The Consumer Financial Protection Bureau is about to begin its Consumer Risk Assessment process, one of the key components of the agency’s Supervision and Examination Manual. This process evaluates CFPB-supervised entities based on the amount of risk their activities pose to consumers, identifies the various sources of risk, and assesses the quality of risk controls they’ve put in place. This process is definitely something that those who have been concerned about the expansive powers of the bureau should ready themselves for, according to attorneys in the mortgage banking and consumer financial products practice at the law firm of K&L Gates.

The Consumer Financial Protection Bureau, in a conciliatory gesture to a wary industry, recently announced the existence of a formal Early Warning Notice process that will provide advance notice of potential enforcement actions to individuals and firms under investigation. The process is modeled on similar procedures that have been successful at other federal agencies, according to the CFPB. It starts with the bureau’s Office of Enforcement explaining to individuals or firms that evidence gathered in a CFPB investigation indicates they have violated consumer financial protection laws. Recipients of an Early Warning Notice are then invited to submit a response in writing, within 14 days, including any relevant legal or policy arguments and facts. The Early Warning Notice process “strikes a balance between the goal of fairness to those being investigated and our mission to protect consumers,” said Raj Date, special advisor to the secretary of the Treasury for the CFPB. “This process will help us fulfill our commitment to transparency in enforcing the law.”

Maryland. A federal jury recently convicted Andrew Hamilton Williams, of Hollywood, FL, owner and founder of “Metro Dream Homes,” of fraud conspiracy, wire fraud and conspiracy to commit money laundering in connection with his alleged participation in a massive mortgage fraud scheme which promised to pay off homeowners’ mortgages on their “Dream Homes,” but left them to fend for themselves. ... Minnesota. In Taft v. Wells Fargo Bank, N.A., the U.S. District Court for the District of Minnesota has ruled that a national bank is not bound by state laws that would restrict the fees it can include in principal when making a reverse mortgage loan. In this case, the plaintiff accused the bank of violating Minnesota and South Dakota law by including origination fees, servicing fees, and mortgage insurance charges in the principal amount of her mother’s reverse mortgage loan.

Federal Housing Finance Agency.Office of the Comptroller of the Currency. Single Uniform Audit Program discussed. Representatives of mortgage servicing and foreclosure law firms met with officials from the Federal Housing Finance Agency and the Office of the Comptroller of the Currency recently to discuss development of a Single Uniform Audit Program to replace the individual servicer reviews of foreclosure law firms as required by the bank regulators’ consent orders and regulatory directives. Industry reps are said to be developing a straw-man proposal.

House Financial Services Financial Institutions Subcommittee Chairwoman Shelley Moore Capito, R-WV, and ranking member Rep. Carolyn Maloney, D-NY, last week introduced H.R. 3461, the Financial Institutions Examination Fairness and Reform Act, to address widespread industry concerns with bank examinations. Some bankers say the reasons for certain decisions made by regulators during the examination process have not been clear. Bankers have also reported that some examiner decisions have effectively and unnecessarily reduced the amount of capital available for increased lending.

The Government Accountability Office recently confirmed the view widely held in the mortgage finance industry that federal regulators are not doing enough to analyze the cost and other effects of implementing the Dodd-Frank Act. “Little is known about the actual impact of the final Dodd-Frank Act rules, given the short amount of time the rules have been in effect,” the GAO said. The government watchdog noted that federal financial regulators are required to perform a variety of analyses, but the requirements vary and none of the regulators are...

A proposed Senate bill to steadily wind down Fannie Mae and Freddie Mac over the course of a decade appears to have some support at the Federal Housing Finance Agency, where the acting director is eager for Congress to move toward resolving the three-year-old conservatorships of the two government-sponsored enterprises. S. 1834, the Residential Mortgage Market Privatization and Standardization Act of 2011 would gradually reduce the two GSEs over 10 years through an unusual mechanism. Instead of guaranteeing the entire MBS trust as they...

Freddie Mac this week announced a new class of single-family MBS backed by mortgages previously repurchased from MBS because they were in serious delinquency. Both government-sponsored enterprises began aggressively buying seriously delinquent loans out of their MBS trusts at the beginning of 2010 because new accounting rules required them to consolidate all their outstanding MBS on their balance sheets. Buying the distressed loans out of the MBS trusts had no impact on their financial accounting, but it allowed them to better manage...

Although primary market lenders will face fewer hurdles in originating refinance loans for underwater Fannie Mae and Freddie Mac borrowers, detailed guidelines released by the government-sponsored enterprises this week confirm that it will take several months before the expanded programs are fully implemented. And when they are, the revamped Home Affordable Refinance Program will generate up to one million new loans that otherwise wouldn’t have happened, according to estimates by Keefe, Bruyette & Woods. That’s just about what the market expected, and it will mean... (Includes one data chart)

Four years after the credit crisis, analysts at Fitch Ratings expect eventual losses from structured finance transactions to soar from current levels, about $94 billion, or 2.7 percent of the original balance of rated transactions, to $376 billion, or 10.6 percent, by the time the dust settles. And the primary culprit, of course, is residential MBS. “Fitch expects a further 9,754 tranches to not recover their full principal, representing 33 percent of all tranches and increasing the proportion of tranches with realized or expected losses to 63 percent of the total...