Government

Wells Fargo has reached an agreement with California Attorney General Edmund G. Brown Jr., to provide loan modifications worth more than $2 billion to an estimated 14,900 California homeowners with pick-a-pay loans originated by World Savings and Wachovia, banks Wells Fargo acquired. Wells Fargo will also pay an additional $32 million to thousands of borrowers who lost their homes through foreclosure. The bank says the majority of Wachovia's Pick-a-Payment customers reside in California.

The call for federal officials to establish industry-wide mortgage servicing and foreclosure standards is getting louder. A group of more than 50 senior economists, academic leaders, and influential investors sent a letter to the heads of federal regulatory agencies Tuesday, urging them to take the lead in setting national standards for mortgage loan servicers. The group argues that widely reported fraud in servicers' dealings with homeowners and foreclosure procedures demands new standards be adopted now.

For every home loan held by Fannie Mae and Freddie Mac that was modified during the third quarter, 2.3 loans were foreclosed on during the same period. The GSEs initiated foreclosure on 339,000 home mortgages during the July to September timeframe. Loan modifications completed in the quarter totaled 146,500, with the majority of those completed through non-HAMP programs. The two companies approved 29,500 short sales during the third quarter.

The Federal Reserve Board on Monday published a final rule amended to increase the asset-size exemption threshold for banks under the Home Mortgage Disclosure Act (HMDA). In 2011, the asset-size exemption for banks will increase to $40 million from $39 million, based on the annual percentage change in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPIW) for the twelve-month period ending in November 2010.

State and federal regulators closed six lending institutions over the weekend -- three in Georgia and one each in Arkansas, Florida, and Minnesota. It brings the number of bank failures for the year to 157, and follows news last week that the FDIC has lowered its operating budget for 2011 based on the expectation that institutional closings will slow in the year ahead. The largest of this weekend's closings was the Bank of Miami in Coral Gables, Florida, with $374.2 million in deposits and assets totaling $448.2 million.

Freddie Mac will delay initiating and resuming foreclosure for at least nine months for financially troubled service members released from active duty through the end of 2011. The decision will give lenders more time to work with service members and explore relief options designed to assist them, according to a statement from Freddie Mac.

A second state has filed a lawsuit against Bank of America for alleged deceptive loan modification and foreclosure practices. Nevada Attorney General Catherine Cortez Masto announced that her office has also opened a lawsuit against the company and its affiliates regarding its residential mortgage servicing procedures. Bank of America says it is disappointed by the lawsuit and is currently engaged in multi-state discussions to improve foreclosure related processes and programs to help distressed homeowners.

Arizona Attorney General Terry Goddard has filed a lawsuit against Bank of America for alleged fraudulent acts committed after a March 2009 lawsuit. Last spring, BofA agreed to develop a modification program for customers in the state to resolve Goddard's allegations that Countrywide had engaged in fraud in originating and marketing mortgage loans. Since then, Goddard says BofA has violated the provisions by failing to make timely decisions on mod requests and proceeding with foreclosures when modifications were pending.

The Securities and Exchange Commission (SEC) is reportedly investigating lenders' procedures for packaging home mortgages into securities bonds for sale to investors. Reuters, citing two sources familiar with the probe, says the SEC sent subpoenas last week to Bank of America, Citigroup, JPMorgan Chase, Goldman Sachs, and Wells Fargo. The subpoenas focus on the earliest stage of the mortgage securitization process, in particular, the role of master servicers.

Congressman Randy Neugebauer (R-Texas), chairman of the House oversight subcommittee, has released a letter to the Federal Housing Finance Agency (FHFA) expressing concern about reports that the Obama administration is pressuring Fannie Mae and Freddie Mac to write down principal mortgages. Neugebauer argues that the GSEs' participation in such a program would increase taxpayer losses - already approaching $150 billion - and run counter to the statutory obligation of FHFA to minimize taxpayer exposure.