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46 | Th e M Rep o RT O r i g i nat i O n S e r v i c i n g a na ly t i c S S e c O n da r y m a r k e t SERVICING LocaL Edition SERVICING Judge Sides with Wells Fargo in Servicing Settlement case Despite the attorney general's attempt to prove otherwise, the bank inDeeD liveD up to its siDe of the Deal, rosemary Collyer rules. NEW YORK // A federal judge dismissed allegations from New York's attorney general that Wells Fargo failed to act in accordance with a historic $25 billion mort- gage servicing settlement struck in 2012. In an opinion, U.S. District Judge Rosemary Collyer said Attorney General Eric Schneiderman didn't present substantial evidence that Wells Fargo—one of five major servicers that originally entered into the deal with 49 state attorneys general—neglected its servicing obligations under the terms of the settlement. Schneiderman had specifically accused Wells of not meeting timeline requirements for loan modifications requested by strug- gling New York homeowners. The allegations cover 97 of the roughly 450,000 mortgages Wells Fargo services in New York alone—or about 0.022 percent, Collyer noted in her judgment. "Despite this small number, NYAG alleges that Wells Fargo repeatedly failed to comply with these loan modification timeline requirements, subjecting numer- ous New York homeowners to Kafkaesque delays and obstruc- tions in the loan modification process," she wrote. She goes on to remind Schneiderman that the 2012 settlement established indepen- dent monitors for all of the firms involved—and that Wells Fargo has only once had issues meeting some of the timeline requirements, a matter that was quickly resolved to the monitor's satisfaction. "The [settlement] does not require absolute perfection in loan servicing," Collyer concluded in her judgment, adding, "To permit NYAG to enforce failures to com- ply with the servicing standards that are so insubstantial would open the floodgates to lawsuits, running afoul of the core pur- pose of the consent judgment—to resolve problems in the mortgage industry with monitoring and compliance and without litigation." Banks in Florida and chicago close in First Failures of 2015 a host of faCtors leD to the finanCial institutions' untimely Demise. flORida // Florida's First National Bank of Crestview took the dubious honor of being the first FDIC-insured bank to close in 2015 as the housing crash finally caught up to it. The closure, announced jointly by the Office of the Comptroller of the Currency (OCC) and FDIC, comes after years of increased scrutiny from regula- tors. OCC first filed a consent order against the Crestview bank in 2010, demanding operational changes after it uncovered what the agency called "unsafe and un- sound banking practices" relating to asset quality, credit risk admin- istration, and violations of statutes relating to real estate lending and appraisals. Rather than improving, the bank's situation got worse, and it has earned zero stars in recent years from bank rating firm Bauer Financial. In the end, First National Bank of Crestview was brought down by its unsafe practices, OCC said. "[T]here is no reasonable pros- pect that the bank will become adequately capitalized," the regu- lator added. Taking over for the failed bank is First NBC Bank in New Orleans, which has taken on all deposits (totaling $78.6 million as of the end of Q 3 2014) and $62 million in assets. FDIC estimates the bank's collapse will cost its Deposit Insurance Fund approximately $4.4 million. First National Bank of Crestview is the first insured Florida bank to fail since June 2014 and only the second to fail in the last year. That compares to four banks that closed in 2013 and eight that failed in 2012. The national tally of insured bank failures has seen a similar trend, falling from a peak of 157 in 2010 to just 18 last year. A small Chicago bank became the second federally insured insti- tution to close this year. Highland Community Bank, located in the city's south side, closed its doors in January on or- ders from the Illinois Department of Financial & Professional Regulation's banking division. Working as receiver, FDIC said it has entered into an arrange- ment with United Fidelity Bank in Evansville, Indiana, which has agreed to take on all of Highland Community Bank's deposits and will purchase "essentially all" of the failed bank's assets. As of the end of 2014, regulators estimate Highland Community Bank had approxi- mately $53.5 million in deposits and $54.7 million in total assets. FDIC estimates the cost of the closing to its Deposit Insurance Fund will be about $5.8 million. Highland Community Bank is Illinois' first closure so far this year. Despite a decline overall in annual bank closings, the state— and particularly the Chicago region—remains a hot spot for failed banks. Of the 18 institutions that shut down last year, five were in Illinois, and three of those were in or around Chicago. 3MReport.indd

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