Government

While the $25 billion settlement between five of the nation's largest servicers and 49 of the state attorneys general awaits approval from a judge, there is some relief in the industry that the 16 months of investigation and negotiation has come to a close. Mike Heid, president of Wells Fargo Home Mortgage, says the agreement represents ""a very important step toward restoring confidence in mortgage servicing and stability in the housing market.""

Bank of America will pay $1 billion to the U.S. to settle on the largest False Claims Act relating to mortgage fraud. Since 2009, the U.S. attorney's office has been investigating lending practices from Countrywide, which BofA acquired in 2008. The results of the investigation led to allegations that the bank created loans insured by the Federal Housing Authority (FHA) to unqualified home buyers. BofA was also accused of originating loans based on inflated appraisals and failing to identify homeowners who could participate in the government's Home Affordable Modification Program.

The Office of the Comptroller of the Currency (OCC) and the Federal Reserve issued statements Thursday detailing monetary penalties they have levied against the nation's largest servicers for ""unsafe and unsound mortgage servicing and foreclosure practices."" The OCC is assessing a total of $394 million in penalties against Bank of America, Citi, JPMorgan Chase, and Wells Fargo. The Federal Reserve's monetary sanctions total $766.5 million and target the same four institutions as well as Ally Financial.

Thursday's unprecedented $25 billion settlement between federal and state officials and the nation's top mortgage servicers was especially favorable to California. After leaving settlement negotiations in September, claiming the proposal at the time was inadequate for California homeowners, Attorney General Kamala Harris opted to sign on to the final settlement, which was revised to secure $18 billion for the state of California. At the time Harris left the settlement, California was expected to receive about $4 billion from the banks.

While the $25 billion robo-signing settlement concludes 16 months of intense negotiations, questions still remain on how this will impact borrowers and the larger economy. Capital Economics stated that while it is good that the settlement has been finalized and will offer principal reductions and refinancing schemes to borrowers, the bigger picture is that the settlement is not large enough to dramatically alter the outlook for the housing market or the wider economy.

Federal and state officials announced Thursday morning that the federal government and 49 state attorneys general - with Oklahoma as the lone exception - have reached a $25 billion agreement with the nation's five largest mortgage servicers to address what authorities describe as ""loan servicing and foreclosure abuses."" The settlement with the nation's top five servicers – Bank of America, JPMorgan Chase, Wells Fargo, Citigroup, and Ally Financial (formerly GMAC) - provides financial relief to homeowners and establishes new homeowner protections.

HOPE NOW announced plans to reach out to military homeowners facing foreclosure. Stakeholders representing the mortgage servicing industry, non-profit counselors, investors, regulators, and military members met in Washington, D.C. to strategize on ways to assist those in the military who are at risk of losing their home due to a permanent change in station and other issues.

Four federal regulatory agencies issued guidance for junior lien holders regarding loan loss allowances. Junior liens include second mortgages and home equity lines of credit. The Federal Reserve, FDIC, National Credit Union Administration, and Office of the Comptroller of the Currency issued the guidance not to enact new rules, but rather ""to reiterate policy and to remind regulated financial institutions to monitor all credit quality indicators relevant to credit portfolios, including junior liens,"" according to a joint release from the agencies.

While the industry awaits the final details of the attorneys general settlement with the nation’s largest servicers, Missouri Attorney General Chris Koster announced Tuesday it is prosecuting DocX, LLC, and its founder, Lorraine Brown, for forgery and false declarations on mortgage documents. The announcement comes after a grand jury delivered 136-count criminal indictments against DocX and Brown, the result of several months of investigation.

An estimated 1.05 million homeowners received permanent loan modifications from mortgage servicers in 2011, according to year-end data released Tuesday by HOPE NOW. That tally includes both proprietary and government-program mods, and represents a 40 percent decline from the 1.76 million modifications granted in 2010. At the same time, HOPE NOW reports loan modifications outpaced foreclosure sales for the fourth consecutive year. In 2011, there were approximately 843,000 foreclosure sales completed, down from 1.07 million in 2010.