Conservative
Repent, America!
Bank of America Corp. and other U.S. lenders’ settlement over foreclosure lapses leaves the firms vulnerable to years of litigation and billions of dollars in liabilities for their roles in the housing collapse.
Government officials can still pursue claims tied to the packaging of loans into securities, criminal-enforcement actions and fair-lending violations, U.S. Attorney General Eric Holder said today in a press conference. The $25 billion deal with the five biggest servicers ends state and federal probes into shoddy foreclosures and pays for debt forgiveness, refinancing and other efforts to keep struggling homeowners in their properties.
“It’s a big check with narrow immunity,” said Paul Miller, a former examiner for the Federal Reserve Bank of Philadelphia and now an analyst with FBR Capital Markets in Arlington, Virginia. “You get the state attorneys general off your back, but you’re not getting immunity from securitizations, which could come with their own steep cost down the road.”
Banks including JPMorgan Chase & Co., Citigroup Inc., Wells Fargo & Co. and Ally Financial Inc. negotiated with regulators for 16 months to seek the broadest possible release from claims tied to the creation and servicing of mortgages. They agreed to a deal that doesn’t liberate them from further losses.
“Because of the narrow nature and the fact that the banks didn’t get the widespread assurances they were seeking, this was mostly meaningless,” said David Lykken, managing partner at Mortgage Banking Solutions, an Austin-based consulting firm.
More Investigations
President Barack Obama announced during his State of the Union speech last month the creation of a government unit to investigate misconduct in the bundling of mortgage loans into securities. The group will streamline and strengthen current efforts to investigate fraud, Holder said Jan. 27.
Regulators are “aggressive” on pursuing securities claims and created a task force to do so, said Department of Housing and Urban Development Secretary Shaun Donovan. The deal doesn’t protect banks from claims related to creating defective loans sold to government-owned Fannie Mae and Freddie Mac, he said.
“It wasn’t the servicing practices that created the bubble, nor caused its collapse,” Donovan said. “It was the origination and securitization of these horrendous products.”
While banks have largely reserved for costs from today’s deal, bigger lenders could face as much as $2 billion a quarter in legal expenses from remaining issues, said Richard Bove, a bank analyst at Rochdale Securities LLC, in an interview with Bloomberg Television. He compared lenders’ predicament to that faced by tobacco and asbestos firms after government agreements.
http://www.businessweek.com/news/20...ore-costs-after-25-billion-mortgage-deal.html
Government officials can still pursue claims tied to the packaging of loans into securities, criminal-enforcement actions and fair-lending violations, U.S. Attorney General Eric Holder said today in a press conference. The $25 billion deal with the five biggest servicers ends state and federal probes into shoddy foreclosures and pays for debt forgiveness, refinancing and other efforts to keep struggling homeowners in their properties.
“It’s a big check with narrow immunity,” said Paul Miller, a former examiner for the Federal Reserve Bank of Philadelphia and now an analyst with FBR Capital Markets in Arlington, Virginia. “You get the state attorneys general off your back, but you’re not getting immunity from securitizations, which could come with their own steep cost down the road.”
Banks including JPMorgan Chase & Co., Citigroup Inc., Wells Fargo & Co. and Ally Financial Inc. negotiated with regulators for 16 months to seek the broadest possible release from claims tied to the creation and servicing of mortgages. They agreed to a deal that doesn’t liberate them from further losses.
“Because of the narrow nature and the fact that the banks didn’t get the widespread assurances they were seeking, this was mostly meaningless,” said David Lykken, managing partner at Mortgage Banking Solutions, an Austin-based consulting firm.
More Investigations
President Barack Obama announced during his State of the Union speech last month the creation of a government unit to investigate misconduct in the bundling of mortgage loans into securities. The group will streamline and strengthen current efforts to investigate fraud, Holder said Jan. 27.
Regulators are “aggressive” on pursuing securities claims and created a task force to do so, said Department of Housing and Urban Development Secretary Shaun Donovan. The deal doesn’t protect banks from claims related to creating defective loans sold to government-owned Fannie Mae and Freddie Mac, he said.
“It wasn’t the servicing practices that created the bubble, nor caused its collapse,” Donovan said. “It was the origination and securitization of these horrendous products.”
While banks have largely reserved for costs from today’s deal, bigger lenders could face as much as $2 billion a quarter in legal expenses from remaining issues, said Richard Bove, a bank analyst at Rochdale Securities LLC, in an interview with Bloomberg Television. He compared lenders’ predicament to that faced by tobacco and asbestos firms after government agreements.
http://www.businessweek.com/news/20...ore-costs-after-25-billion-mortgage-deal.html