The U.S. Court of Appeals for the Sixth Circuit recently took on Molosky v. Washington Mutual Inc., which addressed the preemption of certain state law claims under the federal Home Owners Loan Act. The plaintiffs in this case alleged that certain fees charged by their loan servicer in connection with the prepayment of their mortgage violated both the Michigan Usury Act and their mortgage contract.The lower court had previously rejected the suit on the basis of HOLA preemption, prompting the borrowers to appeal. The Sixth Circuit basically split the difference. On the one hand, the ...

In Marr v. Bank of America, N.A., the U.S. Court of Appeals for the Seventh Circuit has affirmed that borrower testimony alone can overcome the Truth in Lending Act’s “rebuttable presumption” that a borrower has received two notices of his right to rescind a refinance transaction, despite a written acknowledgement by the borrower to the contrary. In this case, the borrower argued that he wasn’t given two right-to-rescind notices as required under TILA, even though he had signed a document indicating he had. He said he had filed away and left undisturbed the documents he received when ...

California. In Balderas v. Countrywide Bank, N.A., the U.S. Court of Appeals for the Ninth Circuit recently ruled that the Truth In Lending Act’s delivery obligation requires borrowers be permitted to keep written copies of the right-to-rescind notice. The court noted that to “deliver” the notice as per TILA requires a “permanent physical transfer from one party to another,” as opposed to momentary delivery. Illinois. Earlier this month, the Department of Financial and Professional Regulations published amendments to the state’s mortgage originator licensing requirements. One change ...

Consumer Financial Protection Bureau. Comments Wanted on Mortgage-Related Rules. The Consumer Financial Protection Bureau is asking for public comment on currently approved information collections associated with certain recently published interim final rules having to do with mortgage lending. One such rule has to do with the Secure and Fair Enforcement for Mortgage Licensing Act (Regulation G) 12 CFR Part 1007.“The information collection will improve the flow of information to and between regulators; provide accountability and ...

The House Oversight and Government Reform Subcommittee on TARP and Financial Services plans to hold a hearing on the afternoon of Tuesday, Jan. 24, on the subject of how the Consumer Financial Protection Bureau will function under its new director, Richard Cordray. A witness list had not been provided as of press time. The event is scheduled to be streamed live on the committee’s website, http://oversight.house.gov/. The new Consumer Financial Protection Bureau is investigating PHH Corp. to see if the lender may have violated the Real Estate Settlement Procedures Act (and possibly ...

The Federal Reserve’s recent suggestion that policymakers consider having the government-sponsored enterprises refinance underwater non-agency mortgages appears unlikely to happen, according to industry analysts and even the Fed. Still, the Fed claims such a program would stabilize the housing market and it would likely reduce losses on non-agency mortgage-backed securities. The Fed said the Home Affordable Refinance Program could be expanded beyond GSE loans – or Fannie Mae and Freddie Mac could implement new programs – to refinance non-agency borrowers that would otherwise meet HARP underwriting requirements. According to the Fed, 1.0 million to 2.5 million non-agency borrowers meet HARP refi standards ...

The non-agency MBS market sank to a record low in 2011, with just $27.59 billion in total issuance, although performance has steadied in the dwindling supply of outstanding deals. New issuance of non-agency MBS was down 56.6 percent from the level reached in 2010, ending a three-year string of modest gains. As has been the case since 2008, the vast preponderance of new issuance involved seasoned collateral – either whole loans or repackaged MBS. Over half (52.3 percent) of non-agency MBS issued in 2011 were re-securitizations, yet the volume of such deals was down 75.2 percent from...(Includes two data charts)

There has been little progress in the development of new ways to pay for credit ratings even though researchers have seven proposed systems designed to address the conflicts of interest that have plagued the non-agency MBS market, according to a new Government Accountability Office report. The GAO noted that there were five significant ratings compensation models when it last reported on the subject in 2010, and two more have since been proposed. But the authors of these models have done little additional work to flesh them out, and none has been adopted in the marketplace, the GAO said. “Given that the [rating...

New research is helping foment pervasive rumors about a massive government refinancing of agency-backed mortgages intended to bolster – or replace – the underperforming Home Affordable Refinance Program for underwater Fannie Mae and Freddie Mac borrowers. Earlier this month, industry watchers began to speculate about possible HARP changes following a note by the Washington Research Group’s Jaret Sieberg – picked up by an American Enterprise Institute blog posting – that predicts President Obama will appoint a “housing advocate” to the Federal Housing Finance Agency via a recess appointment. Such an...

Insurance companies will likely increase their investment in non-agency residential MBS, with market and regulatory influences encouraging movement toward hybrid and floating-rate securities as opposed to fixed-rate bonds, according to some top securities industry analysts. The primary driver on the regulatory level is the anticipated slight rise in capital requirements expected to result from a recent action by the National Association of Insurance Commissioners, the association of state insurance regulators. On Dec. 27, 2011, the NAIC released updated pricing designations that...