A proposed “qualified mortgage” standard to determine a borrower’s ability to repay a mortgage loan creates many pitfalls for loan originators and subjects them to enormous liability if they fail to comply, warned compliance experts. The risk of making non-qualified mortgages for lenders is the borrower’s defense to foreclosure and the higher damages that would be incurred for noncompliance, as well as the impact on the liquidity of those loans if lenders were to sell them down the road, according to panelists on a webinar hosted last week by Inside Mortgage Finance. The proposed ability-to-repay rules and alternative definitions of a “qualified mortgage” (QM) are out for...

The Department of Justice this week flexed its muscle against mortgage redlining in a settlement with a Michigan lender while expressing growing concern over a possible re-emergence of redlining as access to credit becomes more difficult. Industry attorneys noted with some alarm the message the DOJ is sending mortgage lenders through its settlement with Citizens Republic Bancorp and Citizens Bank of Flint, MI. They say the message reflects disturbing trends that defense lawyers have been seeing in their representations of lenders accused of redlining. The proposed settlement, which requires court approval, was filed in conjunction with...

The Government Accountability Office says the Consumer Financial Protection Bureau and other federal regulators should include foreclosure practices in their anticipated national servicing standards, as well as a formal assessment of the risks that are associated with poor documentation practices – the exact repercussions of which are still undetermined. The new GAO report was sparked by widespread criticism of mortgage servicers’ handling of foreclosure documents. It was believed that many affidavits had been improperly notarized or signed, leading to concerns over how these loans were transferred into...

The much-maligned Home Affordable Modification Program posted modest gains in the number of new trial and permanent modifications started during the first quarter of 2011, according to an Inside Mortgage Finance analysis of data released by the Obama administration. The number of new permanent mods started rose 8.1 percent from the fourth quarter, while the number of new trial mod offers was up 2.2 percent. First-quarter 2011 volume in both categories remained well below the levels set back in early 2010, when the program was still gaining traction. The number of active permanent HAMP modifications rose... [Includes two data charts]

With a little over two months remaining before the Consumer Financial Protection Bureau is scheduled to formally take over the sprawling smorgasbord of federal mortgage responsibilities, the lack of a director for the controversial new agency could hinder the CFPB’s launch. Republicans on Capitol Hill have stepped up their campaign to restructure the agency before it gets off the ground. The House Financial Services Committee this week is scheduled to mark up several bills that would impose a five-member commission to oversee the CFPB, rather than a single director, and delay its takeover of the Real Estate Settlement Procedures Act, Truth in Lending Act and other consumer protection laws until...

Fannie Mae and Freddie Mac reported sharply different earnings results for the first quarter, but at least one thing was mostly the same: both government-sponsored enterprises continued to push a significant volume of loans back to lenders through repurchase demands while carrying a large inventory of unresolved buybacks. “Some of our seller/servicers have failed to fully perform their repurchase obligations due to a lack of financial obligations in a timely manner,” Freddie said in its first quarter 2011 earnings report. As of March 31, 2011, the unpaid balance of loans subject to...

New primary mortgage insurance activity declined in step with slowing mortgage origination activity in the first quarter of 2011, and private MIs took more than their share of the hit, according to a new ranking and analysis by Inside Mortgage Finance. A total of $93.54 billion of mortgages originated in the first three months of the year carried primary MI coverage, down 20.3 percent from the fourth quarter of 2010. That was, however, less severe than the 35.0 percent drop in new loan originations over the same period. As refinance transactions represented a smaller share of... [Includes two data charts]

Government Accountability Office: Foreclosure report: The GAO released a report last week entitled Mortgage Foreclosures: Documentation Problems Reveal Need for Ongoing Regulatory Oversight, which was compiled as a result of a probe House Democrats requested...

Bill Beckmann, a former top official at CitiMortgage, has been named as the new president and CEO of Mortgage Electronic Registration Systems and its parent entity, MERSCORP. Beckmann is leaving behind his private consulting firm to join the company. Previously, he was chairman and CEO of CitiMortgage where he had responsibility for strategy, sales, operations, capital markets, and regulation/compliance. Before that, he was president of Citigroup’s real estate servicing and technology group, providing customer service, technology and default…

California. State Sen. Alex Padilla, D-Pacoima, is reportedly drafting his own version of anti- "dual track" legislation that would keep lenders and servicers from filing a foreclosure sale until a loan modification that has been requested by the borrower is denied...