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Last month, year-over-year home price declines were at their lowest level since April 2011, but REO saturation levels rose in three of four regions, according to Clear Capital's latest Home Data Index. Whether this REO increase is an anomaly or the beginning of a new wave of REOs as banks pick up the pace now that they've reached a settlement with the state attorneys general is yet to be determined. Nationally, home prices fell 1.9 percent year-over-year, according to Clear Capital. The West and Midwest experienced the greatest declines, 3.2 percent and 4.3 percent, respectively.

Consumer credit data suggests spending will increase and the housing market will begin to emerge from its slump this year, according to Equifax and Moody's Analytics. Both companies note that as key market data align with pre-recession totals, consumers should anticipate steady economic growth for major credit sectors, including auto, bank card, and consumer finance. While the mortgage lending sector continues to see the highest percentage of delinquencies, it too is showing signs of increased traction in the coming months.

During January, approximately 74,000 homeowners received permanent loan modifications from mortgage servicers, according to modification data released by HOPE NOW, a voluntary, private sector alliance of mortgage servicers, investors, mortgage insurers and non-profit counselors. While the January numbers are a decrease compared to the previous two months, it was a record-breaking month for foreclosure sales. For the first time since October 2009, foreclosure sales, which reached approximately 79,000, outpaced loan modifications.

State regulators closed Global Commerce Bank of Doraville, Georgia on Friday, marking the first bank closing for March and the second Georgia bank to close in two weeks. So far this year, twelve FDIC-insured banks have closed. The FDIC entered into a purchase and assumption agreement with Metro City Bank of Doraville, Georgia, to assume all of the deposits of Global Commerce Bank.

Five California men were charged for allegedly operating a mortgage modification scheme and defrauding hundreds of victims under the business as CSFA Home Solutions, the Office of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP) and Orange County, California, District Attorney Tony Rackauckas announced Friday in a statement. Between January 2009 and March 2012, the defendants are accused of creating numerous fraudulent loan modification businesses through which they purported to offer loan modification assistance.

Former CEO of Brookstreet Securities Corp. was ordered by a federal judge to pay a maximum $10 million for securities fraud, the Securities and Exchange Commission (SEC) announced Friday in a statement. The SEC charged Stanley C. Brooks and Brookstreet in December 2009 with fraud due to the sale of risky mortgage-backed securities to customers who were not looking to purchase risky investments. The more than thousand customers who bought the risky Collateralized Mortgage Obligations (CMOs) through Brookstreet included seniors and retirees.

Treasury says servicers participating in the Home Affordable Modification Program (HAMP) are getting better at evaluating homeowners for eligibility. Its latest performance assessment found no company in need of ""substantial improvement."" OneWest Bank and Select Portfolio Servicing performed at the highest level, needing only minor improvement. As part of the $25 billion settlement announced last month, Treasury has agreed to release incentives previously withheld from Bank of America and JPMorgan Chase.

The principal reduction debate wages on with the Federal Housing Finance Agency (FHFA) standing firm in its resolve that the strategy is not the best option for the GSEs. ""Both companies have been reviewing principal forgiveness alternatives. Both advised me they do not believe that it is in the best interest of the companies to do so,"" FHFA Acting Director Edward DeMarco told the Senate Banking Committee. One senator asked why banks then are turning to principal forgiveness for 20 percent of modifications on their own loans.

While mortgage originations are at their lowest level since 2001, investigations for mortgage fraud have shot up in recent years. As of December 31, 2011, the FBI reported 2,590 pending mortgage fraud investigations with 71 percent involving losses of more than $1 million. With increased levels of foreclosures and delinquencies over the past few years, schemes targeting distressed homeowners as victims have surged. Through FY 2011, FBI investigations resulted in 1,082 convictions of mortgage fraud criminals.

Despite recent reports of modest improvement in the health of the housing economy, Fitch expects the real estate sector to continue to depress the performance of banks, according to Fitch Ratings. Residential real estate is the largest exposure for banks since they make up $2.5 trillion, or roughly one-third of total loans, according to the agency. Home equity represents about 30 percent of this amount, with 1-4 family first lien mortgages making up the balance.