Mortgage Servicing Settlement Reached

Posted on February 9, 2012 by Fred Rivera

February 9, 2012.  Today government officials, including  Attorney General Eric Holder, announced a $26 billion settlement with five banks to settle allegations of mortgage servicing and foreclosure processing errors. The agreement, reached with Bank of America Corp., JPMorgan Chase & Co., Citigroup Inc., Wells Fargo & Co., and Ally Financial Inc., resolves allegations related to foreclosure practices in 2009 and 2010. According to a New York Times article, under the settlement, the banks will provide $17 billion in loan modifications for delinquent borrowers. The deal also includes about $3 billion for “underwater” borrowers to refinance their home and approximately $1 billion paid to the Federal Housing Administration. Another $5 billion includes cash payments to states and federal authorities.

The settlement, which largely provides for loan modification incentives, provides banks certainty about resolving the government's allegations in connection with paperwork errors during foreclosures initiated after borrowers defaulted on their mortgage.   Additional detail about the settlement and its implication will soon follow.

Read U.S. Department of Justice Press Release.

Read Servicing Standards

 Read Wells Fargo Press Release

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Fed Fines Wells Fargo & Co. $85MM for Subprime Loan Problems

Posted on July 20, 2011 by Fred Rivera

On July 20, 2011 the Federal Reserve Board issued a cease and desist order, including an $85 million fine against Wells Fargo & Co. in connection with its subprime mortgage lending.   The Fed's Press Release stated that the action is the largest consumer-protection action of this kind ever by the central bank, and the first major FRB enforcement action related to subprime mortgage lending. The Fed's order addresses allegations that Wells Fargo steered potential prime borrowers into more costly subprime loans.  There are also allegations that Wells employees falsified income information in mortgage applications. In addition to the civil money penalty, the order requires that Wells Fargo compensate affected borrowers. 

 

 

 

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Wells Fargo Settles State AG Investigations Into "Risky Mortgages" Made By Acquired Lenders

Posted on October 7, 2010 by Fred Rivera

October 7, 2010 -  The New York Times reports that Wells Fargo agreed to pay $24 million to resolve investigations by eight state attorneys general into whether lenders acquired by the bank made risky mortgages to consumers without disclosing the risks.   Wells reached the agreement was with attorneys general in Arizona, Colorado, Florida, Illinois, Nevada, New Jersey, Texas and Washington.  The AGs were investigating the lending practices of Wachovia Corporation and a California company it acquired, World Savings Bank. Wells bought Wachovia in late 2008, after Wachovia had already stopped making the loans under investigation.  

The AGs were investigating whether the lenders had engaged in deceptive practices in connection with option adjustable-rate loans, or "pick-a-payment" mortgages as marketed by Wachovia. Those controversial loan products allowed borrowers to defer some interest payments and add them to the principal balance.  Many contend that the option adjustable-rate mortgages were one of the most toxic mortgage products available in the marketplace.  The balance and interest reset caused by deferring interest payments often causes a significant jump in the loan's monthly payments and can result in a mortgage that is underwater.

As part of the settlement, Wells agreed to offer loan assistance potentially worth more than $770 million to more than 8,700 borrowers. The $24 million will be used to help states reach out to customers who may benefit from the loan assistance program.  The agreement includes no admission of wrongdoing by Wells.

 

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