Aurora's appearance in the Fed and OCC's foreclosure review is a stinging reminder of Wall Street's disastrous foray into the mortgage market, and, in particular, how the securitization process weakened lending standards across the U.S.
There are other reminders in Monday's IFR settlement.
For instance, Bank of America is the largest payer in the settlement as a result of its 2008 acquisition of Countrywide Financial, a deal that's rung up in excess of $40 billion in losses for the bank.
Meanwhile, Wells Fargo, by way of its crisis time acquisition of Wachovia is also on the hook for a large chunk of the settlement. In 2006, Wachovia bought mortgage lender Golden West, in a $25.5 billion deal that eventually spelled the firm's demise.Other Wall Street players, notably Goldman Sachs, are absent on the list of banks involved in the IFR settlement. In 2011, Goldman Sachs sold its origination and servicing unit, called Litton Mortgage, to Ocwen Financial (OCN), in an exit from mortgage underwriting. In that deal, Goldman agreed with the Federal Reserve to forgive some loan balances, write off roughly $53 million in unpaid mortgage principal, and refrain from robo-signing -- the practice at the heart of Monday's settlement. Ocwen has been an active buyer of servicing businesses. In 2011, it also acquired Morgan Stanley's loan origination and servicing unit, called Saxon Capital. Aurora is named by the Federal Reserve as one of the servicers taking part in the ten-bank settlement. The list also includes JPMorgan (JPM), Metlife (MET), US Bancorp (USB) PNC Financial Services (PNC), SunTrust Bank (STI) and Sovereign, a unit of Spanish banking conglomerate Santander (STD). For Bank of America investors, the Independent Foreclosure Review settlement and a $10 billion deal with Fannie Mae appears to have the biggest impact. In total, both settlements appear they will cost the bank in excess of $5 billion, wiping out most of the firm's fourth quarter profit As part of the IFR settlement, the Fed and OCC said on Monday that the foreclosure review had ended, and that the servicers subject to the foreclosure settlement would make $8.5 billion in cash payments and other assistance to borrowers victimized by servicing errors. Borrowers could receive up to $125,000 each, in a deal that is split between $3.3 billion in direct payments to eligible borrowers and $5.2 billion in other assistance such as loan modifications. For more on the IFR settlement, see why lenders were slow to detail the cost to investors. Follow @agara2004 -- Written by Antoine Gara in New York
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