Government

A New York federal judge ruled Monday against the proposed $285 million settlement agreed to by Citigroup and the Securities and Exchange Commission (SEC) in October. Judge Jed Rakoff said he has ""regretfully"" concluded that the agreement is neither reasonable nor in the public interest. Rakoff's opposition is rooted in the lack of evidence needed to determine whether the settlement is sufficient and the fact that Citigroup did not admit fault. He has set a trial date of July 16 for the issue to be aired in public.

Bad real estate loans from the boom years of the last decade have forced 412 FDIC-insured lenders to shutter their operations since the start of 2008. No institution's balance sheet has been fully insulated from the downturn in the real estate markets, but data released by the FDIC suggests lenders are finding their way out of the storm. After rising since 2006, the FDIC's so-called ""Problem List"" of banks at risk of failure has contracted for two quarters in a row. At the same time, money set aside to cover expected loan losses has fallen nearly 50 percent from a year ago.

Freddie Mac has expanded its winter REO sales incentive program to the states of Alaska, Kansas, Kentucky, Missouri, Oregon, and Washington. That makes the promotional offer now active in 33 states and the District of Columbia. The winter sales promo is being offered through HomeSteps, Freddie Mac's REO disposition unit, and pays an extra $1,000 bonus to the selling agent, as well as additional incentives to owner occupant buyers. Offers must be received by January 31, 2012.

While the attorneys general working toward a settlement with the nation's largest servicers may be able to strike a settlement without California, it may cost them. A deal that seemed likely imminent as of the end of October would have required $25 billion from the banks - $5 billion in cash penalties and $20 billion in refinancings and modifications. That $25 billion could be reduced to $18.5 billion if California refuses to take part in the settlement, and it could limit the amount of assistance provided to California homeowners.

The PMI Group, Inc. says it has filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code. According to PMI, the move is a direct result of the seizure of its subsidiaries PMI Mortgage Insurance Co. and PMI Insurance Co. by the Arizona Department of Insurance on October 20, 2011. PMI sought to overturn the regulator's seizure of its mortgage insurance operations, but that motion was denied on Friday.

A federal judge has ruled to allow the Delaware and New York attorneys general to pursue litigation in Bank of America's $8.5 billion settlement with mortgage investors. Bank of America reached the settlement agreement in June with Bank of New York Mellon, the trustee for the 530 mortgage-backed securities trusts in question. But the judge has ruled that there's more at stake than the financial interests of the few major investors involved in the settlement negotiations.

The Office of the Comptroller of the Currency (OCC) issued a report Tuesday on actions taken to correct deficiencies in mortgage servicing and foreclosure processing by the 12 institutions it oversees. The OCC has made public the names of the independent consultants retained for foreclosure reviews, and notes that evaluations of certain cases and mailings to more than 4 million borrowers are underway. The agency says all servicers have instituted policies to end dual-tracking and provide borrowers with a single point of contact.

Sen. Bob Corker of Tennessee introduced legislation in early November aiming to wind down Fannie Mae and Freddie Mac over the next 10 years and replace the Mortgage Electronic Registration System (MERS) with a new government-run registry. According to the ratings agency DBRS, Corker's proposal could give the private market for mortgage securitizations a much needed boost, and the creation of a new MERS database could ease investor concerns over the legal battles facing the original system.

Did policies in place at Fannie Mae and Freddie Mac help fuel foreclosure abuses such as robo-signing? That's the question posed by Rep. Elijah Cummings to the GSEs' regulator. As ranking member of a House oversight committee, the nation's housing crisis has been a central focus of Cummings' work. He says documents show FHFA directed the GSEs to fine servicers $150 million in 2010 for not processing foreclosures fast enough, even though an internal report concluded servicers were overloaded and documentation problems were evident.

The Office of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP) announced Monday that it intervened to block 40 mortgage modification schemes advertised on Yahoo! and Bing. In response, Microsoft terminated 400 advertising contracts with the perpetrators of the schemes. Microsoft is the founder of Bing, and its technology backs Yahoo! Search. Monday's notice follows an announcement last week in which SIGTARP reportedly shut down 85 mortgage modification scams advertised on Google.