3 Hitches in Bank of America’s Big Mortgage Settlement

[hvactec]

Last week, investors were excited that Bank of America had finally put its big mortgage headaches behind it. Today, we have a monkey wrench in those plans.

As first reported by The Wall Street Journal, a group of bond investors said it plans to challenge BofA’s proposed $8.5 billion settlement with some investors who lost money on fizzled mortgage-backed securities.

(Click HERE to read the mortgage-bond challenge to Bank of America’s settlement.)

The group of bond investors challenging the settlement — we don’t know their identities — may not succeed in the courts, of course. But at the very least their potential challenge shows BofA’s path out of mortgage hell may not be smooth.

The investor group, called Walnut Place, has at least three main objections to the BofA mortgage settlement reached last week:

1) Not Enough Money: Walnut Place said BofA is getting off too easy in only agreeing to dole out $8.5 billion — which is more than the bank’s collective profits since the financial crisis. According to the investor group’s court filing:

“[BofA unit] Countrywide may be liable to repurchase loans with unpaid principal balances of as much as $242 billion. The $8.5 billion that Countrywide and Bank of America have agreed to pay is therefore only a small fraction of the potential liability that they would have faced in litigation on behalf of the trusts.”

2) Settlement Investors Are Conflicted: Walnut Place sees conflicts-of-interest in the investors — including Pimco, BlackRock and the Federal Reserve Bank of New York — that negotiated the $8.5 billion settlement with BofA deal. Walnut Place said in its filing:

“[M]any of these 22 investors have substantial ongoing business relationships with Bank of America other than their ownership of certificates in Countrywide-sponsored trusts. For example, BlackRock Financial Management, Inc., is one of the 22 investors. During the time in which the Settlement Agreement was being negotiated, Bank of America owned up to 34 percent of BlackRock….Many other of the 22 investors also have substantial business dealings with Bank of America or its subsidiaries other than their ownership of certificates in Countrywide-sponsored trusts.”

read full story 3 Hitches in Bank of America’s Big Mortgage Settlement - Deal Journal - WSJ

 

[hvactec]

Bank of America should payback what is due with interest in full.
I mean homeless man gets arrested for plugging in a cell phone, he has to pay back what was due.

 

[waltky]

Granny says, "Dat's right - make `em pay it back...

FTC: Countrywide borrowers to get $108 million in refunds
July 20, 2011: Borrowers who were overcharged by Countrywide Financial more than three years ago are finally going to get what's due to them.

The Federal Trade Commission said Wednesday that, as a result of a settlement reached with the mortgage lender more than a year ago, it is sending out checks totalling nearly $108 million to more than 450,000 former Countrywide borrowers. The compensation was for overcharges made before the failing company was acquired by Bank of America in 2008. "It's astonishing that a single company could be responsible for overcharging more than 450,000 homeowners," FTC Chairman Jon Leibowitz said in a prepared statement. "Countrywide's unconscionable behavior harmed American consumers on a massive scale and we are proud to be getting every single dollar back to hundreds of thousands of struggling consumers who can least afford to lose the money."

There were two categories of overcharges, according to Frank Dorman, an FTC spokesman. The first were tied to inspections, home maintenance, lawn mowing and other services that Countrywide provided to homes of borrowers in default. Instead of directly hiring local vendors for those tasks, the company used their own subsidiary companies to hire the vendors -- and then had the subsidiaries mark up the fees, sometimes doubling them or more. They passed along the overcharges to the homeowners. Affected consumers will receive all those overcharges back.

The second set of overcharges came in the form of false claims and fees to escrow accounts of borrowers who entered into Chapter 13 bankruptcies (this type of bankruptcy protection provides debtors with time to pay off what they owe). The borrowers weren't notified about the fees or charges at the time they were incurred. The FTC says they will get back the entire amount of those undisclosed fees or charges. The action covered borrowers who were in default between January 1, 2005 and July 1, 2008. Many of the amounts are quite small; the average is about $240, but some borrowers will receive checks of several thousand dollars, the FTC said.

The payments will start to go out on Thursday. Countrywide borrowers with questions about the program can call the redress administrator, Gilardi & Co. at 1-888-230-3196, or go online at the FTC's Countrywide Settlement page.

Source

See also:

Fed hits Wells Fargo with $85 million fine
July 20, 2011: The Federal Reserve announced a record $85 million fine Wednesday against Wells Fargo for allegedly pushing borrowers with good credit into expensive mortgages and falsifying loan applications.

The Fed accused the nation's fourth largest bank by assets of steering potential borrowers who could have qualified for prime rates into more expensive subprime loans. The authorities also claimed that employees of Wells Fargo Financial, a non-bank subsidiary closed last year, doctored income information on mortgage applications to push through borrowers that would not have qualified for based on income. The fine is the largest the Fed has ever issued under its consumer-protection authority and is the first action taken against a bank for predatory lending practices related to the housing bubble.

The loans in question were made between 2004 and 2008 and are estimated to involve up to 10,000 borrowers. The Fed also ordered Wells Fargo to compensate borrowers who were affected by the alleged activities. Wells Fargo agreed to pay the fine without admitting any wrongdoing. The Fed blamed compensation and sales quota policies at Wells Fargo Financial for encouraging employees to falsify documents. It also faulted the bank for having inadequate controls in place to manage risks. In a statement, Wells Fargo said the allegations stem from a few former employees and pledged to increase oversight of its lending practices.

"The alleged actions committed by a relatively small group of team members are not what we stand for at Wells Fargo," said chief executive John Stumpf. "Fair and responsible lending practices have been at the core of our culture, and they will continue to guide us as we work closely with the Federal Reserve to provide restitution to customers who may have been harmed." The loans in question were primarily made to home owners looking to refinance existing mortgages and often involved additional cash payments, according to the Fed.

Under the Fed's order, Wells Fargo is required to review subprime loans made between January 2006 and June 2008. In cases where borrowers were pushed into loans or had their income information altered, the bank is required to make restitution. The Fed estimated that up to 10,000 borrowers could be eligible for compensation ranging between $1,000 and $20,000. Wells Fargo said it has already compensated 600 customers as part of an internal investigation. Wells Fargo expects that less than 4% of the 300,000 loans it originated over the last four and a half years will be eligible for compensation. The payments have already been factored into reserves, according to Wells Fargo. On Tuesday, Wells Fargo reported record net income of $3.9 billion for the second quarter on more than $20 billion in revenue.

Source

 

[SofiaY]

FTC is working on things to solve the problems

 

[editec]

Do any of us have any plans to sue for the overpriced real estate we bought?

Or are only bond investors worthy of such special consideration?