Secondary Market

Washington Mutual Inc.'s former executives, underwriters, and auditor reached a $208.5 million settlement in a class-action lawsuit by investors. The Seattle-based institution was the largest U.S. bank to fail, and this settlement is one of the largest resulting from the financial crisis. The class-action suit combined more than 20 cases in which investors claimed the bank misrepresented its financial condition when its loans began to fail after careless underwriting and inflated appraisals.

Milestone Asset Resolution Company, a diversified financial services management firm, announced several changes last week regarding the expansion of its business operations following a corporate investment from Oaktree Investment Holdings. Oaktree will acquire a non-controlling equity position in the company, and going forward, Milestone will be known as Sabal Financial Group.

Fitch Ratings expects that Bank of America's recently proposed settlement for mortgage repurchase and servicing claims will positively affect the ratings of approximately 10 percent of Fitch-rated U.S. residential mortgage-backed securities (RMBS) in the affected Countrywide trusts. In addition, the ratings agency says payouts from the settlement in the short term and improved servicing practices over the longer term are likely to further improve recovery prospects for a larger portion of bonds.

Ally Financial Inc., one of the nation's five largest mortgage servicers, acknowledged receipt of subpoenas from the U.S. Department of Justice and the U.S. Securities and Exchange Commission (SEC) Wednesday. The subpoenas are directed at Ally Financial Inc. and GMAC Mortgage LLC's mortgage activities. Ally says the subpoenas may result in adverse judgments, fines and penalties, or injunctions.

Thirteen defendants were indicted on mortgage fraud offenses involving nearly $13 million in fraudulent loans in Ohio, according to a statement from county prosecutor Bill Mason and the Cuyahoga County Mortgage Fraud Task Force. Defendants included a supervisor, account managers, and appraisers formerly working for Argent Mortgage Company. Argent was one of the largest home loan originators in Cuyahoga County from 2003 to 2005.

Seriously past-due home mortgages continue to decline for the nation's largest mortgage company, continuing a 15-month path of descent. Fannie Mae says the share of single-family loans it holds that are 90 or more days past due or in foreclosure fell 8 basis points to 4.19 percent in April, and then dropped another 5 basis points to 4.14 percent in May. Fannie Mae says servicers completed modifications on 16,419 of its loans in May. For the first five months of the year, loan modifications total 84,133.

The man charged with orchestrating possibly one of the most notorious mortgage fraud schemes in U.S. history has been handed a 30-year prison sentence. Lee Farkas, CEO of Taylor Bean & Whitaker, was told Thursday by a U.S. district judge in Virginia that his crimes merit three decades behind bars. Judge Brinkema said she did not detect ""one bit of actual remorse"" in Farkas. From 2002 through 2009, Farkas and his co-conspirators manufactured fraudulent mortgages and securities in a scheme that led to the collapse of Colonial Bank.

Allonhill, an independent third-party review firm specializing in mortgage due diligence and credit risk management, has hired Jim Sadler as managing director of business process management and analytics. He is responsible for refining the firm's business processes and operational strategy. Additionally, he will develop custom analytics to measure and report the company's performance and help put into operation a new client-facing implementation team.

Bank of America will pay investors $8.5 billion to compensate them for Countrywide's dealings years before the subprime lender was acquired by BofA. The settlement resolves nearly all of BofA's first-lien repurchase exposure from Countrywide-issued bonds. It involves 530 trusts and $424 billion in securities. The company has also agreed to implement certain servicing changes, which will cost some $400 million. BofA says the cleanup will leave it with a loss for the second quarter, but the market has responded positively to the news.

Northlight Financial LLC, a New York-based manager of private equity debt investments, has announced the formation of a limited partnership, Northlight LP. The fund will provide asset-backed loans to middle market companies, acquire whole loans in the secondary market, and purchase distressed assets in the commercial, industrial, and real estate sectors. It will initially deploy $100 million in capital.