Posts Tagged ‘ federal housing finance agency ’

JPMorgan Chase Reaches $13B RMBS Settlement with U.S. Government

JPMorgan Chase Reaches $13B RMBS Settlement with U.S. Government


JPMorgan Chase has struck a deal with the U.S. Department of Justice to resolve civil claims from both federal and state officials over residential mortgage-backed securities (RMBS) issued prior to January 1, 2009, by the bank and two financial institutions it acquired in 2008–-Bear Stearns and Washington Mutual.

The $13 billion settlement is the largest in American history between the U.S. government and a single entity.

Under the agreement reached, JPMorgan will pay $9 billion in restitution and provide an additional $4 billion in relief for homeowners at risk of foreclosure and communities impacted by the housing crisis. Federal officials say the relief funding could benefit more than 100,000 borrowers.

According to JPMorgan, the cash portion of the settlement payment consists of a $2 billion civil monetary penalty and $7 billion in compensatory payments, including a previously announced $4 billion payment to resolve litigation claims from the Federal Housing Finance Agency.

Borrower relief will be in the form of principal reduction, forbearance, and other direct benefits from various relief programs, the bank explained. JPMorgan Chase has committed to complete delivery of the promised relief to borrowers before the end of 2017.

The settlement was negotiated through the Residential Mortgage-Backed Securities Working Group, a joint state and federal unit formed in 2012 by President Obama to investigate wrongdoing within the mortgage-backed securities market that helped to trigger, contribute to, or exacerbate the U.S. financial crisis.

New York Attorney General Eric T. Schneiderman co-chairs the RMBS Working Group. Tuesday’s settlement comes 13 months after Schneiderman sued JPMorgan for fraudulent RMBS packaged and sold by Bear Stearns before it was acquired by JPMorgan at the behest of government officials at the Federal Reserve, FDIC, and U.S. Treasury.

In announcing the unprecedented settlement, Schneiderman said, “Since my first day in office, I have insisted that there must be accountability for the misconduct that led to the crash of the housing market and the collapse of the American economy. This historic deal … is exactly what our working group was created to do.”

He continued, “We refused to allow systemic frauds that harmed so many New York homeowners and investors to simply be forgotten, and as a result we’ve won a major victory today in the fight to hold those who caused the financial crisis accountable.”

Separately, the FDIC announced Tuesday that it also reached a settlement with JPMorgan Chase and its affiliates in relation to the failure of six banks. The FDIC, acting as receiver for the failed institutions, says misrepresentations where made in the offering documents for 40 RMBS purchased by the now-defunct banks.

JPMorgan agreed to pay $515.4 million, which will be distributed among the receiverships for the failed Citizens National Bank (failed May 22, 2009), Strategic Capital Bank (May 22, 2009), Colonial Bank (August 14, 2009), Guaranty Bank (August 21, 2009), Irwin Union Bank and Trust Company (September 18, 2009), and United Western Bank (January 21, 2011).

From May 2012 to September 2012, the FDIC as receiver for five of the failed banks filed 10 lawsuits against JPMorgan, its affiliates, and other defendants for violations of federal and state securities laws in connection with the sale of RMBS.

As part of the global settlement reached, JPMorgan acknowledged it made serious, material misrepresentations to the public—including the investing public—about numerous RMBS transactions, according to a statement on the New York attorney general’s website.

JPMorgan Chase says it is fully reserved for this settlement.


JPMorgan Said to Strike $13B Deal with U.S.

JPMorgan Said to Strike $13B Deal with U.S.


JPMorgan Chase is reportedly set to pay a record $13 billion to the government to settle questions surrounding its sale of bonds backed by poor loans.

An unidentified source reportedly told Bloomberg that JPMorgan CEO Jamie Dimon discussed the deal on Friday with U.S. Attorney General Eric Holder. According to that source, the discussed deal does not release the bank from potential claims of criminal liability at the insistence of Holder, who earlier this year remarked that some institutions may be “too big to jail.”

The agreement—a step up from the $11 billion deal reported in September—will include $4 billion in relief for

consumers and $9 billion in payments and fines,Bloomberg reported. If finalized, it will be the largest payout in history among settlements between financial firms and the government.

In addition to settling the bank’s dealings with the Federal Housing Finance Agency—which named JPMorgan among more than a dozen defendants who allegedly sold bad loans to Fannie Mae and Freddie Mac—the agreement will also resolve pending inquiries by New York Attorney General Eric Schneiderman, according to reports.

While costly, such a deal will be a long-term victory for JPMorgan, which has been plagued by legal costs following the housing crash. The bank’s third-quarter earnings, released earlier in October, showed a loss as litigation expenses weighed profits down. Many of those issues stem from JPMorgan’s acquisition of Washington Mutual and Bear Stearns in 2008 at the government’s behest—a move Dimon has expressed regret about in the past.

“[The bank’s] Board continues to seek a fair and reasonable settlement with the government on mortgage-related issues—and one that recognizes the extraordinary circumstances of the Bear Stearns and Washington Mutual transactions, where were undertaken at the request or encouragement of the U.S. Government,” he said in the most recent quarterly filing.

Creative Buyers, Brokers Keep Sales Humming Despite Lack of Listings

Creative Buyers, Brokers Keep Sales Humming Despite Lack of Listings


Many in the real estate industry believe there is a listing shortage, but a close look at the numbers suggests buyers in most markets are purchasing homes in increasingly larger volumes—even if some of those sales involve off-market homes not listed for sale.

In July there was a 5.1-month supply of unsold existing homes, unchanged from June but down from a 6.3-month supply in July 2012, according to the National Association of Realtors (NAR). But despite the lower inventory, the volume of home sales continues to increase.

“Existing-home sales,” NAR reported, “have stayed well above year-ago levels for the past two years, while the median price shows seven straight months of double-digit year-over-year increases.”

In most businesses, everyone is elated when sales increase. For those in real estate, more sales equal more opportunities to generate transaction commissions, which is a good thing. And yet, the real estate community is somehow concerned when sales have been increasing month after month for nearly two years and prices are 11 percent higher than a year ago.

“The robust housing market recovery is occurring in spite of tight access to credit and limited inventory,” said NARChief Economist Lawrence Yun back in May of the April numbers. “Without these frictions, existing-home sales easily would be well above the 5-million unit pace.”

It turns out home sales did exceed that 5 million pace the very next month, in May, as well as in June and July, according to NAR—even with the frictions still in place.

If unlisted sales are included, the sales numbers are even higher. RealtyTrac sales data—which is sourced from public sales deeds and includes sales of unlisted properties—shows existing-home sales have exceeded the 5 million annualized mark for the past 10 months. In July, RealtyTrac data shows annualized sales reached as high as 5.5 million, up 4 percent from the previous month and up 11 percent from a year ago.

Similar to NAR statistics, the RealtyTrac numbers include residential single-family homes, condominiums, townhomes, and co-ops but do not include multifamily homes or commercial property. And the RealtyTrac

numbers only include arms-length transactions, excluding transfers back to a lender as part of a foreclosure action.

But the RealtyTrac numbers also include off-market transactions such as foreclosure auction sales to third-party buyers, typically investors paying all-cash for a property that is not listed on the local multiple listing service (MLS). These are the types of transactions that are increasing at the fastest rate. Specifically, foreclosure auction sales to third parties increased 133 percent in the first six months of 2013 compared to the same time period in 2012.

But it’s not just off-market foreclosure auctions that account for the rise in sales despite a lack of listing inventory. Buyers and their real estate brokers are getting creative in buying off-market inventory in other ways as well. These creative buyers and brokers are contacting distressed homeowners and other potentially motivated sellers to see if they want to sell even if they have not yet listed for sale. They’re finding homeowners who are about to list through word of mouth or social media, and they’re persistently reaching out to banks—the most success comes when dealing with smaller local banks—that have foreclosure inventory not yet listed for sale.

It’s the last category of unlisted bank-owned homes that may prove to be the biggest challenge for housing going forward. As of the second quarter, the Federal Housing Finance Agency, Fannie Mae, and Freddie Mac reported a combined total of 183,381 real estate owned (REO) homes, according to the Calculated Risk blog. RealtyTrac data shows total REO inventory nationwide at 515,593 as of the end of July.

Those half a million REOs nationwide represent a 12-month supply at the current sales pace of REO properties, which was about 135,000 sales in the second quarter.

Markets with the most REO inventory were Miami (29,829), Chicago (27,020), Phoenix (20,160), Atlanta (20,141), and Detroit (18,622). Miami REO inventory represents an estimated 20-month supply at the current sales pace there, while REO inventory in Chicago, Phoenix, and Atlanta represents an estimated 10-month supply, and REO inventory in Detroit represents an estimated 11-month supply.

Many of these REOs are not listed for sale yet and are being listed at a painstakingly slow pace from the perspective of buyers who are hungry for more inventory to purchase. Still, the presence of this unlisted REO inventory should give buyers hope that they will find a property (or properties) to purchase, provided they are willing to be creative and patient in their search.

Daren Blomquist is a VP with RealtyTrac. He is directly responsible for the creation of the company’s U.S. foreclosure market and sales reports, which are cited by thousands of media outlets and industry bodies nationwide.

GSEs Update Servicing Guidelines to Prepare for CFPB Rules

GSEs Update Servicing Guidelines to Prepare for CFPB Rules


As the industry prepares to comply with the January implementation of new rules from the Consumer Financial Protection Bureau (CFPB), Fannie Mae and Freddie Mac updated their servicing guides to ensure compliance.

In keeping with the Servicing Alignment Initiative, the two agencies worked with their regulator, the Federal Housing Finance Agency to ensure their guidelines are in sync. The new guidelines address loss mitigation, foreclosure procedures, and the borrower appeal process.

Under the new rules a servicer is prohibited from mentioning foreclosure earlier than 121 days into a delinquency situation. At the 121-day mark, a servicer has five business days to refer a loan to foreclosure.

At that point, the servicer must take legal action to foreclose. However, if a borrower submits a “First Complete Borrower Response Package” more than 37 days before the scheduled foreclosure sale, the servicer must delay legal action.

Additionally, a servicer must always provide written receipt of a borrower response package within five days of receiving the package.

The GSEs will allow servicers up to 15 days to complete pre-referrals for foreclosures. “Servicers must now perform a pre-referral to foreclosure review within 15 days prior to the date by which the servicer is required to refer the mortgage loan to foreclosure,” Fannie Mae said in its announcement.

In cases of natural disaster, borrowers must complete a borrower response package in order to apply for forbearance longer than six months.

When a servicer denies a loan modification, it must let the borrower know the reason for the denial, and the borrower has the right to appeal the denial within 14 days.

The servicer must then respond to the appeal within 30 days. The servicer must also ensure the appeal review is completed by a different individual or set of individuals than those who originally denied the borrower loss mitigation.

Fannie Mae also addressed the single point of contact requirement saying, servicers must “develop an approach to managing delinquent borrowers that provides continuity of contact with the borrower and allows a borrower to contact one individual or a dedicated team of individuals in the servicer’s organization.”

Freddie Mac’s notice also reminds servicers that their “compliance with Freddie Mac’s requirements does not ensure that the servicer is in compliance with the CFPB final rule or any other applicable laws.”

Most of the new rules will be implemented January 10, 2014, according to the GSEs, the same implantation date for the CFPB’s new rules.


Industry, Congress Urge DeMarco Not to Lower Loan Limits

Industry, Congress Urge DeMarco Not to Lower Loan Limits


Federal Housing Finance Agency Acting Director Edward DeMarco is deliberating lowering the loan limits for Fannie Mae and Freddie Mac. Congress and the industry, however, are voicing a singular opposition, claiming such action would be detrimental to the housing recovery that is starting to take place across the country.

Members of Congress and several industry groups have sent letters to DeMarco over the past week urging him not to lower the GSEs’ conforming loan limits.

“Lowering loan limits further restricts liquidity and makes mortgages more expensive for households nationwide,” stated the National Association of Federal Credit Unions (NAFCU) in a letter signed by several other industry groups.

The association pointed out that many Americans still struggle to gain access to credit, and in the past year most conforming loans went to borrowers with credit scores ranging between 760 and 770.

The Mortgage Bankers Association (MBA) expressed similar concern in a letter it sent October 4, saying, “Any reduction in loan limits would have significant impact on thousands of families caught between the current limits and new, lower limits.”

On the other hand, reducing the loan limit would “significantly increase demand for private capital,” according to Fitch Ratings. However, the agency admitted “it is not clear how much impact this would have on the nascent recovery in the housing market.”

According to NAFCU’s calculations, lowering the conforming loan limit from $417,000 to $400,000 would have shut almost 154,000 borrowers out of the market in 2012.

letter signed by more than 60 members of Congress stated, “We are deeply concerned” by the possibility DeMarco would single-handedly lower the conforming loan limit.”

The representatives noted in their letter, “Currently, homeownership rates are at an historic 18-year low,” adding that “[m]ortgage credit is virtually nonexistent for middle class Americans with less than stellar credit.”

Rep. Brad Sherman (D-California), one of the 66 representatives to sign the letter to DeMarco pointed out that the current loan limit is necessary to support the middle class. “In the Los Angeles area, these limits are not at the level of a mansion; they afford a middle class home,” he said.

The federal lawmakers also pointed out that DeMarco previously stated he would not make changes to the conforming loan limit on his own. Their letter referenced comments DeMarco made in 2011 before the House Financial Services Committee when he said, “I really and truly believe that the Congress of the United States is the body that should make the determinations about the future path of the loan limit if it is going to be something other than what current law provides.”

“We couldn’t agree more,” the letter from congressional members stated.

Furthermore, Congress and the NAFCU question the legality of such a move by DeMarco, as the Housing and Economic Recovery Act of 2008 expressly states that if home prices decline, then the loan limit should remain the same.

The act “clearly indicated that the limits shall NOTdecline below the current $417,000,” stated the NAFCU in its letter.

MBA also expressed concern for the industry as it already faces major changes due to the Consumer Financial Protection Bureau’s (CFPB) Qualified Mortgage (QM) and Ability-to-Repay rules that will take effect in the new year.

“The operational challenges of changing loan limits in hundreds of jurisdictions around the country while at the same time redesigning, installing, and testing new CFPB-compliant loan origination systems would impose an excessive burden on the industry,” MBA stated.


Delinquencies Drop on GSEs’ Foreclosure Prevention Actions

Delinquencies Drop on GSEs’ Foreclosure Prevention Actions

10/07/2013 BY: ASHLEY R. HARRIS

Nearly 3 million homes have been saved from foreclosure since the beginning of the GSEs’ conservatorship in 2008.

According to the Federal Housing Finance Agency, Fannie Mae and Freddie Mac have completed more than 2.9 million foreclosure prevention actions, which have helped more than 2.4 million borrowers stay in their homes.

And, of those more than 2 million homeowners who have benefited from those actions, more than 1.4 million received permanent loan modifications.

The GSEs were busy during the first half of the year, with more than 247,000 foreclosure prevention actions and 117,000 of them occurring in the second quarter.

FHFA’s Federal Property Manager’s Report submitted to Congress Monday also found that the number of Fannie Mae and Freddie Mac delinquent home loans dropped nationally in the second quarter and the 60-plus-days delinquent loans dipped 7 percent during the first quarter.

The effort to keep homeowners in their homes seems to be working. More than half of the troubled homeowners who received permanent loan modifications in the second quarter saw their monthly payments drop by more than 30 percent.

Completed third-party sales and foreclosure sales continued on a downward trend with a 10 percent reduction in the second quarter.

CoreLogic Case-Shiller Indices Register 10.2% Annual Gain in Q1

CoreLogic Case-Shiller Indices Register 10.2% Annual Gain in Q1


In its first-quarter report, the CoreLogic Case-Shiller Home Price Indexes experienced a double-digit national price gain for the first time since the housing bubble that took place seven years ago.

Prices increased an average of 10.2 percent from the first quarter of last year to the first quarter of this year across the 380 metro markets tracked.

“Record levels of affordability, a slow improving job market, and very small inventories of new and existing homes for sale will continue to drive U.S. home price appreciation during the summer,” said David Stiff, chief economist for CoreLogic Case-Shiller.

However, the economist does predict a slow-down in appreciation over the next year. From the first quarter of this year to the first quarter of next, the Case-Shiller Indexes predict a 6.5 percent price gain.

Markets currently experiencing the greatest price appreciation are some of those that “were at the center of the housing bubble,” according to CoreLogic.

Several California markets are among the top markets for price gains over the past year.

San Jose, California, posted a 23.7 percent price gain; San Francisco posted a 21.1 percent price gain; and Sacramento, California, experienced a 21.0 percent price gain.

Phoenix, Arizona, and Las Vegas recorded price increases of 22.8 percent and 20.9 percent, respectively.

However, of these notable markets, San Francisco is the only one where price gains are expected to continue in the double digits over the next year. Case-Shiller predicts a 10.5 percent gain in the metro.

Additionally, Stiff staves off any concerns of growing bubbles, saying, “there is less need for concern now since home prices remain 26 percent below their peak nationally and are even lower in many metro markets.”

The cause of many of the double-digit price increases across the country is low inventory. Phoenix, Sacramento, and Detroit all have just three months supply.

At the other end of the spectrum, a few metros did experience price declines over the year ending in March 2013, but “it is likely that home prices in these cities will turn positive by the end of the year,” Stiff said.

CoreLogice Case-Shiller Indexes rely on a combination of their own data along with information from the Federal Housing Finance Agency and Moody’s Analytics.

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