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Mortgage Investor Questions Settlement Estimates

Mortgage investors take note - some professionals in the industry are forecasting a dollar amount nearly four times the government's estimates tallying the cost of penalties related to servicing operations at the country's big banks. Currently, the most popular figure in terms of a total settlement stands at $25 billion, but at least one portfolio manager feels that the actual number should be closer to $100 billion.


Continuing litigation among several state attorneys general and multiple U.S. financial institutions has turned the harsh spotlight on issues within the mortgage servicing divisions of the banks. Recently, Vincent Fiorillo, a member of ""The Association of Mortgage Investors"":the-ami.org/ and portfolio manager for ""DoubleLine Capital Management"":www.doubleline.com/, spoke out on the problems and resulting costs, noting that a many more billions of dollars would be required to establish an end to private legal wranglings and prevent additional lawsuits.

Presenting at the ""2012 Reuters Investment Outlook Summit"":the-ami.org/, Fiorillo said, ""I like the idea of a big settlement because it gives


everyone a clean start. We need to clear things out ... We've got a standstill here.""

According to ""Reuters"":www.reuters.com/, Fiorillo has become a ""spokesman for institutional mortgage investors,"" and the news outlet referenced his numerous appearances on Captiol Hill to give testimony on possible resolutions to the nation's ongoing mortgage crisis. Defending his enormous $100 billion price estimate for wrapping up mortgage servicing litigation maneuvers, Reuters quoted Fiorillo as saying, ""A $100 billion deal would go a long way to enable loan modifications for homeowners whose mortgage balances exceed the value of their homes and to pay back investors who lost money on securities backed by questionable mortgage loans.""

Continuing his commentary at the conference, Fiorillo also added of the dissension between banks and the government, ""I don't know if there is anyone against fixing it ├â┬ó├óÔÇÜ┬¼├é┬ª I just don't know if anyone is listening to the people who could fix it.""

Fiorillo's statements closely follow moves by many states attorneys general to pursue settlements. In Iowa, Attorney General Tom Miller is attempting to lead ""multi-party settlements talks,"" but attorneys generals for New York, California, and Massachusetts have opted to conduct independent investigations, instead of joining Miller's group effort.

Reuters mentioned that Massachusetts, in particular, has been recognized as very aggressive in its pursuit of penalties for big banks, with around $600 million collected thus far from originators and Wall Street companies. However, the news source pointed out Fiorillo's general feeling that ""that there are few people willing to actually repair the problem.""