Legal Issues

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

February 27, 2015 - Inside Mortgage Trends

Don’t Even Think of Basing Comp on Loan Terms

Lenders should stay as far away as possible from even the appearance of basing any part of a loan officer’s pay on the terms of a mortgage. During an Inside Mortgage Finance webinar this week, Amy Durant, an attorney with the Bodman law firm in Ann Arbor, MI, emphasized the importance of the restrictions on compensation that are embedded in a Consumer Financial Protection Bureau rule. The rule states...

February 27, 2015 - Inside Mortgage Trends

If You’re Not Testing for TRID, You’re Late

Conversations with executives at leading industry technology vendors suggest that if mortgage lenders are not already testing their systems and processes for compliance with the impending integrated disclosure rule from the Consumer Financial Protection Bureau, they are already behind the curve. Tech vendors have been working with some of their clients for months already, and in some cases for more than a year, testing systems and process as they prepare for “TRID,” the Truth in Lending Act/Real Estate Settlement Procedures Act integrated disclosure rule. Scott Stucky, chief strategy officer at DocuTech, said...

February 27, 2015 - Inside The GSEs

FHFA Issues New Guidance on Fraud Reporting by FHLBanks

The Federal Housing Finance Agency recently updated its regulatory guidance for the Federal Home Loan Banks on the reporting of fraudulent financial instruments. The new guidance instructs the FHLBanks to implement policies and procedures for complying with the reporting requirements regarding anti-money laundering and suspicious activity that the Financial Crimes Enforcement Network published Feb. 25, 2014. The FinCEN regulation takes some of the provisions of the Bank Secrecy Act and applies them to the FHLBanks, and delegates examination responsibility to the FHFA to determine compliance. “Generally, the FinCEN regulation requires that each regulated entity develop an anti-money laundering program and file suspicious activity reports (SARs), among other requirements,” the FHFA said. The FinCEN reg took effect April 28, 2014. The ...

February 27, 2015 - Inside The GSEs

Courts Affirm Government Supremacy over Shareholders

A series of court decisions have affirmed the supremacy of the executive branch of government in its regulation of Fannie Mae and Freddie Mac to the chagrin of private-equity investors seeking compensation in the wake of the financial crisis, according to a recent analysis by Kroll Bond Rating Agency. Those recent court decisions confirm the fact that the two GSEs are “instrumentalities of the federal government and not private corporations,” Kroll analysts said. “While this reality may bother some equity investors – and rightly so – this is good news for bond investors,” they noted. For equity investors, the court decisions underscore the fact that the GSEs are “creatures of Congress,” the analysts pointed out. In contrast, private corporations are governed by ...

February 27, 2015 - Inside MBS & ABS

Morgan Stanley, DOJ Agree Tentatively on an MBS Settlement; Goldman Sachs Faces Another MBS Suit

Morgan Stanley has agreed in principle with the Department of Justice to pay $2.6 billion to resolve MBS claims the agency’s civil division indicated it would bring against the company, according to a new disclosure from the Wall Street firm. Morgan Stanley’s disclosure about a potential MBS lawsuit by the U.S. Attorney for the Northern District of California contained no other details. However, the firm increased its legal reserves by $2.8 billion to cover any potential settlement and other pending legacy-related MBS disputes. The adjustment increased...

February 23, 2015 - Inside the CFPB

Industry Ups Pressure on CFPB Approach to Indirect Auto Finance

A number of industry groups ramped up their efforts to convince the CFPB to revisit its auto financing enforcement policy, after the release of an industry-funded report that challenged the analysis that undergirds it. The impetus behind the challenge is a Charles River Associates study commissioned by the American Financial Services Association that analyzed the complexities of the indirect finance market and evaluated the CFPB’s current fair lending investigations, with special attention to the proxy methodology used by the bureau. The CRA study concluded that “observed variations in ‘dealer reserve’ at the financial institution portfolio level are mitigated when market complexities are considered and adjustments are made for proxy bias and error.” This suggests to industry representatives that there are ...

February 23, 2015 - Inside the CFPB

Antonakes Describes Bureau’s Unique Examination Strategy

Despite the comparatively small staff of examiners at the CFPB – close to 500 – Deputy Director Steven Antonakes said in a speech last week that his staff is an “x-factor,” in that the bureau works closely with other state and federal exam teams to leverage its resources. In military terms, that’s known as a force multiplier. “The bureau does not have a safety and soundness mandate. Nevertheless, we very much care about the financial health of banks and nonbanks,” Antonakes said. “As a veteran of two banking crises, I can tell you unequivocally that, in my view, consumer protection is not in conflict with safety and soundness. Consumers benefit from a healthy, competitive, and diversified financial services system through greater access ...

February 23, 2015 - Inside the CFPB

CFPB Sending a Message on Deceptive, Misleading Ads

The CFPB brought the hammer down on a handful of nonbank mortgage companies in the last two weeks over advertising practices the bureau asserts are deceptive and misleading because, in three of the cases, the lenders allegedly implied U.S. government approval of their products or otherwise suggested the companies were agencies of the federal government when in point of fact they were not. The actions are a confirmation to the industry that lenders don’t have to be big players with deep pockets or even depository institutions to earn the bureau’s wrath. They are also a big wake-up call in terms of compliance. “For decades, many lenders which have used direct mail to market to consumers have emphasized the government-insured nature ...

February 20, 2015 - Inside FHA Lending

Ginnie Mae Servicing Up Slightly in 4Q, 2014

Ginnie Mae servicing volume gained a mere percentage point in the fourth quarter of 2014 from the previous quarter, capping a productive year for servicers of government-backed mortgages, according to Inside FHA Lending’s analysis of agency data. Servicing volume rose by only 1.0 percent to $1.5 trillion during the last three months of 2014 from $1.4 trillion in unpaid principal balance in the first quarter, and increased 4.0 percent year over year. Four out of the top five Ginnie Mae servicers were banks, of which three experienced declines in their servicing portfolios on quarterly and year-over-year bases. The leader of the pack, Wells Fargo, closed out the year with $416.0 billion in Ginnie Mae servicing and capturing 27.8 percent of the market. Its servicing portfolio fell ... [ 1 chart ]

February 20, 2015 - Inside FHA Lending

VA to Issue Final ‘Qualified Mortgage’ Rule in May

The Department of Veterans Affairs expects to have a finalized Qualified Mortgage (QM) rule by May to help clear up some issues that have arisen since the agency issued an interim final rule last spring. The VA issued the interim QM rule for comment on May 9, 2014, to define which VA loans will have QM status under the ability-to-repay (ATR) rule. Issued by the Consumer Financial Protection Bureau, the ATR rule provided temporary QM status to loans eligible for FHA insurance and guaranties by the VA and the Department of Agriculture’s Rural Housing Service. Eligible government-backed loans must be 30-year fixed-rate with no interest-only, negative amortization or balloon features. Total points and fees must not exceed 3 percent of the total loan amount for loans of $100,000 or more. Loans that meet the definition of a temporary VA-eligible QM are considered as in compliance with the ATR rule. They are designated as “safe harbor QMs,” provided they are not ...

February 20, 2015 - Inside FHA Lending

CFPB Takes Action Against Deceptive Advertising

The Consumer Financial Protection Bureau recently sued a reverse mortgage lender and issued consent decrees against two other mortgage companies for misleading consumers with false advertising about FHA-insured mortgage products. The CFPB filed suit against All Financial Services (AFS), a Maryland-based reverse mortgage lender, in the federal district court in Baltimore alleging that the lender disseminated misleading ads for Home Equity Conversion Mortgage loans between November 2011 and December 2012. In addition, AFS allegedly failed to maintain copies of the ads as required by the CFPB under its reverse mortgage regulations. According to court filings, the CFPB alleges that the lender/broker mailed out ads using materials and language that seemed to indicate that it was a federal entity or an affiliate of a government entity. All AFS ads appeared as if they were ...

February 20, 2015 - Inside FHA Lending

Lenders Urged to Study Changes in New Handbook

FHA lenders should spend the next couple of months familiarizing their staff with the requirements in the FHA’s new Single Family Housing Policy Handbook to ensure proper implementation of the changes on June 15, 2015, according to compliance experts. The impending changes in the Single Family Handbook are complex and significant. Lenders will need proper legal guidance to navigate and understand hundreds of pages of consolidated housing policies and guidance, as well as substantive changes to FHA requirements, said K&L Gates experts in a recent analysis. The handbook is a consolidated, authoritative source of single-family housing policy and is meant as a one-stop resource for FHA lenders. It gathers and streamlines all FHA requirements, which are currently spread throughout various handbooks, mortgagee letters and other documents, making it easier for lenders to ...

February 20, 2015 - Inside FHA Lending

Tech Issues Delay HECM Financial Analysis Rule

The FHA has delayed the effective date of new guidance that will require reverse mortgage lenders to perform a financial assessment of applicants for a Home Equity Conversion Mortgage. The FHA indicated that the change was necessary to allow vendors and the Department of Housing and Urban Development to align their respective software before the new system can be operational. Those familiar with the technology said delivering the required system enhancements should not take long. The FHA said a new effective date should be expected within 30 to 60 days of the original March 2 effective date. It will be announced in a new mortgagee letter, the agency added. The new guidance requires lenders to evaluate HECM borrowers’ willingness and capacity to meet their obligations and to comply with program requirements. “Financial assessment” means doing a much more ...

February 20, 2015 - Inside MBS & ABS

Due Diligence Providers for MBS and ABS Prepare for Increased Transparency, Liability

Disclosure of findings from third-party due diligence on MBS and ABS are set to go from a few paragraphs in a rating report to a detailed form with certification from the due diligence firm, thanks to standards established by the Securities and Exchange Commission. The standards take effect for deals that price June 15 or later. Within five days before the first sale in an offering that will receive a rating, the findings and conclusions of any third-party due diligence report obtained by the issuer or underwriter must be disclosed in Form ABS-15G or the rating report. The disclosure requirement applies to private placements along with SEC-registered deals. “Our biggest challenge now is educating...

February 19, 2015 - Inside Mortgage Finance

Foreclosure Activity Increasing as Mortgage Servicers Work Through Judicial Process

While mortgage performance continues to improve, servicers have put an increased emphasis on completing foreclosures in recent months, according to industry analysts. Foreclosure starts and bank repossessions have increased after more than a year of monthly declines, according to RealtyTrac. “Foreclosure ‘spring cleaning’ got off to a quick start in January,” said Daren Blomquist, a vice president at RealtyTrac. Servicers typically observe...

February 13, 2015 - Inside The GSEs

9th Circuit Court Upholds GSE Exemption from Local Taxes

The U.S. Court of Appeals for the Ninth Circuit recently affirmed that federal mortgage programs and their administrators, including Fannie Mae and Freddie Mac, are exempt statutorily exempt from state and local taxation of real property transfers. The panel – consisting of Circuit Court Judges Richard Paez, Jay Bybee and Consuelo Callahan – held that because Congress had power to regulate the secondary mortgage market, it was authorized under the “Necessary and Proper Clause” to create Fannie and Freddie and to ensure their preservation by exempting them from state and local taxes. Brought by the City of Spokane, WA, the lawsuit is part of a wave of similar filings throughout the country to challenge the GSE exemption from ...

February 13, 2015 - Inside The GSEs

Watt: I’m Not Presuming ‘Abuse’ by Captives That Want to Join FHLB

The Federal Housing Finance Agency isn’t providing a timetable on when it might decide the thorny issue of captive insurance companies becoming members in the Federal Home Loan Bank system. In a recent press briefing, FHFA Director Mel Watt also clarified that he is not presuming that any current members or applicants want to “abuse” their membership benefits, but said the agency must still go through the process of fielding comments on a proposal that would effectively ban captives from joining the system. Roughly 18 current members of the FHLBanks are affected by the proposed ban, seven of which are affiliated with real estate investment trusts. Captives do not write coverage outside of their own company. Traditional insurance companies that ...

February 13, 2015 - Inside The GSEs

U.S. Judge Rebuffs Shareholder Attempt to Claim GSE Profits

A U.S. district court judge in Iowa recently dismissed a shareholder motion to vacate an amended agency agreement requiring Fannie Mae and Freddie Mac to pay nearly all their quarterly profits to the Treasury equal to their net worth. Filed by Continental Western Insurance Company, the lawsuit is similar to another case, Perry Capital, Inc. v. Lew, filed by the plaintiff’s parent, Berkley Regional Insurance Co., and Berkley Insurance Co. against the Federal Housing Finance Agency…

February 13, 2015 - Inside MBS & ABS

RMBS Working Group Head Defends Justice Dept. Settlements From Accusations of Misappropriation

Were Bank of America, Citi and Chase manipulated into making donations to Democrat-leaning housing advocacy groups as part of their recent mortgage settlements with the Department of Justice? That seemed to be the implicit question underlying the grilling of a key Justice Department official by Republican members of a House Judiciary subcommittee during a hearing this week that focused on the donations the three mega-banks were directed to make to housing counseling groups as part of their $36.6 billion settlement with the DOJ. “The concern is...

February 12, 2015 - Inside Mortgage Finance

Paired Testers Uncover Discriminatory Lending at M&T Bank, Minorities Get Fewer Breaks than Whites

M&T Bank is facing lending discrimination allegations in U.S. District Court in Manhattan after a fair housing group claimed to have accumulated evidence of disparate treatment between qualified minority borrowers and less-qualified white mortgage applicants. The Fair Housing Justice Center, a New-York based nonprofit, accused M&T Bank of violating the Fair Housing Act by offering higher loan amounts to white borrowers and allowing more flexible criteria than those made available for minority borrowers. As of press time, M&T did not respond...

February 12, 2015 - Inside Mortgage Finance

HUD Mum on Reported Revisions in Direct Endorsement Program, Loan Certification Policies and Procedures

The Department of Housing and Urban Development declined to comment on the progress on revised policy drafts that may help reduce lender liability and ease back-end enforcement actions. The FHA is considering procedural changes aimed at easing lender liability to spur more FHA lending to qualified, underserved borrowers. Specifically, FHA is reportedly working to raise the bar on loan certification violations, making it harder to sue lenders for unintentional or technical mistakes. Such a change could spur...

February 12, 2015 - Inside Mortgage Finance

Investors Can’t Seem to Make Up Their Minds About Mortgage Stocks; Some are In, and Some Are Out

Institutional investors that loaded up on mortgage stocks the past two years have been battered by huge losses thanks to a 34 percent plunge in originations and negative publicity generated by industry bellwether Ocwen Financial and some of its peers. But with some mortgage stocks – such as Owen – trading at 80 percent discounts to their 52-week highs, now may be the time to “re-enter” the volatile world of mortgage equities. At least, that’s how some hedge funds and private-equity firms view the matter. According to Henry Coffey, a vice president and senior analyst at Sterne Agee, there are...

February 9, 2015 - Inside the CFPB

NCLC Calls on CFPB to Ban Expired Debt Collections

The CFPB should ban the collection of debts on which the statute of limitations has expired, according to a new report from the National Consumer Law Center on “zombie debt.” “In light of the serious harm to consumers caused by time-barred collections, we urge the CFPB to prohibit all collection of time-barred debt – whether through litigation or non-litigation means – as unfair, deceptive or abusive acts or practices,” said the NCLC. This prohibition should apply to creditors, debt collectors and debt buyers. The CFPB has authority to make rules “necessary or appropriate” to its ability to enforce the Fair Debt Collection Practices Act (FDCPA) and “to prevent evasions thereof,” the consumer group said. It also has general authority to issue “rules ...

February 9, 2015 - Inside the CFPB

CFPB Pushes to Ban Firm From Providing Consumer Credit

Following up on a lawsuit it filed late last year, the CFPB last week filed a proposed consent order with a federal district court to require a Texas-based company, Union Workers Credit Services, to pay a penalty of $70,000, and to permanently ban it from offering any consumer credit products or services.The bureau alleges Union Workers duped thousands of consumers into signing up for a sham credit card. The CFPB is tapping its authority under the Consumer Financial Protection Act of 2010 to allege unfair, deceptive, and abusive acts or practices on the part of the company. The complaint also alleges violations of the Fair Credit Reporting Act. In December 2014, the CFPB sued the company over allegations that ...

February 9, 2015 - Inside the CFPB

Bureau Obtains $480M in Debt Relief for Corinthian Borrowers

Numerous current and former heavily indebted student borrowers who attended schools previously owned by Corinthian Colleges will see the outstanding amount they owe reduced by 40 percent, under the terms of a deal struck by the CFPB, the Department of Education and ECMC Group, the new owner of a number of the schools. The total debt relief amounts to $480 million. Back in September, the CFPB sued Corinthian Colleges Inc. for allegedly luring tens of thousands of students to take out private loans, known as “Genesis loans,” to cover expensive tuition costs by advertising bogus job prospects and career services. The bureau also alleged that Corinthian used illegal debt collection tactics to strong-arm students into paying back those loans while ...

February 9, 2015 - Inside the CFPB

CFPB Slams Subprime Credit Card Co. for $2.7 Million in Refunds

Last week, the CFPB ordered Continental Finance Company, LLC, a subprime credit card originator, marketer and servicer based in Newark, DE, to refund approximately $2.7 million to consumers who were charged allegedly illegal fees. The bureau also imposed a $250,000 civil penalty on Continental. The CFPB alleged that Continental “engaged in deceptive acts or practices by making false statements regarding certain fees charged consumers in connection with credit cards,” and by “representing, expressly or impliedly, that certain security deposits consumers provided for certain credit cards” would be insured by the Federal Deposit Insurance Corp. The company also violated the Truth in Lending Act and its implementing Regulation Z by requiring some consumers to pay fees exceeding the 25 percent limit ...

February 9, 2015 - Inside the CFPB

CFPB Warns Against Using NDAs to Withhold Supervisory Info

The CFPB recently warned financial institutions under its supervisory authority not to hide behind third-party non-disclosure agreements (NDAs) as a way of blocking the bureau’s access to all the supervisory information it needs from those under its charge. “The CFPB is aware that some supervised financial institutions may have entered into non-disclosure agreements that purport to restrict the institution from sharing information with a regulator, or to require the institution to notify a third party when it shares information,” the agency said. However, NDAs “neither alter the legal restrictions on the disclosure of confidential supervisory information (CSI) nor impact the CFPB’s authority to obtain information from covered persons and service providers in the exercise of its supervisory authority.” Further, a ...

February 6, 2015 - Inside FHA Lending

More Issuer Entry Prompts More Data Collection

February 6, 2015 - Inside FHA Lending

FHA Adds Standard Language to Counseling Notic

The FHA has updated the contents of a notice to delinquent borrowers regarding the availability of approved housing counseling and provided a new template for lenders to explain, in simple terms, the benefits of housing counseling. The latest guidance, Revised Notification to Homeowners of Availability of Housing Counseling Services (Mortgagee Letter 2015-04), also provides a description of counseling services to delinquent borrowers. The revised requirements supplement those outlined in previous mortgagee letters and certain provisions in the HUD handbook. Lenders must comply with the new requirements by April 4, 2015. FHA lenders must provide delinquent borrowers with a notice about the availability of housing counseling by an approved provider and the principal mortgage lender. However, there is no standard language for such notices Hence, the FHA has ...

February 6, 2015 - Inside FHA Lending

FHA Originations Significantly Down in 2014, Refis Up

Overall, 2014 was not a good year for FHA originations as tight underwriting and high loan costs narrowed the band of borrowers able to qualify for an FHA-insured residential loan, according to an Inside FHA Lending analysis of agency data. FHA total endorsements dropped to $35.2 billion, an 8.1 percent drop in the fourth quarter from the previous quarter, with fixed-rate and adjustable-rate mortgages declining by 7.9 percent and 12.7 percent, respectively. FHA purchase originations suffered a decline of 11.3 percent. There was one bright spot: FHA refinances rose a meager 2.2 percent while the percentage of conventional loans that refinanced into FHA saw a more substantial lift of 13.0 percent quarter to quarter. FHA baseline lending (below $417,000) saw volume drop 8.4 percent in the fourth quarter. FHA jumbo loan amounts up to the statutory high-cost loan limit and ... [ 2 charts ]

February 6, 2015 - Inside FHA Lending

Accounting Treatment of Past Due Loans Clarified

The Mortgage Bankers Association notched a win for small, independent issuers after the Financial Accounting Standards Board agreed with the group’s position on the accounting of seriously delinquent loans in Ginnie Mae pools. At issue is whether companies that service pools with loans that are 90 days or more delinquent should put those loans on their balance sheet even if they have no intention of buying the loans out of the pool. According to the MBA, a Big Four accounting firm issued controversial guidance which would have been burdensome for small mortgage-backed securities issuers that have limited funding and no incentive or history of buying defective loans out of pools. After months of exchanges, FASB staff finally agreed with the MBA’s view that the decision process involves two steps. First, a loan must be 90 days or more delinquent and trigger ...

February 6, 2015 - Inside FHA Lending

HECM Policy for Non-Borrowing Spouses Revised

Reverse mortgage lenders now have the option to delay calling a Home Equity Conversion Mortgage due and payable where there is an eligible non-borrowing spouse and a case number assigned prior to Aug. 4, 2014. A delay would postpone foreclosure triggered by the death of the HECM borrower or the last surviving borrower and allow the qualified, non-borrowing spouse to stay in the house for a certain period until the HECM is resolved. Under revised FHA guidance, reverse mortgage lenders are allowed to assign eligible HECMs to the Department of Housing and Urban Development upon the death of the borrower. They have the option of foreclosing in accordance with the contract as endorsed or choose the “mortgagee optional election assignment (MOE).” MOE means the optional assignment selected by a lender for a HECM loan with an assigned FHA case number prior to ...

February 6, 2015 - Inside FHA Lending

HUD Gives Controversial Fee One More Try

Federal housing regulators once again sought authority from Congress to impose an administrative fee on lenders to support information technology improvements and administrative functions at the FHA – a bid Congress rejected last year. As part of President Obama’s FY 2016 budget, the Department of Housing and Urban Development is proposing to charge lenders up to $30 million in fees to cover FHA salaries and expenses and information technology upgrades. The IT component will focus on strengthening FHA’s risk-management efforts through expanded quality-control reviews, enhanced tools and other risk-management initiatives. Separately, the president requests an appropriation of $174 million in administrative costs to enable the FHA to implement a risk management and program-support process – both critical for FHA’s oversight of ...

February 6, 2015 - Inside MBS & ABS

DOJ, State AGs Announce Historic Settlement with S&P for Misrepresenting Quality of RMBS, CDOs

The Department of Justice and other allied parties this week reached a $1.375 billion settlement with Standard & Poor’s to resolve allegations that the firm’s investment-grade ratings misled investors into buying securities backed by badly underwritten mortgages. The agreement resolves the DOJ’s 2013 lawsuit against S&P and its parent, McGraw Hill Financial Inc., along with the suits filed by 19 states and the District of Columbia. Each of the lawsuits alleges that investors incurred substantial losses on residential MBS and collateralized debt obligations that carried S&P’s ‘AAA’ ratings, which effectively masked their true credit risks. S&P was accused...

February 5, 2015 - Inside Mortgage Finance

Industry Professionals Say Estimated Number of Beneficiaries of FHA Premium Cut Exaggerated

A significant percentage of mortgage industry professionals think President Obama’s estimate that 250,000 borrowers will benefit from the FHA annual premium reduction is “too high” and that the impact will be minimal, according a new survey by the Collingwood Group. The monthly survey said 47 percent thought the estimate is too high and the price cut is not enough to generate a substantial number of new homeowners given that credit standards remain tight. They also said that the 50 basis point reduction in the annual premium is insufficient to make financing affordable. Meanwhile, 34 percent thought...

February 5, 2015 - Inside Mortgage Finance

Nonbank Servicers Continued Building Market Share In Late 2014, Business Becoming More Fragmented

Although depository institutions continued to account for the lion’s share of the mortgage servicing market, nonbank servicers continued to gain ground in late 2014, according to a new market analysis and ranking by Inside Mortgage Finance. Banks, thrifts and credit unions accounted for 71.8 percent of the $7.351 trillion of home mortgages serviced by the 50 largest players in the market as of the end of last year. Nonbank servicers accounted for 28.2 percent of the group total, up from 25.9 percent at the end of 2013. That’s...[Includes two data charts]

January 30, 2015 - Inside MBS & ABS

Will Ocwen Be Forced to Settle With MBS Investors Trying to Bring the Company to Its Knees?

Ocwen Financial may have to settle with investors in non-agency MBS it services to avoid having the underlying servicing rights being yanked away by a trustee, according to investors and analysts tracking the situation. Early this week, Ocwen attorney Richard Jacobsen sent a letter to the law firm of Gibbs & Bruns, sternly telling the attorneys for some of the RMBS holders that there is no basis for default under the trust agreements. Gibbs & Bruns is working...

January 29, 2015 - Inside Mortgage Finance

Wells, Chase Settle With CFPB Over Kickback Allegations, But Mystery Lender Escapes Wrath

Wells Fargo and JPMorgan Chase reached a financial settlement with the Consumer Financial Protection Bureau and the Maryland attorney general last week over allegations related to illegal mortgage kickbacks involving some of their loan officers and Genuine Title, a title company based in Maryland that went out of business last spring. The two government agencies are seeking civil penalties of $24 million from Wells Fargo and $600,000 from JPMorgan Chase. They also want $10.8 million from Wells and $300,000 from JPMorgan Chase in redress for consumers whose loans were involved in the marketing arrangement at issue. The CFPB and the Maryland AG also took action...

January 29, 2015 - Inside Mortgage Finance

Watt Defends GSEs’ Low Downpayment Offerings, Offers Few Clues on Where G-Fees Are Heading

The government-sponsored enterprises’ new low downpayment programs received a vigorous defense from Melvin Watt, the director of the Federal Housing Finance Agency, at a hearing this week by the House Financial Services Committee. Republicans on the committee attacked the programs from a number of angles, including raising concerns about default rates on mortgages with lower downpayments and fears of a “race to the bottom” with the FHA. “If you carefully look at other considerations and take them into account in deciding whether to back that credit, you can ensure...

January 26, 2015 - Inside the CFPB

CFPB Seeks Public Input on Safe Student Account Scorecard

As part of the growing attention the CFPB is paying these days to the marketing relationships between financial institutions and colleges and universities, the CFPB released for public comment a draft Safe Student Account Scorecard that offers information to institutions of higher learning when soliciting agreements from financial institutions to market safe and affordable financial accounts for their students. “The scorecard builds on prior work by the Federal Deposit Insurance Corp. and is designed to help colleges evaluate the costs and benefits to students of a financial product based on information about its features and how it is marketed,” said CFPB Director Richard Cordray. The bureau is seeking public input on the scorecard, which highlights four areas for schools to ...

January 26, 2015 - Inside the CFPB

Bureau Position Upheld as SCOTUS Sides With Borrower on Rescission

When it comes to legal cases at the Supreme Court of the United States, score one for the CFPB. Earlier this month, in Jesinoski v. Countrywide, the SCOTUS essentially upheld the bureau’s position on borrower rescission of a mortgage under the Truth in Lending Act. Specifically, the high court unanimously ruled that TILA only requires written notice to a mortgage lender within three years in lieu of requiring a borrower to formally file a lawsuit within that time span. Under TILA, a borrower may rescind a mortgage within the first three days of consummation of the transaction or the delivery of the mandated disclosures required. However, if a lender fails to make the disclosures demanded under TILA, this right is ...

January 26, 2015 - Inside the CFPB

CFPB Enforcement Tool Hangs in Balance as SCOTUS Hears Case

The legal doctrine of disparate impact is a powerful arrow in the enforcement quiver the CFPB can bring to bear across a number of sectors in the broad financial services industry – and it may get a big boost if the Supreme Court of the United States says it is legal. Last week, the SCOTUS heard oral arguments in Texas Department of Housing and Community Affairs, Et Al., v. The Inclusive Communities Project Inc. (No. 13-1371). The crux of this case is whether disparate impact claims are cognizable under the Fair Housing Act of 1968, where a plaintiff alleges discrimination based on the disparate impact that a defendant’s “facially neutral” practice has on members of a demographic group of society, the ...

January 26, 2015 - Inside the CFPB

Wells, JPMorgan Settle With CFPB Over Mortgage Kickback Claims

Wells Fargo and JPMorgan Chase settled with the CFPB and the Maryland Attorney General last week, resolving allegations of participating in an illegal marketing kickback scheme with Genuine Title, a title company that has since gone out of business. The government agencies alleged that Genuine Title gave the banks’ loan officers cash, marketing materials and consumer information in exchange for business referrals. The CFPB and the Maryland AG also took action against former Wells Fargo employee Todd Cohen and his wife, Elaine Oliphant Cohen, both of Baltimore, for their alleged involvement. The two government agencies are seeking $24 million in civil penalties from Wells Fargo and $600,000 in civil penalties from JPMorgan Chase. They also want $10.8 million from Wells ...

January 23, 2015 - Inside FHA Lending

GNMA to Launch Issuer Scorecard in the Spring

Ginnie Mae will soon introduce the third prong of a strategy to improve its oversight of participants in its mortgage-backed securities program – a performance scorecard for issuers – and monitoring of its risk. Essentially a “scorecard,” the Issuer Operational Performance Profile (IOPP) will enable issuers to better understand and comply with Ginnie Mae’s expectations. It also provides a way for issuers to measure and improve their performance and compare it to the performance of their peers. Final testing and training for IOPP began this winter, with deployment expected “in early 2015,” the agency said. Issuers will be scored monthly based on a series of metrics. Each issuer will be rated against its peers by applying a weighting algorithm and, in some cases, adjusting for certain control factors. Each issuer will receive two scores: one for operational management and ...

January 23, 2015 - Inside FHA Lending

FHA Tweaks Rules for Doing Business with Agency

The FHA has proposed key changes to rules for 203(k) consultants, direct endorsement (DE) underwriters and nonprofit groups that do business with the agency. The changes are part of a draft section, “Doing Business with FHA – Other Participants,” which will be incorporated into the overall Single Family Policy handbook. The draft contains information regarding eligibility, approval and recertification requirements for 203(k) program consultants, direct endorsement (DE) underwriters and nonprofit groups. The FHA posted the draft versions of “Doing Business with FHA – Other Participants in FHA Transactions” and “Quality Control, Oversight and Compliance – Other Participants in FHA Transactions” on its SF Housing Policy Drafting Table for public review and comment. The draft consolidate various existing Department of Housing and Urban Development handbooks, mortgagee letters, housing notices and ...

January 23, 2015 - Inside FHA Lending

Low Rates, High Demand Power VA’s 3Q14 Surge

Production of loans with a VA guaranty was moderately strong in the third quarter of 2014, thanks to lower rates and increased demand for the no-downpayment loans, according to Inside FHA Lending’s analysis of the latest agency data. A 14.1 percent quarter-to-quarter surge helped the industry end last year’s first nine months with a total of $76.3 billion in VA loans, mostly purchase home mortgages taken out by a younger generation of war veterans. VA streamline refinancing also accounted for a substantial chunk of originations, 19.2 percent. Volume jumped from $19.5 billion in the first quarter of 2014 to $26.5 billion the following quarter. Lenders closed out the third quarter with $30.2 billion. Stanley Middleman, chief executive officer of Freedom Mortgage, said VA lending is on the upswing, driven by low interest rates. He thinks the VA home loan guaranty program has been ... [ 1 chart ]

January 23, 2015 - Inside FHA Lending

FHA Likely to Reclaim Share with Premium Cut

The half-percent annual premium reduction the FHA announced recently will likely enable the agency to reclaim the high loan-to-value segment of the mortgage market from Fannie Mae and Freddie Mac, according to analysts. Speaking with some originators that have been looking at the best way to securitize high LTV loans, Deustche Bank securities analysts said the lower FHA annual premium would put pressure on the government-sponsored enterprises to lower the cost of their guarantees. “The grapevine has anticipated for months that [g-fees] have little chance of going up and more chance of going down,” the analysts said. “But the specific risk triggered by the FHA move is that the cost of credit will now drop for high-LTV conventional borrowers.” Even before the FHA policy shift, private mortgage insurers have been pressuring the Federal Housing Finance Agency to ...

January 23, 2015 - Inside FHA Lending

Lenders Expect Modest Refinance Wave

FHA lenders are gearing up to meet an anticipated increase in demand for purchase and refinance loans with mortgage rates falling to near-historic lows coupled by a 50 basis point cut in FHA’s annual insurance premium. Lenders hope the combination of lower mortgage rates and the revised FHA pricing structure will create sufficient incentive for more borrowers to purchase a home or refinance an existing mortgage. For example, Freedom Mortgage, 32nd in Inside FHA Lending’s 2014 ranking of FHA lenders, is looking to hire as many as 500 new employees to handle the anticipated surge following the FHA action. Stanley Middleman, chief executive officer of Freedom Mortgage, expects a robust FHA refinance market during the first half of 2015, tapering off in the second half. “Lower rates, coupled with premium reduction, put a lot of FHA borrowers in a position to get their ...

January 23, 2015 - Inside Nonconforming Markets

Views Vary on CFPB’s Proposal to Help Innovation

Some observers see a proposal from the Consumer Financial Protection Bureau to help lenders gain certainty regarding new products as helpful, while others warn that it is unworkable. In October, the CFPB proposed a system for issuing no-action letters to companies that want to offer innovative financial products but face “substantial uncertainty” regarding how the regulator might treat them. Affirmative no-action letters would state that the CFPB has no ...

January 23, 2015 - Inside MBS & ABS

SCOTUS Ruling in TILA Rescission Case Could be Trouble for Non-Agency MBS, SFIG Brief Suggests

Last week, the U.S. Supreme Court unanimously ruled that the Truth in Lending Act only compels a borrower to file a written notice within three years of consummation in order to rescind a mortgage if the lender fails to provide the required disclosure, instead of formally filing a lawsuit within that period. This could spell bad news for the non-agency RMBS space, according to an amicus brief the Structured Finance Industry Group filed with the high court in the case, Jesinoski v. Countrywide Home Loans, Inc. The first problem SFIG noted with the position that the SCOTUS eventually upheld is that it will have a chilling effect on non-agency MBS. “A determination that mere notice is sufficient to effect a rescission would reverberate through all segments of the RMBS market, creating significant hurdles for originators, issuers, ratings agencies, servicers, and trustees alike, while breeding doubt among investors regarding the value of future and already-issued private-label RMBS,” said the trade group. That’s...


With the recent dip in interest rates, how do you feel about loan volumes this year?

We see loan production ending 2015 flat compared to 2014.
We’re optimistic that our originations will rise by 10 to 20 percent year over year.
We’re really optimistic: We expect production to increase by 20 percent or better from last year.
We’re not so bullish. Originations for us may actually fall.

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