Banking Law

Fannie Mae Reaches $20B Settlement with Banks; Lawyers Lose Jobs

A $20 billion agreement announced on Monday between Fannie Mae and major banks is bad news for lawyers and contract workers hired to review foreclosure irregularities.

Promontory Financial Group was among the companies hired to evaluate robo-signing and other irregularities in a process set up in 2011, the Wall Street Journal (sub. req.) reports. Contract lawyer Drew Mandl tells the newspaper he was among hundreds of Promontory workers told on Monday that their jobs had ended and they should leave the office immediately. “Hundreds of newly unemployed JDs here in Denver this AM,” he tweeted.

The foreclosure abuse probe was resolved in an $8.5 billion deal between Fannie Mae and 10 U.S. lenders. In a separate pact, Bank of America reached an $11.6 billion settlement to resolve allegations it made bad mortgages and then sold them to Fannie. The New York Times DealBook Blog and the Associated Press also have stories.

Most of the loans covered in Bank of America’s settlement were the result of its purchase of Countrywide Financial in 2008. The bank sold about 20 percent of its loan servicing business to finance the settlement, leading to worries that the consolidation of the mortgage industry will harm consumers, DealBook says.

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