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Inside Washington (11/28/2011)
  • WASHINGTON (11/29/11)--The Department of Housing and Urban Development (HUD) has offered to release banks from some loss-mitigation liability on delinquent Federal Housing Authority (FHA)-insured loans under settlement negotiations with the largest mortgage servicers. The settlement talks among state attorneys general, federal officials and mortgage servicers are focused on illicit foreclosure-related practices, including so-called robo-signing of foreclosure documents (American Banker Nov. 28). The parties to the talks hope to complete the settlement by Christmas, according to the Banker. The government sued Deutsche Bank in May for $1.2 billion, claiming underwriting and quality-control violations. The suit left open the possibility of similar action against Bank of America Corp., Wells Fargo & Co., Citigroup Inc. and JPMorgan Chase & Co., which hold billions of dollars each of delinquent FHA-insured loans. If a bank files an FHA mortgage-insurance claim, and HUD finds evidence that it improperly serviced the underlying mortgage, a bank may be held liable for triple damages, or fined three times the sum of the original. Under the settlement, HUD would release banks from that liability and not seek the fine …
  • WASHINGTON (11/29/11)--Citigroup and the Securities Exchange Commission (SEC)will prepare for trial after a federal judge rejected a proposed settlement plan between the two parties. Citigroup had agreed to pay $285 million to settle charges that it misled investors about an investment tied to the deteriorating housing market in 2007 (Washington Post Nov. 28). Betting against the housing market, Citigroup made $160 million in profit, while investors lost more than $700 million. But U.S. District Court Judge Jed S. Rakoff rebuked the SEC for charging Citigroup with negligence instead of fraud as part of the settlement. Rakoff also criticized the agency for following its standard practice of allowing defendants to settle charges without admitting or denying any wrongdoing …

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