Majority of States Reported on Board with Robo-Signing Settlement

Details are still sketchy, but
apparently a settlement has been agreed upon between five major banks and a
majority of the states’ attorneys general. 
The settlement involves Bank of America, Wells Fargo, Citigroup,
JPMorgan Chase, and Ally Financial and arises out of charges that the banks and
their subsidiary servicers used robo-signing and other abuses in processing
thousands of foreclosures.

The settlement was announced by lead
negotiator, Iowa Attorney General Tom Miller who, according to CNBC said of the
deal, “This enables us to move forward
into the very final stages of remaining work. Federal and state officials, as
well as representatives from the banks, continue to address matters that they
must complete before finalizing any settlement,” Miller said in a statement
released late Monday…

…(read more)

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Finally, a foreclosure settlement (Maybe)

States have until late Monday to agree to the latest draft deal aimed at relieving homeowners struggling with mortgages bigger than their home’s value.

The State of the Mortgage Industry According to MBA

The Mortgage Bankers Association (MBA) provided its annual
assessment of The State of the Mortgage Industry in a press conference Wednesday
afternoon.  Michael Young, MBA Chairman
said that the states that have been hardest hit by the housing crisis are and
will continue to deal with the aftermath but there are signs that in much of
the nation 2012 will bring a recovering market.

One bright spot, Young said, is that the turmoil in the
single family market has actually helped the multi-family sector; the rental
market has tightened and more lenders have moved into the sector, especially
life insurance companies.  In the
residential market, he said, the one topic that is discussed everywhere is the
lack of financing and what can be done about it.

David H. Stevens, MBA President and CEO said that lack of
financing
can be traced to a single factor, market uncertainty.  Part of it is uncertainty about international
markets and how they might ultimately impact the domestic situation but there
is also a tremendous amount of uncertainty about regulation.  Dodd-Frank, he said, has 300 regulations that
have yet to be fully promulgated and the new Consumer Financial Protection
Bureau (CFPB) and other regulators all have or are considering regulations
about how loans can be provided and serviced. 
There is uncertainty surrounding repurchases as well and while MBA
believes lenders should be held accountable for their mistakes, they should not
be held accountable for the loans performance if it failed solely due to
changing economic circumstances.  For
that reason MBA supports a time limit on the repurchase obligation.

Addressing three areas in particular, he said, would
decrease a lot of the insecurity.  New
regulations regarding Qualified Mortgages (QM) and Qualified Residential
Mortgages (QRM) are eminent and QM will in effect, define what loans get
made.  Mortgages which do not meet QM as
laid out by CRPB will simply not get made because lenders will feel there is
too much liability involved.   MBA supports certain parts of the QM such as
the requirement for full documentation but other parts such as the point and
fee cap lack flexibility and will disproportionately affect the pricing of small
loans.  

Most of all, he said, the proposed regulations are too general.  There needs to be specificity in the
underwriting standards such as in the definition of what constitutions “ability
to repay.”  Without a bright line in the
regulations that enable a safe harbor for lenders, he said, any lending is
going to be restricted on the margins and any loans that fall into the gap
between QM and QRM will see significant price adjustments to reflect the
liability.

While MBA also supports risk retention and much of the
intent of the QRM such as eliminating no-docs and interest only and other
exotic loans, regulators are going beyond the intent of Congress by adding debt
to income and loan-to-value ratios.  The
requirement for a 20 percent down payment will create a dual class system under
QRM, with lower income borrowers, unable to amass the down payment; forced into
FHA loans while there will be a private market for upper income borrowers.  Stevens said MBA will be “very aggressive” in
making sure these changes to QRM are pulled back.

Another area of uncertainty is the 50-state settlement with
servicers
.  Borrowers don’t care about
their servicers until they get into trouble with their mortgages but then the
multiple state and federal laws that govern servicing cause stress for the
borrowers and for servicers and investors as well.  The settlement may provide a framework for
national standards which would remove some of the uncertainty in this area.  In the same vein, Stevens said that President
Obama’s new fraud task force must be careful to avoid redundancy with other
investigations and carefully measure how it impacts borrowers or it could
create trepidation among lenders and further reluctance to lend.  

The present structure of the mortgage market with 90 percent
of lending having some government involvement through the GSEs or FHA is simply
unsustainable, Stevens said.  The private
sector must be brought back into the market and the major players in the
industry are close to agreement on what the future of the secondary market
should look like.  This is very close to
a model proposed by MBA some years ago which would have the following
characteristics:

  • Transactions would be funded with private
    capital from a broad range of sources.
  • The federal government should have a role in
    promoting stability and liquidity in the core mortgage market. This role should be in the form of an
    explicit credit guarantee on a class of mortgage-backed securities and the
    guarantee would be paid for by risk-based fees.
  • Taxpayers and the system itself should be
    protected through limits on the mortgage products covered, the types of
    activities undertaken, strong risk-based capital requirement, and actuarially
    fair payments into a federal insurance fund.

In answer to a reporter’s question about the chances of
President Obama’s streamlined refinancing program being approved, Stevens said
it would be an uphill climb.  FHA is
legislatively limited to loans with a maximum LTV of 97.5 percent so to go as
high as 140 percent which Steven’s said he expected the legislation to attempt
will require full approval of Congress.

Jay Brinkmann, Senior Vice President and Chief Economists said
he expects jobs to be created at about a 150,000 per month pace in 2012 but
this will be uneven by location and dependent on an individual’s education.  The length of unemployment hit a record high
in November and persons with a high school education or less are remaining
unemployed longer than those with a college degree.

According to Brinkmann, mortgage originations will drop from
$1.26 trillion in 2011 to $992 billion in 2012 with most of the loss coming in
refinancing.  The purchase market will be
largely unchanged or will rise slightly. 
This does not, however, reflect any changes that might be made in the
HARP program or any unforeseen outside events.

…(read more)

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Oregon Joins Servicer Settlement

The Attorney General of Oregon announced
today that he will join in the so-called 50-state Attorneys General settlement
with five major financial institutions that operate the large servicing
organizations.  The settlement arose out
of a multi-state investigation of alleged improprieties the servicers’
management of delinquent loans and foreclosures. 

Attorney General John Kroger said in a
prepared statement that “The Oregon Department of Justice is deeply committed
to protecting consumers.  In assessing
any potential consumer protection settlement I compare the benefits of the
settlement with potential benefits that might accrue in the future if we chose
to litigate rather than settle.  I have
made that assessment in this case, and I am confident that signing this
agreement is in the best interest of Oregon consumers.”

Several attorneys general have remained
in settlement talks while pursuing litigation on their own while at least one, California’s
Kamala Harris, withdrew from the settlement saying it provided inadequate
redress to the homeowners of her state. 

Kroger said that the settlement
agreement penalizes banks which engaged in wrongful practices and brings badly
needed relief for homeowners.  However,
because the release in the agreement is narrowly drafted, Oregon will be able
to pursue both multi-state and independent investigations of illegal
securitization and other practices.  “Simply
put,” he said, “I am not confident we could get a better agreement on this
limited set of issues if we litigated for several more years.”

The Attorney General said further
information on the agreement would be forthcoming but he released the following
highlights:

  • An estimated $30 million to the State of Oregon.
  • An estimated $100 to $200 million in relief to
    distressed Oregon homeowners including “underwater” borrowers
    and homeowners facing foreclosure.
  • Tough new servicing standards that protect all
    homeowners from unfair and unscrupulous servicing practices.

The agreement is not final and must
be submitted to a federal judge for approval.

…(read more)

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Hope Is Rising for Mortgage Accord

New York Attorney General Eric Schneiderman said he is confident his main concern with a pending settlement of alleged bank- foreclosure abuses would be resolved, but he didn’t commit to participating in an agreement.