Tuesday Report, October 30, 2012
Special to the Texas Low Income Housing Information Service
In an attempt to pare down a $25 billion settlement for bilking borrowers, Wells Fargo has sent checks to an estimated 10,000 mortgage holders they screwed with “robo signings” and other fraudulent practices – but if the victims cash the checks, they can’t sue later.
Meanwhile, federal lawsuits are filed against Wells Fargo, JPMorgan Chase and Bank of America for sleazy loans. For the first time, bank officers may face criminal charges for processing toxic mortages.
For a pdf version of the full stories, plus contextual articles in social, environmental and legal areas, contact Bo McCarver at firstname.lastname@example.org
Wells Fargo quietly sends refunds to some FHA mortgage customers
By E. Scott Reckard Los Angeles Times October 29, 2012
Thousands of Wells Fargo & Co. home loan customers recently received a surprise in the mail: refund checks from the big bank, along with letters saying they had paid unnecessary fees for their mortgages.
The unsolicited offers of thousands of dollars arrived with a catch – if the borrowers cash the checks, they can’t later sue the No. 1 U.S. home lender. The San Francisco bank said in the letters that borrowers were put into more expensive loans when they could have qualified for cheaper ones.
Analysts said the letters sent to potentially 10,000 Wells Fargo borrowers were a way for the bank to sidestep further litigation over “steering” customers into unfavorable loans – allegations that the government has made about certain Wells Fargo operations in the past.
It’s one in a long series of legal troubles for major mortgage lenders, the five largest of which agreed in February to a $25 billion settlement of accusations that they “robo-signed” foreclosure affidavits and otherwise abused distressed borrowers. Mortgage investors have barraged them with lawsuits over defaulted loans, and the government also recently filed separate complaints against banks including Wells Fargo, JPMorgan Chase & Co. and Bank of America Corp.
“It sounds like they either found some problems themselves or the regulators discovered them and told them to get things fixed,” said Paul J. Miller, an analyst who follows Wells Fargo for Friedman, Billings, Ramsey & Co.
Feds sue BofA for $1 billion over loans sold to Fannie, Freddie
By E. Scott Reckard Los Angeles Times October 24, 2012
The federal government has filed another mortgage-fraud lawsuit against Bank of America, contending that defective loans generated by the bank’s Countrywide Financial Corp. subsidiary caused mortgage finance giants Fannie Mae and Freddie Mac to lose more than $1 billion.
A statement Wednesday from the office of U.S. Atty. Preet Bharara in New York said that after the subprime mortgage market collapsed in 2007, Calabasas-based Countrywide devised a loan-processing system called “Hustle” to “process loans at high speed and without quality checkpoints.”
BofA used the Hustle system after acquiring Countrywide in 2008, according to the lawsuit, described as the department-of-justice-ORGOV0000160.topic”Justice Department’s first civil fraud suit over loans sold to Fannie and Freddie. The companies were seized by the government during the financial crisis in a bailout that has cost taxpayers $137 billion.
BofA employees could face charges in U.S. fraud case: prosecutor
By Grant McCool Reuters October 25, 2012
Bank of America Corp (BAC.N) employees could face civil fraud charges as part of a federal lawsuit accusing the bank of causing taxpayers more than $1 billion in losses by selling toxic mortgage loans to Fannie Mae (FNMA.OB) and Freddie Mac (FMCC.OB), a prosecutor said on Thursday.
The comments were made at a hearing in Manhattan federal court to set a timetable for the U.S. Department of Justice’s first civil fraud lawsuit over mortgage loans sold to the two big mortgage financiers, which the government had announced on Wednesday. Fannie Mae and Freddie Mac were bailed out and put in government conservatorship in 2008.
“Potentially, the government may amend its complaint to include individuals, present or former employees of Bank of America,” Assistant U.S. Attorney Pierre Armand told U.S. District Judge Jed Rakoff.
Federal Reserve stands firm on bond-buying program
By Zachary A. Goldfarb Washington Post October 24, 2012
The Federal Reserve said Wednesday that it is standing firm on its plan to stimulate the economy for the foreseeable future and will keep up its open-ended, bond-buying program.
Wrapping up a two-day policy meeting, the Fed made little change to its latest policy statement after declaring last month that it would take aggressive new action to bolster economic growth to try to drive down unemployment. At the time, the central bank said it would buy $143 billion of mortgage bonds through the remainder of the year and, using surprising new language, would continue to support the economy even when the recovery shows signs of strengthening.
In Wednesday’s statement, the Fed said it is concerned that unless it continues to provide stimulus, “economic growth might not be strong enough to generate sustained improvement in labor market conditions.”
Zillow now lists homes in foreclosure
The free Zillow feature allows home buyers and others to view homes that aren’t listed for sale but are headed that way because of financial distress. Critics cite privacy concerns.
By Alejandro Lazo Los Angeles Times October 25, 2012
Real estate website Zillow.com has built a successful business out of telling online visitors how much your house is worth. Now it’s telling the world whether you’re in foreclosure.
The company on Thursday launched a free feature that allows anybody searching for homes to view those that aren’t listed for sale but are headed that way because of financial distress.
Nosy neighbors will be able to see if a homeowner has defaulted on the mortgage and by how much, whether a house has been taken back by the lender, and what a house might sell for in foreclosure, among other things.
While information on borrowers in foreclosure has long been public, it has been accessible only to those willing to dig through public records or pay specialized providers who aggregate that data for a fee. Zillow executives described the new feature as a service for people shopping for homes and a way to provide increased transparency to real estate.
Home Prices Push Low-Wage Workers Out of Cities
By Nicole Goodkind CNBC October 26, 2012
Sales of single-family homes in the U.S. rose by 5.7% in September, the highest rate since April 2010.
Most would argue that these numbers are indicative of an improving economy — an increase in housing sales leads to an increase in housing prices. Daniel Shoag, associate professor of Public Policy at Harvard’s Kennedy School, would argue the opposite.
High housing prices actually decrease income mobility and ultimately hurt the U.S. economy, according to a new study by Shoag and his colleague Peter Gangong.
“What higher housing prices have done,” Shoag tells the Daily Ticker, “is they’ve taken half the country off of this income convergence track.” Certain U.S. cities have “become prohibitively expensive for low-skilled workers and they’ve sort of become segregated places full of high-skilled workers. That’s contributed to regional income inequality and played a part of the rising income inequality that we see.”
Laborers are being priced out of cities like San Francisco and New York City and migrating to smaller cities like Las Vegas and Phoenix. This phenomenon slows economic growth, Shoag argues.
Full story at: http://www.cnbc.com/id/49551180
Bust To Boom: Why Housing Matters, Economically
NPR October 26, 2012
The economy has peppered political speeches for much of the presidential campaign. But talk of creating jobs has stolen thunder from the housing market.
The epic housing collapse four years ago was a key ingredient in creating the Great Recession in the first place. Plus, boosting the housing market can be a boon for overall economic recovery.
Beginning A ‘Long-Term Cycle’
Derek Thompson, senior editor at The Atlantic, follows the housing market. He says housing is a major driver of the overall economy because it impacts multiple sectors. When you buy a home, for example, you also buy things to put in it. When companies notice that kind of activity, they respond, he says.
That knock-on effect is boosting stocks at Home Depot and Lowe’s; they’re trading at their highest prices in a decade. That, in turn, lures investors.