Government

With their 2012 first quarter earnings, JPMorgan and Wells Fargo revealed the reclassification of $1.6 billion and $1.7 billion, respectively, in second lien mortgages as nonperforming loans even though they are not yet delinquent. Fitch Ratings said it believes many U.S. banks are likely to follow suit, and that it does ""not view this as a material shift in the performance of these loans."" Both banks cited regulatory guidance as reasons for the reclassification. The reclassified loans are second liens associated with delinquent first liens. In cases involving delinquent loans, second liens are written off before a first lien takes any losses.

Through an ongoing investigation into bid rigging, a former executive of a New York tax liens company pleaded guilty Tuesday for his role in rigging bids for tax liens auctioned by municipalities through out the state, according to statement issued by the Department of Justice. Stephen E. Hruby, who supervised the purchasing of municipal tax liens at auctions in New Jersey, was the seventh to plead guilty from the ongoing bid rigging investigation. A felony charge was filed against him in the U.S. District Court in Newark, New Jersey.

Housing permits surged another 4.5 percent in March to a seasonally adjusted annual rate of 747,000, the highest level since September 2008, the Census Bureau and Department of Housing and Urban Development reported jointly Tuesday. At the same time though, housing starts fell for the third time in the last four months to the lowest level since last October. The increase in permits was driven largely by multi-family activity; single family permits fell for the first time since last September.

Ally Financial has agreed to extend the maturity of its secured debt facility with its wholly owned mortgage subsidiary Residential Capital LLC (ResCap). Shortly following the announcement, Fitch Ratings issued a research note on the action, saying that Ally's decision is in line with the agency's expectation of continued moderate support to ResCap from its parent company. That moderate support, however, may be short-lived. With the debt renewal only extended through mid-May, Ally may be planning for a bankruptcy resolution in the near future.

The head of one of the world's most powerful financial policy bodies has tossed her hat into the debate over mortgage principal reductions. Christine Lagarde, managing director of the International Monetary Fund (IMF), says ""the housing problem in the U.S. is something that needs to be addressed"" and it is ""a matter of urgency."" Lagarde tipped her hat in favor of the administration's proposal of principal reductions, but said the problem is that ""the big boys and girls - Fannie and Freddie - have to be part of that equation.""

The Consumer Financial Protection Bureau (CFPB) issued a bulletin Friday reminding financial institutions that they may be held accountable for violations under contracted service providers. The agency said that banks and nonbank entities need to supervise their third-party vendors with due diligence, consistently request and review their internal controls and training materials, and establish clear expectations about compliance. The CFPB is reaffirming its role as both a formal supervisor and informal trendsetter in the industry.

In response to mortgage servicing rules the Consumer Financial Protection announced it may propose, Fitch Ratings issued a statement and said it believes mortgage servicers will incur increased operational, compliance, and reporting expenses if the rules take effect. To create more transparency, the CFPB said it is considering rules which require clear monthly mortgage statements, a warning before interest rates adjust, options to avoid ""force-placed"" insurance, and early information to keep customers out of foreclosure.

Eleven state attorneys general sent a letter to Edward DeMarco, Acting Director of the FHFA, urging him to allow Fannie Mae and Freddie Mac to move forward with principal reductions. Headlined by Massachusetts Attorney General Martha Coakley, the letter doubled down on the FHFA to ""preserve assets and prevent unnecessary foreclosures by implementing loan modifications that include principal write-downs."" State attorneys general said that new reductions ""should consider all of a borrower's debts, not just the monthly mortgage debt, be uniform, transparent, and publicly disclosed.""

As of December 31, 2011, the Hardest Hit Fund (HHF), which is meant to fund innovative measures to help families through the housing crises in hardest hit states, has spent just 3 percent of its budget since its February 2010 inception, a report published by a watchdog organization for taxpayers revealed Thursday. More specifically, as of the end of 2011, HHF spent $217.4 million of the $7.6 billion available for the program, and has provided assistance to just 30,640 homeowners, which is about 7 percent of the 458,632 to 486,536 homeowners it is estimated to help over the life of the program, which ends in 2017.

First time claims for unemployment insurance jumped 13,000 to 380,000 for the week ended April 7, the Labor Department reported Thursday, the highest level since the end of January. At the same time the previous week’s report were adjusted upward by 10,000, wiping out what had been a four year low and showing an increase of 4,000 initial claims instead of an originally reported drop of 6,000 for the week ended March 31.