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Monday Morning Cup of Coffee: Fed officials suggest economy could rebound

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Monday Morning Cup of Coffee takes a look at stories across the HousingWire news desk, with more coverage to come on bigger issues.

Bank of America (BAC) continues one of its major legacy mortgage battles in the courtroom. Prosecutors told a federal judge that Bank of America should pay the maximum penalty of $863 million for selling faulty mortgages to Fannie Mae and Freddie Mac. They want this because of the nature of the fraud, Bloomberg reported.

The prosecutors argued that the bank’s fraud was simple but brazen.

The case is from Bank of America’s Countrywide unit which was found liable for selling the government-sponsored entities thousands of defective loans in the first mortgage-fraud case brought by the U.S. to go to trial.

Even though there are signs of improvement in the labor market, Fed officials said there is still plenty of room for the jobless rate to fall further, according to an article in Reuters.

Federal Reserve Chairman Ben Bernanke and two other top policymakers spoke on Friday on the same day as the most recent  jobs report. The policymakers urged caution about drawing conclusions from economic data.

As HousingWire reported Friday, total payroll jobs in October increased by 204,000 positions, following a revised increase of 163,000 for September and after a revised gain of 238,000 for August.

On the other hand, Dennis Lockhart, president of the Atlanta Fed Bank, and John Williams, president of the San Francisco Fed Bank, said they were encouraged by the October job gains, but they warned against reading too much into one month of data.

However, Lockhart said he would not rule out paring back the Fed's massive stimulus program before the end of the year.

"This is a period in which there are a lot of unusual things going on," Lockhart said. "So for that reason, I would be a little reticent to draw up very profound conclusions from one month's positive jobs number."

For the past year, Fed officials have been eyeing and questioning the mortgage real estate investment trust sector as an area of trouble and market vulnerability, an article in The Wall Street Journal claimed.

Although, the main question is whether or not REITs pose a systematic threat to the financial system if they fail.

A new report from the Federal Reserve Bank of Richmond shows that regulators are studying mREITs to see what would happen if they suffered a major shock.

“While mREITs clearly present risks to investors, it is not yet clear where mREITs fall relative to other financial institutions in terms of systemic risk,” the paper’s authors said.

“The financial crisis, however, highlighted the potential hazards that leverage and maturity transformation may present to overall financial stability, particularly where less-regulated institutions are involved,” the paper added.

The good news is that mortgage REITs only own 4.2% of the multi-trillion dollar agency mortgage-backed securities market, making it likely the market can absorb any shock.  

In light of Veterans Day, Bank of America (BAC) donated more than 800 homes to military veterans and first responders through various nonprofit organizations, the company announced.

The bank made a commitment in August 2012 to donate 1,000 properties over the course of three years and is projected to reach that goal a year ahead of schedule.

"This weekend, as Americans pay tribute to those who have served and sacrificed for their country, we are honored to continue our support of veterans and their families through this unique home donation program," said Ron Sturzenegger, Legacy Asset Servicing executive for Bank of America.

"These donations help veterans like Sergeant Miller and his family build a strong foundation for their future, while improving communities across the country,” Sturzenegger added.

To reach its goal, the bank partners with organizations that work closely with military veterans and their families to identify needs, such as the Military Warriors Support Foundation, Operation Homefront and Purple Heart Homes.

The Federal Insurance Corp. reported no bank closings for the week ending Nov. 8.

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