Tag Archives: Federal Reserve

Although the Independent Foreclosure Review (IFC) has concluded after regulators reached an $8.5 billion foreclosure settlement with 10 banks, questions still remain concerning the abandoned foreclosure review process and the terms for the current settlement. In the search for more answers, three lawmakers recently wrote letters to the Office of the Comptroller (OCC) and the Federal Reserve. Sen. Elizabeth Warren (D-Massachusetts) and Rep. Elijah Cummings (D-Maryland) sent a joint letter dated January 31 to the OCC and the Fed requesting specific information, including the results of all performance reviews.

With a nod to the report the nation’s economy had contracted in the fourth quarter, the Federal Open Market Committee (FOMC) voted Wednesday to continue its program of purchasing $40 million a month of mortgage-backed securities (MBS) and to maintain the target Fed Funds rate at 0 to 0.25 percent.

HSBC is the latest bank joined in on the foreclosure settlement with federal regulators over allegations that the bank's practices led to wrongful foreclosures. The Federal Reserve Board and Office of the Comptroller of the Currency (OCC) announced HSBC will pay $249 million, with $96 million for direct payments to eligible borrowers and $153 million for mortgage assistance.

Economic activity expanded in the closing weeks of 2012, the Federal Reserve said in its periodic Beige Book released Wednesday, reflecting a slow but steadily declining unemployment rate and low rates of inflation--conditions the Fed said would have to be met before it raises interest rates. According to the Beige Book, districts reported stronger consumer spending--about 70 percent of the nation's GDP--with holiday sales ""modestly higher"" than in 2011. At the same time, the report said business contacts were ""citing concerns that consumers will spend cautiously due to ongoing fiscal uncertainty.""

The $8.5 billion foreclosure settlement on January 7 led to the conclusion of the Independent Foreclosure Review, and it also led to the layoff of more than 800 contract workers at JPMorgan Chase, according to a report from the Wall Street Journal. The Journal first reported 839 workers were laid off, including 529 in Brooklyn and 310 in Florence, South Carolina. Companies involved in the settlement were first required to hire third party consultants to review foreclosure actions that occurred in 2009 and 2010 as part of consent orders from regulators in 2011.

The Federal Reserve announced it paid a record $88.9 billion to Treasury in 2012. In 2011, the Fed distributed $75.4 billion to Treasury. The previous record amount was for $79.3 billion in 2010, according to the Fed. The earnings are from Fed programs that were introduced to stimulate the economy and involve the purchase of billions in mortgage-backed securities (MBS) each month to keep interest rates down. Currently, the Fed buys $40 billion in MBS each month and $45 billion in Treasury purchases.

Ten major mortgage servicers reached an agreement with federal regulators to pay more than $8.5 billion over alleged foreclosure abuses, the Federal Reserve announced in a release Monday. The agreement replaces the Independent Foreclosure Review process with a new framework allowing eligible borrowers to receive compensation more quickly. Of the $8.5 billion, $3.3 billion will go toward direct payments to eligible borrowers and $5.2 billion will be used to assist borrowers in other ways, such as through loan modifications.

The Federal Reserve Bank of Boston recently conducted a study to clarify the effect of mortgage payment size on likelihood of default, and the researchers concluded ""interest rate changes dramatically affect repayment behavior."" Researchers compared homeowner payment behavior both before and after payment reductions and compared them to similar loans that did not receive simultaneous reductions. According to the findings, a payment reduction of about 2 percentage points results in a 50 percent decline in default probability.

With fluctuations in rental and owner markets over the past few years, it can be difficult to determine whether one is better off renting or owning. In Manhattan, renting is currently the more financially viable option, according to a new study by the Federal Reserve Bank of New York.

The housing market has managed to be one of the few areas in the economy that is ""essentially unshaken"" by fiscal cliff uncertainties, according to a commentary from the Wells Fargo Securities Economics Group. Based on recent moves from the Federal Reserve, the commentary further noted the Fed ""appears to be banking on a housing recovery."" Last week, the Fed announced plans to continue buying $45 billion in long-term securities amid the expiring Operation Twist. The Fed also maintained its pace of buying $40 billion in MBS. In addition to actions from the Fed, the housing market has gained support from other factors such as an improving unemployment rate, increasing home prices and sales, and decreasing foreclosures.