Another Bank Gets Spanked...Wells Fargo!
Years after the fact, the hammer is continuing to fall on banks that didn’t conduct themselves well during the financial crisis. Wells Fargo (NYSE: WFC ) is to pay more than $6.5 million to settle allegations from the Securities and Exchange Commission that it didn’t adequately inform clients about the risks of some of its mortgage-backed securities. No one likes being fined but, at least this unhappy chapter is about to end for the bank and its shareholders, not to mention its clients.
Don’t trust your broker
Like many banks of that era, Wells Fargo enthusiastically recommended investments tied to mortgage-backed securities to its clients. Unfortunately, also true to the times, the company seemingly let its enthusiasm get ahead of itself. According to the SEC, it sold those goods "without fully understanding their complexity or disclosing the risks to investors."
The entire financial industry had -- and has -- egg on its face from its collective actions during the crisis, which are by no means limited to misadventures with mortgage securities. This bad behavior is indicated by the sheer amount of the fines handed down so far by the SEC, which total nearly $2.2 billion. That amount, by the way, is more than the net profit posted by more than a few big-name banks last year, not the least of which is noted SEC crisis-era miscreant Bank of America (NYSE: BAC ) .
Looked at in the scope of the overall crisis aftermath, Wells Fargo dodged a few bullets. Paying $6.5 million for a bank of its size is chump change, particularly when matched against what others were penalized. Wells allegedly failed to do its due diligence before recommending the investments. It’s not in the super bad guy category that the SEC says "concealed from investors risks, terms, and improper pricing in CDOs and other complex structured products."
Scofflaws in this group include: Citigroup (NYSE: C ) , which is alleged to have misled investors about a not-small $1 billion CDO, and is currently facing a $285 million settlement with the Feds for its conduct, on top of a $75 million slap it’s already paid for shenanigans related to subprime mortgage asset exposure; JPMorgan Chase’s (NYSE: JPM ) J.P. Morgan Securities unit, now recovering from a $154 million settlement for not being forthright with customers regarding a particular mortgage securities transaction; and Big Daddy, Goldman Sachs (NYSE: GS ) , currently swallowing a bitten bullet after it agreed to pay the Commission a record $550 million fine for effectively lying about one of its products tied to subprime mortgages.
For its relatively lighter sin of pushing mortgage-related bad stuff ignorantly, Wells Fargo lands closer to the bottom of the list in terms of penalties. Its fine -- which, by the way, is to be paid by the bank, even though it’s not admitting or denying the SEC’s allegations -- is more or less in line with companies alleged to have engaged in lesser misconduct.
Tiny drops in the bucket
The relatively light fine is likely one big reason why Wells Fargo stock wasn’t hit hard -- or much at all --by the news. Relief was probably the dominant emotion of the bank’s investors following the suit, who can now look forward instead of glancing back in worry, as the SEC breathes down their necks.
The number $6.5 million is lower than any significant item on the bank’s income statement or balance sheet. Even on the basis of its most recent quarter, the amount is dwarfed by net interest income ($11 billion) and bottom line ($4.6 billion). The penalty amount doesn’t even come close to what the company will be paying in dividends ($1.16 billion or so) for its most recent quarter.
Meanwhile, bottom line is good (although it’d be nice if revenue started growing again), the stock is teasing its two-year high, and out of the 35 analysts who track the company, 26 rate it some form of “buy.”
No shareholder likes it when their company is zapped for a penalty, and Wells Fargo needs to be more prudent and less reckless going forward. If it can do so, and keep on the clean side of the law, it might put the past behind it and enjoy a bright future.
Some argue that it’s a good time to buy into banks, now that the crisis is (hopefully) behind us. To find out what you need to know about Wells Fargo, click here for a free copy of The Motley Fool’s special report, The Only Big Bank Built to Last.
Thursday, August 23, 2012
Fannie Mae Announces New Short Sales Guidelines
Fannie Mae Announces New Short Sale Guidelines
New Guidelines Streamline Short Sale Processes to Prevent Foreclosures and Help Communities Stabalize:
WASHINGTON, DC – Fannie Mae (FNMA/OTC) announced that it will implement new short sale guidelines for servicers to follow as part of the Federal Housing Finance Agency’s Servicing Alignment Initiative. The new guidelines streamline documentation requirements, waive deficiencies for borrowers that successfully complete a short sale and set standard payments for subordinate lien holders. In addition, all servicers will have the authority to approve and complete short sales that conform to the requirements without receiving individual approval from Fannie Mae.
“Short sales have become an increasingly important tool in preventing foreclosures and stabilizing communities,” said Leslie Peeler, senior vice president, National Servicing Organization, Fannie Mae. “We want to help as many homeowners avoid foreclosure as possible. It is vital that servicers, junior lien holders and mortgage insurers step up to the plate with us. These new guidelines will open doors to help more homeowners qualify for short sales, remove barriers to completing short sales, and make the process more efficient for homeowners and servicers.”
NOTICE: Short Sale Training and designations…worth it or waste of money? Become the lender preferred short sale agent. All major lenders Bank of America, Wells Fargo, Chase, Citi.
Under the new guidelines, servicers will be permitted to approve a short sale for borrowers who have certain hardships but have not yet gone into default. Those hardships include the death of a borrower or co-borrower, divorce or legal separation, illness or disability or a distant employment transfer. In addition, Fannie Mae is significantly reducing the documentation required to complete a short sale, including requiring no documentation of a borrower’s hardship 90 days or more delinquent and have a credit score lower than 620. This will remove barriers for those homeowners who are most in danger of foreclosure and increase servicer efficiency in completing a short sale.
Fannie Mae will also limit subordinate-lien payments to $6,000. Previously, subordinate lien holders often attempted to negotiate higher payments. The servicer will be able to offer the maximum payment of $6,000 in order to facilitate the transaction. By setting a standard payout amount and a limit for every transaction, Fannie Mae is removing the guess work and standardizing the transaction to help accelerate the short sale process.
Fannie Mae has taken a number of steps to make the short sale process more efficient, including implementing a Short Sale Assistance Desk to help real estate professionals in targeted markets work out challenges in individual short sales, requiring servicers to complete short sale evaluations within 60 days and making military families who receive Permanent Change of Station orders eligible for a short sale. Fannie Mae completed 38,717 short sales through the first six months of 2012 and 70,025 in full year 2011.
The Servicing Guide Announcement implementing the changes to Fannie Mae’s short sale guidelines will be distributed to servicers and posted to www.efanniemae.com on Wednesday, August 22. Homeowners can learn more about short sales, modifications and other foreclosure alternatives at www.knowyouroptions.com.
Fannie Mae exists to expand affordable housing and bring global capital to local communities in order to serve the U.S. housing market. Fannie Mae has a federal charter and operates in America’s secondary mortgage market to enhance the liquidity of the mortgage market by providing funds to mortgage bankers and other lenders so that they may lend to home buyers. Our job is to help those who house America.
New Guidelines Streamline Short Sale Processes to Prevent Foreclosures and Help Communities Stabalize:
WASHINGTON, DC – Fannie Mae (FNMA/OTC) announced that it will implement new short sale guidelines for servicers to follow as part of the Federal Housing Finance Agency’s Servicing Alignment Initiative. The new guidelines streamline documentation requirements, waive deficiencies for borrowers that successfully complete a short sale and set standard payments for subordinate lien holders. In addition, all servicers will have the authority to approve and complete short sales that conform to the requirements without receiving individual approval from Fannie Mae.
“Short sales have become an increasingly important tool in preventing foreclosures and stabilizing communities,” said Leslie Peeler, senior vice president, National Servicing Organization, Fannie Mae. “We want to help as many homeowners avoid foreclosure as possible. It is vital that servicers, junior lien holders and mortgage insurers step up to the plate with us. These new guidelines will open doors to help more homeowners qualify for short sales, remove barriers to completing short sales, and make the process more efficient for homeowners and servicers.”
NOTICE: Short Sale Training and designations…worth it or waste of money? Become the lender preferred short sale agent. All major lenders Bank of America, Wells Fargo, Chase, Citi.
Under the new guidelines, servicers will be permitted to approve a short sale for borrowers who have certain hardships but have not yet gone into default. Those hardships include the death of a borrower or co-borrower, divorce or legal separation, illness or disability or a distant employment transfer. In addition, Fannie Mae is significantly reducing the documentation required to complete a short sale, including requiring no documentation of a borrower’s hardship 90 days or more delinquent and have a credit score lower than 620. This will remove barriers for those homeowners who are most in danger of foreclosure and increase servicer efficiency in completing a short sale.
Fannie Mae will also limit subordinate-lien payments to $6,000. Previously, subordinate lien holders often attempted to negotiate higher payments. The servicer will be able to offer the maximum payment of $6,000 in order to facilitate the transaction. By setting a standard payout amount and a limit for every transaction, Fannie Mae is removing the guess work and standardizing the transaction to help accelerate the short sale process.
Fannie Mae has taken a number of steps to make the short sale process more efficient, including implementing a Short Sale Assistance Desk to help real estate professionals in targeted markets work out challenges in individual short sales, requiring servicers to complete short sale evaluations within 60 days and making military families who receive Permanent Change of Station orders eligible for a short sale. Fannie Mae completed 38,717 short sales through the first six months of 2012 and 70,025 in full year 2011.
The Servicing Guide Announcement implementing the changes to Fannie Mae’s short sale guidelines will be distributed to servicers and posted to www.efanniemae.com on Wednesday, August 22. Homeowners can learn more about short sales, modifications and other foreclosure alternatives at www.knowyouroptions.com.
Fannie Mae exists to expand affordable housing and bring global capital to local communities in order to serve the U.S. housing market. Fannie Mae has a federal charter and operates in America’s secondary mortgage market to enhance the liquidity of the mortgage market by providing funds to mortgage bankers and other lenders so that they may lend to home buyers. Our job is to help those who house America.
Fannie Mae Announces New Short Sale Guidelines
New Guidelines Streamline Short Sale Processes to Prevent Foreclosures and Help Communities Stabilize
WASHINGTON, DC – Fannie Mae (FNMA/OTC) announced that it will implement new short sale guidelines for servicers to follow as part of the Federal Housing Finance Agency’s Servicing Alignment Initiative. The new guidelines streamline documentation requirements, waive deficiencies for borrowers that successfully complete a short sale and set standard payments for subordinate lien holders. In addition, all servicers will have the authority to approve and complete short sales that conform to the requirements without receiving individual approval from Fannie Mae.
“Short sales have become an increasingly important tool in preventing foreclosures and stabilizing communities,” said Leslie Peeler, senior vice president, National Servicing Organization, Fannie Mae. “We want to help as many homeowners avoid foreclosure as possible. It is vital that servicers, junior lien holders and mortgage insurers step up to the plate with us. These new guidelines will open doors to help more homeowners qualify for short sales, remove barriers to completing short sales, and make the process more efficient for homeowners and servicers.”
NOTICE: Short Sale Training and designations…worth it or waste of money? Become the lender preferred short sale agent. All major lenders Bank of America, Wells Fargo, Chase, Citi.
Under the new guidelines, servicers will be permitted to approve a short sale for borrowers who have certain hardships but have not yet gone into default. Those hardships include the death of a borrower or co-borrower, divorce or legal separation, illness or disability or a distant employment transfer. In addition, Fannie Mae is significantly reducing the documentation required to complete a short sale, including requiring no documentation of a borrower’s hardship 90 days or more delinquent and have a credit score lower than 620. This will remove barriers for those homeowners who are most in danger of foreclosure and increase servicer efficiency in completing a short sale.
Fannie Mae will also limit subordinate-lien payments to $6,000. Previously, subordinate lien holders often attempted to negotiate higher payments. The servicer will be able to offer the maximum payment of $6,000 in order to facilitate the transaction. By setting a standard payout amount and a limit for every transaction, Fannie Mae is removing the guess work and standardizing the transaction to help accelerate the short sale process.
Fannie Mae has taken a number of steps to make the short sale process more efficient, including implementing a Short Sale Assistance Desk to help real estate professionals in targeted markets work out challenges in individual short sales, requiring servicers to complete short sale evaluations within 60 days and making military families who receive Permanent Change of Station orders eligible for a short sale. Fannie Mae completed 38,717 short sales through the first six months of 2012 and 70,025 in full year 2011.
The Servicing Guide Announcement implementing the changes to Fannie Mae’s short sale guidelines will be distributed to servicers and posted to www.efanniemae.com on Wednesday, August 22. Homeowners can learn more about short sales, modifications and other foreclosure alternatives at www.knowyouroptions.com.
Fannie Mae exists to expand affordable housing and bring global capital to local communities in order to serve the U.S. housing market. Fannie Mae has a federal charter and operates in America’s secondary mortgage market to enhance the liquidity of the mortgage market by providing funds to mortgage bankers and other lenders so that they may lend to home buyers. Our job is to help those who house America.
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