Government

Two real estate investors are pleading guilty to mail fraud and bid rigging at public foreclosure auctions in Northern California, according to the Department of Justice. The investors conspired with others to quash competition for properties at foreclosure auctions in Alameda and Contra Costa counties in 2009 and 2010. The duo also admitted to committing mail fraud by using mail to organize their own private auctions open only to co-conspirators.

The nation's unemployment rate remained at 9.1 percent during the month of September, as employers added a net of 103,000 new jobs to their payrolls, according to the U.S. Department of Labor. Since April, the rate has held in a narrow range from 9.0 to 9.2 percent. Government data shows that there are 14 million people out of work in the United States, and one in three of those have been without a job for more than a year. Job loss - long-term unemployment especially - is now the biggest driver of mortgage defaults.

Federal housing programs came under attack during a congressional hearing Thursday titled ""The Obama Administration's Response to the Housing Crisis."" Members of the Senate challenged witnesses with questions about the effectiveness of several programs, including the Neighborhood Stabilization Program and the Home Affordable Modification Program. Industry experts also discussed the potential of new initiatives, such as the REO rental proposal.

Treasury released a new progress report on its Home Affordable Modification Program (HAMP) Wednesday. The number of modifications granted continues to slip - fewer than 26,000 in August - but each month's results are chipping away at the pool of eligible borrowers who fit the HAMP criteria. Treasury's report comes just one day before a House subcommittee is scheduled to hold a hearing on the administration's response to the housing crisis, and one of HAMP's most outspoken critics is heading to Capitol Hill to testify.

With an estimated 250,000 foreclosed homes on Fannie Mae's and Freddie Mac's books, the government is considering inventive ways to divulge excess inventory and return stability to the housing market. The administration sent out a request for information (RFI) in August asking how a government REO rental program might work. The industry has responded with enthusiasm, submitting a slew of proposals now under consideration. Suggestions include lease-to-own options, rent-and-hold, and joint profit sharing.

With little faith that ongoing negotiations between state officials and major mortgage servicers will result in a fair and just settlement, Massachusetts Attorney General Martha Coakley signaled Wednesday that she will be taking her case to the courts. Coakley did not disclose which companies would be targeted, but cited servicers' failure to establish their right to initiate foreclosure and filings of false or misleading documents as the basis for the impending legal actions.

The Federal Housing Finance Agency (FHFA) had knowledge of such foreclosure procedural abuses as robo-signing and falsified documentation years before these infractions made front-page headlines and triggered industry-wide investigations, according to the agency's own inspector general. Beyond a number of very specific red flags - including consumer complaints, media reports of foreclosure mills, and even public court filings - the inspector general says the sheer nature of market conditions should have been enough to lead FHFA to take action.

The current compensation structure for mortgage servicing needs to be revised so servicers' incentives will align with those of borrowers and investors, stated Federal Reserve Governor Sarah Bloom Raskin in a speech Tuesday. Raskin says it is imperative that servicers have adequate incentives to perform payment processing efficiently on performing mortgages, and to perform effective loss mitigation on delinquent loans. She also believes investors need methods to allow them to monitor servicer performance.

The Federal Housing Administration's (FHA) reserves have fallen below legal limits, and the agency now holds $4.7 billion against a $1 trillion portfolio. According to reports recently released by FBR Capital Markets & Co. and HUD's Office of Inspector General (OIG), FHA may crack down on lenders and servicers and may not be paying out default claims quite as generously as in the past. FBR says FHA claim denials could cost the industry as much as $13.5 billion.

California has withdrawn from settlement negotiations between the 50 state attorneys general and the nation's top servicers regarding robo-signing and other foreclosure-related violations. California's Attorney General Kamala Harris says progress has been made in identifying common-sense reforms to mortgage servicing, but she believes the current settlement proposal is ""inadequate"" for California homeowners. As the state with the highest incidence of defaults, California has been a significant participant in the negotiations.