he CFPB initiated its first data security enforcement action last week, ordering online payment platform Dwolla, based in Des Moines, IA, to pay a $100,000 penalty for allegedly deceiving consumers about its data security practices, to stop misrepresenting those practices and to fix them. According to the bureau, from December 2010 until 2014, Dwolla claimed to protect consumer data from unauthorized access with safe and secure transactions. The company also claimed that it encrypted all sensitive personal information and that its mobile applications were safe and secure. As a result of its investigation, the CFPB said that, among other issues, Dwolla misrepresented its data-security practices by falsely claiming they exceed or surpass industry security standards. “Contrary to its claims, Dwolla ...

Mass Defection of Top Financial Services Attorneys at K&L Gates. A total of 26 top attorneys – including Laurence Platt, Phillip Schulman, Steven Kaplan, Melanie Brody and Jonathan Jaffe – have jumped ship from the K&L Gates law firm in Washington, DC, to the rival Beltway law shop of Mayer Brown. Their new Consumer Financial Services Group will advise leading financial services companies – including banks, investment banks, private equity funds, hedge funds, mortgage companies, marketplace lenders, emerging payment companies and start-ups –as well as various types of participants in the consumer credit and real estate finance arenas. Their specialized focus will include counseling clients on federal and state laws governing the making, servicing, purchase and sale of residential mortgage loans and the ...

Freddie Mac has launched a project to correct some “operational deficiencies” in how it transfers money in and out of mortgage-backed securities trusts. The GSE said in its 2015 10-K filing that the issue has not had a material impact on its earnings or on investors in its MBS. Freddie explained that seller/servicers deposit various funds – such as mortgage principal and interest payments owed to MBS investors and guarantee fees due to the GSE – into custodial accounts for securitization trusts. The funds owed to the company are classified as restricted until they are transferred to an operating cash account. Management, however, determined that Freddie has not maintained detailed pool-by-pool records of funds in the custodial account...

Fannie Mae and Freddie Mac single-family business slowed in February as the purchase-mortgage sector faltered, and trends suggest the GSEs are losing share in their core market. The two enterprises issued $50.05 billion of single-family mortgage-backed securities last month, according to a new ranking and analysis by Inside The GSEs. That was down 11.5 percent from January and left Fannie and Freddie production for the first two months of 2015 12.2 percent behind the pace set last year. February’s new issuance was also the lowest monthly total for the GSEs since May 2014, when they produced $44.80 billion of single-family MBS. Purchase-mortgage volume followed seasonal patterns and sank 18.5 percent from...

Fannie Mae and Freddie Mac are private companies, according to a recent Ninth Circuit Court of Appeals case that dismissed an argument stating that the mortgage giants are federal instrumentalities as it relates to them being liable under the False Claims Act. Now some say this ruling may influence and stir up reaction about a case in Delaware involving GSE shareholders who argue that the Treasury sweep of the GSEs’ profits was illegal. In the United States ex rel. Adams v. Aurora Loan Services, Inc., et al., a whistleblower case, James Adams, on behalf of the government, named 16 banks, lenders and servicers as defendants in a FCA breach of representations-and-warranties lawsuit. It was alleged...

The Federal Housing Finance Agency released the 2015 Scorecard progress report for Fannie Mae and Freddie Mac on March 3. The agency detailed goals the GSEs met in 2015 and mentioned several initiatives for this year including the first public release of non-performing loan sales data in 2016. Because of the amount of time needed to transfer sold loans to a new servicer, evaluate borrowers for foreclosure prevention action and complete loan modification trial periods, the FHFA said it takes six to 12 months after the datew of an NPL sale to get any meaningful data. Once it has that data, it will begin to assess borrower outcomes of NPL sales going forward.

The 11 surviving Federal Home Loan Banks posted a significant increase in net income during the fourth quarter of 2015, along with a surprising jump in advances. The Office of Finance reported that the FHLBanks generated $673 million in net income during the fourth quarter, a 39.0 percent increase from the prior period. That brought year-to-date income to $2.850 billion, a 26.6 percent gain from 2014. Non-interest income was up sharply last year in large part because of settlements related to FHLBank investments in soured non-agency mortgage-backed securities, which brought in $688 million in 2015, mostly in the first half of the year. Legal settlements accounted for...

The Federal Housing Finance Agency issued a final rule last week in which it adjusted the maximum civil money penalties it can impose on a regulated entity or any entity-affiliated party. The last time the maximum CMP amounts were set was in 2008. The FHFA noted that the increases in maximum penalty amounts contained in this final rule might not necessarily affect the amount of any CMP the FHFA may seek for a violation. “FHFA would calculate each CMP on a case-by-case basis in light of a variety of factors,” the final ruling stated. The FHFA’s Rules of Practice and Procedures allow the agency to govern cease-and-desist proceedings, civil money penalty assessment proceedings, and other administrative adjudications.

FHFA Ramps Up HARP Social Media Efforts. The Federal Housing Finance Agency kicked off a new social media campaign in late February, #HARPNow, to let more than 367,600 homeowners across the country know about the Home Affordable Refinance Program before it expires on Dec. 31, 2016. FHFA will use Twitter, LinkedIn and YouTube to reach homeowners in the 10 states with the greatest concentration of HARP-eligible borrowers. Fannie Names Winner of Second NPL Community Impact Pool. Fannie Mae announced that New Jersey Community Capital is the winning bidder of the company’s second Community Impact Pool of non-performing loans. This pool of loans was structured to attract diverse participation from non-profits, smaller investors and minority- and women-owned businesses. The transaction...

Publicly-traded nonbank mortgage lenders posted erratic results from their mortgage-banking operations during the fourth quarter of 2015. As a group, the nine companies reported a combined $54.08 million in mortgage-banking income for the fourth quarter, a significant improvement from the $26.26 million loss they posted in the previous quarter. But three of the nonbanks – Impac, Ocwen and PHH Corp. – recorded losses on their mortgage origination ... [Includes one data chart]