Wells Fargo agreed last week to pay more than $125.0 million and offer $50.0 million in downpayment assistance to settle subprime-related fair lending claims by the Department of Justice and others. The claims center on brokered originations for African-American and Hispanic borrowers. The DOJ alleged that between 2004 and 2009, Wells charged approximately 30,000 African-American and Hispanic wholesale borrowers higher fees and rates than non-Hispanic white borrowers because of their race or national origin ...

Principal reduction loan modifications completed by five major banks as part of the national servicing settlement have not been applied disproportionately to mortgages in non-agency mortgage-backed securities, according to Fitch Ratings. Non-agency MBS investors have raised concerns that servicers that agreed to the recent $25.0 billion settlement will complete their mandated principal reduction mods on non-agency MBS instead of on portfolio loans. “Although still early, there has been no evidence of ...

The vast majority of repurchase requests on mortgages in non-agency mortgage-backed securities were in dispute in the first quarter of 2012, according to an Inside Nonconforming Markets analysis of Securities and Exchange Commission 15Ga disclosures. However, industry analysts expect settlements to increase during the second half of this year. Securitizers reported $29.03 billion in mortgages in non-agency MBS with repurchase demands in the first quarter of 2012, with 98.6 percent of the volume classified as in dispute ... [Includes one chart]

Servicing rules previewed by the Consumer Financial Protection Bureau in April are flawed, overreaching and need to be adjusted, according to four trade groups representing servicers and lenders. The CFPB said it plans to propose disclosures this month for servicers to send to borrowers as well as servicing procedures, some of which are required by the Dodd-Frank Act. The DFA requires a notice to be sent to hybrid ARM borrowers six months before the initial interest rate reset. The CFPB said it is considering expanding ...

The Consumer Financial Protection Bureau last week released its long-pending proposal for combined mortgage disclosures, with an emphasis on characteristics common in nonconforming mortgages. “In particular, explanations of how rates and payments can change over time are not always made clear [from current disclosures],” said Richard Cordray, director of the CFPB. Currently, the Real Estate Settlement Procedures Act and the Truth in Lending Act require different disclosures for borrowers. As directed by the Dodd-Frank Act ...

Portfolio lenders as well as those looking to issue non-agency mortgage-backed securities cautioned the Consumer Financial Protection Bureau against setting specific thresholds for debt-to-income ratios on “qualified mortgages.” Some non-agency MBS investors countered that a bright line DTI ratio would be useful. In June, the CFPB reopened the comment period on the pending ability-to-repay rule, with an emphasis on data relating to DTI ratios. The deadline for comments was last week. The Clearing House Association ...

HECM Changes. HUD announced this week that all FHA-approved mortgagees that remit insurance premiums on home-equity conversion mortgages must submit certain information to HUD by July 25 if they have not been involved with the Home Equity Reverse Mortgage Information Technology project. The FHA plans to change the process used to remit MIPs for the HECM program in the near future. Upcoming Ginnie Changes. During the monthly Ginnie Mae issuer outreach call this week, Ginnie officials announced that they will ... [Includes three briefs]

Ten previously optional fields on the FHA’s TOTAL Scorecard will be required with the release of TOTAL Scorecard Version 3.0. Some pending applications will be “grandfathered” under the previous TOTAL Scorecard requirements for 90 days. The new required fields are: borrower paid closing costs, current housing expenses, gift letter amount, gift letter source, required investment, total closing costs, total fixed payment, seller concessions, downpayment and condominium indicator. The new version of the scorecard ...

The Department of Agriculture issued a final rule last week to implement a new annual fee for the Rural Housing Service Section 502 Single Family Housing Guaranteed Loan Program. The fee applies to all RHS Section 502 loans with a conditional commitment dated on or after Oct. 1, 2011. The fee for fiscal year 2012 is 0.3 percent and the USDA noted that the fee for subsequent years is subject to change, with a fee of up to 0.5 percent allowed. The fee – along with the up-front guarantee fee already charged by the USDA ...

The VA’s use of residual income to qualify borrowers for mortgages should be incorporated in the ability-to-repay rules for qualified mortgages, according to some industry participants. Lender trade groups and consumer advocates each suggested the standards last week in comments submitted to the Consumer Financial Protection Bureau. In June, the CFPB sought comments on the relation between debt-to-income ratios and borrower performance. “Residual income standards supersede DTI in the VA’s underwriting decision tree ...