settlement. I can sum it up in two words: drop dead.  Or two letters:  F.U. This proposals is so pathetically thin that it’s not a good faith counterproposal. This document only deals with servicing standards–nothing in it whatsoever about penalties, modification quotas, etc. But even on servicing standards it is a bunch of empty promises to have internal controls and try harder.

The first point about this counterproposal is simply to note what’s absent from it:

(1) nothing about principal reductions

(2) nothing about second liens and conflicts of interest

(3) nothing about MERS (reserved for later)

(4) nothing about in-sourced vendor fees or force-placed insurance to affiliates. This makes the fees and force-place insurance sections pretty meaningless.

(5) nothing about pyramiding of fees.

via: Credit Slips

Draft Uniform Servicing Standards

[ipaper docId=52067940 access_key=key-1h4x2rylxqp4qcg8bpqr height=600 width=600 /]

From CNNMONEY [link]

“Principal writedown for people who could pay their mortgages? Yeah, that’s off the table,” JPMorgan Chase (JPM, Fortune 500) CEO Jamie Dimon said when asked about the idea after an appearance before a U.S. Chamber of Commerce forum in Washington.

Read the excerpts below carefully… You’ll be screwed if you plan to wait on any reasonable settlement, just like “HAMP” left you waiting for your mod. Don’t expect miracles!

PERIOD. DONE.

From The New York Times

“We have a long way to go,” Iowa Attorney General Tom Miller, who is leading the effort from the states’ side, said after the afternoon session broke up.

[…]

Lengthy negotiations work to the banks’ advantage, critics say.

“The banks’ strategy is to run the clock,” a Georgetown University law professor, Adam Levitin, said. “The chances of a settlement that meaningfully reforms mortgage servicing and makes the banks pay an appropriate price for illegal conduct are rapidly slipping away.”

This was taken From Zack Carter’s Article on Huffington Post:

“I am incensed that the FBI has not filed one criminal case,” Rep. Marcy Kaptur (D-Ohio) said, referring to the lack of prosecutions against major banking executives. “And I’m very worried that the game that’s being played here is to run out the statute of limitations.”

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Oh and AG’s make sure the banks get barred from Deficiency Judgments in your settlement!

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Question: Why don’t the AG’s just FORCE-PLACE a settlement and be done with it?

via: The Wall Street Journal

The document, reviewed by The Wall Street Journal, is a response to a 27-page term sheet banks received earlier this month from state attorneys general that would require the servicers to consider reducing principal for troubled borrowers. The 15-page bank proposal, dubbed the Draft Alternative Uniform Servicing Standards, includes time lines for processing modifications, a third-party review of foreclosures and a single point of contact for financially troubled borrowers. It also outlines a so-called “borrower portal” that would allow customers to check the status of their loan modifications online.

But the document doesn’t include any discussion of principal reductions. Nor does it include a potential amount banks could pay for borrower relief or penalties. Government officials have discussed a settlement sum of more than $20 billion.

© 2010-19 FORECLOSURE FRAUD | by DinSFLA. All rights reserved.

By Robert Schmidt and Tom Schoenberg

(Updates with excerpt from letter in fourth paragraph.)

March 22 (Bloomberg) — Four more Republican state attorneys general are opposing a plan to resolve a nationwide probe of foreclosure and mortgage-servicing practices because the terms may foster a “moral hazard.”

In a letter today to Iowa Attorney General Tom Miller, a Democrat who has taken the lead in the investigation, the officials objected to new documentation requirements and principal reductions outlined in the proposed settlement submitted to the country’s top mortgage-servicing companies this month.

by Jesse Eisinger
ProPublica, March 16, 2011, 3:13 p.m.

Shahien Nasiripour
HuffPost Reporting shahien@huffingtonpost.com

NEW YORK — The Obama administration is seeking to force the nation’s five largest mortgage firms to reduce monthly payments for as many as three million distressed homeowners in as little as six months as part of an agreement to settle accusations of improper foreclosures and violations of consumer protection laws, six people familiar with the matter said.

Described as a “shock and awe” approach, the deal would accomplish the four goals set out by state and federal policy makers and regulators as part of their multi-agency investigations into abusive mortgage practices by the nation’s largest financial firms: punish banks for violations of state law and federal regulations; provide much-needed assistance to distressed borrowers; stabilize a deteriorating housing market; and dissuade firms from abusing homeowners in the future.

By PAUL KRUGMAN

Published: March 13, 2011

Count me among those who were glad to see the documentary “Inside Job” win an Oscar. The film reminded us that the financial crisis of 2008, whose aftereffects are still blighting the lives of millions of Americans, didn’t just happen — it was made possible by bad behavior on the part of bankers, regulators and, yes, economists.

What the film didn’t point out, however, is that the crisis has spawned a whole new set of abuses, many of them illegal as well as immoral. And leading political figures are, at long last, showing some outrage. Unfortunately, this outrage is directed, not at banking abuses, but at those trying to hold banks accountable for these abuses.

By Scot J. Paltrow

WASHINGTON | Fri Mar 11, 2011 1:10pm EST

WASHINGTON (Reuters) – A settlement proposal by state attorneys general with the five biggest U.S. mortgage servicers stands out less for what it contains than for what it omits — terms for resolving the most difficult issues dividing regulators and the big banks.

The proposal, which calls for a dramatic increase in loan modifications, is intended as the basis for settling allegations of widespread wrongdoing by the big loan servicers in handling millions of foreclosures.

By David McLaughlin – Mar 11, 2011 3:05 PM ET

Virginia is among “at least a dozen” U.S. states that don’t back a proposal submitted last week to resolve a nationwide probe of foreclosure and mortgage- servicing practices, Virginia Attorney General Kenneth Cuccinelli said.

There isn’t consensus among all 50 state attorneys general about the terms of the settlement proposed to U.S. banks, Cuccinelli, a Republican, said today in a telephone interview.

“When some attorneys general found out what was being agreed to, they had a great degree of unease over it,” Cuccinelli said. He declined to name which states, aside from his own, were opposed to parts of the plan.

By ABIGAIL FIELD Posted 12:20 AM 03/09/11

Now that I’ve had a chance to read the mortgage mess settlement proposal I realize what it really is: a repudiation of the servicing industries’ standard business practices.

Thankfully, it includes a couple provisions I was concerned were absent. Servicers have to show their math when announcing if a modification is denied, so the consumer can challenge the calculation, and foreclosures will no longer start with incomplete or fraudulent documentation. Those steps buttress other good provisions: banning foreclosures while modifications are negotiated and tried, and making trial modifications permanent after three payments.

While I’m glad those provisions are in the document, the term sheet is nonetheless pathetic. Repudiating the servicing industry’s business model mostly means telling servicers they can’t break the law and must act with basic good faith, such as crediting payments as of the day they were received and charging only one late fee for a late payment. As a result, the agreement reads as an indictment — not just of the servicing industry, but also of law enforcement, regulators and Congress.

Washington Post Staff Writer
Wednesday, March 9, 2011; 8:55 PM

Republican lawmakers on Wednesday accused the Obama administration of trying to make an end run around Congress as it negotiates a large settlement with banks involved in shoddy foreclosure practices.

In a letter to Treasury Secretary Timothy F. Geithner, Republicans criticized the scope of a 27-page draft term sheet that was recently submitted to five of the nation’s largest banks by state attorneys general and a handful of federal agencies, including the Justice Department and the new Consumer Financial Protection Bureau.

“The settlement agreement not only legislates new standards and practices for the servicing industry, it also resuscitates programs and policies that have not worked or that Congress has explicitly rejected,” the letter said. It was signed by nearly half a dozen Republicans, including Rep. Scott Garrett (N.J.), the lead sponsor.

“The settlement agreement not only legislates new standards and practices for the servicing industry, it also resuscitates programs and policies that have not worked or that Congress has explicitly rejected”

Speaking of reviving the FAILED HAMP PROGRAM…

[ipaper docId=50420719 access_key=key-13fgya6xnrt7ccozg2l1 height=600 width=600 /]?

Wow. Talk about brass balls. Lets see you maneuver through this one.

By NELSON D. SCHWARTZ Published: March 8, 2011

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Showing resistance for the first time against government pressure to write off tens of billions worth of mortgage debt, Bank of America executives said on Tuesday that the idea was unworkable and warned that it would be unfair to borrowers who had managed to stay current on their loans.

“There’s a core problem that if you start to help certain people and don’t help other people, it’s going to be very hard to explain the difference,” said Brian T. Moynihan, the chief executive of Bank of America. “Our duty is to have a fair modification process.”