Wells Fargo Bank has settled two lawsuits with BlackRock, Pacific Investment Management Co. LLC and other plaintiffs over the bank’s role as trustee for residential mortgage-backed securities trusts.

The bank will pay $43 million and denies the claims in the litigation, under the terms of the agreement. Separate from the settlement amount the bank is paying, up to $70 million will be released from trust reserve accounts created in connection with the litigation.

“Following more than four years of litigation, including fact and expert discovery, we concluded that this agreement provides a fair and reasonable resolution of the claims,” said Pimco, BlackRock and the other institutional investor plaintiffs through their counsel, Timothy DeLange of Bernstein Litowitz Berger & Grossmann LLP. “We appreciate Wells Fargo’s professionalism in reaching this agreement and commend their efforts to work with certificate holders to resolve the litigation. While we believe the claims are meritorious, the settlement provides an immediate and concrete benefit for class members, while bringing the litigation to a close.”

The settlement also resolves a related action seeking declaratory relief against Wells Fargo, as well as claims by Wells Fargo against certain investment advisors. The securities were created over 10 years ago. Federal and state cases alleging similar claims filed that other institutional investors weren’t a part of the settlement.

The agreement, which is subject to approval by the court, resolves claims regarding the fulfillment of Wells Fargo’s duties as trustee, including providing certain notifications to certificate holders, for 271 RMBS trusts created between 2004 and 2008. Wells was to administer the trusts, and it had no role in the origination or servicing of the mortgages at issue, according to the bank. The agreement resolves a significant portion of the claims asserted against the company in connection with its role as trustee for RMBS trusts. Separate lawsuits filed by certain other institutional investors concerning 58 trusts are not covered by the agreement.

“Consistent with our sound business practices, we believe that we appropriately fulfilled our duties as trustee by performing the responsibilities prescribed in the relevant contracts for these decade-old trusts,” said Troy Kilpatrick, head of corporate trust services at Wells. “While we disagree with the allegations, it is in the best interest of all parties to put this protracted litigation behind us and we are satisfied with this settlement.”

Wells Fargo had disclosed the RMBS Trustee litigation in its public filings, including in its most recent Quarterly Report on Form 10-Q. The settlement amount was fully accrued on June 30.

The Department of Justice Department has filed a civil complaint against UBS and its U.S. affiliates, alleging the sale of residential mortgage-backed securities to investors was fraudulent.

UBS misled investors about the quality of billions of dollars in subprime and Alt-A mortgage loans backing 40 RMBS deals, between 2006 to 2007, the years just prior to the financial meltdown.

“The complaint alleges that instead of ensuring that their representations to investors were accurate and transparent, UBS affirmatively misled investors and withheld crucial information from them about the loans in its deals,” said United States Attorney Pak, for the Northern District of Georgia.  “UBS allegedly placed a higher priority on selling bonds and making profits than accurately representing the quality of the underlying loans to investors. These practices resulted in massive losses to investors, harmed homeowners, and ultimately jeopardized the banking system.”

According to the government, in offering documents for the bonds UBS misrepresented the loans and concealed that the loans were much riskier and more likely to default than the bank represented. Ultimately, the 40 RMBS sustained catastrophic losses.

The complaint alleges that UBS’ actions violated the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, including mail fraud, wire fraud, bank fraud, and other misconduct. The ACT authorizes the attorney general to seek civil penalties up to the amount of the gain derived from the violation, or the losses investors suffered.

“The fraudulent actions by UBS as alleged in the complaint contributed to the 2008 financial crisis, which resulted in lasting economic harm to the nation and unnecessary suffering for Americans,” said Principal Deputy Associate Attorney General Jesse Panuccio. “This suit aims to hold UBS accountable and sends a strong message that the Department of Justice will not tolerate fraud committed by corporations.

“Investors who bought RMBS from UBS suffered catastrophic losses, which not only caused direct harm to those investors, but also contributed to the financial crisis of 2008,” said United States Attorney Donoghue. “The filing of this complaint makes clear that we will continue to hold financial institutions fully accountable for their conduct and will aggressively pursue financial fraud.”

AHP Servicing, a specialty servicer of past due residential mortgages, has inaugurated a $50 million offering designed to help keep homeowners out of foreclosure.

AHP and other financial organizations purchases loans that have fallen behind in payments but could be restructured or settled—using crowd sourced funding. It then works with home owners so they can stay in their homes, or resolve their debt at a discount.

[caption id="attachment_7523" align="alignleft" width="150"] DeAnn O'Donovan[/caption]

"AHP empowers socially responsible investors to help financially strapped borrowers and homeowners retain their properties while offering investors a competitive preferred rate of return," said DeAnn O'Donovan, president and CEO of AHP Servicing. "We're flipping the switch on the traditional loan servicing model so that ROI is judged not just by dollars, but also by sense. We create a purpose in addition to creating a profit."

Investors can realize returns as high as 10% annually, distributed in monthly dividend payments to investors, assuming the investment is held for at least two years. If funds are withdrawn earlier than two years, returns will be lower. The aim is to return the principal within five years. So far, AHP's prior offerings have not missed a monthly distribution.

"Our offering diversifies investor returns into an asset class that is not correlated to the stock market," O'Donovan noted. "What's more, our offering is available to both accredited and non-accredited investors. We offer best efforts liquidity and seek to deliver monthly distributions with annual preferred returns up to 10%."

AHP Servicing seeks socially responsible investors who are looking for investments that make real differences in people's lives, and socially conscious investment advisors, their clients and foundations to invest in the offering.

AHP Servicing’s sister company, American Homeowner Preservation, is a crowdfunded offering with a 10-year track record of socially responsible investing that keeps financially distressed homeowners in their homes.

Rising rates will be the top challenge facing mortgage executives next year.

They cited rates, 54 percent, as the top obstacle the housing market faces in 2019. Next were a lack of affordable housing supply, 37 percent, and government sponsored enterprise reform, seven percent, according to a survey from Genworth Mortgage Insurance of more than 200 executives that attended the MBA Annual Conference last month. The pending expiration of the qualified mortgage, two percent, was next.

For first-time homebuyers, the scarcity of affordable housing, 58 percent, will make buying a home difficult for them. “While rising interest rates and a lack of affordable housing supply continue to drive increase in home prices, first-time homebuyers have not wavered in their efforts to buy homes," said Rohit Gupta, president and CEO, Genworth Mortgage Insurance. "We continue to stress the importance of education and [options] for this demographic to set them up for success.”

Also, first time homeowners suffer from a lack of consumer knowledge, 20 percent, about the homebuying process, and rising interest rates, 13 percent, will be a drag on originations among this segment of the marketplace. The lack of an appropriate credit history, nine percent, is a lesser barrier to entering the market.

Other conclusions from the survey are as follows:

Technology is needed in loan application submission and closing process to improve customer experience:
Eighty-five percent of executives believe that integrating technology into the loan application submission process, 41 percent, and/or the closing process, 44 percent, will provide the strongest improvements in customer engagement. Also, respondents identified either the loan inquiry process or private mortgage insurance, 15 percent, as areas where technology could make a large improvement.

Borrowers' risk profiles see minor improvements:
While the housing market is expected to undergo some turbulence over the coming year, industry professionals are beginning to notice small improvements in the risk profiles of borrowers that want to enter the market. Of those surveyed, 41 percent, noted a small improvement in the quality of borrowers, while 53 percent, saw no change to a small decline, in their profiles. However, some identified an increase, 5 percent, in the risk profiles of applicants; just one percent reported a significant decline in risk profiles.

Regulatory won’t support increase in affordable housing:
When it comes to fixing the disparity in available housing inventory, a majority of mortgage executives, 62 percent, do not believe that regulatory policy changes introduced over the next 12 to 24 months will support the construction of more affordable homes, those priced at $300,000 or less. The shortage of affordable housing options  identified in the survey as a significant hurdle for new homebuyers, as well as the overall success of the housing market in 2019.