Exclusive: U.S. regulator set to fail Wells Fargo on community lending test - sources

Wed Dec 7, 2016 | 5:37 PM EST A man walks by a bank machine at the Wells Fargo & Co. bank in downtown Denver, Colorado, U.S. April 13, 2016. REUTERS/Rick Wilking/File Photo - RTSSNGX A man walks by a bank machine at the Wells Fargo & Co. bank in downtown Denver, Colorado, U.S. April 13, 2016. Reuters/Rick Wilking/File Photo - RTSSNGX Exclusive: U.S. regulator set to fail Wells Fargo By Patrick Rucker | WASHINGTON A U.S. bank regulator is ready to fail Wells Fargo on a national scorecard for community lending, sources familiar with the decision said on Wednesday, in a move that could limit near-term expansion for the bank. Wells Fargo is due to be deemed a bank that "needs to improve" under the Community Reinvestment Act (CRA), a law meant to promote lending to poor neighborhoods. The move is a two-notch downgrade from the "outstanding" tag Wells Fargo has held since 2008 and the change would give regulators a greater say on day-to-day matters like whether they may open new branches. The ruling from the Office of the Comptroller of the Currency, the main regulator for national banks, is due by early January, said the sources with knowledge of the plans. A Wells Fargo spokesperson declined to comment. A spokesman for the OCC also declined to comment. Wells Fargo has struggled since September to overcome its admission that employees wrongly created as many as 2 million accounts without customer authorization. A downgrade on the bank's community service score could further tarnish the reputation of the San Francisco-based lender at a time when it hopes to move beyond the scandal. Wells Fargo may win an appeal to the downgrade through an independent arm of the regulator but no decision has yet been made, said sources familiar with the process. Consumer advocates have faulted the OCC for letting eight years pass between reviewing Wells Fargo's commitment to community development. "Regulators could have downgraded Wells Fargo years ago and maybe that would have stopped some of this wrongdoing," said Paulina Gonzalez, head of the California Reinvestment Coalition. Following the 2008 housing market collapse, the OCC faulted several national banks for their community lending. Bank of America Corp (BAC.N) lost its "outstanding" grade in 2011 when the OCC faulted the lender for "discriminatory or other illegal credit practices." JPMorgan Chase & Co (JPM.N) also slipped one notch from "outstanding" to "satisfactory" in 2013. But industry and regulatory sources said they knew of no other case where a national bank had slipped two notches in a single review of CRA compliance. (Reporting By Patrick Rucker, additional reporting by Dan Freed in New York; Editing by Meredith Mazzilli, Bernard Orr)

Wells Fargo to pay $4.1 million to settle charges of illegal student loan practices

Wells Fargo to pay homeowners $3.45 million over mailing error The Wells Fargo bank branch is seen in Golden, Colorado in an October 11, 2013 file photo. REUTERS/Rick Wilking/Files The Wells Fargo bank branch is seen in Golden, Colorado in an October 11, 2013 file photo. REUTERS/Rick Wilking/Files By Suzanne Barlyn A Wells Fargo & Co mortgage unit will pay $3.45 million to some customers because of a processing error that delayed the mailing of letters to almost 8,000 homeowners in bankruptcy and shortened their notice period about changes to monthly mortgage payment amounts, according to a court document. The unit, called Wells Fargo Bank NA, agreed on the sum in a pact with the Department of Justice's U.S. Trustee Program, which oversees the country's bankruptcy system, according to a letter from the bank filed in U.S. Bankruptcy Court in Greenbelt, Maryland. Wells Fargo agreed to fix the mailing error and give credits and refunds worth $3.45 million to affected homeowners. Inquiries by an independent compliance monitor hired by the bank as part of an $81.6 million settlement with the Justice Department last year uncovered the problem, said Cliff White, director of the U.S. Trustee Program's executive office, in a statement. [L1N13025Y] In that agreement last year, Wells Fargo settled claims that it denied thousands of homeowners a chance to challenge mortgage payment increases imposed during their bankruptcy proceedings. The latest $3.45 million deal reached with Wells Fargo supplements that settlement, the U.S. Trustee Program said. The bank also has agreed to expanded compliance monitoring. A Wells Fargo spokesman said it self-reported the mailing delay to the U.S. Trustee Program upon learning of the problem and that it is providing timely delivery of documents. (Reporting by Suzanne Barlyn; Editing by Bill Rigby) ================================ CFPB’s Arbitration Proposal Draws 13,000 Comments Flood of comments indicates consumer agency faces tough time completing regulation By Yuka Hayashi Aug. 23, 2016 4:12 p.m. ET WASHINGTON—The Consumer Financial Protection Bureau was flooded with nearly 13,000 public comments on its proposed rule to restrict the use of arbitration clauses in consumer financial contracts, indicating a rough road ahead for completing the contentious regulation. Hours before the public comment period ended late Monday, letters of support and opposition were sent in by leading groups vying to ======================== Money | Mon Aug 22, 2016 3:33pm EDT The sign outside the Wells Fargo & Co. bank in downtown Denver April 13, 2016. REUTERS/Rick Wilking The sign outside the Wells Fargo & Co. bank in downtown Denver April 13, 2016. REUTERS/Rick Wilking By Suzanne Barlyn A Wells Fargo & Co unit will pay $4.1 million to settle allegations that it engaged in illegal private student loan servicing practices that unfairly penalized certain borrowers, the Consumer Finance Protection Bureau (CFPB) said on Monday. The bureau said it identified breakdowns throughout Wells Fargo's servicing process, including failing to provide important payment information to consumers, charging illegal fees and failing to update inaccurate credit report information. Wells neither admitted nor denied the charges, the bureau said. The settlement resolves three areas of concern related to "procedures that were retired or improved many years ago, and addresses the impact to a small number of customers," a Wells Fargo spokesman said. The procedures at issue were either retired or corrected between 2011 and 2013. The $4.1 million sum includes a $3.6 million penalty to the bureau and a $410,000 fund for borrowers. Last year, the CFPB found that more than 8 million U.S. borrowers are in default on more than $110 billion in student loans. Breakdowns in student loan servicing may be driving the problem, the bureau said. Student loans make up the second largest U.S. consumer debt market with roughly $1.3 trillion owed by borrowers who took out federal and private loans, the bureau said. Also In Money U.S. appeals court declines to reconsider Bank of America ruling U.S. banks want to cut branches, but customers keep coming From the Olympics to Wall Street: The athletes who become brokers Bonnie Baha, DoubleLine's director of global credit, dies Loans from private lenders are a small fraction of that amount, totaling about $100 billion owed. But they are often used by borrowers with high debt levels who also have federal loans, the CFPB said. The bureau said the bank processed payments in a way that made consumers pay more fees. If a borrower's payment was not enough to cover the total amount due for all loans in an account, the bank divided that payment among the loans in a way that maximized late fees rather than satisfying payments for some of the loans, the bureau said. Wells Fargo's Sioux Falls, South Dakota-based education finance unit services about 1.3 million U.S. consumers, the CFPB said. (Reporting by Suzanne Barlyn; Editing by Alan Crosby, Bernard Orr)

Real Estate Relegation: Reuters: Wells Fargo agrees City of London office buy, shrugs off Brexit fear

Context News Property company St. Modwen cut the value of its stake in a high-end project in London’s Nine Elms, it announced on July 5. The 21 million pound cut represents a 10 percent writedown according to Liberum research. United Overseas Bank, a Singaporean lender, announced on June 30 that it was suspending its loans programme for London properties in the wake of uncertainties caused by Britain's June 23 vote to leave the European Union. Singaporeans were the top Asian investors in UK real estate in 2015, followed by Hong Kongers and Chinese, according to Savills. Financial data company Markit said on July 4 its construction Purchasing Managers' Index plunged to 46.0 in June, its lowest level since June 2009, and down from 51.2 in May. St Modwen’s London-listed shares fell 10 percent on July 5, closing at 232 pence. ================ London faces a luxury ghost-town problem The city’s charm was fading for high-end home investors even before the UK’s vote to quit the EU. A developer in the fancy Nine Elms complex just took a writedown, and prime prices are 8 pct below their peak. Sterling’s fall is a temporary lure, but the capital is losing lustre.

London’s alpha housing market is showing signs of strain. The city was losing its charm for high-end home investors even before the UK decided to quit the EU. A developer holding part of the fancy Nine Elms complex has cut the value of its stake, and prices for the most prized houses in central London are now 8 percent below their 2014 peak. Sterling’s fall will attract some buyers, but Britain's capital city is losing its relative appeal.

Property group St. Modwen cut the value of its stake in Nine Elms to the tune of 10 percent, reflecting falling prices in the area. The impact of the Brexit vote could send London home prices down by 10 percent to 20 percent, Green Street analysts reckon, and there are already signs of caution. Singapore’s United Overseas Bank said it will no longer lend against property in the capital after the June 23 vote to leave the European Union. Singaporeans were the top Asian investors in UK real estate last year.

Sinking money into London property has been a winning strategy for wealthy Asian and Middle Eastern buyers since the financial crisis. A house bought in the most exclusive neighbourhoods of London mid-2011 would be worth 24 percent more today, according to Savills. That lags the 29 percent return on the FTSE 100 in the same period, but that was tolerable while investors expected prices to continually increase.

They are now more likely to look elsewhere. An increase in stamp duty that came into effect in April for buy-to-let properties checked demand even before the referendum. Oversupply was threatening to stymie rising prices, with more than 35,000 luxury London homes slated to be built in the next decade, according to consultancy Arcadis. Nor is the prospect of global banks moving tens of thousands of traders to Paris or Frankfurt a good omen for sales of flashy properties.

Buy-to-let is also losing ground. London ranks 74th on a Global Property Guide list of 82 international cities for annual rental yield. New York, Tokyo and Sydney all have lower buying prices per square meter and higher rent yields. Investors can now get a better deal elsewhere, with no compromise on big-city glitz.

============================ Breakingviews on Twitter breakingviews.com breakingviews.com Search the Archive Tuesday, 19 July 2016 Sign In Request Trial Home Columns Features Videos Books Calculators About Us ▶Home ▶Features ▶The City will survive Britain’s big rift Client-centric centres 19 July 2016 By Dominic Elliott The City of London will remain a financial hub for longer than Britain remains a member of the European Union. Talks over how the United Kingdom leaves the EU could end with extra regulation, higher costs and more capital requirements for the financial sector. But it’s unlikely that clients – principally, asset managers and non-financial companies – will move much. They are the ones who drive the so-called “cluster effect”. First, think about the worst that could happen from Britain’s exit talks with the EU. That would be a loss of the so-called passporting rights that let banks sell services from a UK office throughout the continent without restriction. Without those rights, Britain would have to rely on copying unattractive templates set by Switzerland or Norway – or aim for “regulatory equivalence”, which means drafting legislation to match any new European laws, in an obvious betrayal of the pro-Brexit campaign’s pledge to “take back control”. UKfees Some business would move, like the clearing of euro-denominated securities. That would probably shift to Frankfurt or Paris, taking middle and back office staff and possibly some front office traders with it. That might lead to between 30,000 and 50,000, or up to a tenth of the total financial workers in London, leaving, based on estimates by think tank New Financial. But other business might stay. Advisory and equity capital markets bankers, or currency and commodities traders, should be able to ply their trade in London as before. Foreign exchange and commodities markets aren’t subject to EU-wide regulation, while UK-based clients typically account for up to a third of total European equity and merger advisory fees, according to Thomson Reuters data. That said, London could lose other kinds of trading and debt capital markets businesses. A question of costs All this would create two types of cost for investment banks in particular. With no passporting rights, their annual operating costs could rise by 3 percent, says the Boston Consulting Group. An example might be the need to duplicate roles, or no longer being able to share costs between divisions. The hike in personnel and administrative expense could fall most heavily on the U.S. banks. On average, the UK accounted for 88 percent of their staff in Europe, the Middle East and Africa in 2014, according to think tank Bruegel. Goldman Sachs had the largest proportion at 97 percent, while JPMorgan had the least with just 70 percent. The other cost is capital. European banks might need to set up separately capitalised subsidiaries both in continental Europe and the UK, possibly resulting in an additional capital requirement of up to 40 billion euros, reckons consultancy Boston Consulting Group. That would affect European banks like BBVA, BNP Paribas, Deutsche Bank, Intesa Sanpaolo, Societe Generale and UniCredit more than U.S. peers, which already have subsidiaries in London. Yet the cost of upping sticks could be even higher – and is harder to quantify. There’s no single city that yet offers a neat alternative to London. Frankfurt and Dublin are the two frontrunners. Paris, Milan, Madrid and Amsterdam are second-tier options. But all have problems. Dublin has a shortage of housing. Madrid has more office vacancies than other wannabe financial hubs, but those offices are of lower quality, according to JPMorgan research. Moreover, moving staff is cumbersome and expensive. School fees, estate agents and logistics companies are just the beginning. Consultants Synechron put the cost of relocation at as much as 50,000 pounds ($66,000) per employee. Let the client decide The deciding factor might well be the cluster effect. It’s not so much that banks like to be near their rivals. It’s more that it makes sense to be close to clients. Insurers and asset managers, two important kinds of customer, would probably be less affected by a hard Brexit than banks. Insurance companies, say, tend to have separately capitalised subsidiaries across the EU, and law firm Norton Rose Fulbright expects bilateral treaties between the EU and the UK to keep the industry more or less intact. The Mifid II and Mifir regulations that come into force in 2018 should also allow fund managers based in the UK access to the single market as third country-compliant institutions, and only a few should have to move staff to, say, Luxembourg or Dublin to ensure their distribution platforms conform. Nor are big blue-chip companies based in London likely to start delisting in droves. Many of these companies are either UK or emerging market corporates that favour the London Stock Exchange for its higher trading volume relative to other venues. The easiest decision for banks right now is to do nothing. For starters, there may be bargains to be had. Wells Fargo on July 18 said it had agreed to buy an 11-storey office development project in London’s City financial district from HB Reavis, one of the largest UK real estate deals since Britain voted to leave the EU. The U.S. bank plans to consolidate all its UK staff into one location. Politicians may yet make it worth banks’ while to stay. New British premier Theresa May has resisted discussing financial services in public since she took office. The sector is too toxic to promote. But it’s unlikely that she would want to see the UK’s highly tax-generating financial sector dissolve or decamp on her watch. As the smoke from Brexit clears, London may have to share its financial hub status, but is unlikely to lose it. dominic-elliott-152x197 dominic-elliott-152x197 Related Links Breakingviews is not responsible for the content of external internet sites. ▶ Wells Fargo to Purchase New Building in London, July 18 ▶ Boston Consulting Group: Assessing the Impact of Brexit ▶ Subjects ▶ Banking ▶ Brexit ▶ European Union ▶ London ▶ United Kingdom Related Articles ▶ How to read global banks' love letter to London Context News Wells Fargo on July 18 said it had agreed to buy an 11-storey office development project in London's City financial district from HB Reavis, one of the largest UK real estate deals since Britain voted to leave the European Union. "With this new building in London, we are able to bring our team members together in one location in order to more efficiently and effectively manage our operations," Frank Pizzo, Wells Fargo regional president for Europe Middle East & Africa, said in a statement. European banks might have to hold up to an extra 40 billion euros of capital if Britain exits the European Union without a trade deal that would allow institutions to sell their services across borders freely, according to research by Boston Consulting Group (BCG). These so-called passporting rights would be at risk unless Britain could forge a relationship with the EU like Norway's, which allows the country's banks to sell services into the bloc but also requires the country to allow freedom of movement. Without such a deal, there is a risk that banks would have to set up separately capitalised entities both in the UK and elsewhere in Europe, BCG says, and annual global operational costs could rise 3 percent. JPMorgan research published on July 11 estimated the total additional cost in the event of a clean exit from the European Union for eight investment banks to be $1.5 billion per year, or about a 2.5 percent increase. The banks it analysed were Barclays, BNP Paribas, Credit Suisse, Deutsche Bank, Goldman Sachs, Morgan Stanley, Societe Generale and UBS. Most Popular ▶ SoftBank’s $32 bln ARM bet gives investors a shock ▶ ARM bids best left to the irrational or desperate ▶ Netflix shows its age with cringe-worthy wordplay ▶ Nuclear subs are symbol of UK’s ebbing charm ▶ Turkey will pay high price for political stability =============================

Living Wells

Living Wells Wells Fargo: first big bank simple enough to fail 26 November 2014 | By Daniel Indiviglio EmailShare CommentSave Wells Fargo is the first big bank to get its affairs in order. The $1.6 trillion lender secured a conditional stamp of approval from regulators for its living will. Less credible plans from 11 other titans suggest size isn’t the main issue. The real problems are complexity and interconnectedness. The provisional post-collapse plan submitted by Wells Fargo wasn’t perfect. The Federal Reserve and Federal Deposit Insurance Corp want a revised version for next year. Unlike with other big banks, however, U.S. authorities expressed optimism that Wells Fargo’s blueprint could facilitate an orderly resolution in bankruptcy. The regulatory response also lacked some of the tougher language used by the FDIC when it reviewed the others. When it comes to scale, Wells Fargo sits in the exclusive $1 trillion-plus balance sheet club. The other three members, JPMorgan, Bank of America and Citigroup, all failed their unwinding-plan tests in August. In terms of market capitalization, Wells Fargo, at $280 billion, also surpasses its rivals. If systemic risk were correlated to size alone, then Wells Fargo ought to be among the riskiest of the bunch. Its ability to craft a living will more quickly underscores the two big ways in which it differentiates itself. First, Wells Fargo lacks the global reach of other mega-banks. That minimizes cumbersome, cross-border issues others face. The bank led by John Stumpf also has a significantly smaller presence on Wall Street, which means its web of securities and counterparties is far less entangled. A bank that is easier to disassemble when dead is also probably one easier to manage while it’s alive. That may be a growing part of the message from the living will process. At the same time, the ability of a bank like Wells Fargo to forge a doomsday path, at least on paper, is a sign that the once-maligned concept is taking hold. Wells Fargo being simple enough to fail should be a small sign of encouragement for shareholders, bondholders and taxpayers. If the more complex institutions can’t draft similarly credible plans, however, they may yet find themselves under renewed pressure to be taken apart long before they expire.

Why More Americans Are Renouncing U.S. Citizenship

Why More Americans Are Renouncing U.S. Citizenship by Ari Shapiro February 20, 2014 3:42 AM number of U.S. citizens renouncing their American citizenship spiked to 3,000 last year, up from about 500 in earlier years. While reasons vary from person to person, a U.S. tax law passed in 2010 has complicated life for many Americans living abroad. David Sucsy/iStockphoto The number of U.S. citizens renouncing their American citizenship spiked to 3,000 last year, up from about 500 in earlier years. While reasons vary from person to person, a U.S. tax law passed in 2010 has complicated life for many Americans living abroad. David Sucsy/iStockphoto A few times a year, the Treasury Department publishes a long list of names announcing all of the Americans who have lately abandoned their U.S. citizenship. According to the legal website International Tax Blog, the number hovered around 500 a decade ago. Last year, it hit a record high of nearly 3,000. This was not a gradual change. It was a sudden spike. It's a story of dominoes falling, one after another, leading to an unexpected outcome. The first domino fell in 2008, when federal prosecutors accused the Swiss bank UBS of helping wealthy Americans hide their money tax-free in overseas accounts. It was a big case, leading to indictments, fines and prison time. The U.S. Congress wanted to make sure it didn't happen again. During the economic recession, lawmakers saw a chance to bring in massive sums of money and stop tax cheats at the same time. "They just found UBS in a terrible scheme to encourage tax evasion," Barney Frank, the Democratic congressman from Massachusetts, told NPR in 2009. "I think there are clearly tens of billions that can be recovered there." The next year, in 2010, Congress passed the Foreign Accounts Tax Compliance Act. The law affects every foreign bank that does business with the U.S. And not just banks: It also applies to retirement accounts, mutual funds, and more. Renouncing citizenship is not as easy as throwing a passport onto the fire. It's a lengthy process, involving interviews, paperwork and legal procedures. So people who do it generally have a compelling motivation. And while individual reasons for renouncing may vary from person to person, experts in the field say the recent dramatic spike has more to do with the 2010 tax law than any other factor. Wisconsin financial adviser David Kuenzi works with Americans overseas who are affected by the law. "[Congress] said to all of these institutions, 'You need to follow this set of criteria to determine all of the Americans who are your clients," says Kuenzi, "and you need to report directly to us on their holdings.' " Shut Out Of Foreign Banks Foreign banks looked at the new law and decided that the regulations would be a huge hassle. Many of them decided to wash their hands of American account-holders. "They canceled the accounts of just about every American in Europe," says retiree John Mainwaring, "including me." Seventy-year-old Mainwaring grew up in Ohio, served in the U.S. Army, and has lived in Munich, Germany, for about 40 years. After his old German banks kicked him out, he tried to find new ones that would take him in. "I went everywhere," he says, "to every bank in Germany. The problem is, the ones here don't deal with Americans." Congress wanted to catch tax cheats. But the net also snagged Americans whose foreign bank accounts let them pay their bills in the countries they now call home. U.S. Taxes Americans, No Matter Where They Live The United States is very unusual in this respect. Most countries in the world don't tax their citizens living abroad. So, for example, a Spaniard living in Canada won't pay Spanish taxes. Instead, he'll pay Canadian taxes. But the U.S. taxes American citizens wherever they are in the world. "If I can compare it to romance, I say the U.S. is like Fatal Attraction," says Suzanne Reisman, a lawyer in London who advises Americans abroad. "Once they've got you, they never let you go. You have to renounce your citizenship, or you have to die." So today, Americans who don't like the Fatal Attraction relationship are giving up their U.S. citizenship in record numbers. In Switzerland, so many people want to renounce their citizenship that the U.S. Embassy actually has a waiting list. "I want to be clear: It's not about a dollar value of taxes that I don't want to pay," says Brian Dublin, a businessman who lives near Zurich. "It's about the headache associated with the regulations, filing in the U.S., and then having financial institutions in the rest of the world turn me away." Dublin says he is ready to renounce, despite the ties he feels to the country of his birth. "I grew up in America. I love my country. But I just feel that the current regulations are onerous." Officials from the Treasury Department, the State Department, the IRS and Congress spoke on background for this story. None would talk on tape. They all generally agree on the facts of the situation. Even so, there is very little pressure to change it. As one Senate staffer pointed out, nobody in Congress represents overseas Americans. And government officials think this law is succeeding at catching the tax cheats. That may be worth the side effect of losing a few thousand American citizens every year. ​26 top American corporations paid no federal income tax from ’08 to ’12 – report Published time: February 28, 2014 22:55 Get short URL AFP Photo / Getty Images / Scott Olson Tags Corporate news, Global economy, USA Twenty-six of the most powerful American corporations – such as Boeing, General Electric, and Verizon – paid no federal income tax from 2008 to 2012, according to a new report detailing how Fortune 500 companies exploit tax breaks and loopholes. The report, conducted by public advocacy group Citizens for Tax Justice (CTJ), focuses on the 288 companies in the Fortune 500 that registered consistent profit every year from 2008 to 2012. Those 288 profitable corporations paid an “effective federal income tax rate of just 19.4 percent over the five-year period — far less than the statutory 35 percent tax rate,” CTJ states. One-third, or 93, of the analyzed companies paid an effective tax rate below 10 percent in that timespan, CTJ found. Defenders of low corporate taxes call the US federal statutory rate of 35 percent one of the highest companies face in any nation. But the report signals how the most formidable corporate entities in the US take advantage of tax breaks, loopholes, and accounting schemes to keep their effective rates down. “Tax subsidies for the 288 companies over the five years totaled a staggering $364 billion, including $56 billion in 2008, $70 billion in 2009, $80 billion in 2010, $87 billion in 2011, and $70 billion in 2012,” CTJ states. “These amounts are the difference between what the companies would have paid if their tax bills equaled 35 percent of their profits and what they actually paid.” Just 25 of the 288 companies kept tax breaks of $174 billion out of the $364 billion total. Wells Fargo received the largest amount of tax subsidies - $21.6 billion - in the five-year period. The banking giant was joined in the top ten on that list by the likes of AT&T, ExxonMobil, J.P Morgan Chase, and Wal-Mart. AFP Photo / Etienne Franchi AFP Photo / Etienne Franchi About 1 in 11 of the 288 companies paid a zero percent effective federal income tax rate in the five years considered. Pepco Holdings – which supplies utility services to Delaware, the District of Columbia, Maryland, and parts of New Jersey – paid a cumulative five-year effective rate of -33 percent, the lowest of any company in that period. In fact, utilities came out particularly well among other industries. Reuters / Jonathan Ernst Reuters / Jonathan Ernst “The sectors with the lowest effective corporate tax rates over the five-year period were utilities (2.9 percent), industrial machinery (4.3 percent), telecommunications (9.8 percent), oil, gas and pipelines (14.4 percent), transportation (16.4 percent), aerospace and defense (16.7 percent) and financial (18.8 percent),” CTJ reported. CTJ said the companies are allowed to pay such low federal rates based on factors that include offshore tax sheltering, accelerated asset depreciation based on continued investment, stock options, and industry-specific tax breaks. “Of those corporations in our sample with significant offshore profits, two thirds paid higher corporate tax rates to foreign governments where they operate than they paid in the U.S. on their U.S. profits,” according to CTJ. The non-profit group says this lax taxation climate among the most powerful US corporations comes amid an aggressive push by lobby and trade groups on Capitol Hill “to reduce the federal corporate income tax rate, based on the claim that our corporate tax is uncompetitively high compared to other developed nations.” Just this week, US House Ways and Means Committee Chairman Dave Camp (R) introduced a tax reform proposal that would lower the maximum federal effective tax rate to 25 percent. Though, tellingly, this aspect of the plan – among other attempts at bipartisan consensus in the proposal – renders it no chance of even getting a hearing in the Republican-dominated House during a mid-term election year, when such a conciliatory offering can be used as a cudgel against disapproving conservatives. House Ways and Means Committee Chairman Dave Camp (R-MI) (AFP Photo / Chip Somodevilla) House Ways and Means Committee Chairman Dave Camp (R-MI) (AFP Photo / Chip Somodevilla) Companies have already disputed CTJ’s report, saying that the study only looks at federal income taxes while ignoring other tax burdens they face, such as on the state and local level. In addition, the companies say low effective rates are part of congressional attempts to offer tax relief to corporate America in order to create larger economic opportunity. To reverse low corporate federal tax rates, CTJ recommends Congress end corporations’ ability to "defer" taxes on offshore profits; limit use of executive stock options that reduce taxes by "generating phantom 'costs'” the companies don't really incur; end accelerated depreciation opportunities; restore the corporate Alternative Minimum Tax; and strengthen corporate income and tax disclosure regulations. “These findings refute the prevailing view inside the Washington, D.C. Beltway that America’s corporate income tax is more burdensome than the corporate income taxes levied by other countries, and that this purported (but false) excess burden somehow makes the U.S. ‘uncompetitive,’” CTJ concluded.

North Carolinians could be forced to accept fracking on their property

By John Upton Donald Lee Pardue Forced fracking could be coming to Chatham County, N.C. Not willing to sell out to frackers? If you’re a property owner living above natural gas reserves in North Carolina, you might not have a choice. A panel charged by the state’s legislature with developing hydraulic fracturing guidelines recommended Wednesday that property owners be forced to allow drilling beneath their property if enough of their neighbors want it. From the Associated Press: A panel commissioned by state government said Wednesday that forced fracking should be allowed in North Carolina. Forced or compulsory pooling allows the state to let energy companies drill into natural gas reserves under non-consenting property owner’s land. Property owners in the state receive a percentage of the profits from gas extracted from under their property. The study group recommended at least 90 percent of acreage of a drilling area be voluntarily leased before remaining property owners are forcibly pooled. The News & Observer reports that the recommendation is expected to be adopted by the state legislature this fall. More from the article: The proposal by a state study group endorses a rarely used 1945 law that’s never been tried here on the kind of scale that would be required for shale gas exploration, or fracking. Thousands of property owners could potentially be affected in the state’s gas-rich midsection in Lee, Moore and Chatham counties. … “We are talking about a for-profit industry taking away personal freedoms with the blessing of the government,” Therese Vick, a community activist with the Blue Ridge Environmental Defense League, told the Compulsory Pooling Study Group. Taking away those personal freedoms is already the norm in some states. In Ohio, there’s an unofficial guideline stating that if 90 percent of property owners in an area consent to the sale of a gas deposit, everybody else has to sell out to frackers too, according to the Compulsory Pooling Study Group’s draft report [PDF]. In Kentucky, the figure is 51 percent. In Virginia, it’s just 25 percent. John Upton is a science fan and green news boffin who tweets, posts articles to Facebook, and blogs about ecology. He welcomes reader questions, tips, and incoherent rants: johnupton@gmail.com. ============= Fracking boom could lead to housing bust By Roger Drouin thinkpanama When it comes to the real estate market in Bradford County, Pa., where 62,600 residents live above the Marcellus Shale, nothing is black and white, says Bob Benjamin, a local broker and certified appraiser. There aren’t exactly “fifty shades of grey,” he says, but residential mortgage lending here is an especially murky situation. When Benjamin fills out an appraisal for a lender, he has to note if there is a fracked well or an impoundment lake on or near the property. “I’m having to explain a lot of things when I give the appraisal to the lender,” he says. “They are asking questions about the well quite often.” And national lenders are becoming more cautious about underwriting mortgages for properties near fracking, even ones they would have routinely financed in the past, Benjamin says. That’s a real problem in Bradford County, where 93 percent of the acreage is now under lease to a gas company. Local banks are still lending because they have to if they want the business in the county, according to Benjamin, who has been involved in the area’s real estate market since 1980. But, he says, “The big boys, Wells Fargo and the other banks are probably pretty similar, they are going to protect their butt.” Lawyers, realtors, public officials, and environmental advocates from Pennsylvania to Arkansas to Colorado are noticing that banks and federal agencies are revisiting their lending policies to account for the potential impact of drilling on property values, and in some cases are refusing to finance property with or even just near drilling activity. Real estate experts say another problematic trend is that many homeowners insurance policies do not cover residential properties with a gas lease or gas well, yet all mortgage companies require homeowners insurance from their borrowers. “Well, that is a conflict,” says Greg May, vice president of residential mortgage lending at Ithaca, N.Y.-based Tompkins Trust Company. Last month, a landowner in Madison, N.Y., was surprised when their insurance company refused to renew their homeowners policy because there is a conventional gas well on their property. While the media and environmental groups have focused on shale drilling’s potential to poison the soil, water, and air, they’ve largely overlooked its potential to poison the real estate market. “I think we are on the tip of this,” says Steve Hvozdovich, Marcellus Shale coordinator for Clean Water Action in Pennsylvania. “Whether you are the homeowner trying to get homeowners insurance or the neighbor [to a fracking site] who is trying to refinance, there are just so many tentacles to this. I don’t think people are grasping all the impacts of natural gas drilling.” Benjamin doesn’t often hear property owners talk about the issue. “I don’t think most are concerned about it,” he says. “But I think they may have to be in the future.” The first denial Brian and Amy Smith live across the street from a new gas well in Daisytown in Washington County, Pa., an hour south of Pittsburgh. Last year, when they applied for a new mortgage on their $230,000 home and hobby farm, they were denied. According to ABC affiliate WTAE, this appears to be the first example in western Pennsylvania of a homeowner being denied a mortgage because of gas drilling on a neighbor’s property: In an email, Quicken Loans told the Smiths, “Unfortunately, we are unable to move forward with this loan. It is located across the street from a gas drilling site.” Two other national lenders also turned down Brian Smith’s application. “I think a lot of folks nationally are watching this case,” says Rep. Jared Polis (D-Colo.), a congressman who represents areas north and west of Denver. He noted that in his home district fracking leads to a “haircut on a property’s values.” “I think it is something that the banks would frankly be smart to look at,” Polis says. Elisabeth N. Radow, a lawyer and chair of the League of Women Voters of New York State’s Committee on Energy, Agriculture and the Environment, says the Smiths’ story shows that property owners are clearly vulnerable to what happens on their neighbors’ land in fracking territory. “A [fracking] gas well brings commercial activity, can pollute drinking water and devalue the property.” Radow says it’s logical that high-volume horizontal fracturing — an operation in which millions of gallons of water mixed with hundreds of chemicals are pumped horizontally into layers of shale — has lenders worried. “They are trying to protect themselves,” she says. Radow advises people looking to purchase a home anywhere with drilling to do their homework before buying. She predicts that homeowners will start seeing mortgage provisions prohibiting gas drilling. She saw one earlier this month from New Jersey, where the gas industry is lobbying Gov. Chris Christie (R) to open the Delaware River basin to fracking. The Obama administration has so far taken a hands-off approach to regulating fracking, as have many states, so the banks are trying to figure out how to proceed in uncertain territory. “What is the federal government doing to protect the Smiths of the world?” asks John R. Nolon, a land-use and property professor at Pace Law School. “Banks are out there on the frontier of this regulatory chaos saying, ‘We can’t assure ourselves this is a safe technology because there is this fragmented regulatory process.’” A very clear stance The “Mineral, Oil and Gas Rights Rider” [PDF] on loan paperwork from Sovereign Bank says the mortgage will be automatically recalled if the property owner transfers any oil or gas rights or allows any surface drilling activity. It also specifies that owners must “take affirmative steps to prevent the renewal or expansion” of a current gas lease. A spokesperson for Sovereign Bank said the company would not comment for this story. May, the lending firm vice president from Ithaca, says he is neither pro- nor anti-fracking, but he thinks property owners and prospective buyers need to be aware of these kinds of mortgage issues. “That is one of the top lenders that has taken a very clear stance,” May says of the Sovereign Bank document. “We need to pay attention to this.” Another big unknown is how homeowners might be affected by horizontal drilling happening underneath their property, May said. “Horizontal drill bores radiate out from the vertical bore up to one mile in each direction, which could potentially impact other owners’ fee-simple real estate ownership,” May says. The problems are here Twelve hundred miles southwest of Bradford County, Connee Robertson and her husband run an animal rescue center on 1.6 acres overlooking Little Red River in Heber Springs, Ark. Robertson moved to the area in 1993 because she fell in love with this part of the Ozarks known for its pristine rivers and lakes. That was before gas companies such as Chesapeake Energy discovered the Fayetteville shale formation in the early 2000s. Once that happened, the majority of property owners in Heber Springs leased their gas rights. “Everyone saw dollar signs,” Robertson says. “Everyone ends up regretting it. The problems are here now.” Over the past few years, those problems have included earthquakes and drilling crews pulling water out of the Little Red River. One of Robertson’s horses died for unknown reasons, and her neighbors’ wells have been polluted. More recently, Robertson has heard about buyers unable to purchase homes in the area because they can’t secure financing. In the Laurel Highlands area of Pennsylvania’s Allegheny Mountains, traditionally known for tourism and recreation, drilling is scaring off prospective second-home buyers before they even start thinking about mortgages, says Melissa Troutman of the Mountain Watershed Association. She knows of one buyer who left the market after they learned that there was drilling three and a half miles from a home they were looking at. In technical default Many of the largest mortgage institutions have already enacted policies that bar lending to certain properties near gas drilling and gas lines. The Federal Housing Administration’s lending guidelines prohibit financing for homes within 300 feet of a property with “an active or planned drilling site.” In an email response to a question from Grist, FHA spokesman Lemar Wooley explained the reasoning behind the guidelines: FHA is primarily concerned with the health and safety of the occupants of the dwelling. If the property is subject to smoke, fumes, offensive noise and odors, etc. to the extent they would endanger the health of the occupants then the property is ineligible. FHA is also concerned with the risk to the insurance fund. So if the property is subject to those same items and the health of the occupants is not endangered, but the marketability of the property is compromised, the property may not be eligible for FHA insurance. Fannie Mae and Freddie Mac also prohibit property owners from signing a gas lease. May said many owners are now in “technical default” under the terms of their mortgage if they signed a gas lease without first getting consent from their lender. Another clause in Fannie Mae and Freddie Mac mortgages prohibits hazardous materials on a residential property. “It comes as a surprise to a lot of people. They weren’t aware that their mortgage came with those restrictions,” May said. Back in Bradford County, Benjamin, who plans to retire in 10 or so years, hasn’t decided whether he wants to keep his family in the area, where there are “good and bad points” to the drilling boom. But he knows one thing for sure: Fracking “changed everything” in the region’s real estate market. Roger Drouin is a freelance journalist who covers environmental issues. When he’s not reporting or writing, he is out getting almost lost in the woods. He blogs at rogersoutdoorblog.com. =======================

New York to sue BofA, Wells Fargo over mortgage practices

Tue, May 07 00:24 AM EDT By Karen Freifeld and Aruna Viswanatha NEW YORK (Reuters) - New York Attorney General Eric Schneiderman said on Monday he plans to sue Bank of America Corp and Wells Fargo and Co for violating the terms of a settlement designed to end mortgage servicing abuses. Schneiderman issued the announcement, which suggests lawsuits could be filed against the banks within two months, ahead of a widely anticipated report from the monitor for the multi-state settlement, which is expected to be critical of banks. The planned action is the first involving allegations that top banks, which agreed last year to provide $25 billion in relief to homeowners and comply with a set of servicing standards to atone for foreclosure misconduct, are not living up to their obligations under the deal. Schneiderman said that, since last October, his office had documented 339 violations of standards - 210 by Wells Fargo and 129 by Bank of America - dictating the timeline for banks to process mortgage modification applications. Schneiderman said he would seek injunctive relief and an order requiring the two banks to comply with the settlement. His statement did not say he was seeking damages or penalties. But it is unclear how far Schneiderman can take his efforts, because they come outside the primary channel authorized by the settlement for any potential violations. The settlement authorized the monitor to first work with a servicer to correct any potential violations and sue only if the servicer does not fix the errors. In an afternoon news conference, Schneiderman acknowledged the authority provided to the monitor, but said he could still move forward. "There is more than one cop on the beat," he said. The action draws further attention to the continuing plight of borrowers facing foreclosures some five years after the start of the housing crisis. Some borrowers say they wait months for word from their bank on a request to modify a loan, only to be told their paperwork has been lost. It also highlights the banks' lingering mortgage headache, even if this latest move might not result in significant additional monetary penalties.

"Wells Fargo and Bank of America have flagrantly violated those obligations, putting hundreds of homeowners across New York at greater risk of foreclosure," the attorney general said in a statement.

A spokeswoman for Wells Fargo declined to comment. Bank of America said in a statement that it takes seriously the allegations of servicing problems and will work quickly to address them. Bank of America and Wells Fargo are among five banks that agreed to the settlement in February 2012. At the news conference, Schneiderman declined to say whether the other three banks - JPMorgan Chase & Co, Citigroup Inc and Ally Financial Inc - could face similar lawsuits, but said his announcement had "implications" for the other servicers. WATCHDOG REPORT COMING SOON The National Mortgage Settlement was brokered between the banks and 49 state attorneys general. While the settlement's monitor has issued several reports on monetary relief provided to homeowners under the settlement, an upcoming report will be its first assessment of compliance on troubled borrowers. That report, expected in the next few weeks, will include how quickly banks must respond to requests for loan modifications. The monitor, former North Carolina Banking Commissioner Joe Smith, said in a statement on Monday that he appreciates Schneiderman's interest in the issue. He also said he will use the full force of his own power to hold banks accountable.

"Under the Settlement, there is a process that allows me to conduct reviews of the banks' compliance and report them to the public. I am following this process and look forward to sharing my findings and enforcement activities in June," Smith said.

A committee comprised of federal regulators and more than a dozen state attorneys general will have the first crack at pursuing any potential litigation. U.S. Department of Housing and Urban Development General Counsel Helen Kanovsky, whose agency sits on the committee, said HUD takes violations of the settlement seriously and expected "further action to be taken" after Smith releases his findings. Iowa Attorney General Tom Miller, who spearheaded last year's settlement, said in a statement that his office has been in discussions with Smith about several issues, including missed deadlines. Connecticut Attorney General George Jepsen, who is also on the monitoring committee, said he was aware of many of the issues raised by New York and will work with the committee to ensure the banks comply with the settlement. Some housing advocates welcomed Schneiderman's move ahead of other states and the settlement's monitor.

"We hope this action by the AG will push other state and federal regulators to draw a line in the sand against abusive mortgage servicing practices," Josh Zinner, co-director of the Neighborhood Economic Development Advocacy Project in New York, said in a statement.

In an interview, Zinner said housing advocates were worried that a lot of problems still remained since last year's settlement. The February 2012 settlement released the banks from claims over faulty foreclosure practices and the mishandling of requests for loan modifications. It was supposed to speed mortgage relief to homeowners in need and provide $2,000 payments to borrowers who lost their homes to foreclosure. (Reporting by Karen Freifeld in New York and Aruna Viswanatha in Washington; Editing by John Wallace and Andre Grenon)

Bank of America to charge debit card use fee

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By Joe Rauch
Thu Sep 29, 2011 5:05pm EDT
(Reuters) - Bank of America Corp plans to charge customers who use their debit cards to make purchases a $5 monthly fee beginning early next year, joining other banks scrambling for new sources of revenue.

U.S. banks have been looking for ways to increase revenue as regulations introduced since the financial crisis limited the use of overdraft and other fees.

The Dodd-Frank Act's Durbin amendment, due to go into effect on October 1, caps fees banks can charge merchants for processing debit card transactions at 21 cents per transaction from an average of 44 cents, potentially costing banks billions of dollars.

Banks also face broader operational challenges as low interest rates and higher capital requirements hit profitability, and the sluggish economy depresses loan demand.

Other large U.S. banks including Wells Fargo & Co, JPMorgan Chase & Co and SunTrust Banks Inc are testing or planning monthly debit card fees.

"The economics of offering a debit card have changed," Bank of America spokeswoman Anne Pace said on Thursday. Bank of America is the largest U.S. bank by assets.

Senator Richard Durbin, architect of debit card interchange fee reform, bashed the proposed monthly fee. "Bank of America is trying to find new ways to pad their profits by sticking it to its customers," he said in a statement. It's overt, unfair, and I hope their customers have the final say."

A FEE TOO FAR?

Even before introduction of the Durbin amendment's rules on debit fees, Bank of America's fee income was dropping at its deposits and card services units. The bank's deposits unit reported fee income of $1 billion in the second quarter of 2011, down 34 percent from $1.5 billion a year before.

Card services, which includes the bank's credit and debit card operations, reported fee income of $1.9 billion, down 23 percent from $2.5 billion in second quarter 2010.

"This might be a fee too far," said Ed Mierzwinski, director of the consumer program for the U.S. PIRG, a federation of state public interest research groups.

Mierzwinski said such fees could push customers to smaller banks that have not introduced checking and debit-related fees.

Pace said customers expect certain features for their accounts, like overdraft and fraud protection, and the fee would offset some of those costs.

The fee will be waived for the bank's premium or platinum privileges accounts tied to its Merrill Lynch brokerage. It will also not be charged for using the card to access the bank's ATMs, Pace said.

She declined to say how much the bank expects to earn through these fees or how many customers would be affected.

Some banks have pushed back against debit fees.

Citigroup Inc said earlier this month that it would not impose debit card usage fees as part of a broader account restructuring.

The head of banking products for Citi's U.S. consumer bank said customers had told the bank that a debit card fee would be "a huge source of irritation."

(Reporting by Joe Rauch in Charlotte, North Carolina, editing by Gerald E. McCormick


================

Obama to announce actions on housing, student loans


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WASHINGTON | Mon Oct 24, 2011 12:55am EDT
(Reuters) - President Barack Obama this week will announce a series of actions to help the economy that will not require congressional approval, including an initiative to make it easier for homeowners to refinance their mortgages, according to a White House official.

The actions come as Obama is facing resistance from Republicans to a $447 billion jobs package he has urged Congress to pass.

The first of the initiatives will be unveiled during Obama's three-day trip to western states beginning Monday.

He will discuss the changes in mortgage rules at a stop in Nevada, which has one of the hardest-hit housing markets in the country.

The Obama administration has been working with the Federal Housing Finance Agency, the regulator for Fannie Mae and Freddie Mac, to find ways to make it easier for borrowers to switch to cheaper loans even if they have little to no equity in their homes.

The FHFA intends to loosen the terms of the two-year-old Home Affordable Refinance Program (HARP), which helps borrowers who have been making mortgage payments on time but who have not been able to refinance as their home values have dropped.

The Wall Street Journal reported that the changes should boost refinancing because they will let banks avoid the risk of any "buy-back" on a HARP mortgage as long as borrowers have made their last six mortgage payments and they prove that they have a job or another source of passive income.

They are also set to reduce loan fees that Fannie and Freddie charge and waive fees on borrowers that refinance into loans with shorter terms, the Journal said.

Pricing details won't be published until mid-November, and lenders could begin refinancing loans under the retooled program as soon as December 1, the newspaper reported, citing federal officials. Loans that exceed the current limit of 125 percent of the property's value won't be able to participate until early next year, the report said.

In Denver Wednesday, Obama will announce a student loan initiative.

"The only way we can truly attack our economic challenges is with bold, bipartisan action in Congress," White House Communications Director Dan Pfeiffer told The New York Times.

"The president will continue to pressure Congressional Republicans to put country before party and pass the American Jobs Act, but he believes we cannot wait, so he will act where they won't."

(Reporting by Caren Bohan and JoAnne Allen. Editing by Sandra Maler and Chris Wilson)

==============


Obama tests go-it-alone steps for U.S. economy
By Jeff Mason | Reuters – 4 hrs ago
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LAS VEGAS (Reuters) - President Barack Obama launched the first in a series of executive actions on Monday aimed at bypassing Republicans in Congress to show American voters he is serious about tackling a jobs and housing crisis that endangers his re-election.
Trying to seize the initiative and demonstrate he will take steps on his own if lawmakers do not act, Obama began a campaign-style swing through Western states seen as crucial to his chances of winning a second term in the November 2012 election.
Armed with the new slogan "We can't wait," the president started the three-day trip in economically hard-hit Nevada, a key political battleground and the state with the highest home foreclosure rate. He then goes to California and Colorado.
Obama's strategy is aimed at further painting Republicans as obstructing economic recovery, most recently by impeding his $447 billion jobs package in Congress, and making clear he is not powerless to act.
Questions remain about whether go-it-alone remedies -- the first of which was Monday's announcement of a expanded mortgage refinancing program to help struggling homeowners keep their homes -- can do much to revive the anemic economy and reduce stubbornly high unemployment.
"I'm here to say to the people of Nevada, the people of Las Vegas: we can't wait for an increasingly dysfunctional Congress to do its job. Where they won't act, I will," Obama told a small crowd of homeowners in front of the home of a family that he had visited to chat about aid for the housing market.


U.S. homeowners who owe more than their properties are worth got new help with word that a federal housing regulator is easing the terms of a program that helps so-called "underwater" borrowers who have been on time with payments but are unable to refinance.
The plan, which does not require congressional approval, is the latest effort to shore up the weak U.S. housing market. The lingering problem is crucial to the economic recovery and remains a political liability for Obama.
It was unclear whether Obama's approach, which falls short of an overarching plan some experts have called for, will give enough of a boost to the battered market to spur growth.
A lawmaker earlier this month estimated an expanded program could help as many as 600,000 to 1 million additional borrowers. But that is only a fraction of the estimated 11 million homeowners who are classified as underwater.
STUDENT LOAN PROGRAM
Obama will lay out a new student loan initiative in another swing state, Colorado, on Wednesday and keep rolling out at least one new initiative each week, said White House communications director Dan Pfeiffer.
Other executive steps are likely to include help for small businesses, and the White House said that on Tuesday it will unveil action to help boost jobs for military veterans. It did not say how many jobs it expected this step to create.
But aides to the president, who has operated by executive order before, appeared to concede his options for acting on his own authority can have only a modest impact compared with his broader stimulus program now stalled in Congress.
"They are not a substitute for congressional action, which is why he continues to urge Congress to wake up," White House spokesman Jay Carney told reporters aboard Air Force One.
Obama, who shed his jacket in the warm Nevada afternoon and spoke without the help of a teleprompter, insisted the unilateral measures would "make a difference" but acknowledged it would take time for the housing market to heal fully.
The president's latest moves come after Republicans defeated his full jobs plan in Congress and then voted down Obama's first efforts to get his proposals through piecemeal, despite polls showing strong public support for the package.
Brendan Buck, spokesman for House of Representatives Speaker John Boehner, the top Republican in Congress, accused Obama of campaigning instead of working to find common ground.
"The best way to achieve the outcome they are looking for would be to pick up the phone and work with Republicans instead of starting a fresh new campaign," Buck said.
Obama is seeking to capitalize on public displeasure with Congress after a summer of legislative gridlock.
Obama's public approval ratings have fallen to close to 40 percent, the low of his presidency, because of discontent with his economic stewardship.
Congress, where Republicans control the House and Obama's Democrats control the Senate, is even more unpopular. Its approval rating fell to about 12 percent after budget battles pushed the government to the brink of a shutdown and an unprecedented default on the national debt.
The states on Obama's tour were chosen deliberately.
Each has large populations of Hispanics, a voting bloc Obama's campaign is eager to win over. Nevada and Colorado are "swing states" which alternate allegiance between Republicans and Democrats, making them valuable election prizes.
(Additional reporting by Caren Bohan, JoAnne Allen and Margaret Chadbourn; writing by Matt Spetalnick and Jeff Mason; editing by John O'Callaghan and Todd Eastham)=============The U.S. Senate on Dec. 17 passed a bill to extend the current reduced rate of Social Security tax and the provision of long-term unemployment benefits through Feb. 29, 2012. To pay for these measures, the legislation would increase mortgage guarantee fees charged by government-sponsored enterprises Fannie Mae and Freddie Mac by 10 basis points per year through 2021. Although some details of the bill may change before final ratification, this aspect of the bill currently has bipartisan support. The language passed by the Senate requires the funds received by Fannie and Freddie as a result of the fee increases to be deposited directly with the Treasury, and does not allow them to be considered a reimbursement of subsidies from the federal government. Slushie MaeFannie, Freddie role funding tax cut is perilous19 December 2011 | By Daniel IndiviglioU.S. lawmakers are struggling with the details of extending the Social Security payroll tax reduction. But both sides want to pay for it by raising the guarantee fees charged by mortgage giants Fannie Mae and Freddie Mac. That’s a needed change, but siphoning the extra money straight to Treasury sets a perilous precedent. Fannie and Freddie currently charge somewhere in the 20 to 30 basis points range for single-family mortgage guarantees. The current plan in Congress would force them to hike their average fees by 10 bp from the 2011 level for the next 10 years. This revenue would pay for the continuation of the lower payroll tax and the extension of long-term unemployment insurance benefits for just a few months, through the end of February 2012. Raising the fees that Fannie and Freddie charge makes sense. The two enterprises have been on a Treasury drip-feed since September 2008, costing taxpayers over $150 billion so far in direct subsidy since then. More income in theory would reduce that need, if they were allowed to keep it. Moreover, higher fees from the two government-run lenders should make it easier for private-sector lenders to compete again. For now, almost all U.S. mortgages rely on a federal guarantee. Such a small fee hike won’t suddenly cause private financing to thrive, though it would be a step in the right direction. But the objective of stabilizing the finances of the two companies would be dangerously undercut by the way Congress wants to do things. As approved by the Senate, the extra revenue from higher guarantee fees would be paid directly to the Treasury. This would set a precedent for using Fannie and Freddie as a piggy bank to close a politically troublesome budget gap – and sticking the already bleeding institutions with a 10-year obligation that will fund just a few months of federal spending. Whether Uncle Sam should be involved in the mortgage market at all is questionable.((Uncle Sam, National Icon Born: c. 1812 Birthplace: United States Best Known As: Cartoon symbol of the United States Uncle Sam is the cartoon embodiment of the government of the United States of America, a character who appeared in newspapers and magazines beginning in the first part of the 19th century. The commonly accepted version of his origin, or at least the best explanation anyone's been able to supply, is that he was modelled after Samuel Wilson, a meat purveyor to the United States army during the War of 1812. Known as "Uncle Sam," Wilson put his initials on his goods. The initials U.S. were also taken to stand for United States. Over the years Uncle Sam evolved into a tall, white-haired man with beard, sporting patriotic colors and a top hat. The most common modern image can be traced to his depiction by James Montgomery Flagg from 1916, for a military recruitment poster calling "I Want YOU For the U.S. Army.")) But a history of dodgy governance and massive losses mean that Fannie and Freddie need to be phased out. The latest idea from Congress makes it likely the two behemoths (Something enormous in size or power.)will still be around in a decade. It’s further evidence that lawmakers of all stripes can’t resist deferring hard decisions until there is no easy sleight(A clever or skillful trick or deception; an artifice or stratagem.) of hand left.================Dec. 20, 2011 3:30 AM ETHouse GOP to reject stopgap payroll tax cutANDREW TAYLOR, Associated Press AIM ShareHouse Speaker John Boehner at a news conference on Capitol Hill in Washington, Monday, Dec. 19, 2011, as Majority Whip Kevin McCarthy, R-Calif., listens at right. (AP Photo/Jose Luis Magana)More NewsVideoHouse GOP to reject stopgap payroll tax cutDec. 20, 2011 3:01 AM ETHouse GOP out to reshape Senate's payroll tax cutDec. 19, 2011 7:34 AM ETPayroll tax bill faces uncertain House prospectsDec. 18, 2011 8:01 AM ETSenate OKs payroll tax cut, huge spending billDec. 17, 2011 10:51 PM ETHouse passes $1T budget bill, avoids shutdownDec. 16, 2011 2:51 PM ETAdvertisementAdvertisementWASHINGTON (AP) — With the Senate adjourned for the holidays, House Republicans are moving to shelve a bipartisan two-month extension of the Social Security payroll tax cut that cleared the Senate over the weekend and are demanding instead that their fellow lawmakers return to the Capitol for negotiations.After a spate of bipartisanship last week, the combatants are back in full-throated warfare over President Barack Obama's payroll tax initiative and other expiring measures, including jobless benefits for almost 1.8 million people who will lose them next month if Congress doesn't act.Instead of accepting a two-month stopgap Senate measure that would ensure fighting continues into February, Republicans said they would move Tuesday to set up an official House-Senate negotiating panel known as a conference committee. The Senate's top Democrat said he would refuse to negotiate until the House passes the short-term version.Both sides insist they want to extend the provisions before a Dec. 31 deadline, but that will prove difficult. After overwhelmingly passing a two-month extension Saturday, senators raced for the exits in the belief that the House would see no alternative but to go along. The Senate isn't scheduled to resume legislative work until Jan. 23.The Senate's short-term, lowest-common-denominator approach would renew a 2 percentage point cut in the Social Security payroll tax, plus jobless benefits for the long-term unemployed, and would prevent a huge cut in Medicare payments to doctors. The 2 percentage point tax cut provides about a $1,000 annual tax cut for a typical earner making about $50,000 a year.But House Republicans quickly erupted in frustration at the Senate measure, which drops changes to the unemployment insurance system pressed by conservatives, along with cuts to Obama's health care law. Also driving their frustration was that the Senate, as it so often does, appeared intent on leaving the House holding the bag — leaving it no choice but to go along."With millions of Americans struggling to make ends meet, it would be unconscionable for Speaker (John) Boehner to block a bipartisan agreement that would protect middle-class families from the thousand-dollar tax increase looming on January 1st," said Senate Majority Leader Harry Reid, D-Nev., who negotiated the two-month extension with Senate GOP leader Mitch McConnell of Kentucky. The 2 percentage point tax cut provides about a $1,000 annual tax cut for a typical earner making about $50,000 a year.Both sides were eager to position themselves as the strongest advocates of the payroll tax cut, with House Republicans accusing the Senate of lollygagging on vacation and Senate Democrats countering that the House was seeking a partisan battle rather than taking the obvious route of approving the stopgap bill to buy more time for negotiations.Just a couple of weeks after many Republicans made it plain they thought that the payroll tax cut — the centerpiece of Obama's autumn jobs agenda — hadn't worked and that renewing it was a waste of money, Republicans emerged from a closed-door meeting touting their support for the president."Do you want to do something for 60 days that kicks the can down the road?" said Rep. Jeb Hensarling, R-Texas. "Or do you want to do what the president asked us to do? And we're people who don't agree with the president all that often.""I've never seen us so unified," Rep. Louie Gohmert, R-Texas, said as he left a two-hour, closed-door meeting Monday night where Republicans firmed up their plans. He said the payroll tax cut that has been in effect this year failed to create any jobs, but he favored extending it for another 12 months because "it's tough to raise taxes when you're in a down economy."Congress' approval ratings are in the cellar, in part because of repeated partisan confrontations that brought the Treasury to the brink of a first-ever default last summer, and more than once pushed the vast federal establishment to the edge of a partial shutdown.This time, unlike the others, Republican divisions were prominently on display.The two-month measure that cleared the Senate, 89-10, on Saturday had the full support of McConnell, the Republican leader, who also told reporters he was optimistic the House would sign on. Senate negotiators had tried to agree on a compromise to cover a full year, but were unable to come up with enough savings to offset the cost and prevent deficits from rising.The two-month extension was a fallback, and officials say that when McConnell personally informed Boehner and House Majority Leader Eric Cantor of the deal at a private meeting, they said they would check with their rank and file.But on Saturday, restive House conservatives made clear during a telephone conference call that they were unhappy with the measure.Ironically, until the House rank and file revolted, it appeared that Republicans had outmaneuvered Democrats and Obama on one point.The two-month measure that cleared the Senate required the president to decide within 60 days to allow construction on a proposed oil pipeline that promises thousands of construction jobs. Obama had threatened to veto legislation that included the requirement, then did an about-face.The president recently announced he was delaying a decision on the pipeline until after the 2012 elections, meaning that while seeking a new term, he would not have to choose between disappointing environmentalists who oppose the project and blue-collar unions that support it.Associated Press==================End of the nightmareU.S housing in recovery, but morphing in shape20 December 2011 | By Martin HutchinsonPrintEmailSaveA 9.3 percent rise in home starts in November suggests the U.S. housing market is now in a stable recovery, even if its contours are shaping up quite differently than in past rebounds. Broad housing indicators continue to gather strength, helping the economy, but with a new reality of lower home ownership and more multi-family rentals. If house prices continue to decline and rents rise in 2012, the sector’s current huge subsidies may become irrelevant, perhaps even economically damaging. Evidence for the housing recovery extends beyond the most recent housing starts figures. The National Association of Home Builders index of builder confidence rose two points in November, to its highest level in four years, finally pushing it above the nadir of the early 1990s recession. Inventories of unsold homes have been worked down substantially in both the new home and existing home sectors. But the shape of the market is changing. The sharp 25.3 percent November increase in multi-family unit starts, together with the continued gradual retreat in the home ownership percentage from its 2004 high, suggests a future with more apartments, more rentals and more affordable cheaper housing stock. Though the religion of home ownership became public policy in recent decades, economically the move to rentals isn’t a problem. Workers can be employed building apartments as well as houses. While existing home prices are down a modest 4.7 percent from a year ago, rents are up 2.4 percent, according to the Bureau of Labor Statistics. With house prices down and renting rebounding, current housing market subsidies become less relevant. When the average existing home sells for $162,000, a government guaranteed mortgage limit of $729,750 is excessive. The home mortgage tax deduction is also irrelevant, when at today’s 3.94 percent mortgage rate the interest on a $150,000 mortgage is $5,910 compared to the standard deduction of $11,600 for married filers. These subsidies wastefully divert investment into housing, forcing millions of people into homes they cannot afford and contributing to the massive U.S. fiscal imbalances. It’s also true that most of these tax benefits accrue to the relatively wealthy. A healthy housing market is essential to America’s economic recovery regardless of whether people rent or buy their abodes. Next year may finally mark housing’s bottom.=====================California Attorney General Sues Fannie, Freddie Demanding AnswersPublished December 20, 2011| Associated Press Print Email Share CommentsSAN FRANCISCO – California's attorney general filed lawsuits against mortgage giants Fannie Mae and Freddie Mac on Tuesday, demanding that the companies that own some 60 percent of the state's mortgages respond to questions in a state investigation.Attorney General Kamala Harris, whose office filed the lawsuits in San Francisco Superior Court, is investigating Freddie Mac's and Fannie Mae's involvement in 12,000 foreclosed properties in California where they served as landlords. She also wants to find out what role the companies played in selling or marketing mortgage-backed securities.The essentially identical lawsuits ask the mortgage firms to respond to 51 investigative subpoenas(A writ requiring appearance in court to give testimony) that call on Fannie Mae and Freddie Mac to identify all the California homes on which they foreclosed. They also want the mortgage firms to reveal whether they have information on the decreased value of those homes due to drug dealing or prostitution, as well as explosives and weapons found on those vacant properties."Foreclosures not only affect the families who lose their homes, but also the safety, health and welfare of the entire community," the lawsuit said.Harris also called on Fannie Mae and Freddie Mac to disclose whether they have complied with civil rights laws protecting minorities and members of the Armed Forces against unlawful convictions and foreclosures.The suits also seek to determine whether the companies are in compliance with California's securities and tax laws.The companies were taken over by the federal government and put into conservatorship under the Federal Housing Finance Agency in September 2008 to save them from collapse.An attorney representing the Federal Housing Finance Agency said in a letter attached to the lawsuits that the 51 subpoenas were "frequently vague and ambiguous," and said state attorneys general did not have the authority to issue subpoenas against the federal conservator."The burden to collect that information would be nothing short of staggering," the letter said. Representatives of Fannie Mae and Freddie Mac said the companies would not comment on the lawsuits Tuesday.The lawsuits could determine whether states have a right to investigate the mortgage firms while they are under federal control. Harris argues that since the mortgage companies own properties in California, they are subject to state law and demands.Fannie Mae and Freddie Mac buy home loans from banks and other lenders, package them into bonds with a guarantee against default and then sell them to investors around the world. The two own or guarantee about half of U.S. mortgages, or nearly 31 million loans.The companies have so far cost American taxpayers more than $150 billion -- the largest bailout of the financial crisis. They could cost up to $259 billion, according to the FHFA.Two former CEOs at Fannie Mae and Freddie Mac last week became the highest-profile individuals to be charged in connection with the 2008 financial crisis. In a lawsuit filed in New York, the Securities and Exchange Commission brought civil fraud charges against six former executives at the two firms, including former Fannie CEO Daniel Mudd and former Freddie CEO Richard Syron.The executives were accused of understating the level of high-risk subprime mortgages that the companies held just before the housing bubble burst.Harris has created a task force that is pursuing criminal charges and civil judgments in mortgage fraud cases. She has said that her office would not join a planned 50-state settlement over foreclosure abuses that federal officials and other state attorneys general are negotiating with major U.S. banks.She said the settlement gave bank officials too much immunity from civil litigation.Harris said 768,330 residential mortgages were foreclosed on in California between January 2007 and June of this year.Read more: http://www.foxnews.com/politics/2011/12/20/california-attorney-general-sues-fannie-freddie-demanding-answers/#ixzz1h9QCmtvR=======================Stimulating reformMortgage reform might actually help U.S. economy30 December 2011 | By Daniel IndiviglioU.S. lawmakers have punted the problem of mortgage financiers Fannie Mae and Freddie Mac, probably until 2013 at least. But reforms could take years to implement and a start is long overdue. Removing the government presence from the mortgage market all at once would be too disruptive to contemplate. Through its various housing agencies, Uncle Sam currently backs about 95 percent of new lending. But a plan should be put in place to gradually wean the market off federal guarantees over, say, a decade. A clear path to reform would eliminate uncertainty about the future of housing finance in general and the discredited Fannie and Freddie in particular. As banks are fond of saying when faced with new regulations, knowing what is coming helps remove uncertainty. It would allow financial firms, investors, realtors and borrowers alike to prepare. One perhaps unexpected side-effect of setting a date for the end of government guarantees could be a boost for the housing market. Without federal subsidies, mortgage loans would become more expensive in the future. This, paired with prevailing ultra-low interest rates, should encourage even cautious buyers to enter the market, clearing inventory and getting housing activity going. Several proposals to reset housing finance policy are floating around Congress. All would wind down Fannie and Freddie and reduce the government’s role. One would replace them with a government agency backing up to 50 percent of mortgages. Another would create private sector firms that buy government reinsurance. Yet another, unveiled in early December and sponsored by Senator Johnny Isakson, would largely privatize the mortgage market over 10 years. The Treasury laid out a roughly similar range of options early in 2011, but never sounded enthusiastic about full privatization of the market. That’s unfortunate, since it merits serious consideration. But lawmakers aren’t known for boldness, especially in an election year. The housing lobby could easily paint a picture of Washington’s reforms threatening the American Dream. But perhaps the powerful constituencies eager for the government to remain involved in the mortgage market - including most lenders, investors and realtors - need to think again, along with politicians. Finalizing reform in 2012 could bring certainty, a swifter housing rebound, and more stability to the U.S. economy.=============================In 2011, several bills to overhaul the U.S. housing finance market were introduced in Congress. All would do away with mortgage giants Fannie Mae and Freddie Mac, but each chooses a different path for mortgage financing.One bill, sponsored by Representatives Gary Miller and Carolyn McCarthy, would create a government agency to back up to 50 percent of the mortgage market. Another bill, sponsored by Representatives Gary Campbell and Gary Peters, would create at least five private firms to finance mortgages. They would be backed by reinsurance purchased from the government. A third bill, sponsored by Senator Johnny Isakson, would wean the mortgage market off government support over a 10-year period. =========================UPDATE 2-BofA investor lawsuit wins class-action statusMon, Feb 06 19:01 PM EST* BofA accused of hiding Merrill losses, bonuses* Investors who owned stock, call options claimed lossesBy By Jonathan StempelFeb 6 (Reuters) - Investors suing Bank of America Corp won class-action status for their lawsuit accusing the bank of fraudulently misleading them about the 2008 takeover of Merrill Lynch & Co and the size of Merrill's losses and bonus payouts.U.S. District Judge P. Kevin Castel in Manhattan on Monday rejected the second-largest U.S. bank's argument that the investors could not prove they suffered losses by relying on materially misleading statements or omissions.Among the other defendants who were also sued and opposed class certification were former Bank of America Chief Executive Kenneth Lewis, former Merrill Chief Executive John Thain, former Bank of America Chief Financial Officer Joe Price, and Bank of America's board of directors.Lewis had won initial praise for saving Merrill from possible collapse when he agreed to buy it on Sept. 15, 2008, the day Lehman Brothers Holdings Inc went bankrupt.But investors later faulted the bank for not disclosing the scope of Merrill's soaring losses, which reached $15.84 billion in the fourth quarter of 2008, before Dec. 2008 shareholder votes on the merger. They also objected to Merrill's having paid $3.6 billion of bonuses despite the losses.Merrill losses forced Bank of America in January 2009 to get a second bailout from the federal Troubled Asset Relief Program, and contributed to a 93 percent drop in the Charlotte, North Carolina-based bank's stock price.The lawsuit consolidated litigation that had been brought nationwide, and names pension funds in Ohio, Texas, the Netherlands and Sweden as lead plaintiffs.It covers a variety of investors who owned Bank of America stock or call options between September 2008 and January 2009.Class certification lets plaintiffs pursue their case as a group, which can cut costs, and can lead to larger recoveries than if plaintiffs were to sue individually.Bank of America spokesman Lawrence Grayson declined to comment. David Hoffner, a lawyer for Thain, had no immediate comment. Lawyers for the remaining defendants and the investors did not immediately respond to requests for comment.AVOIDING WASTEIn his ruling, Castel pointed to comments by Lewis on a Jan. 2009 conference call about "much, much higher deterioration" of Merrill assets than expected to support the plaintiffs' claims that Merrill's losses should have been revealed sooner.He also said the record supported claims that the alleged misrepresentations about the bonuses were material.Class certification was also appropriate because litigation of each claim separately "would likely result in wasteful and repetitive lawsuits," he added.Bank of America, Lewis and Price are also defendants in a civil fraud lawsuit led by New York Attorney General Eric Schneiderman. He took over that case from his predecessor Andrew Cuomo, who is now New York's governor.The law firms Bernstein Litowitz Berger & Grossmann; Kaplan Fox & Kilsheimer; and Kessler Topaz Meltzer & Check were named lead counsel for the plaintiffs in the class-action case.Bank of America shares closed Monday up 13 cents at $7.97. They closed at $33.74 on the last trading day before the Merrill takeover was announced, and bottomed at $2.53 on Feb. 20, 2009.The case is In re: Bank of America Corp Securities, Derivative, and Employee Retirement Income Security Act (ERISA) Litigation, U.S. District Court, Southern District of New York, No. 09-md-02058.============================

Government to seek court approval of $25 billion mortgage pact
Sat, Mar 10 00:51 AM EST
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WASHINGTON, D.C. (Reuters) - A previously announced $25 billion settlement between five major banks accused of abusive mortgage practices and government officials will be filed in federal court on Monday, people familiar with the matter said late Friday.

The pact unveiled February 9 is expected to result in payments and other mortgage relief for about one million borrowers, but must first be approved by a judge.

Bank of America Corp, Wells Fargo & Co, JPMorgan Chase & Co, Citigroup Inc and Ally Financial Inc agreed to the settlement after 16 months of negotiations with state attorneys general and federal agencies, including the U.S. Justice Department and the U.S. Department of Housing and Urban Development.

But the fine print took another month to finalize.

Negotiators had hoped to file a settlement on Friday, but the deal was held up at the last minute over a disagreement between Nevada and Bank of America, people familiar with the matter said.

The state and the bank had negotiated a separate side deal to resolve an older lawsuit filed by the state.

The nature of the Friday disagreement was not immediately clear. Representatives of Nevada and Bank of America could not immediately be reached for comment after business hours.

The larger deal, to be spread out over three years, requires the banks to cut mortgage debt amounts and provides $2,000 payments to certain borrowers who lost their homes to foreclosure.

It releases the banks from civil government claims over faulty foreclosures and the mishandling of requests for loan modifications. Forty-nine states signed the pact.

The probe that led to the settlement discussions started after evidence emerged late in 2010 that banks robo-signed thousands of foreclosure documents without properly reviewing paperwork.

(Reporting By Aruna Viswanatha; editing by Carol Bishopric)

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Government details mortgage pact, promises tough oversight
Mon, Mar 12 17:05 PM EDT

By Aruna Viswanatha

WASHINGTON (Reuters) - The government released the fine print of its landmark $25 billion mortgage settlement, and promised to closely police the banks' pledges to bring widespread housing relief, even while letting them dodge admission of wrongdoing.

The deal, announced last month and filed on Monday in federal court in Washington, D.C., requires five major banks to help struggling borrowers to settle accusations they pursued faulty foreclosures and misled borrowers who sought loan modifications.

The banks did not admit to the accusations laid out in the complaint, but the government said its intention was to "remediate harms allegedly resulting from the alleged unlawful conduct."

A judge still has to approve the settlement, and any hearing on the deal would likely be contentious. (Involving or likely to cause contention; controversial: )

The Association of Mortgage Investors on Monday promised to intervene in court, saying that investors in mortgage-backed securities were excluded from settlement talks, and could be financially harmed by mortgage writedowns or modifications.

The group said in a statement that it planned to ask the court to place a cap on modifications for investor-owned loans and seek other changes.

The Obama administration has heavily promoted what it characterizes as an historic settlement to provide some relief to about 1 million struggling homeowners.

The deal will be spread out over three years and requires the five banks - Bank of America, Citigroup, JPMorgan Chase, Wells Fargo, and Ally Financial - to cut mortgage debt amounts and restructure troubled loans.

They are also paying $5 billion in cash to the federal and state governments, including $1.5 billion to fund $2,000 payments to borrowers who lost their homes to foreclosure.

While the Obama administration's previous efforts to jumpstart a housing recovery have not lived up to their initial promises, officials believe this time may be different.

The settlement includes an independent monitor who will ensure banks comply with the new mortgage payment processing standards through a "very specific" sampling process, test questions, and error thresholds, an Obama administration official said in a briefing with reporters on Monday.

The results will be publicly reported, said the official, who declined to be named.

Consumer advocates supported the idea that the new settlement could go further than past efforts.

"The bank servicers have really done a terrible job of servicing homeowners' mortgages," said Ira Rheingold, executive director of the National Association of Consumer Advocates.

The settlement "gives them direction on how they are to behave" and includes "pretty strong penalties," he said.

Throughout the talks, critics questioned whether the government was aggressive enough in pursuing the alleged misconduct. On Monday the U.S. Department of Housing and Urban Development again defended its efforts in a memo entitled "Myth vs. Fact."

State and federal negotiators also described the talks as akin to herding cats, with so many parties involved. The 99-page official complaint, for example, includes 51 pages of signatures.

RELIEF MATH

The settlement documents - filed as one lawsuit and five separate consent judgments with the banks - provide little detail about the misdeeds government investigations uncovered.

Instead, the documents devote hundreds of pages to detailing how different types of relief will count toward the banks meeting their obligations under the settlement.

The settlement benefits are spread over 3-1/2 years, but includes incentives for much of the assistance to go out in the first year of the settlement.

Banks are required to provide 30 percent of the relief in the form of cutting mortgage debt for borrowers who owe more than their homes are worth, but the banks receive different amounts of credit for different scenarios.

Banks only get credit for reducing debt for homes where the borrower owes up to 175 percent of the current value, for example.

They get full credit if they own the loan, but 45 cents of credit for every dollar of reduction on a loan they service for a separate investor.

Banks are expected to bring a borrower's monthly payments to within 31 percent of a borrower's income, and establish a new loan value that is no greater than 120 percent of the value of the home.

According to the settlement documents, the banks are also paying tens of millions of dollars to resolve whistleblower lawsuits alleging lenders defrauded the government in seeking federal mortgage insurance for some risky loans. The banks are paying $95 million, for example, to settle a case brought by Lynn Szymoniak, a homeowner who was featured on CBS' "60 Minutes" last year for uncovering details about banks' so-called robo-signing of foreclosure documents. Szymoniak will get $18 million from the settlement.

ALLY GETS ITS OWN MODIFICATION

Some banks negotiated separate requirements.

Ally Financial, for example, negotiated a steep discount on the fine part of its settlement, based on an inability to pay it, according to people familiar with the matter.

It was expected to pay some $250 million, but the Justice Department cut it to around $110 million, these people said.

In exchange, it committed to solicit all borrowers in its own loan portfolios and to offer to cut principal for delinquent borrowers down to 105 percent of the home's value. It also offered to refinance underwater borrowers who are current on their payments.

A spokeswoman for Ally, Gina Proia, said Ally had modified 28 percent of its servicing unit's portfolio since 2008, and agreed to implement a "broader menu of consumer relief options."

Bank of America, which had the largest exposure to the settlement due to its 2008 purchase of the troubled subprime lender Countrywide Financial, also agreed to offer deeper cuts for its underwater borrowers.

The bank has agreed to contact more than 200,000 borrowers and will potentially cut their debt to the current value of the home. In exchange, Bank of America can avoid up to $850 million in payments.

(Reporting By Aruna Viswanatha in Washington and Rick Rothacker in Charlotte N.C.; Editing by Tim Dobbyn)

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Home building permits near 3.5-year high
Tue, Mar 20 13:12 PM EDT
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By Lucia Mutikani

WASHINGTON (Reuters) - Permits for homebuilding neared a 3.5-year high in February, suggesting a budding recovery in the housing market was still on track even though groundbreaking activity slipped.

New building permits surged 5.1 percent to a seasonally adjusted annual rate of 717,000 units last month, the highest since October 2008, the Commerce Department said on Tuesday.

The jump in permits, which exceeded economists' expectations for an advance to a 690,000-unit pace, reinforced views the housing market was improving and that home building would add to economic growth this year for the first time since 2005.

"The data provides further evidence of a rebound in housing activity. Housing is being nursed back to health, but getting out of rehab takes time," said Eric Green, chief economist at TD Securities in New York.

Financial markets largely ignored the data.

While green shoots are emerging in the housing market, an oversupply of unsold homes is depressing prices and starts are still less than a third of the 2.27 million rate peak reached in January 2006.

In February, housing starts slipped 1.1 percent to a rate of 698,000 units, but there was more new construction activity in January than previously reported. Moreover, starts were up 34.7 percent from February last year, the biggest year-on-year rise since April 2010.

Construction of single-family homes - the lion's share of the market -- dropped 9.9 percent last month, but groundbreaking for multi-family housing projects soared 21.1 percent.

Over the past year, starts on single-family homes have risen 17.8 percent, while multi-family starts have nearly doubled as demand for rental properties has risen, with many Americans moving away from homeownership.

HOUSING COMEBACK

While home building now accounts for only about 2.5 percent of gross domestic product, it remains a major force in the economy. Economists estimate that for every one house built, about 2.5 jobs are created.

Permits last month were boosted by a 4.9 percent rise in approvals for single-family home projects to their highest level since April 2010. It was the fifth straight month that building permits for single-family homes had increased.

Permits usually lead home construction by about a month, meaning that starts will likely reverse their slide in March.

Permits for multi-family homes rose 5.6 percent to a 245,000-unit rate.

The data followed a report on Monday that showed sentiment among home builders held at a near five-year high in March.

"Builders are not just spending money on permits unless they absolutely intend to use them. We will see housing starts above 700,000 units next month," said Joel Naroff, chief economist at Naroff Economic Advisors in Holland, Pennsylvania.

"We are likely to see as much as a 20 percent increase in housing starts this year compared to last year. That is a healthy gain and it's going to add lots to jobs and lots to GDP and that's all that really matters," he said.

(Editing by Andrea Ricci)

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Americans brace for next foreclosure wave
Thu, Apr 05 02:22 AM EDT
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By Nick Carey

GARFIELD HEIGHTS, Ohio (Reuters) - Half a decade into the deepest U.S. housing crisis since the 1930s, many Americans are hoping the crisis is finally nearing its end. House sales are picking up across most of the country, the plunge in prices is slowing and attempts by lenders to claim back properties from struggling borrowers dropped by more than a third in 2011, hitting a four-year low.

But a painful part two of the slump looks set to unfold: Many more U.S. homeowners face the prospect of losing their homes this year as banks pick up the pace of foreclosures.

"We are right back where we were two years ago. I would put money on 2012 being a bigger year for foreclosures than 2010," said Mark Seifert, executive director of Empowering & Strengthening Ohio's People (ESOP), a counseling group with 10 offices in Ohio.

"Last year was an anomaly, and not in a good way," he said.

ESOP in Ohio engages in "hits" on Chase branches -- they say Chase is the least accommodating major bank when it comes to working with struggling homeowners -- where they try to hand letters to bank mangers calling on chief executive Jamie Dimon to lobby FHFA head Edward DeMarco for principal reductions. A Chase spokeswoman said the bank has made "extensive efforts" to work with homeowners, helping 775,000 borrowers stay in their homes since early 2009, avoiding foreclosure "more than twice as often as we have had to foreclose." Housing groups like ESOP maintain, as they have throughout the housing crisis, that unless the FHFA embraces widespread principal reduction, many more under water borrowers face losing their homes.

"Until banks engage in meaningful principal reduction as a matter of course," ESOP's Seifert said after a recent protest at a Chase branch in Cleveland, "this crisis will not end."

In 2011, the "robo-signing" scandal, in which foreclosure documents were signed without properly reviewing individual cases, prompted banks to hold back on new foreclosures pending a settlement.

Five major banks eventually struck that settlement with 49 U.S. states in February. Signs are growing the pace of foreclosures is picking up again, something housing experts predict will again weigh on home prices before any sustained recovery can occur.

Mortgage servicing provider Lender Processing Services reported in early March that U.S. foreclosure starts jumped 28 percent in January.

More conclusive national data is not yet available. But watchdog group, 4closurefraud.org which helped uncover the "robo-signing" scandal, says it has turned up evidence of a large rise in new foreclosures between March 1 and 24 by three big banks in Palm Beach County in Florida, one of the states hit hardest by the housing crash

Although foreclosure starts were 50 percent or more lower than for the same period in 2010, those begun by Deutsche Bank were up 47 percent from 2011. Those of Wells Fargo's rose 68 percent and Bank of America's, including BAC Home Loans Servicing, jumped nearly seven-fold -- 251 starts versus 37 in the same period in 2011. Bank of America said it does not comment on data provided by other sources. Wells Fargo and Deutsche Bank did not comment.

Housing experts say localized warning signs of a new wave of foreclosure are likely to be replicated across much of the United States.

Online foreclosure marketplace RealtyTrac estimated that while foreclosures dropped slightly nationwide in February from January and from February 2011, they rose in 21 states and jumped sharply in cities like Tampa (64 percent), Chicago (43 percent) and Miami (53 percent).

RealtyTrac CEO Brandon Moore said the "numbers point to a gradually rising foreclosure tide as some of the barriers that have been holding back foreclosures are removed."

One big difference to the early years of the housing crisis, which was dominated by Americans saddled with the most toxic subprime products -- with high interest rates where banks asked for no money down or no proof of income -- is that today it's mostly Americans with ordinary mortgages whose ability to meet payment have been hit by the hard economic times.

"The subprime stuff is long gone," said Michael Redman, founder of 4closurefraud.org. "Now the folks being affected are hardworking, everyday Americans struggling because of the economy."

"HARD TO CATCH UP"

Until December 2010, Daniel Burns, 52, had spent his working life in the trucking industry as a long-haul driver and manager. When daily loads at the small family business where he worked tailed off, he lost his job.

Unable to cover his mortgage, Burns received a grant from a government fund using money repaid from the 2008 bank bailout. That grant is due to expire in early 2013 and Burns is holding out on hopeful comments from his former employer that he might get his job back if the economy recovers.

"If things don't pick up, I will be out on the street," he said, staring from his living room window at two abandoned houses over the road in the middle-class Cleveland suburb of Garfield Heights, the noise of traffic from a nearby Interstate highway filling the street.

Underscoring the uncertainty of his situation, Burns' cell phone rings and a pre-recorded message announces that his unemployment benefits are due to be cut off in April.

A bit further up the shore of Lake Erie, Cristal Fell, who works night shifts entering data for a trucking company in Toledo, has fallen behind on her mortgage a second time because her ex-husband lost his job and her overtime was cut.

"Once you get behind it's so hard to catch up," she said.

Fell, a mother of four, hopes the economy will gather enough speed to help her avoid any risk of losing her home. Her ex-husband has found a new job and she is getting more overtime, so she hopes she can catch up on her mortgage by the fall.

Burns and Fell are the new face of the U.S. housing crisis: Middle class, suburban or rural with a conventional 30-year fixed mortgage at a reasonable interest rate, but unemployed or underemployed. Although the national unemployment rate has fallen to 8.3 percent from its peak of 10 percent in October 2009, nearly 13 million Americans remain jobless, meaning many are struggling to keep up with their mortgage payments.

Real estate company Zillow Inc says more than one in four American homeowners were "under water" or owed more than their homes were worth in the fourth quarter of 2011. The crisis has wiped out some $7 trillion in U.S. household wealth.

"We're seeing more people coming through who have good loans with reasonable interest rates," said Ed Jacob, executive director of non-profit lender Neighborhood Housing Services of Chicago Inc, which provides foreclosure counseling. "But in many households only one person works now instead of two, or they had their hours cut."

"The answer to the housing crisis now is job creation."

EARLY SIGNS OF UPTICK?

Zillow expects the resurgence in foreclosures this year, combined with excess inventory of unsold, bank-owned homes will contribute to a 3.7 percent national decline in prices before the market hits bottom in 2013 and stays there until 2016.

"The hangover from this crisis will far outlast the party of the boom years," said Zillow chief economist Stan Humphries.
Getting through the remaining foreclosures and dealing with the resulting flood of homes on the market in the wake of the bank settlement is a necessary part of the healing process for the U.S. housing market, he added.

According to leading broker dealer Amherst Securities, some 9.5 million homes are still at risk of default and in February it said it expected to see the uptick in foreclosures start to hit in March and April.

There is other evidence that many of the foreclosures that did not happen in 2011 will happen this year.

A January report by the Neighborhood Economic Development Advocacy Project in New York found that in the first half of 2011 the number of 90-day pre-foreclosure notices in New York City outnumbered court foreclosure actions by a ratio of 14 to one, indicating that while proceedings were initiated against many homeowners, they were left incomplete.

"Now the banks have a settlement, foreclosure numbers for 2012 are going to be high," said NEDAP co-director Josh Zinner.

A recent survey by the California Reinvestment Coalition, an umbrella group of nearly 300 non-profit groups in the state, of member agencies found 75 percent of respondents expected increased demand for their foreclosure prevention services in 2012 but more than a third had to scale back services because of funding cuts.

"Funding is a major concern given what our members expect for this year," said associate director Kevin Stein.



All this has non-profits intensifying calls for the Federal Housing Finance Agency to drop its opposition to allowing the government-backed mortgage giants Fannie Mae and Freddie Mac it regulates to reduce principal for underwater homeowners.

Principal reduction involves reducing the amount borrowers owe in order to make a loan modification affordable for struggling homeowners. Republicans and the FHFA oppose principal reduction because of the risk of "moral hazard"- that homeowners who do not need help will seek to abuse largesse and have their mortgages reduced too.



(Reporting By Nick Carey; Editing by Martin Howell and William Schomberg; Desking by Andrew Hay)

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BofA board $20 million settlement called inadequate
Sat, Apr 21 14:54 PM EDT


(Reuters) - Bank of America Corp directors, who were sued by shareholders for allegedly paying too much for Merrill Lynch & Co in 2008, must defend a proposed $20 million settlement of the claims in federal court in New York, court papers show.

Calling the settlement "grossly inadequate," lawyers in a similar Delaware case have asked P. Kevin Castel, the judge overseeing the New York matter, to order the parties agreeing to the deal to justify its terms.

Castel directed that parties submit necessary documents by May 4.

The New York Times first reported that the Delaware plaintiffs objected to the settlement in New York as inadequate.

Damages in the case could reach $5 billion, according to the plaintiffs in the case being handled in Delaware Chancery Court, the paper said.

Larry Grayson, spokesman for BofA, declined to comment on the matter.

Lawyers in the Delaware case complained that if the settlement in New York were approved, their clients' damages claims would be wiped out ahead of a scheduled October trial, the newspaper said.

Court papers show the settlement was struck on April 12 by lawyers representing two public employee pension funds that had sued the directors of Bank of America for breach of fiduciary duty. The funds are the Louisiana Municipal Police Employees' Retirement System and the Hollywood Police Officers' Retirement System in Florida.

Bank of America has been the subject of much litigation over Merrill, including its failure to more quickly disclose that Merrill was on its way to losing $15.8 billion in the fourth quarter of 2008 and was also paying out $3.6 billion in bonuses to employees.

Castel's colleague in New York, Judge Jed Rakoff, grudgingly approved a $150 million settlement by the bank of U.S. Securities and Exchange Commission civil charges over the Merrill takeover, after earlier rejecting a $33 million accord as inadequate.

(Nivedita Bhattacharjee in Chicago and Jon Stempel in New York; Editing by Vicki Allen)
========== ============= Iranian hackers target Bank of America, JPMorgan, Citi Fri, Sep 21 17:40 PM EDT By Jim Finkle and Rick Rothacker (Reuters) - Iranian hackers have repeatedly attacked Bank of America Corp, JPMorgan Chase & Co and Citigroup Inc over the past year as part of a broad cyber campaign targeting the United States, according to people familiar with the situation. The attacks, which began in late 2011 and escalated this year, have primarily been "denial of service" campaigns that disrupted the banks' websites and corporate networks by overwhelming them with incoming web traffic, said the sources. They said there was evidence suggesting the hackers targeted the three banks in retaliation for their enforcement of Western economic sanctions against Iran. Whether the hackers have been able to inflict more serious damage on computer networks or steal critical data is not yet known. Iran has beefed up its cyber capabilities after its nuclear program was damaged in 2010 by the Stuxnet virus, widely believed to have been developed by the United States. Tehran has publicly advertised its intentions to build a cyber army and encouraged private citizens to hack against Western countries. The attacks on the three largest U.S. banks originated in Iran, but it is not clear if they were launched by the state, groups working on behalf of the government, or "patriotic" citizens, according to the sources, who requested anonymity as they were not authorized to discuss the matter. The hackers also targeted other U.S. companies, the sources said, without giving specifics. They said the attacks shed new light on the potential for Iran to lash out at Western nations' information networks. "Most people didn't take Iran seriously. Now most people are taking them very seriously," said one of the sources, referring to Iran's cyber capabilities. Iranian officials were not available to comment. Bank of America, JPMorgan Chase and Citigroup declined to comment, as did officials with the Pentagon, U.S. Department of Homeland Security, Federal Bureau of Investigation, National Security Agency and Secret Service. A U.S. financial services industry group this week warned banks, brokerages and insurers to be on heightened alert for cyber attacks after the websites of Bank of America and JPMorgan Chase experienced service disruptions. Senator Joseph Lieberman, chairman of the Senate's Homeland Security and Governmental Affairs Committee, said on Friday that he believes Iran was behind the attacks. "I think this was done by Iran and the Quds Force, which has its own developing cyber attack capability," Lieberman said during a taping of C-SPAN's "Newsmakers" program. The Quds Force is a covert arm of Iran's Revolutionary Guards. "I believe it was a response to the increasingly strong economic sanctions that the United States and our European allies have put on Iranian financial institutions," he said. (http://cs.pn/Q320Up) Tensions between the United States and Iran, which date back to the revolution in 1979 that resulted in the current Islamic republic, have escalated in recent years as Washington has led the effort to prevent Tehran from getting a nuclear bomb and imposed tough economic sanctions. DISRUPTIVE CAMPAIGN Denial-of-service campaigns are among the oldest types of cyber attacks and do not require highly skilled computer programmers or advanced expertise, compared with sophisticated and destructive weapons like Stuxnet. But denial-of-service attacks can still be very disruptive: If a bank's website is repeatedly shut down, the attacks can hurt its reputation, affect customer retention and cause revenue losses as customers cannot open accounts or conduct other business. Bank of America, Citigroup and JPMorgan Chase have consulted the FBI, Department of Homeland Security and National Security Agency on how to strengthen their networks in the face of the Iranian attacks, the sources said. It was not clear whether law enforcement agencies are formally investigating the attacks. The Iranian attackers may have used denial-of-service to distract the victims from other, more destructive assaults that have yet to be uncovered, the sources said. Frank Cilluffo, who served as homeland security adviser to former U.S. President George W. Bush, told Reuters he knows of "cyber reconnaissance" missions that have come from Iran but declined to give specifics. "It is yet to be seen whether they have the wherewithal to cause significant damage," said Cilluffo, who is now director of the Homeland Security Policy Institute at George Washington University. Security experts said Iran's cyber capabilities are not as sophisticated as those of China, Russia, the United States or many of its Western allies. Jim Lewis, a former U.S. Foreign Service officer, said Iran has been testing its cyber technology against Israel and other Gulf states in recent years. "It's like the nuclear program: It isn't particularly sophisticated but it makes progress every year," said Lewis, who is a senior fellow at the Center for Strategic & International Studies. (Additional reporting Mark Hosenball, Andrea Shalal-Esa and Jim Wolf in Washington, Joseph Menn in San Francisco and David Henry in New York; Editing by Tiffany Wu, Steve Orlofsky and Dan Grebler) ============= Freddie Mac wins dismissal of shareholder lawsuit Wed, Sep 26 21:08 PM EDT By Jonathan Stempel (Reuters) - A federal judge has again dismissed a lawsuit accusing Freddie Mac of misleading shareholders by understating its subprime mortgage exposure and overstating its capital strength ahead of the 2008 financial crisis. U.S. District Judge John Keenan in Manhattan said the allegations made in an amended lawsuit failed to show that Freddie Mac officials, including former Chief Executive Richard Syron, intended to mislead shareholders, or withheld significant information from them. He also said Freddie Mac had made a "bevy of truthful disclosures" about its credit and risk exposures during the period covered by the lawsuit, including over loans it guaranteed and its activities in nontraditional markets. "It defies logic to conclude that executives who are seeking to perpetrate fraudulent information upon the market would make such fulsome disclosures," Keenan wrote. Shareholders led by the Illinois-based Central States, Southeast and Southwest Areas Pension Fund had accused Freddie Mac of hiding its risks after revealing a $2 billion quarterly loss on November 20, 2007. The lawsuit covers losses by investors in Freddie Mac common and preferred shares from that date until September 7, 2008, when U.S. regulators seized Freddie Mac and larger rival Fannie Mae and put them in a conservatorship under the Federal Housing Finance Agency. Lawyers for the plaintiffs did not immediately respond to requests for comment. Keenan had in March 2011 dismissed an earlier version of the lawsuit, which was first filed in August 2008, but given the plaintiffs a chance to amend their complaint. He refused on Wednesday to give them another chance. The shareholder lawsuit is separate from a civil fraud lawsuit that the U.S. Securities and Exchange Commission has been pursuing against Syron and other former Freddie Mac officials. Defendants in that case have denied wrongdoing. The case, whose title has a different named plaintiff, is Kuriakose v. Federal Home Loan Mortgage Corp et al, U.S. District Court, Southern District of New York, No. 08-07281. (Reporting By Jonathan Stempel in New York; Editing by Chris Gallagher) ========= BofA pays $2.4 billion to settle claims over Merrill Fri, Sep 28 18:05 PM EDT By Martha Graybow and Rick Rothacker (Reuters) - Bank of America Corp agreed on Friday to pay $2.43 billion to settle claims it hid crucial information from shareholders when it bought investment bank Merrill Lynch & Co at the height of the financial crisis. The settlement, among the biggest of its kind to stem from the 2008 meltdown, underscores how Bank of America is still suffering from decisions it made during the crisis, even as competitors are moving on. The second largest U.S. bank likely lost money in the third quarter in large part because of the agreement, while other major banks, including JPMorgan Chase & Co and Wells Fargo & Co are expected to earn billions of dollars each. As Lehman Brothers failed in September 2008, Bank of America agreed to buy Merrill Lynch. But in the weeks after that agreement, the bank tried unsuccessfully to scrap the deal. Merrill Lynch generated more than $15 billion of losses and its executives agreed to award employees up to $5.8 billion of bonuses. Bank of America's shareholders voted to approve the deal in December 2008. After the merger closed, Bank of America shares fell sharply, and investors sued, saying Merrill's losses and bonuses should have been disclosed before the vote. Bank of America denied the lawsuit's allegations, but CEO Brian Moynihan said the bank agreed to settle to remove uncertainty and put the case behind it. The Merrill Lynch deal, as well as the bank's 2008 purchase of subprime lender Countrywide Financial, have ended up costing Bank of America billions, with the bank's mortgage business alone losing more than $35 billion since the Countrywide deal. But the Merrill Lynch acquisition has also given much needed revenue to Bank of America. While the bank does not break out its results from Merrill Lynch, its wealth management and investment banking units, which owe much of their business to Merrill, generated nearly $160 billion of revenue from 2009 through June, or 43 percent of the bank's overall revenue. Friday's settlement, which requires court approval, would resolve a case set for an October 22 trial in U.S. District Court in Manhattan. Investors sued the company and executives including former Chief Executive Ken Lewis, but Bank of America said it was footing the bill for the settlement. At a brief hearing before Judge Kevin Castel on Friday afternoon, the judge told lawyers,

"This is, needless to say, a good development," referring to the settlement. Few expect the settlement to face the obstacles that Bank of America experienced in 2009 when settling with the Securities and Exchange Commission over this same acquisition. A judge rejected the bank's initial settlement and forced both parties to renegotiate it.

LONG-SOUGHT DEAL In September 2008, Bank of America's Lewis told his shareholders that buying Merrill Lynch was a real opportunity. The investment bank had the biggest retail brokerage on the Street, which gave Bank of America a new channel for selling products like credit cards. As the deal started to look bad toward the end of 2008, Lewis tried to back out of it. But then-Treasury Secretary Henry Paulson pressured him to go through with the transaction. In January 2009, when Bank of America closed on its Merrill Lynch purchase, it received a $20 billion government bailout to shore up its balance sheet. Bank of America has since repaid the money. Lewis retired at the end of 2009. The deal helped the financial system but hurt Bank of America's shareholders, said Gary Townsend, chief executive of Hill-Townsend Capital in Chevy Chase, Maryland. Bank of America shares have slid more than two-thirds since the Merrill deal was announced in September 2008. "It's good to get a bad tooth removed. But the question is, 'How expensive was Ken's mistake back in 2008?,'" Townsend said. Lewis, when contacted by Reuters, declined to comment on the settlement. The Merrill deal was valued at $50 billion when announced, but the final price was around $29.1 billion as Bank of America's shares fell. Bank of America's acquisitions have continued to bring it pain. Since the financial crisis, the bank has agreed to pay more than $16 billion in 12 settlements with mortgage investors and other accords linked to takeovers, counting an $8.5 billion pact that still needs court approval. On top of that $16 billion, Bank of America is on the hook for $11.8 billion in payments, mortgage modifications and loan refinancings as part of a $25 billion settlement this year over allegedly faulty handling of foreclosures. EXPECTED LOSS The bank expects to incur total litigation expenses of about $1.6 billion in the third quarter. It said that expense, a U.K. tax charge and a charge related to improvements in the company's credit spreads would hit quarterly results by about 28 cents per share. That would likely trigger a loss for the period. Analysts had expected profit of 14 cents per share when the bank releases results on October 17, according to Thomson Reuters I/B/E/S. Lead plaintiffs in the lawsuit included the State Teachers Retirement System of Ohio, the Ohio Public Employees Retirement System and the Teacher Retirement System of Texas. The case was originally filed in 2009 by former Ohio Attorney General Richard Cordray, now director of the U.S. Consumer Financial Protection Bureau. Four to five million shareholders could be eligible to share in the settlement, said Dan Tierney, spokesman for Ohio Attorney General Mike DeWine. Payouts will depend on the number of shares owned, he said. Bank of America shares slipped 9 cents to $8.88 on the New York Stock Exchange in afternoon trading. Prior to this accord, the largest crisis-era investor class action settlement involved allegations Wachovia, now part of Wells Fargo & Co, misled investors about the quality of loans sold before the financial downturn, according to NERA Economic Consulting. Wells Fargo agreed last year to pay $590 million to resolve that lawsuit, on top of $37 million that auditor KPMG LLP agreed to pay. Overall, the largest securities fraud settlements in U.S. history include the $7.2 billion agreement with investors stemming from the collapse of Enron; the $6.2 billion WorldCom settlement; and the $3.2 billion agreement over the accounting scandal at Tyco International, according to Stanford Law School's Securities Class Action Clearinghouse. Under the Bank of America settlement, the bank will also make changes to its corporate governance through January 1, 2015. Some of the changes already were part of a February 2010 settlement with the U.S. Securities and Exchange Commission, including provisions on independence of the board compensation committee and an annual shareholder vote on executive pay. The plaintiffs' law firms leading the case are expected to apply for $150 million in fees, said Tierney, the Ohio attorney general's spokesman. The law firms include Bernstein Litowitz Berger & Grossmann; Kaplan Fox and Kessler Topaz Meltzer & Check. The fee, which would be subject to court approval, works out to 6 percent of the settlement fund. (Additional reporting by Grant McCool and Nate Raymond in New York, Tom Hals in Wilmington, Delaware and Tanya Agrawal in Bangalore; Editing by Supriya Kurane, Jeffrey Benkoe and David Gregorio) ============= Bank of America to settle with Fannie Mae, sell mortgage assets Mon, Jan 07 10:06 AM EST 1 of 2 (Reuters) - Bank of America on Monday announced roughly $11.6 billion of settlements with mortgage finance company Fannie Mae and a $1.8 billion sale of collection rights on home loans, in a series of deals meant to help the bank move past its disastrous 2008 purchase of Countrywide Financial Corp. The settlements and transactions and other charges will result in Bank of America posting only a small profit for 2012's fourth quarter. The bank is due to report results on January 17. Bank of America is paying $3.6 billion to Fannie Mae and buying back $6.75 billion of bad loans from the mortgage company to clear up all claims that government-owned Fannie Mae had made against the bank. Fannie Mae and its sibling, Freddie Mac, have been pushing banks to buy back loans they sold to the two companies that never should have been sold to them because the loans did not meet the companies' criteria for purchasing. Bank of America said most of the settlement would be covered by reserves, and another $2.5 billion, before taxes, that it set aside in the fourth quarter. A separate settlement over foreclosure delays will result in Bank of America paying $1.3 billion to Fannie Mae, the mortgage company said. Bank of America had already set aside money to cover most of that, but took another $260 million charge in the fourth quarter to cover the balance. Bank of America also sold the rights to collect payments on about $306 billion of loans to Nationstar Mortgage Holdings and Walter Investment Management Corp. Nationstar is paying $1.3 billion for the right to service some $215 billion of loans, while Walter Investment is paying $519 million for the right to service about $93 billion of mortgages. Reuters first reported that Bank of America was talking to Nationstar and Walter Investment on Friday. (Reporting by Tanya Agrawal in Bangalore and David Henry in New York.; Editing by Dan Wilchins and Maureen Bavdek) ======================== US banks agree an $8.5 billion foreclosure settlement Get short URL Published: 08 January, 2013, 00:13 TAGS: Scandal, USA, Banking, Finance (Reuters / Jonathan Ernst) Owners of wrongfully repossessed houses could now get up to $125,000 as ten major US banks agree to settle federal complaints. This will end a foreclosure review process begun by a 2011 enforcement action. Under the new agreement, those people who had their homes seized and then sold would get the biggest pay offs, while banks who failed to modify people’s loans in light of a change of income would get off more lightly. The settled compensation is anywhere between $1000 and $125,000. The initial 2011 enforcement review was ordered because banks and mortgage companies had bypassed steps in the foreclosure process and had mishandled people’s paperwork. The banks involved include the Bank of America, Wells Fargo, JP Morgan Chase, Citigroup, MetLife Bank, PNC Financial Services and Sovereign. Monday’s settlement was announced by the Office for the Comptroller of the Currency (OCC) and the Federal Reserve and covers up to 3.8 million people who had their homes repossessed in 2009 and 2010. Of those about 400,000 borrowers may receive payments. About $3.3 billion would be in direct compensation payments to borrowers, while $5.2 billion would pay for assistance such reducing loans or the interest rates at which they are paid back. The deal “represents a significant change in direction” from the original 2011 agreements said Thomas Curry, a spokesman for the OCC said in statement. Both banks and consumer watch dogs had complained that the 2011 settlement required loan-by-loan reviews, which were time consuming and costly without reaching many home owners. Banks were also paying large sums to consultants to review the files and some people questioned the independence of those consultants. Curry said that the new deal ensures “That consumers are the ones who will benefit, and that they will benefit more quickly and in a more direct manner”. But some consumer advocates have said the new settlement lets the banks off the hook, as under the old deal some payments could have been much higher.

“It’s another get out of jail card for the banks, it caps their liability at a total number that’s less than they thought they were going to pay going in,” said Diana Thompson, a lawyer with the national Consumer Law Centre.

================== Consumer watchdog tightens mortgage lending rules on banks Thu, Jan 10 00:12 AM EST By Emily Stephenson and Margaret Chadbourn WASHINGTON (Reuters) - More than five years after the housing market collapsed, the U.S. government's newly created consumer watchdog said Thursday it will force banks to verify a borrower's ability to repay loans to ward off the kind of loose lending that helped push the U.S. economy into recession. The Consumer Financial Protection Bureau said its new guidelines would also protect borrowers from irresponsible mortgage lending by providing some legal shields for lenders who issue safer, lower-priced loan products. Lenders and consumer groups have anxiously awaited the new rules, which are among the most controversial the government watchdog is required to issue by the 2010 Dodd-Frank financial reform law. "When consumers sit down at the closing table, they shouldn't be set up to fail with mortgages they can't afford," Richard Cordray, the bureau's director, said in a statement. The new rules are intended to combat lending abuses that contributed to the U.S. housing bubble, when shoddy mortgage standards led American households to take on billions of dollars in debt they could not afford. The U.S. economy is still feeling the after-effects of the bubble, which sparked a global credit crisis after it burst in 2006. As the housing market imploded, banks sharply tightened the screws on lending. Regulators said the new rules would head off future crises by preventing irresponsible lending, without forcing banks to restrict credit further. Lenders will have to verify a potential borrower's income, the amount of debt they have and their job status before issuing a mortgage. And because lenders are likely to want the heightened legal protection that comes with offering certain "plain vanilla" loans, the rules could go a long way in determining who gets a loan and who can access low-cost borrowing rates. SAFE HARBOR FOR LENDERS Dodd-Frank directed regulators to designate a category of "qualified mortgages" that would automatically be considered compliant with the ability-to-repay requirement. The rule was first set in motion by the Federal Reserve and then handed off to the consumer bureau in July 2011. The consumer protection bureau said on Thursday that it would define "qualified mortgages" as those that have no risky loan features - such as interest-only payments or balloon payments - and with fees that add up to no more than 3 percent of the loan amount. In addition, these loans must go to borrowers whose debt does not exceed 43 percent of their income. These loans would carry extra legal protection for lenders under a two-tiered system that appears to create a compromise between the housing industry and consumer advocates. Bank groups had lobbied the bureau to extend a full "safe harbor" to all qualified loans, preventing consumers from claiming in lawsuits that they did not have the ability to repay them. But consumer advocates wanted a lower form of protection that would allow borrowers greater latitude to sue. Under the rules announced on Thursday, the highest level of protection would go to lower-priced qualified mortgages. Such prime loans generally will go to less-risky consumers with sound credit histories, the bureau said. Higher priced loans would receive less protection. Lenders would be presumed to have verified the ability to repay the loan, but borrowers could sue if they could show that they did not have sufficient income to pay the mortgage and cover other living expenses. CREDIT AVAILABILITY Some lawmakers and mortgage lenders had warned against a draconian rule that could exacerbate the current credit crunch and set back a housing market that has become a bright spot in an otherwise tepid economic recovery. Consumer bureau officials said they were sensitive to concerns about credit tightening, and they baked into the rules several provisions meant to keep credit flowing and to smooth the transition to the new regime. The new rules establish an additional category of loans that would be temporarily treated as qualified. These mortgages could exceed the 43 percent debt-to-income ratio as long as they met the underwriting standards required by Fannie Mae, Freddie Mac or other U.S. government housing agencies. The provision would phase out in seven years, or sooner if housing agencies issue their own qualified mortgage rules or if the government ends its support of Fannie Mae and Freddie Mac, the two housing finance giants it rescued in 2008. Regulators also proposed creating a qualified mortgage category that would apply to community banks and credit unions. Banks will have until January 2014 to comply with the new rules, the consumer bureau said. (Reporting by Margaret Chadbourn and Emily Stephenson; Editing by Tim Ahmann and Lisa Shumaker) ================== Jan. 17, 2013 3:49 PM ET Taxpayers will ease banks' costs in mortgage deal By MARCY GORDON Banks say new agency's oversight is slow, costly Jan. 15, 20135:25 PM ET Wells Fargo nets record profit, but mortgages slow Jan. 11, 20131:15 PM ET Banks prepare for earnings; mortgages cast a pall Jan. 10, 20133:11 PM ET Greek unemployment hits new high Jan. 10, 20137:35 AM ET New federal rules aim to curb risky mortgages Jan. 10, 20133:01 AM ET Advertisement Advertisement Buy AP Photo Reprints WASHINGTON (AP) — Consumer advocates have complained that U.S. mortgage lenders are getting off easy in a deal to settle charges that they wrongfully foreclosed on many homeowners. Now it turns out the deal is even sweeter for the lenders than it appears: Taxpayers will subsidize them for the money they're ponying up (To pay (money owed or due). The Internal Revenue Service regards the lenders' compensation to homeowners as a cost incurred in the course of doing business. Result: It's fully tax-deductible. Critics argue that big banks that were bailed out by taxpayers during the financial crisis are again being favored over the victims of their mortgage abuses. "The government is abetting the behavior by not preventing the deduction," said Sen. Charles Grassley, R-Iowa. "The taxpayers end up subsidizing the Wall Street banks after the headlines of a big-dollar settlement die down. That's unfair to taxpayers." Under the deal, 12 mortgage lenders will pay more than $9 billion to compensate hundreds of thousands of people whose homes were seized improperly, a result of abuses such as "robo-signing." That's when banks automatically approved foreclosures without properly reviewing documents. Regulators reached agreement this week with Goldman Sachs and Morgan Stanley. Last week, the regulators settled with 10 other lenders: Bank of America, JPMorgan Chase, Wells Fargo, Citigroup, MetLife Bank, PNC Financial Services, Sovereign, SunTrust, U.S. Bank and Aurora. The settlements will help eliminate huge potential liabilities for the banks. Many consumer advocates argued that regulators settled for too low a price by letting banks avoid full responsibility for wrongful foreclosures that victimized families. That price the banks will pay will be further eased by the tax-deductibility of their settlement costs. Companies can deduct those costs against federal taxes as long as they are compensating private individuals to remedy a wrong. By contrast, a fine or other financial penalty is not tax-deductible. Taxpayers "should not be subsidizing or in any way paying for these corporations' wrongdoing," said Phineas Baxandall, a senior tax and budget analyst at the U.S. Public Interest Research Group, a consumer advocate. Spokesmen for several of the banks in the mortgage settlement didn't immediately respond to requests for comment. Bank of America declined to comment. In some rare cases, federal regulators that have reached financial settlements with companies have barred them from writing off any costs against their taxes, even if they might be legally entitled to do so. The Securities and Exchange Commission did so, for example, in 2010 in a $550 million settlement with Goldman. That case involved civil fraud charges over the sale of risky mortgage bonds before the financial crisis erupted. It was the largest amount ever paid by a Wall Street bank in an SEC case. But the SEC defined nearly all the $550 million as a civil penalty. That meant it couldn't serve as a tax deduction for Goldman. The agency cited "the deterrent effect of the civil penalty." In that case, the SEC appeared to want to send a message at a time of public anger over Wall Street excess, said James Cox, a Duke University law professor and expert on the SEC. Cox noted that when they negotiate financial settlements, companies consider whether they can deduct some of their costs. Similarly, when BP agreed in November to plead guilty and pay a record $4.5 billion in the 2010 Gulf oil spill disaster, the Justice Department got BP to agree not to deduct the cost of the settlement against its U.S. taxes. The total BP will pay includes about $1.3 billion in fines. But it also includes payments of $2.4 billion to the National Fish and Wildlife Foundation and $350 million to the National Academy of Sciences. Normally, those payment would have been tax-deductible. The banks that just settled with regulators over their mortgage abuses are getting off lightly, Cox suggested. When the amount companies must pay in a settlement "is just the cost of doing business, there's not very much deterrence value there," he said. At least one lawmaker, Sen. Sherrod Brown, D-Ohio, wants regulators to bar the tax deductibility of the lenders' costs. Brown made his argument in a letter to Federal Reserve Chairman Ben Bernanke, U.S. Comptroller of the Currency Thomas Curry and other top regulators. The Fed and the comptroller's office, a Treasury Department agency, negotiated the foreclosure abuse settlements with the banks.

"It is simply unfair for taxpayers to foot the bill for Wall Street's wrongdoing," Brown wrote in the letter dated Thursday. "Breaking the law should not be a business expense." Unfair, too, in the eyes of Charles Wanless, a homeowner in the Florida Panhandle who is fighting his lender over foreclosure proceedings. As Wanless sees it, the government is giving help to banks that it refuses to give to troubled homeowners, who still must pay their full share of taxes. "The government comes after us for every little bit of money we have," Wanless said.

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