Government

Katherine Porter, a professor at the University of California, Irvine School of Law was appointed as the California monitor to ensure compliance from the five largest servicers - Bank of America, JPMorgan, Wells Fargo, Citigroup, and Ally Financial - as stated in the $25 billion settlement, announced Attorney General Kamala D. Harris. Upon federal court approval of the settlement, Porter will verify if the lenders are meeting their obligations to California homeowners.

Details of the $25 billion settlement involving state and federal officials and the five largest servicers will change how liens are prioritized, and in turn, opponents say, will benefit banks but hurt investors. Typically, in cases involving delinquent loans, the second liens are written off before a first lien takes any losses. Under the settlement, first and second liens will share in the losses equally, with both getting written down proportionally instead of wiping out the second lien, which tends to yield a higher return since it includes a higher risk.

Appraisers, lenders, and investors appear to be routinely overestimating the values of homes prior to foreclosure, especially in the weakest housing markets, according to two economists with the Federal Reserve Bank of Cleveland. Their report suggests that more accurate pricing could speed the clearing of REO inventories, save lenders money by reducing the carrying costs associated with bank-owned homes, and bring greater stability to housing markets across the country.

The FHFA's decision to not allow for principal reductions on Fannie Mae and Freddie Mac loans came under sharp criticism during a Senate subcommittee hearing Thursday. John DiIorio, CEO of 1st Alliance Lending, a mortgage origination firm, argued in support of principal reduction, even when analyzing the benefits from a bottom-line perspective, not simply as a form of aid. Laurie Goodman, senior managing director of Amherst Securities, said there were a number of flaws in an FHFA study used to defend the decision to not apply principal forgiveness, and discussed three major criticisms and ""technical flaws.""

The Federal Housing Finance Agency (FHFA) released its final rule regarding private transfer fees Thursday. After reviewing the 4,200 comments it received in response to its proposed guidance, the FHFA is issuing a rule that restricts Fannie Mae, Freddie Mac, and the Federal Home Loan Banks from taking on mortgages and related securities encumbered by certain types of private transfer fee covenants, also known as Wall Street home resale fees.

First time claims for unemployment insurance fell 14,000 in the week ended March 9, the Labor Department reported Thursday, the first drop in four weeks. Continuing claims, reported on a one-week lag, also fell, dropping 81,000 to 3,343,000, after two straight weekly increases. The four week moving average for initial claims was flat at 355,750, unchanged from the previous week, while the four week average for continuing claims declined 25,250 to 3,394.250.

Oklahoma residents seeking restitution under the state's mortgage settlement with the nation's largest mortgage servicers must apply for benefits by September 13, 2012. The agreement between Attorney General Scott Pruitt and Bank of America, Citigroup, Ally's GMAC, JPMorgan Chase, and Wells Fargo gives the state $18.6 million, all of which will be used to compensate residents wronged in the foreclosure process. Under the nationwide settlement, Oklahoma would have received an estimated $10.2 million, and most of it would have been ""paid"" in the form of credits for loss mitigation activities fulfilled by the servicers.

New York Attorney General Eric Schneiderman secured $25 million from three of the nation's top servicing shops after filing a lawsuit early last month regarding foreclosures he says were improperly processed through Mortgage Electronic Registration System (MERS). Bank of America, JPMorgan Chase, and Wells Fargo will each pay the state of New York $5.9 million, according to settlement documents obtained by Reuters. MERS itself has faced a number of lawsuits regarding its participation in the foreclosure process, and results have been mixed from state to state.

If extremely severe economic conditions were to fall upon the U.S., 15 of the 19 banks tested by the Fed's stress scenario projections are said to be able to survive and continue to lend. The hypothetical stressful scenario included a 13 percent unemployment rate, 50 percent decline in equity prices, and a 20 percent decline in home prices. The scenario covers nine quarters into the fourth quarter of 2013, and the four banks that failed - Ally Financial, Citigroup, SunTrust, and MetLife - were said to have one or more projected regulatory capital ratios that fell below the 5 percent minimum levels at some point over the stress scenario horizon, according to the Fed.

The Securities and Exchange Commission (SEC) charged three former senior executives of Thornburg Mortgage for hiding the company's true financial state in an annual report. The plan backfired and caused a 90 percent value loss for the company in two weeks. The SEC alleges Thornburg's chief executive officer, chief financial officer, and chief accounting officer overstated the company's income by more than $400 million and falsely recorded a profit for the 2007 fourth quarter at the start of the financial crises.