The lawsuit was filed in Cook County Circuit Court, and it relies on internal email from within the ratings agency as evidence of the company’s misrepresentations of risk.

According to the court filing, an employee said “an investment could be restructures by cows and we would rate it”, which is outrageous considering the importance of S&P in the financial industry.

Madigan also used references from a former director at S&P, stating “profits are running the show.”

Illinois Attorney General’s lawsuit highlights what really happened before the financial crisis and the main cause. “S&P consistently misrepresented the risk of mortgage-backed securities, assigning these securities its highest seal of approval – or AAA rating,” Lisa Madigan’s office stated.

“Publically, S&P took every opportunity to proclaim their analyses and ratings as independent, objective and free from its desire for revenue,” Madigan said. “Yet privately, S&P abandoned its principles and instead used every trick possible to give deals high ratings in order to retain clients and generate revenue.”

This resulted the housing bubble that burst soon as the investments began defaulting, triggering the current situation we are facing.

“The mortgage-backed securities that helped our market soar and ultimately crash – could not have been purchased by most investors without S&P’s seal of approval”.

The other side, S&P is washing its hands, denying an culpability. “The case is without merit, and we will defend ourselves vigorously,” said an S&P spokesperson.

Principal reduction is one of the key adjustments the modification centers around. HAMP currently includes an option for servicers to provide underwater homeowners who are struggling with their payments with a modification that includes principal writedown.

The Treasury comes to back up the administration’s plan by tripling the incentives for such restructurings, paying from 18 to 63 cents on the dollar depending on the degree of change in the LTV (loan-to-value) ratio.

The FHFA (Federal Housing Finance Agency) ordered GSEs to stop employing HAMP’s principal reducing option and the Treasury notified the FHFA that it will pay these same principal reductions incentives to the GSEs if they allow servicers to forgive principal in conjunction with a HAMP modification.

As a response the FHFA issued a statement which says it analyzed the principal reduction offer, but it does not offer any greater benefits than the tools already in use.

However, it will reassess the investor incentives now being offered, taking into consideration the number of eligible loans, operational costs to implement such changes, and the potential effects of incentivizing borrowers to remain current,DsNews cited.

Another change that targets HAMP, is offered for borrowers underwater, with second lien and medical bills. These borrowers will be eligible for an alternative program evaluation with more flexible debt-to-income criteria.

Furthermore, Treasury is ready to expand availability to include investor properties that are currently occupied by a tenant as well as vacant properties for rental use.

In addition, the deadline for HAMP is now December 31, 2013, not 2012 as originally planned.

According to numbers published by the Treasury, HAMP has already helped approximately  (sic!) 900,000 struggling homeowners by offering permanent modification, providing them a median savings of more than $500 a month.

“In addition to foreclosure prevention initiatives such as HAMP, the federal government plans to focus on transitioning foreclosed properties into rental housing, making it possible for responsible homeowners to refinance, and providing hard-hit states with resources to develop targeted relief programs” Tim Massad, Treasury’, assistant secretary added.

Now DsNews reports that a spokesperson for Iowa Attorney General Tom Miller’s office is corroborating the claim, saying that the settlement draft is already available and it is in the hands of the AGs for review.

The Associated Press came out with an update yesterday stating that the settlement terms require as much as $25 billion from the 14 banks participating in the settlement.

The draft also lays down the number of distressed homeowners who will receive about $1,800: 750,000 individuals will be the lucky ones to get this amount from the banks.

Another important point of the settlement is that 1 million homeowners may receive principal reductions.

Although there were rumors suggesting President Barack Obama will announce the successful settlement during his State of the Union today, Miller stated yesterday that the committee did not reach an agreement with five of the nation’s largest servicers, so it will be no official settlement announcement anytime this week.

The more the settlement terms get known, and get wider publicity the more concerns are expressed even among officials: last week Ohio AG Sherrod Brown expressed his concerns the proposed settlement may be too easy on banks.

“A settlement must provide meaningful, widespread relief to Ohio homeowners. Unfortunately, the numbers reported in various media accounts fail to meet this test,” Sherrod wrote. “The proposed principal reduction program must focus on banks settling with their own money, rather than shifting their financial liability to Private Label Securities (PLS) trusts,” he added.

Reuters reported that Brown reiterated his concerns Monday .“Instead of criminal prosecutions, we are talking about not much more than a slap on the wrist,” Brown said. “In many ways, Wall Street isn’t just too big to fail, it’s also too big to jail.”

The independent foreclosure review targets millions of troubled homeowners who faced foreclosure between January 1, 2009 and December 31, 2010, as a result of enforcement actions imposed by the regulators against 14 servicers. This is one direct result of the robo-signing scandal, that surfaced in the fall of 2010.

The OCC already mailed multiple million emails to potential borrowers, but if they did not receive an email with this information, borrowers involved in a foreclosure action during the above mentioned period can request a case review by an independent consultant to determine whether if they suffered financial injury as a result of deficiencies in the foreclosure process.

The mailing process started in November, and eligible borrowers should have received a letter by the end of last year with the details of the process.

What Oregon AG highlights once again is that there is no cost associated with the review program.

Unfortunately, scammers already took the scene and began mailing their own letters to Oregon consumers and offering to conduct “an independent foreclosure home loan review” for a certain fee.

Oregon AG warn state consumers to beware anyone who wants payment to conduct this independent foreclosure review of any other foreclosure prevention program.

“If you receive a letter suggesting that you qualify for compensation or received a grant without having requested an independent review from the federal government, it is a scam,” according to the warning issued by Kroger’s office.

Canceled HAMP trials, that hit 615,000 last year are likely to end up in foreclosure and the percentage of failed trials pushed through foreclosure doubled compared to last year, by reaching 10.6% of the total failed trials. The Treasury data shows that in 2010 forecloses accounted only 4.4% of the total failed HAMP trials.

With foreclosures trending upwards, alternative modification on these loans are exactly the opposite: of the canceled HAMP trials 39.7% went through the bank’s own private programs, down from 45.4% over the same 11 month period, from January to November.

Another highlight of the Treasury report is foreclosure completion of borrowers never accepted into HAMP. The research conducted by the Treasury shows they also trend upwards, as of the 1.8 million seriously delinquent borrowers denied a HAMP trial, 7.6% completed foreclosure, compared to 5% a year prior.

This isn’t particular to any specific servicing company, they all saw jump in foreclosures. For instance CitiGroup had 71,808 HAMP trials canceled, and pushed roughly 13.5% through the foreclosure process as of November 1, up from 3.1% reported in 2010.

Ally Financial reported a 6.4% increase compared to 2010, with its 12.8% recorded last year. At JPMorgan Chase the increase went to 11.3% from 6.2%, while Bank of America reported 9.3% of failed HAMP trials put into foreclosure compared to just 1.9% a year prior.

According to the OCC (Office of the Comptroller of the Currency) 17% of the 108,000 HAMP modifications began in the second quarter of  2010 went 60 or more days delinquent within one year, compared to 31% redefault rate for other private programs, HousingWire reported citing from the report.

Last week Federal Reserve Chairman Ben Bernanke submitted a white paper to Congress  providing “a framework for thinking about directions policymakers might take to help the housing market,” expressing his support for an REO rental program. Furthermore he stressed the importance of accessible credits, that would boost the housing market, just like it did before the housing collapse.

Bernanke stated that “some actions that cause greater losses to be sustained by the GSEs in the near term might be in the interest of taxpayers to pursue if those actions result in a quicker and more vigorous economic recovery.” In addition other Fed members have expressed their support for Bernanke’s white paper.

The recipient of the white paper, the Congress on the other hand has started to make action based on its own scenario that will trigger the housing recovery: it uses funding from the GSEs to fuel it.

The action plan involves the extensions of the Temporary Payroll Tax Cut, which calls on the Federal Housing Finance Agency to raise the GSEs guarantee fees.

However, some Congress members have different views about Bernanke’s status to define directions. Sen. Orrin Hatch wrote a reply to Bernanke saying that the Fed Chairman has overstepped his bounds with his white paper.

“I believe that your recent housing white paper, and recent advocacy by Federal Reserve officials for further taxpayer-funded government intervention in housing and mortgage markets, intrudes too far into fiscal policy advice and advocacy.”

It s unclear at this time which side has the winning card, but until a proper scenario is just a dream, the economic recovery will remain a dream too. And eats dust from the fight between the Congress and the Fed? The taxpayer, of course.

The report highlights that this is the moment distressed borrowers should enter the program, as borrowers have a better chance to earn a permanent modification. “Eighty-three percent of eligible homeowners that signed on to HAMO since June 2010 have received a permanent modification, with an average trial period of 3.5 months,” DsNews reported.

Furthermore, the Treasury report goes on an states that HAMP is way better than the mortgage industry’s already functioning modification programs, and the OCC found that the loan mods through HAMP perform extremely well, with 70.5% of the modified loans remaining current, versus 57.6% of other proprietary mods.

Out of the several million homeowners in limbo, there are only 891,542 left, who are currently delinquent and are eligible for HAMP assistance.

Another information coming from Raphael Bostic, HUD assistant secretary emphasizes that HAMP’s Principal Reduction Alternative (PRA) – which by the way requires servicers of non-GSE loans to evaluate program applicants for a principal reduction when the LTV ratio is 115% or higher – is also performing well, as the numbers show: through November 2011, 38,243 permanent PRA mods had been granted, and there are another 15,875 PRA active trials. The list of lenders using the PRA program is led by Bank of America.

The announcement came Friday, right after the US Department of Labor stated that the nation’s unemployment rate trends down. According to the department’s data unemployment slipped to 8.5% nationwide, as the economy added 200,000 new jobs.

The rate is down from a 8.6% reported in November and as the statement says the downward trend was better than expected, with analysts forecasting a rise un unemployment for the last month of the year.

DsNews reports that previously servicers could offer up to three months of forbearance without payment on Freddie Mac loans or up to six months, but with reduced payments, without prior approval coming from the mortgage giant.

However, extended forbearance plans had to receive prior approval and often only applied to natural disasters or medical emergencies.

With the new extended forbearance plan, Freddie Mac now offers up to six months of forbearance to unemployed borrowers without prior approval. In the other hand, the GSE has to grant the forbearance plan, but it can go up to one year.

Tracy Mooney, SVP of single-family servicing and REO at Freddie Mac commented the statement, saying that the new plan will help families facing prolonged periods of unemployment with a greater measure of security, as this extension gives them more time to find a new job and time to solve their delinquencies.

Freddie officials say this will help more families to get back on track and keep their homes.

With the new, already active directive servicers can evaluate unemployed homeowners already in a forbearance plan to propose extension of the terms.

He is trying to push the Justice Department and the SEC to open immediately criminal investigations into Freddie and Fannie. Brown says officials need to take a closer look at the GSEs business dealings they had before the housing collapse and their disclosure of subprime mortgage holdings.

Brown tries to underscore the lack of any criminal investigation against CEOs or key people who’s actions triggered the housing collapse and the financial crisis. If the investigation results in evidence of illegal actions, people should go to jail immediately, Brown wrote in a letter to Attorney General Eric Holder and SEC Chairman Mary Shapiro.

He is 100% confident about GSE CEOs took action to pad their own pockets while hiding the extent of their mortgage risks from everybody.

The SEC’s latest action of filing a lawsuit against six former GSE chief executives is far too timid. If this is how the Justice Department and the SEC is looking to hold key people,  bank CEOs accountable for their action, then we have a problem, Brown suggests. He cites the 2003 accounting scandals at Fannie Mae that resulted in only civil penalties.

While the SEC filed a lawsuit alleging fraud against Fannie’s former CEO Daniel Mudd, Enrico Dallavecchia, former CEO of Fannie Mae, and former EVP of single family mortgage Thomas Lund, and Richard Syron, former CEO of Freddie Mac, Patricia Cook, former EVP and chief business officer and Donal J. Bisenius, former EVO for single-family guarantee business, it agreed to enter into non-prosecution, right after the SEC submitted the lawsuit papers.

Both early stage and serious delinquencies remained unchanged over the quarter, the OCC said in its latest report.

Looking at these mortgage delinquencies separately, the OCC stats show that loans 30 to 59 days delinquent maintained 3%, while seriously delinquent mortgages stood at nearly 5% for the quarter.

On the other hand, new foreclosures are up more than 21% with the total number of loans in foreclosure reaching 1.3 million, accounting only 4.1% of the loans observed by the Office.

But the greatest news reported by the OCC is that performing loans accounted 93.1% of the GSEs’ portfolio, unchanged from the prior quarter.

Another great news highlighted by the OCC report was regarding the number of loan modifications, trial period plans and payment plan was 0.6% higher than the prior quarter, but 2.4% less than a year ago.

On average, mortgage modifications included 24.4% reductions in monthly principal and interest payments, DsNews cited from the report.

Another positive news underscored by the OCC reports was that HAMP mods included reductions up to 35.1%, which saved borrowers $567 per mont.

Out of the 90% of all modifications completed during the analyzed third quarter, 77.5% came with reduced interest rates, 20.5% included principal referrals and 7.8% included principal reductions

Of the HAMP modifications, 86.8% included reduced interest rates, another 34.9% inclded principal deferrals and 10.2% included principal reductions.

The report covers the 32.4 million loans, which account 62% of all existing mortgages in the country.