Washington Mutual is set to exit bankruptcy as a mortgage reinsurance company. The former holding company of one of the largest bank failures ever finalized a deal with hedge funds yesterday that will allow it to retain millions of dollars in income tax credits it piled up during the final years of the bank’s operations.
Scientific studies of recent foreclosures are finding high rates of errors. The emerging consensus is that around 80 percent of U.S. foreclosures have substantial legal defects, such as forged signatures and documents, filings made by a bank that does not have legal standing for a loan, and the failure to file all required documents.
Capital One’s acquisition of ING Direct has been approved by regulators. With the acquisition, Capital One becomes the 5th largest bank according to deposits. The deal includes the U.S. operations of ING Direct only. To minimize brand confusion, the acquired bank will be renamed within one year. ING Direct is in good shape financially but had to be sold to raise money for its corporate parent, ING.
Citibank is paying $158 million to compensate the U.S. government for misleading mortgage documents its CitiMortgage unit filed over a six-year period in order to obtain insurance for risky mortgages. The bank had already changed it operating practices and accounting controls and set aside $125 million in connection with this case. The bank had an incentive program, discontinued last year, that paid bonuses to underwriting workers who found ways to circumvent accounting controls.
From everything I can see, U.S. real estate values have nearly finished their post-bubble decline and will stay near their current levels, on average, for about the next 9 years. Declining asset values are a problem for banks that rely on assets as collateral. The biggest declines in the last seven years have been seen in real estate and related securities. As real estate values level off, it will take some of the financial pressure off of banks.
The NCUA today placed A M Community Credit Union into conservatorship. The credit union has 16,000 members, primarily in Wisconsin.