Legal Issues

Browse articles from all of our Newsletters related to Legal Issues.

March 27, 2017 - Inside the CFPB

Rep. Cleaver Calls on Bureau to Combat Fintech Abuses

In a recent letter to CFPB Director Richard Cordray, Rep. Emanuel Cleaver, D-MO, called upon the bureau to address potential abuses by financial technology companies that may be engaged in predatory small-business lending. In so doing, he asked that the CFPB “investigate whether fintech companies engaged in small business lending are complying with all anti-discrimination laws, including the Equal Credit Opportunity Act.” The congressman’s letter noted that fintech lending companies, also known as alternative small-business lenders, are a fast-growing industry offering a new wave of innovation, but they also pose many risks, he added. “Over the past decade, there’s been a very large increase of Silicon Valley start-ups and technology companies that are functioning like banks,” Cleaver said. “The CFPB ...


March 27, 2017 - Inside the CFPB

Industry Hopes to Undo Parts of Dodd-Frank on Three Fronts

The new political landscape in Washington, DC, has intersected with the judicial movement on the PHH Corp. v. CFPB case to give the mortgage industry some hope that the bureau can be scaled back. But the task is complicated by the fact that the new administration is headed by a political novice, and by the fact that the industry itself is not particularly unified about what kind of changes should be made. During a recent webinar sponsored by Inside Mortgage Finance, three top industry attorneys discussed some of the prospects for change on three separate fronts of the federal government: the executive branch, the legislative branch and the judicial branch. If there’s a single theme or take-away from the event,...


March 27, 2017 - Inside the CFPB

CFPB Fines Nationstar $1.75 M Over HMDA Reporting Errors

The CFPB has fined Nationstar Mortgage $1.75 million for allegedly violating the Home Mortgage Disclosure Act by “consistently failing to report accurate data about mortgage transactions for 2012 through 2014,” the agency said. The CFPB said it found that Nationstar’s HMDA compliance systems were flawed and generated mortgage lending data with significant, preventable errors. “Nationstar also failed to maintain detailed HMDA data collection and validation procedures, and failed to implement adequate compliance procedures,” the bureau alleged. “It also produced discrepancies by failing to consistently define data among its various lines of business.” Further, data samples reviewed by the CFPB showed substantial error rates in three consecutive reporting years, the bureau said. “In the samples reviewed, the CFPB found error rates ...


March 27, 2017 - Inside the CFPB

Trump’s Latest Executive Order Appears to Apply to CFPB

President Trump recently signed yet another executive order to roll back the reach of the federal government – this one promoting “a comprehensive plan for reorganizing the executive branch.” But unlike some of the earlier EOs from the White House, the odds seem to be higher that this one may apply to the CFPB. In an email exchange, former CFPB official Benjamin Olson, now a partner with the BuckleySandler law firm in Washington, DC, was asked if this EO applies to his former employer. He replied: “Yes and no. Unlike past orders that referred to ‘executive departments and agencies,’ this one refers to agencies ‘defined in’ 5 U.S.C. 551(1), which seems to include – or at least not exclude – independent agencies such ...


March 27, 2017 - Inside the CFPB

Trump Administration Takes No Position on RESPA in PHH Brief

As different as the presidential administrations of Barack Obama and Donald Trump may appear, one thing they have in common is an apparent unwillingness to get into the statutory weeds when it comes to the interpretation and enforcement of the Real Estate Settlement Procedures Act. Earlier this month, the Department of Justice under the Trump administration, just as it had under the Obama administration, side-stepped the RESPA issues associated with the long-running battle between PHH Mortgage and the CFPB. In its amicus brief with the U.S. Court of Appeals for the District of Columbia Circuit, the government said simply: “The United States takes no position on the statutory issues in this case….” For the Trump administration, the case comes down ...


March 24, 2017 - Inside MBS & ABS

Banks to Settle Legacy MBS Case; Deutsche Bank’s Class Bid Rejected; Court Favors Collateral Manager

Wells Fargo, Deutsche Bank and the Royal Bank of Scotland have agreed to pay investors $165 million to resolve allegations of misrepresenting the quality of mortgage loans underlying securities issued by now-defunct subprime lender NovaStar Mortgage. The agreement was announced last week subject to approval by Judge Deborah Batts of the U.S. District Court for the Second District of New York, according to a report by Reuters. At issue is $7.7 billion in residential MBS delivered into various trusts and sold to investors, including pension funds, prior to the housing crash. A multi-employer union pension plan led by the New Jersey Carpenters Health Fund filed...


March 23, 2017 - Inside Mortgage Finance

CFPB Moving Vigorously Ahead with Enforcement Actions, as Prospect Mortgage RESPA Case Reveals

With the enforcement of the Real Estate Settlement Procedures Act at stake, and a hostile occupant in the Oval Office, the Consumer Financial Protection Bureau is certainly not being bashful about continuing its regulation-by-enforcement modus operandi. The recent enforcement action against Prospect Mortgage is just the latest example. According to Colgate Selden, a partner in the Washington, DC, office of the law firm of Alston & Bird, the case is important because “it indicates the CFPB is moving full-speed ahead regardless” of the recent court rulings in PHH v. CFPB. This case is...


March 23, 2017 - Inside Mortgage Finance

Trump Administration Urges Court in PHH Case To Ditch CFPB ‘Removal Only for Cause’ Provision

The Trump administration late last week filed its amicus brief with the U.S. Court of Appeals for the District of Columbia Circuit in PHH Corp. v. Consumer Financial Protection Bureau, and, as expected, sided with the lender this time around, but didn’t go as far as some had hoped it would. In its brief, the Department of Justice argued in support of eliminating the removal-only-for-cause protection that currently applies to the director of the CFPB. However, whereas PHH has argued that the CFPB be eliminated in its entirety, the Trump administration argued in favor of retaining the CFPB, but with a director removable at the will of the president. Currently, the director may be removed...


March 17, 2017 - Inside FHA/VA Lending

Trump Proposes Drastic Cuts to 2018 HUD Discretionary Spending

The Trump administration has proposed deep budget cuts in 2018 for the Department of Housing and Urban Development and the U.S. Department of Agriculture, but whether the agencies’ critical housing insurance programs would be affected is unclear. The cuts are part of the administration’s plan to reduce non-defense discretionary spending dramatically in order to fund increased defense spending and President Trump’s southern border wall, and to bring down a projected $9.4 trillion U.S. deficit over the next decade.Released this week, the preliminary 2018 budget seeks $40.7 billion in gross discretionary funding for HUD, $6.2 billion or 13.2 percent lower than the department’s approved spending in 2017. The $47.3 billion in discretionary budget authority enacted for fiscal 2017 does not include offsetting receipts from FHA and Ginnie Mae, which lowered the congressionally appropriated cost for ...


March 17, 2017 - Inside FHA/VA Lending

Georgia Appeals Court Finds for Wells Fargo in Provisional Win

A Georgia appellate court recently handed Wells Fargo Bank a provisional win in a lawsuit in which a VA borrower alleged breach of contract and wrongful foreclosure. In Wells Fargo Bank, N.A., d/b/a Wells Fargo Home Mortgage v. LaTouche, the court ruled that Wells did not breach its duty to the borrower to comply with VA foreclosure regulations. The court concluded that the trial court had erred in denying Wells Fargo’s motion for summary judgment as to the defendant’s claims for wrongful foreclosure that hinged upon the same VA regulations. The reversal stemmed from Wells Fargo’s request for an interlocutory review of the trial court’s denial of its motion for summary judgment on defendant Michael LaTouche’s claims for breach of contract, wrongful foreclosure and “surprise. An interlocutory review is undertaken when a question of law must be answered by an appellate court before ...


March 17, 2017 - Inside FHA/VA Lending

Quicken Loans Notches First Win After Court Narrows Scope of Case

A favorable court ruling on the statute of limitations for filing claims under the False Claims Act gave Quicken Loans its first win in a closely watched government case involving allegedly fraudulent FHA loans. Judge Mark Goldsmith of the U.S. District Court for the Eastern District of Michigan dismissed portions of the Department of Justice’s lawsuit against Quicken in a March 9 decision, narrowing the lender’s potential liability for FHA losses. The losses were blamed on sloppy underwriting, fraudulent certification and loan performance. The DOJ said the FHA would not have knowingly insured the loans had it known they were defective. The DOJ and the Department of Housing and Urban Development’s inspector general began an investigation of Quicken’s FHA lending activities in April 2012. The investigation encompassed some 246,000 FHA loans, which Quicken originated from ...


March 17, 2017 - Inside FHA/VA Lending

Serial Rapid Refinancing Continues As VA, MBA Explore Potential Cures

Solicitation of VA purchase loans for streamline refinancing within weeks of closing is apparently continuing despite Ginnie Mae’s efforts to stop the harmful practice. The Mortgage Bankers Association has expressed concern that guidance on pooling eligibility for streamlined refinance loans, which Ginnie issued in October last year, was far less effective than expected. Although the aggressive refinancing trend has slowed due to Ginnie’s action, there are still “pockets of that activity” being reported, said Pete Mills, MBA senior vice president. Refinancing a veteran’s purchase mortgage less than six months after its origination is not in the vet’s best interest because it strips equity from the house and results in higher financing costs, said Mills. While the rapid refi trend involves only a small number of loans in Ginnie mortgage-backed securities pools, investors do not get the full benefit of their investment because of early prepayment. Mills said there are a handful of lenders and brokers that ...


March 17, 2017 - Inside MBS & ABS

Government Must Turn Over Unprivileged Documents Relating to Treasury Sweep

In a prominent Fannie Mae and Freddie Mac shareholder case, the government was ordered to go back through thousands of documents related to the Treasury sweep to determine whether they fall under the executive privilege that has been more narrowly defined. In an attempt to make sure the government asserted privilege properly on the 11,000 documents it is withholding, Federal Claims Court Judge Margaret Sweeney asked it to reexamine the large batch and turn over any that don’t merit secrecy by April 17. This order follows...


March 16, 2017 - Inside Mortgage Finance

Court Rules Against Lender in MI Cancellation Dispute, Says Federal Law Overrides GSE Servicing Guidelines

A borrower seeking cancellation of private mortgage insurance prevailed last week in a lawsuit against JPMorgan Chase. The appeals court noted that federal law regarding standards for MI cancellation overrides Fannie Mae’s servicing guidelines. The case of Ginnine Fried v. JPMorgan Chase centers on how to calculate a borrower’s loan-to-value ratio when allowing for MI cancellation after the LTV ratio falls below 80.0 percent. The borrower filed...


March 16, 2017 - Inside Mortgage Finance

As Consideration of PHH Corp. v. CFPB Continues, The Role of the Administrative Law Judge Emerges

Nearly all of the discussion related to the ongoing legal battle between PHH Corp. and the Consumer Financial Protection Bureau has involved either questions about the bureau’s interpretation and enforcement of the Real Estate Settlement Procedures Act or issues having to do with the constitutionality of the CFPB. But the role played by the administrative law judge early in the bureau’s enforcement action has surfaced, with potential significance in the eyes of the U.S. Court of Appeals for the District of Columbia Circuit, which recently granted the agency’s request for a rehearing by the full court. To adjudicate the matter early on, the CFPB borrowed...


March 16, 2017 - Inside Mortgage Finance

Detroit Court Ruling in Government’s FHA-Related Case Against Quicken Loans Narrows Lender’s Potential Liability

A recent decision by a federal judge in Detroit dismissing portions of the Department of Justice’s FHA-related claims against Quicken Loans will shrink the lender’s liability under the False Claims Act, according to a legal expert. In a decision rendered March 9 on the closely watched case, U.S. District Judge Mark Goldsmith narrowed the scope and timeframe for which the DOJ can pursue any recovery or settlement against Quicken Loans for FHA losses allegedly due to faulty underwriting and loan default performance. It is the first major decision since the DOJ’s suit was transferred from federal court in Washington, DC, to federal court in Detroit last year. The DOJ and the Department of Housing and Urban Development’s Office of the Inspector General began...


March 13, 2017 - Inside the CFPB

Other News in Brief

Nationstar in the CFPB’s Crosshairs Over HMDA Reporting. Nationstar, the residential mortgage servicer, revealed recently it is being investigated by the CFPB over issues related to complying with the Home Mortgage Disclosure Act.... Non-Agency MBS Issuers Like the Legal Protection of the ATR. Congressional Republicans may be working on legislation to repeal and replace many regulations required by the Dodd-Frank Act, but some issuers of mortgage-backed securities are actually pushing to maintain some of the regulations.... Trump Executive Order on Regulatory Red Tape Unlikely to Apply to CFPB. Will the Bureau Comply Anyway? The executive order that President Trump signed in the middle of February that requires every federal agency to establish a regulatory reform task force to eliminate red tape probably does not apply to the CFPB, according to industry experts....


March 13, 2017 - Inside the CFPB

RESPA Experts See Positive Elements in CFPB Consent Orders

With legal briefs continuing to be filed in PHH Corp. v. CFPB, mortgage experts on the Real Estate Settlement Procedures Act see a bit of a silver lining, along with multiple warnings, in the handful of consent orders the CFPB brought against other industry defendants on the RESPA front. Earlier this year, the CFPB brought a $3.5 million enforcement action against Prospect Mortgage, accusing the firm of illegal kickbacks for mortgage business referrals from two real estate brokers, and in an unusual twist, a mortgage servicing operation. The bureau also acted against ReMax Gold Coast and Keller Williams Mid-Willamette, the brokers, and Planet Home Lending, the mortgage servicer – all of whom it accused of taking illegal kickbacks. During an exclusive ...


March 13, 2017 - Inside the CFPB

Appeals Court Blocks State National Bank from PHH Case

The years-long legal battle that PHH Mortgage and PHH Corp. have been waging with the CFPB continues to take sudden and unexpected turns. One recent example: PHH filed a brief in opposition to the plaintiffs in State National Bank of Big Spring, Texas, et al. v. Lew from intervening in the mortgage lender’s case with the CFPB. …


March 13, 2017 - Inside the CFPB

PHH Corp. Makes its Case Again In RESPA Dispute with CFPB

PHH Corp. and related parties again made a full defense of their position in their legal struggle with the CFPB over alleged misconduct under the Real Estate Settlement Procedures Act. PHH made five primary arguments to the U.S. District Court of Appeals for the District of Columbia Circuit, the first of which was that the CFPB is unconstitutionally structured and must be invalidated. …


March 13, 2017 - Inside the CFPB

Multiple State AGs Detail Their Support of PHH in Case With CFPB

The attorneys general of 15 states came to the defense of PHH Corp. and related parties in their case with the CFPB over the agency’s interpretation and enforcement of the Real Estate Settlement Procedures Act. The AGs of Alabama, Arizona, Arkansas, Georgia, Idaho, Indiana, Kansas, Louisiana, Missouri, Nevada, Oklahoma, South Dakota, Texas, West Virginia and Wisconsin focused on the constitutional issues in the case, with not a single mention of the statutory questions related to the act. The AGs made three major arguments in support of PHH’s position. First, they asserted that the separation of powers plays a critical role in preserving the division of authority within the federal system, and the CFPB’s governance structure violates the separation of powers ...


March 13, 2017 - Inside the CFPB

The Government, As Expected, Switches Sides in PHH Case

The Trump administration has subtly signaled its support for PHH Corp. in the mortgage lender’s long-running dispute with the CFPB over alleged violations of the Real Estate Settlement Procedures Act. In recent days, the Department of Justice asked the U.S. Court of Appeals for the District of Columbia Circuit for permission to file an amicus brief in the case by March 17, one week after the deadline the court had given PHH to file its response to the court’s decision to grant the CFPB’s request for an en banc rehearing. The court has since granted the administration’s request for the one-week extension. In its request, the Justice Department said, “As this court recognized in calling for the views of the ...


March 10, 2017 - Inside The GSEs

Government Ordered to to Review Documents for Bogus Privilege Claims

The government has until April 17 to prove that the 11,000 documents it is withholding are correctly labeled as “privileged.” This week, a ruling by Federal Claims Court Judge Margaret Sweeney ordered the government to review the documents and release those that are non-privileged to the plaintiff’s attorneys in Fairholme Funds Inc. et al., v. The United States. The order came on the heels of a January appeals court ruling that found the bulk of a batch of 56 documents the government refused to turn over to the plaintiff’s attorneys, after being ordered to do so last year, did not merit privilege treatment. They included various memos, emails and presentations from the Treasury, Federal Housing...


March 9, 2017 - Inside Mortgage Finance

MBA and ABA Suggest Guidance for IRS on Reporting Interest for Mortgages that Received Modifications

After years of confusion among servicers and borrowers, the Internal Revenue Service is getting closer to issuing guidance about how servicers should report interest to the IRS on mortgages that receive significant loan modifications. The Mortgage Bankers Association and the American Bankers Association recently submitted a joint comment letter to the agency, which announced plans to issue guidance on the matter back in December 2015. The trade groups said...


March 9, 2017 - Inside Mortgage Finance

Trump Administration Changes Sides

The Trump administration looks to be taking sides with a mortgage lender that says the configuration of the Consumer Financial Protection Bureau is unconstitutional. The government, through the Department of Justice and the Solicitor General, usually sides with government agencies in court cases. But in the closely watched lawsuit involving PHH Mortgage and the CFPB, it’s expected to oppose the bureau’s stance. This week, the U.S. Court of Appeals for the District of Columbia Circuit approved...


March 3, 2017 - Inside MBS & ABS

Pressure on Capital, Dividends Remains as MBS Settlements Linger for Foreign Banks, Says Fitch

The threat of large, unpredictable settlements are looming over several European banks that have not yet resolved their remaining MBS lawsuits, putting pressure on their earnings and capital, according to a new Fitch Ratings report. Uncertainty about the scale of penalties from legacy MBS lawsuits will compel the affected banks to continue being cautious about managing and retaining capital, and distributing dividends. Though most of the banks have strengthened their capital positions considerably since the financial crisis, there would be no rest for them until the last settlement dime has been paid, the report indicated. Bank settlements with U.S. agencies relating to fraud investigations of their roles in the financial crisis, specifically their legacy MBS business, have...


March 3, 2017 - Inside MBS & ABS

Can Blockchain Technology Benefit Securitization? SFIG, Chamber of Digital Commerce Say Yes

Can a technology that helped bring the cryptocurrency Bitcoin into being enhance the securitization markets? The Structured Finance Industry Group and the Chamber of Digital Commerce think so and have partnered to help make it happen. According to Perianne Boring, founder and president of the CDC, which bills itself as the world’s largest trade association representing the blockchain industry, “The securitization process is an ideal candidate for the efficiencies of distributed ledger technology. “Blockchain platforms create...


February 27, 2017 - Inside the CFPB

HUD Reportedly Set to Begin Redlining Probe of CIT Group

The Department of Housing and Urban Development is apparently poised to begin an investigation of allegations of redlining on the part of CIT Group, Pasadena, CA, through its CIT Bank subsidiary, the successor to OneWest Bank, after agreeing to accept a complaint against the lender filed by the California Reinvestment Coalition. The CRC alleges the bank violated and continues to violate the Fair Housing Act by providing residential real estate-related transactions in a manner that discriminates on the basis of race, color and national origin. Specifically, the complaint alleges that since at least 2011, CIT Bank discriminated in marketing and originating housing-related products, as evidenced by the low number of mortgages it made to African-American, Asian-American and Latino borrowers in ...


February 27, 2017 - Inside the CFPB

Judge Rules Harbour Portfolio Advisors Must Comply With CID

Harbour Portfolio Advisors of Dallas, one of the largest providers of seller-financed homes in the U.S., must comply with a civil investigative demand from the CFPB for documents and other information, according to a recent ruling by Judge Nancy Edmunds of the U.S. District Court for the Eastern District of Michigan, in Detroit. The main issue here, according to the respondents in the case, is whether the bureau’s investigative authority extends to their selling, marketing and servicing of a financial product called an agreement for deed (AFD), otherwise known as a “contract for deed” or a “land installment contract.” An AFD is a written agreement to purchase residential property, whereby the seller agrees to deliver a deed to the purchaser ...


February 27, 2017 - Inside the CFPB

Bureau Eyeballing Altisource Over Services Provided to Ocwen

It looks like the CFPB may be prepping an enforcement action against Altisource Portfolio Solutions over certain unspecified technology services provided to Ocwen, its largest customer, according to Altisource’s 10-K filing with the Securities and Exchange Commission, filed in recent days. “[O]n Nov. 10, 2016, Altisource received a Notice and Opportunity to Respond and Advise (NORA) letter from the CFPB indicating that the CFPB is considering a potential enforcement action against Altisource relating to an alleged violation of federal law that primarily concerns certain technology services provided to Ocwen,” the firm said. On Dec. 15, 2016, Altisource provided a written response to the NORA letter setting forth the legal, policy and factual reasons why it believes an enforcement action is ...


February 27, 2017 - Inside the CFPB

State National Bank Plaintiffs Want In on En Banc Rehearing of PHH

It’s not just the defenders of the CFPB that are itching to enter the legal fray between the bureau and PHH Corp. The plaintiffs in State National Bank of Big Spring, Texas, et al. v. Lew have also filed a motion to intervene in the en banc proceeding. The plaintiffs – State National Bank of Big Spring, TX, the 60 Plus Association and the Competitive Enterprise Institute – had previously asked the federal district court for the District of Columbia to consolidate their 2012 lawsuit against the CFPB with that of PHH. However, they were recently denied. In their subsequent petition to the U.S. District Court of Appeals for the DC Circuit, the plaintiffs noted, “More than 18 months ago, this court ...


February 27, 2017 - Inside the CFPB

Democrats, Advocates Again Ask to Intervene in PHH v. CFPB

Each of the parties that were rebuffed recently in their attempts to intervene in the controversial legal dispute between PHH Corp. and the CFPB decided they wouldn’t take “no” for an answer. Each of them again filed a motion with the U.S. District Court of Appeals for the District of Columbia Circuit seeking permission to intervene in the case, contrary to prevailing appeals court rules. Earlier this month, Democrat attorneys general from 16 states and the District of Columbia submitted a petition for rehearing en banc. Also, Sen. Sherrod Brown, D-OH, and Rep. Maxine Waters, D-CA, submitted a motion for rehearing en banc, as did a handful of public interest, consumer advocacy groups. All seek to inject themselves into the ...


February 27, 2017 - Inside the CFPB

Appeals Court Gives CFPB a Win, Agrees to En Banc Rehearing

Could this be an omen of the decision to come? Earlier this month, the U.S. Court of Appeals for the District of Columbia Circuit granted the CFPB’s request for an en banc rehearing in its controversial legal dispute, PHH Corp. v. CFPB. “Upon consideration of respondent’s [CFPB] petition for rehearing en banc, the briefs amici curiae in support of the petition, the response of the United States to the petition, the response of the petitioners [PHH Corp.] to the petition, the supplemental response of petitioners, and the vote in favor of the petition by a majority of judges eligible to participate, it is ordered the petition be granted,” 10 of the court’s 11 justices wrote in their ruling. One of ...


February 24, 2017 - Inside The GSEs

New Govt. Documents Released, Talks of Treasury Sweep Plans

Several more documents were released in relation to an ongoing GSE shareholder case out to prove that the government knew Fannie Mae and Freddie Mac were on the path to profitability at the time the Treasury sweep was put in place.The release came after a judge rejected the government’s appeal of an earlier ruling requiring it to turn over a slew of documents for which it had asserted various forms of privilege in Fairholme Funds vs. United States, et al. All of the latest documents are from 2012. They include a July 20, 2012, memo stating “thoughts on how to signal a plan to amend the preferred stock purchase agreements,” from Treasury...


February 24, 2017 - Inside The GSEs

Appeals Court Ruling Voids Treasury Sweep Claims

Despite a Feb. 21 ruling barring GSE shareholders from making illegal Treasury sweep claims, plaintiffs and speculators are keeping hope alive. In Perry Capital LLC vs. Treasury, the U.S. Court of Appeals for the District of Columbia put a stop to shareholders who have been arguing that the government is illegally confiscating GSE profits, citing language in the Housing and Economic Recovery Act of 2008. The Appeals Court notes: “We hold that the stockholders’ statutory claims are barred by the Recovery Act’s strict limitation on judicial review … We also reject most of the stockholders’ common-law claims. Insofar as we have subject matter jurisdiction over the stockholders’ common-law claims against...


February 24, 2017 - Inside MBS & ABS

Lenders Record Partial Win over RFC; NY Court Rules on Statute of Limitations; SIFMA Files Brief

A Minnesota state court has rendered a judgment that could substantially limit the amount of damages Residential Funding Co. and its successor-in-interest, the ResCap Liquidating Trust, could recover if it were ever to prevail on its claims in any given lawsuit against correspondent lenders, according to industry attorneys. On Feb. 1, the District Court of Hennepin County held that RFC and ResCap would not be able to pursue loan-by-loan damages associated with a repurchase claim and, thus, could not use a repurchase price “formula” to establish damages, said Philip Stein, a partner with Bilzin Sumberg Baena Price & Axelrod, in an analysis. The decision favored...


February 24, 2017 - Inside MBS & ABS

Appeals Court Bars GSE Shareholders from Making Illegal Treasury Sweep Claims, but ‘Breach of Contract’ Possible

In a long-awaited decision, the United States Court of Appeals for the District of Columbia Circuit ruled this week against Fannie Mae and Freddie Mac shareholders who have been contesting the Treasury Department’s net worth sweep of the government-sponsored enterprises’ earnings. On Feb. 21, Judge Royce Lamberth ruled shareholders in Perry Capital LLC vs. Treasury, et al, are barred by the 2008 Housing and Economic Recovery Act from making their claims. Perry sued...


February 23, 2017 - Inside Mortgage Finance

PHH Court Battle With CFPB Goes to Full Appeals Court, With Focus Still on Constitutional Issues

The Consumer Financial Protection Bureau late last week won a fresh hearing of its lawsuit with PHH Mortgage, with the attention likely to center on constitutional issues rather than the agency’s aggressive interpretation of the Real Estate Settlement Procedures Act. The U.S. Court of Appeals for the D.C. Circuit accepted the CFPB’s request for an en banc hearing of its lawsuit with PHH. In October, a three-judge panel of the appeals court ruled in favor of PHH, rejecting the agency’s RESPA interpretation regarding captive mortgage-insurance practices that had for years been widely accepted as legal, even though such programs have been in run-off mode since the housing meltdown. The issue that’s...


February 17, 2017 - Inside FHA/VA Lending

Lender, Charity Hid Defaults from FHA to Manipulate Default Rate

Three federal agencies have announced a joint settlement agreement and consent order with a New York FHA lender and several of its top executives to resolve alleged violations of the Financial Institutions Reform, Recovery and Enforcement Act and the False Claims Act. The U.S. Attorney for the Eastern District of New York, the Office of the Inspector General for the Department of Housing and Urban Development, and the Inspector General of the Federal Deposit Insurance Corp. announced the $1.25 million settlement with Franklin First Financial, Ltd., its Chief Executive Officer Frederick Assini, Chief Operating Officer Christopher Berman, and Andrew Dauro, a manager of the company. The lawsuit alleged that the defendants made illegal payments on behalf of borrowers from February 2009 through March 2010 to keep default rates low so that Franklin First could keep its ...


February 17, 2017 - Inside FHA/VA Lending

4Q16 Spike in FHA Delinquencies Justifies Trump’s Premium Action

The spike in FHA delinquencies in the fourth quarter of 2016 justifies the Trump administration’s decision last month to suspend and review the outgoing administration’s lowering of FHA mortgage insurance premiums, said House Financial Services Committee Chairman Jeb Hensarling, R-TX. Commenting on the Mortgage Bankers Association’s quarterly delinquency rate survey, Hensarling praised President Trump’s decision to set aside the 25-basis-point premium reduction, which Inside FHA/VA Lending reported first on Jan. 6, 2017. “Lowering premiums at this time was a big mistake,” said Hensarling. “The sudden increase in delinquencies makes it clear that President Trump was absolutely right to undo the previous administration’s irresponsible action.” Hensarling recalled that in 2013 “taxpayers had to spend $1.7 billion to bail out the FHA.” Going forward, the FHA must be fiscally sound, with a ...


February 17, 2017 - Inside MBS & ABS

Blackstone’s Next Mortgage Conquest: Fix-and- Flip Lenders That Could Lead to Securitization

Wall Street giant The Blackstone Group this week revealed its investment in “fix and flip” lenders B2R Finance, Charlotte, and Jordan Capital Finance, Chicago, spurring talk that eventually the firm may enter the fledgling nonprime residential market. One nonprime executive, requesting anonymity, told Inside MBS & ABS that he has had several discussions with Blackstone-related companies about partnering with his shop. Issuing MBS is one of the company’s goals, he said, adding: “They want in.” Over the past three years, Blackstone has made...


February 16, 2017 - Inside Mortgage Finance

If President Trump Wants to Fire CFPB’s Cordray, He’s Going About it All Wrong, Law Professor Says

Whether President Trump is serious about replacing the head of the Consumer Financial Protection Bureau remains to be seen. But his enthusiasm over the prospect may have gotten the better of his legal judgement and in fact perhaps laid the foundation for such a replacement to be reversed, one noted legal scholar suggested recently. “If Trump is planning on attempting to remove CFPB Director Richard Cordray ‘for cause,’ he’s hardly going about it in a smart way,” Adam Levitin, a law professor at Georgetown University, said in a recent online blog posting. “The Trump administration keeps generating more and more evidence that any for-cause removal would be purely pretextual, which strengthens Cordray’s hand were he to litigate the removal order (as he surely would).” To begin with, the reasons that are offered as justification for sacking Cordray – such as claims of employee discrimination at the bureau or the agency’s settlements with auto finance companies – refer...


February 13, 2017 - Inside the CFPB

Other News in Brief

Hensarling Threatens to Use Budget Reconciliation Process to Push Through CHOICE Act 2.0. Rep. Jeb Hensarling, R-TX, chairman of the House Financial Services Committee, raised some industry eyebrows last week when details of his new, more aggressive Financial CHOICE Act got leaked to the press, and he indicated he might use the budget reconciliation process to push the bill through Congress.... CFPB Brings Legal Action Against Debt Relief Law Firms, Attorneys. The CFPB recently sued Howard Law PC, Williamson Law Firm LLC, and Williamson & Howard LLP, as well as attorneys Vincent Howard and Lawrence Williamson, in federal court, accusing them of collaborating to charge illegal fees to consumers looking for debt relief....


February 13, 2017 - Inside the CFPB

John Doe Co. Action Another Test of CFPB’s Investigative Authority

The unusual recent case of an unidentified finance company filing suit to prevent the CFPB from disclosing its investigation of the firm, and from bringing any action against it unless and until the agency is restructured in line with the U.S. Constitution, is “yet another challenge to the CFPB’s vast investigative and enforcement authority,” according to two attorneys with the Hudson Cook law firm. “This is a new front in the battle against CFPB overreach,” the pair said in a client note. The stakes here can be high. “Companies facing a CFPB investigation often confront a difficult choice of complying with the investigative demand or fighting the CFPB’s authority,” said the attorneys. “But challenging the CFPB is an uphill battle ...


February 13, 2017 - Inside the CFPB

PHH Succeeds in Fending Off Intervenors in Dispute with CFPB

PHH Corp. won another round against some new antagonists in its dispute with the CFPB over alleged violations of the Real Estate Settlement Procedures Act. Earlier this month, a three-judge panel of the U.S. District Court of Appeals for the District of Columbia Circuit agreed with the lender and refused to allow three separate efforts to intervene in the case. In a simple, single-page order, the three judges “ordered that the motions be denied.” The ruling affects an effort by Sen. Sherrod Brown, D-OH, and Rep. Maxine Waters, D-CA, to insert themselves in the case on behalf of the CFPB. The lawmakers had warned the appeals court that if their effort to intervene was denied, they would seek recourse from ...


February 13, 2017 - Inside the CFPB

Latest RESPA Case Reveals New Things About CFPB Enforcement

An analysis by the Mortgage Bankers Association of the CFPB’s latest foray back into the enforcement of the Real Estate Settlement Procedures Act noted that some of the allegations in the consent orders would have been troubling under the enforcement regime of the Department of Housing and Urban Development. However, the orders also highlight several new points in the way the bureau is enforcing Section 8 of RESPA, the MBA said. “These include that the arrangements steer consumers, exclude other competitors, and were arrived at based on internal analyses of business and that click-throughs to lenders in joint marketing arrangements somehow amount to compensated referrals,” the trade group said. Further, the consent order addressing Planet Home Lending also clarifies that ...


February 13, 2017 - Inside the CFPB

Brokers, Servicer Also Sanctioned By CFPB in Prospect RESPA Case

In addition to bringing an enforcement action against Prospect Mortgage for alleged violations of the Real Estate Settlement Procedures Act, the CFPB also acted against ReMax Gold Coast and Keller Williams Mid-Willamette, two real estate brokers, and Planet Home Lending, a mortgage servicer – all of whom it accused of taking illegal kickbacks from the lender. Specifically, the CFPB accused both brokers of participating in “certain lead agreements and desk license agreements” with Prospect Mortgage, and of accepting payments from the lender in exchange for referrals in violation of RESPA and its implementing regulation, Regulation X. The bureau also said RGC’s agents “required hundreds of consumers wishing to place an offer on one of their properties offered for sale to pre-qualify ...


February 13, 2017 - Inside the CFPB

CFPB Back in RESPA Enforcement Game With Standard Interpretation

The CFPB recently brought a more traditional interpretation to its enforcement of the Real Estate Settlement Procedures Act in an action against Prospect Mortgage, two real estate brokers and a mortgage servicer that focuses on alleged kickbacks for referrals of mortgage business. Among the lender’s alleged violations of RESPA was the use of lead agreements to pay brokers for referrals. According to the CFPB’s consent order, Prospect entered into such agreements with more than 200 different counterparties, most of which were real estate brokers. Under these arrangements, Prospect paid the counterparty for each lead it received. However, these counterparties went “well beyond simply transferring information about prospective buyers,” the CFPB alleged. They also referred prospective buyers to Prospect’s loan officers....


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With the spring homebuying season in full swing, what percentage of your March 2017 application volume has been for “purchase” loans?

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30% to 49%
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