The Department of Housing and Urban Development has reached a settlement with Bank of America that releases the company from liability for failing to adequately provide alternatives to foreclosure on 57,000 delinquent government-insured mortgages.
Like what you see? Click here to sign up for a National Mortgage News free trial and daily newsletter to get the latest feature stories, news headlines, data, and in-depth analysis on the issues impacting the mortgage industry.
The agreement, a draft of which was provided to American Banker, was previously undisclosed. It has been forged on a separate but parallel track from continuing settlement talks between Bank of America, state attorneys general and other regulators over alleged mortgage origination and servicing failures. (AB is a sister publication to National Mortgage News.)
B of A’s pact with HUD requires it to waive a minimum of $10 million in unpaid mortgage payments and vet each of the 57,000 delinquent borrowers for a possible loan modification, short sale or other foreclosure alternative.
“Our total costs for the program will be multiples of that” $10 million minimum, B of A spokesman Dan Frahm said. The deal calls for measures to “ensure these customers have every opportunity to stay in their homes,” he added.
After such outreach, the settlement paves the way for B of A to foreclose on homes that borrowers could not afford even after a mortgage modification and those that have been left vacant by owners.
In forging the agreement, HUD decided to forgo steep monetary damages or admissions of error from the bank.
Instead, it pushed for the lender to implement steps that in most cases it was supposed to have already taken under the terms of its FHA-guaranteed loans, with the apparent aim of minimizing foreclosures and related insurance claims.
“We took the borrowers into account first,” said HUD general counsel Helen Kanovsky. “We think that that’s really the best thing for the FHA [insurance] fund as well.”
The agreement is HUD’s first involving settlement of claims in which a servicer failed to offer loss mitigation to borrowers. It does not, however, prevent HUD from seeking damages from B of A for unrelated origination and servicing failures.
“We fought for as narrow a [legal] release as possible and as much money as possible,” Kanovsky said.
Under HUD’s standard terms, borrowers must be less than 12 months delinquent to qualify for loan modifications. With the B of A settlement, the minimum of $10 million the bank agreed to pay will go to covering past-due arrearages and giving borrowers who are more than a year behind the possibility of qualifying for foreclosure alternatives.
Daily Briefing | Thursday, August 4, 2011
Redwood Experiences Earnings Decline, Sites Lack of Product
Redwood Trust, the only firm to publicly issue jumbo MBS in the past two years, posted a net profit of just $9 million in the second quarter, half of what it earned in 1Q, telling investors there is a lack of quality mortgages to buy at the right price.
Ocwen Posts Strong Earnings, Firm Poised to Become Nation’s Largest Subprime Servicer
Buoyed by gains from mortgage servicing revenue, Ocwen Financial Corp., Atlanta, reported net income of $26.4 million in the second quarter, up 65% from the $16 million it earned in the same quarter last year.
Mortgage Insurers Hurt in Dow Selloff
With the Dow Jones in a steep selloff Thursday afternoon, mortgage insurance stocks took it on the chin, reacting to poor earnings from MI giant The PMI Group.
PennyMac Posts Record Earnings, Poised for Stellar Growth in Correspondent
PennyMac Mortgage Investment Trust reported record earnings of $16.6 million in the second quarter, and told investors that its correspondent mortgage purchases doubled in the second quarter to just over $50 million.
Freddie: 30-Year FRMs Reach a Yearly Low
Thanks to an ailing U.S. economy and trouble in overseas markets, rates offered on 30-year fixed-rate mortgages fell to a new yearly low this week, 4.39%, according to figures compiled by Freddie Mac.
PMI Loses $135 Million in Second Quarter
PMI Group, Walnut Creek, Calif., lost $135 million in the second quarter, but it could have been worse if the company was not able to record a $151 million gain on sale (net of tax) as it was finally able to recognize the note associated with the sale of its Australian mortgage insurance operations.
National Home Prices Still Low Despite Seasonal Uptick
Despite a quarter-over-quarter gain of 4.1%, national home prices are still down over the entire year, according to the Clear Capital Home Data Index Market Report.
Fitch Calls for Careful Navigation of Securities Risk Retention Rules
A Fitch report suggests the securities market needs to be aware of how pending U.S. risk retention regulations compare to European Union laws and how they are expected to affect the behavior of issuers and investors.
MBA Index: Commercial Mortgage Lending Explodes
Commercial mortgage lenders more than doubled their originations in the second quarter compared to 2Q 2010 with all property types especially multifamily contributing to the gains.
A Subordinated Bond Structure for the GSEs?
With the likelihood of legislation to create a new housing finance system increasingly remote, the government should still take interim steps to transition away from a system built around Fannie Mae and Freddie Mac, industry representatives said Wednesday.
Warehouse Volumes Flat at First Tennessee
First Tennessee Bank, Memphis, ended June with $1.9 billion of warehouse commitments on its books, just about flat compared to the same period a year ago.