Government

The co-founder of what was once the largest, most lucrative subprime lender in the country has agreed to pay a total of $67.5 million to settle allegations of fraud. Former Countrywide chief Angelo Mozilo will pay the SEC a $22.5 million penalty to settle charges that he misled investors about the risk associated with Countrywide's business. Mozilo will also pay $45 million to settle insider trading charges. He has been permanently barred from serving as an officer of a publicly traded company.

Bank of America and Fidelity National Financial have come to an agreement regarding the foreclosure paperwork issues that have plagued several of the largest lenders in the past weeks. Fidelity will continue to provide title insurance for BofA's foreclosed properties and defend new homeowners in court if title issues arise. The bank has agreed to cover all court related costs and settlements resulting from lawsuits surrounding title issues. The news comes just as Bank of America has announced that it will resume foreclosures in 23 judicial states beginning October 25th.

After a short-lived quiet period the weekend before, state and federal regulators stepped in on Friday to shut down the operations of one community-based lender in Kansas and two in Missouri. Together, the three closings are expected to cost the FDIC more than $500 million and bring the 2010 failed-bank tally to 132.

The industry has long been awaiting a replacement for the Home Valuation Code of Conduct (HVCC). On Friday, Fannie Mae and Freddie Mac issued new Appraiser Independence Requirements to supplant the controversial HVCC, but both GSEs say the new appraiser rules, effective immediately, ""make no significant changes to core principles of the HVCC."" Fannie and Freddie say they will continue to review the appraisal rules to address issues relating to conflicts of interests and fee disclosure by appraisal management companies.

Ohio Attorney General Richard Cordray has filed a preliminary injunction seeking to prevent GMAC Mortgage from completing foreclosure sales in his state that he says are based on faulty affidavits. Cordray filed suit October 6th against GMAC; its parent, Ally Financial Inc.; and one of its employees, alleging fraud against Ohio consumers and Ohio courts. The preliminary injunction asks that GMAC stop its ""faulty affidavit practices"" while the lawsuit is pending.

A New York judge threw out a case against Countrywide Financial by investors who wanted the company to buy back mortgages that it had reduced payments for. Investors claimed it is unfair for them to have to absorb the cost of modified loans, and that Countrywide was required under contract to buy back any mortgages that it modified. In 2008, Bank of America agreed to an $8.4 billion settlement with attorneys general from several states regarding predatory lending charges against Countrywide.

The Congressional Oversight Panel has ""significant concerns"" related to accountability and conflicts of interest because of Treasury's extensive use of private contractors to carry out functions for the Troubled Asset Relief Program (TARP), particularly foreclosure prevention efforts. The largest TARP contracts were awarded to Fannie Mae and Freddie Mac. Fannie alone employs 600 workers on TARP's foreclosure programs, while Treasury has only 220 staffers working on all TARP programs combined.

The Federal Housing Finance Agency has issued a new policy that outlines specific steps Fannie Mae and Freddie Mac servicers should take to identify and correct deficiencies in foreclosure paperwork. Evidence of servicing staff cutting corners to process foreclosures quickly has lawmakers, consumer advocates, and the entire general public calling for an immediate moratorium on foreclosures. But FHFA says bringing the process to a complete halt is not the answer.

JPMorgan Chase kicked off the third-quarter earnings season Wednesday, and the company says profits are up 23 percent from a year ago. JPMorgan brought in $4.4 billion in net income during the quarter, beating analysts' expectations. During a conference call with investors, CEO Jamie Dimon announced that the company has expanded its foreclosure review to 41 states and 115,000 loan files. He also said the bank will stop using the Mortgage Electronic Registration System (MERS).

Evidence of major servicers mishandling foreclosure paperwork has cast a cloud of doubt over the entire industry and servicing procedures across the board. Consumer advocacy groups and a number of state attorneys general have demanded a nationwide moratorium on foreclosures. But two senior White House officials have indicated that the Obama administration will not support an all-out foreclosure freeze. So far, five companies have announced voluntary foreclosure suspensions because of potential deficiencies in the legal paperwork.