Consumer advocates may be railing against the $25 billion settlement the five largest mortgage servicers struck recently with 49 state attorneys general, but the participating banks are still vulnerable on a number of fronts, according to a top analyst at Moody’s Investors Service. On the one hand, “The settlement will have little to no financial effect on the banks and will remove some of the uncertainty surrounding mortgage servicing,” said Joseph Pucella, vice president and senior…

Of the $25 billion in penalties agreed upon for the multistate servicing settlement, approximately $2.66 billion in cash is going to individual states to provide relief for funds lost through servicer wrongdoing, though states are spending their cash differently. Without the settlement terms, which have yet to be released, it is impossible to know the parameters for which the 49 states in the agreement and the federal government can use their money from Bank of America, Wells Fargo, JPMorgan Chase, Citigroup and Ally Financial. Through announcements by public officials, however, a picture of...

The Multi-State Mortgage Committee and the American Association of Residential Mortgage Regulators have issued Secure and Fair Enforcement for Mortgage Licensing Act (SAFE) Act Examination Guidelines for use by state nondepository mortgage regulators. The primary purpose of the guidelines is “to ensure that all individuals acting as mortgage loan originators are properly licensed and registered under the SAFE Act in all states in which they are conducting business,” said John Ducrest, commissioner of the Louisiana Office of Financial Institutions and chairman of the ...

California. In Kathryn McOmie-Gray v. Bank of America Home Loans FKA Countrywide Home Loans Inc., the Ninth Circuit has ruled that the Truth in Lending Act sets a three-year limitation for the borrower to file notice of claim for loan rescission. McOmie-Gray sought rescission of her loan for alleged violations of disclosure requirements under TILA. The district court dismissed the suit as untimely because it was filed after the three-year period set by TILA. McOmie-Gray subsequently argued to the appeals court ...

The $25.0 billion servicing settlement is just the latest step toward standardized servicing regulation, according to industry analysts. Many non-agency servicers have taken major steps to prepare for an overhaul of servicing regulation, though increased costs are a concern. “It appears that non-agency MBS servicers have already made significant operational changes in an effort to address process deficiencies identified in this settlement and by regulators,” Fitch Ratings said. As with federal consent orders several servicers agreed to last year ...

While the multistate servicing settlement reached by 49 states, federal officials and the nation’s five largest servicers gets the state and federal attorneys off the banks’ backs in regards to servicing and foreclosure, the banks are still wide open to servicing lawsuits from individuals, criminal charges and litigation over their securitization activities. “This is only one part of a long resolution process,” said Richard Andreano, practice leader of Ballard Spahr’s mortgage banking group. Despite complaints from a wide swath of consumer protection groups that the $25 billion in penalties to be...

The five large mortgage servicers that agreed to a $25 billion settlement with 49 state attorneys general this week have already established more than enough reserves to cover their costs, analysts say. Bank of America, Wells Fargo, JPMorgan Chase, Citigroup and Ally Financial agreed to pay $20.0 billion in financial relief to homeowners and $5.0 billion to federal and state governments, of which $1.5 billion will be used to compensate some borrowers who have gone through foreclosure. Both the Federal Reserve Board and the Office of the Comptroller of the Currency levied separate monetary penalties...

The mortgage settlement agreement between state and federal law enforcement agencies and the country’s five largest loan servicers will unleash a new foreclosure wave that will cause real estate-owned properties and distressed home sales to increase, according to market observers. Having the Federal Housing Finance Agency’s REO Initiative ready will be useful when the foreclosure and REO tsunami comes rolling in, academics, economists and analysts agree. The number of properties classified by banks as “real estate-owned,” or REO, has declined over the past year. The reason: the robosigning scandals...

State attorneys general and federal officials this week announced a massive legal settlement with five major mortgage servicers, finally concluding a torturous 16-month-long negotiation. Some 49 states – including New York, California and Florida – agreed to the $25 billion settlement with JPMorgan Chase, Bank of America, Wells Fargo, Ally Bank and Citigroup. The agreement does not provide blanket immunity for the lenders, which can still face criminal charges and are subject to claims over securitization practices and claims brought by individual borrowers. The agreement is based on investigations by...

The New York Attorney General filed a lawsuit last Friday against Mortgage Electronic Registration Systems and three banks that own major stakes in it, another in a long line of legal assaults on MERS and its users. “MERS members, including defendant servicers, have brought over 13,000 foreclosures against New York homeowners naming MERS as the plaintiff/foreclosing party,” read the lawsuit. “However, MERS often lacked standing to foreclose, and representations in court submissions that MERS owned and/or held the promissory note in such proceedings were often false and deceptive.” The defendant...