Fair lending, along with unfair, deceptive and abusive acts and practices (UDAAP), will become increasingly significant and potentially more problematic for the mortgage lending community as regulators at the Consumer Financial Protection Bureau pay more attention to such issues going forward, a top consultant told industry representatives last week. “The keys for mortgage lending, from the enforcement side, are going to be fair lending – the Community Reinvestment Act and fair lending have become very entwined – and UDAAP,” said Jo Ann Barefoot, co-chair of Treliant Risk Advisors and former deputy comptroller of the currency, to attendees of a mortgage regulatory conference sponsored in the nation’s capital by SourceMedia.

The 14 mortgage servicing firms hit by the enforcement actions brought by the Federal Reserve and the Office of the Comptroller of the Currency can expect to see soon a new process by which individual borrowers facing foreclosure can request an independent review, outgoing Acting Comptroller of the Currency John Walsh told industry representatives last week. “As we explored the best means of ensuring that injured homeowners had the opportunity to seek relief, it became clear that what was needed was a robust, transparent and accessible complaint process that will give borrowers the opportunity to request an independent foreclosure review,” Walsh said at a mortgage regulatory forum sponsored by SourceMedia. “I’m happy to say in the next several weeks you’ll see the roll out of just such a process.”

Top lender groups are asking the Consumer Financial Protection Bureau to provide a little more clarification to its recent interim final regulation on alternative mortgage transactions, particularly when it comes to the definition of such a transaction. The American Bankers Association and the Mortgage Bankers Association both support the CFPB’s inclusion of renegotiable rate balloon and shared appreciation mortgages within the AMT definition. However, they both asked that some of the reg’s commentary be clarified to explicitly state that preferred rate loans with fixed rates and price level adjusted mortgages, otherwise considered “variable rate transactions,” also be identified as examples of alternative mortgage transactions.

Certain elements of the Dodd-Frank Act such as the new standard related to unfair, deceptive and abuse acts and practices (UDAAP), along with the Federal Reserve’s “ability to repay” provisions proposal, present “significant litigation risk” to lenders, a top litigation attorney told industry representatives early this week. Speaking to attendees at the Mortgage Bankers Association’s regulatory compliance conference in Washington, DC, on Sunday, Andrew Stutzman, a partner with Stradley, Ronon, Stevens & Young LLP, said, “I’m very troubled by Dodd-Frank in many respects. I think it … and the regulations that are coming out and have come out – the Fed’s ability-to-repay proposal – are extremely complicated and extremely confusing.”

Among the sensitivities associated with the mortgage industry’s foreclosure struggles, none is more fraught with headline risk and the potential for political pressure than foreclosing on an active-duty servicemember of the U.S. military, a top industry attorney told compliance officials this week. “It’s bad enough when you get it wrong on a regular foreclosure action, but when you get it wrong for one of our servicemembers, that’s really where you’re going to have a reputation killer,” Leah Getlan, assistant general counsel at Capital One, told attendees this week at the Mortgage Bankers Association’s annual regulatory compliance conference in the nation’s capital. “I have seen it from time to time, but thankfully, not that often.”

The U.S. Department of Labor’s Occupational Safety and Health Administration has ordered Bank of America to rehire a Countrywide Financial Corp. employee who led internal investigations that revealed “widespread and pervasive wire, mail and bank fraud involving Countrywide employees” and was later dismissed. The employee alleged that those who attempted to report fraud to Countrywide’s employee relations department suffered persistent retaliation. The employee was fired shortly after Countrywide’s acquisition by BofA.

The Consumer Financial Protection Bureau may be making substantial progress on its integrated consumer mortgage disclosure form, but the land title sector is concerned the prototype products generated to date are inadequate when it comes to the disclosure of specific settlement costs. The American Land Title Association told the bureau that the CFPB’s Know Before You Owe project has successfully identified ways to improve the disclosure of loan costs by making them more transparent. However, suggestions for how to disclose some settlement costs, in particular title insurance and attorney fees, have not reached a desired level of transparency and lack the necessary flexibility to avoid consumer confusion.

New Jersey. In northern New Jersey, 8 percent of mortgages are in foreclosure – twice the share for the United States as a whole, according to a new regional mortgage brief prepared by the Federal Reserve Bank of New York. An additional 4 percent of northern New Jersey mortgages are at least 90 days delinquent, the point at which a foreclosure filing can be initiated. “Combined, 12 percent – or about one in eight mortgages – are seriously delinquent,” the Fed said. “By comparison, the pre-crisis share of mortgages seriously delinquent in this region was less than 2 percent.” But flows of mortgages into foreclosure and delinquency are down from their peak levels, although still considerably up from pre-crisis levels. However, the pool of mortgages already in foreclosure continues to grow because there are more loans entering the foreclosure process than there are loans completing the process each month. Foreclosures are lengthy, often taking many months or even years.

More Needed to Reduce REO Inventory. The National Association of Realtors has called upon HUD, the FHFA and Treasury to create an advisory board to help them explore possible options for unloading real estate owned (REO) properties held by Fannie Mae, Freddie Mac and the FHA. “We believe the government has an opportunity to minimize the impact of distressed properties on local markets by expanding financing opportunities, bolstering loan modifications and short sales efforts, and enhancing the efficient disposition of REO properties,” said NAR President Ron Phipps, broker-president of Phipps Realty in Warwick, RI. “This will help stabilize home prices and neighborhoods and help support the broader economic recovery.” The Realtors also recommended the agencies be more aggressive in having loans modified and, when a family is absolutely unable keep their home, to quickly approve reasonable short sale offers that allow families to avoid foreclosure.

Bank of America, in an effort to cut its losses from its 2008 acquisition of Countrywide Financial Corp., is looking to unload its correspondent mortgage business, and is said to be in talks with Nationstar Mortgage Holdings Inc., a unit of private-equity firm Fortress Investment Group. BofA has taken a deep look at its operations in the context of today's marketplace and decided to make some major strategic adjustments, including dumping the correspondent business…