The Federal Housing Finance Agency late last month announced a number of changes to the federal government’s Home Affordable Refinance Program for underwater borrowers with mortgages from Fannie Mae and Freddie Mac. But one important little detail that escaped the attention of many has to do with the borrower loss of non-recourse loan protections for borrowers who refinance. Millions of Americans live in states that have such protections that could keep them from being personally liable in the event of a default. But in many of these states, refinancing removes those protections – enabling a lender to pursue tens or hundreds of thousands of dollars more than they would legally have been entitled to without the refinance.

Treasury Special Advisor Raj Date, the acting head of the Consumer Financial Protection Bureau, told lawmakers last week that the bureau will begin a review later this month of the federal regulations it inherited that affect consumers and financial firms to identify those that may be “obsolete, unnecessary, redundant or counterproductive.” The goal is to update and streamline the regulations, Date told the House Financial Services’ Financial Institutions Subcommittee during a hearing on the first 100 days of the CFPB. “One of the bureau’s central responsibilities is to identify and address outdated, unnecessary or unduly burdensome regulations,” the agency chief said. “The bureau has a unique opportunity to streamline and simplify rules to ensure that they are truly making consumer financial markets work better.”

The prototype mortgage disclosure forms that the Consumer Financial Protection Bureau has been testing are getting generally positive responses for their content and overall design. But they aren’t well suited for the ways in which consumer shopping is adapting to modern technology, according to the Consumer Mortgage Coalition. “Recently, software available on mobile web access devices such as smartphones and tablets has streamlined the home and mortgage shopping process,” the CMC pointed out in its comments on round 5 of the CFPB’s integrated consumer mortgage disclosure project. “This technology is evolving rapidly ... [and] the amount of information available to consumers will continue to increase rapidly in the future.” Given this reality, it does not appear that the Loan Estimate disclosure will be used as a shopping tool because the consumer will have finished shopping by the time they apply for a loan.

Last week, the Consumer Financial Protection Bureau again asked for industry and public input – this time as it works to collect information for the development and testing of new and existing model forms, disclosures, tools and similar related materials. “The core objective of the data collection is to help identify, evaluate, and refine specific features of the content or design of the model forms, disclosures, tools, and other similar related materials to maximize communication effectiveness while minimizing compliance burden,” the bureau said in its notice in the Nov. 2, 2011, Federal Register. The CFPB plans to gather qualitative data through a variety of methods to inform its staff’s design, development and implementation of the model forms, using an iterative process to improve the draft forms

California. The state Department of Real Estate has put into play new rules on disciplinary actions against real estate licensees, effective Oct. 26, 2011. The rules establish the authority by which the DRE can issue an order of suspension or debarment per the Business and Professions Code. They also make clear that an individual who receives a notice of intention to issue an order of suspension or debarment cannot engage in any real estate-related business activity that is regulated under the authority of Division 4 of the state BCP. Further, anyone debarred is prohibited from engaging in any real estate-related business activity of a finance lender or residential mortgage lender. The new rules also require real estate brokers to vet their employees and regular business associates who participate in real estate-related business to ensure they are not subject to an order of suspension or debarment.

The Financial Crimes Enforcement Network.GSE anti-money laundering, SARs reporting proposed. The Financial Crimes Enforcement Network proposed regulations that would require Fannie Mae, Freddie Mac and the Federal Home Loan Banks to develop anti-money laundering programs and file suspicious activity reports with FinCEN. The government-sponsored enterprises currently file fraud reports with their regulator, the Federal Housing Finance Agency, which then files SARs with FinCEN when the facts in a particular fraud report warrant a SAR under FinCEN’s reporting standards.

A white paper put together by a researcher at the Federal Reserve looks into what determines whether federal and state supervisors examine state banks independently or together. The results suggest that supervisors coordinate examinations in order to support states with lower budgets and capabilities and more banks to supervise. “I find that states with larger budgets examine more banks independently, that they accommodate changes in the number of banks mostly through the number of examinations with a federal supervisor and that, when examining banks together, state banking departments that have earned quality accreditation are more likely to write conclusion reports separately from federal supervisors,” researcher Marcelo Rezende said. The results also indicate that regulation affects supervision by changing the characteristics of banks. “Independent examinations decrease with branch deregulation, which is consistent with the facts that this reform consolidated banks within fewer independent firms and that state and federal supervisors are more likely to examine large and complex institutions together,” said Rezende.

The servicing settlement being negotiated between state attorneys general and major banks will likely require principal reduction via loan modifications and possibly refinances. Principal reduction, however, will likely only be required for certain mortgages held in bank portfolios. The Federal Housing Finance Agency has refused to allow principal reduction on mortgages serviced for the government-sponsored enterprises. Non-agency mortgage-backed security investors, meanwhile, have been more accepting of principal reduction of late but the vast majority of such mod activity is already concentrated on portfolio loans. ...

Ratings by DBRS of new non-agency mortgage-backed securities will include analysis of several factors at the metropolitan statistical area level. The new rating methodology and loss model were released last week without substantive changes from the proposal the rating service issued in October. “The experience of the last decade has made it apparent that it is not credible to consider loan performance without factoring in house prices and unemployment rates,” DBRS said. ...

Non-agency investors will not support new mortgage-backed securities until lenders and issuers establish stringent standards for originations and securitization, according to industry participants. “You’re going to need something to convince people – at least in the top tier – that their credit risk is pretty low,” David Lukach, a partner and head of the U.S. structured finance group at PricewaterhouseCoopers, said at a discussion hosted by the Securities Industry and Financial Markets Association last week. ...