The Department of Justice’s recent civil lawsuit against Bank of America/Countrywide over allegedly defective loans sold to Fannie Mae and Freddie Mac is a clear sign of the government’s more aggressive use of the False Claims Act and the 1989 thrift bailout law to target not only participants in government loan programs but any lender who sold loans to the government-sponsored enterprises, according to industry lawyers. Filed last week by the U.S. Attorney for the Southern District of New York, the suit is another example of the government’s increasingly aggressive effort to recoup taxpayer losses from the financial meltdown and to remind potential violators of the significant whistleblower provisions in the FCA and the Financial, Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA), noted the Washington, DC, law firm BuckleySandler. The DOJ is following...

Smaller mortgage lending institutions remain apprehensive about their legal liability when it comes to originating qualified mortgages under the CFPB’s pending QM/ability-to-repay rule, and hope they’ll get a full safe harbor. Recent talk has mounted that the bureau is considering a two-tier approach to its QM rule: a safe harbor for mortgages that will be defined as “prime,” and the lesser rebuttable presumption for subprime or nonprime. Elizabeth Eurgubian, vice president and regulatory counsel for the...

Last week, the Department of Justice raised eyebrows in a $1 billion legal action against Bank of America as successor to Countrywide Financial by filing the first civil fraud suit alleging violations of the False Claims Act and the Financial Institutions Reform, Recovery and Enforcement Act in the sale of mortgages to Fannie Mae and Freddie Mac. The federal government asserts that since the Treasury Department has had to bail out Fannie and Freddie, approximately $1 billion in losses suffered by the companies...

The mortgage lending industry told the CFPB that limiting the upfront points and origination fees borrowers pay to the providers of mortgage credit could inadvertently harm the market and the borrowers who are the intended beneficiaries. The American Bankers Association said in a comment letter to the bureau that “the overly stringent Dodd-Frank Act prohibitions that ban borrowers’ options to pay upfront points and origination fees to creditors will greatly damage the availability of financing alternatives for consumers.”...

Representatives of the mortgage lending and financial services industries jointly told federal regulators they strongly support efforts to prevent property “flipping,” but they are also concerned that the regulators’ proposed rule to implement requirements for property appraisals in connection with “higher-risk mortgage” loans might be far too complicated. “[T]he main complexity of the proposed rule relates to the fact that Congress defined higher-risk mortgages based on the spread of the annual percentage rate (APR) over...

Lender and financial services industry representatives, commenting on the CFPB’s recently released five-year strategic plan, called for clear, comprehensive guidance to the industry along with enough time to ensure full compliance, given the sheer volume of all the other rulemakings being promulgated in the wake of the financial crisis. The American Financial Services Association, the Consumer Mortgage Coalition and the Mortgage Bankers Association said they were pleased that the first goal in the strategic plan is to prevent...

Last week, the CFPB released a report entitled, “The Next Front? Student Loan Servicing and the Cost to Our Men and Women in Uniform,” outlining the unique servicing obstacles reported by U.S. military service members seeking to pay off student loan debt. “Since I began this job almost two years ago, I’ve visited over 40 different military installations – talking to senior leaders, military service providers and thousands of service members and spouses,” said Holly Petraeus, head of the bureau’s Office...

Competing special servicers Ocwen Financial and Walter Investment Management worked together this week to outbid Nationstar Mortgage to acquire Residential Capital’s mortgage servicing rights and origination platform at a bankruptcy auction. And Berkshire Hathaway won a separate auction for ResCap’s whole-loan portfolio. After approval by the bankruptcy court, Ocwen would handle 86.5 percent of the $374.0 billion ResCap MSRs with Walter acquiring $50.4 billion in Fannie Mae MSRs along with ResCap’s ...

FHA loan originations, driven largely by streamline refinancing, increased 5.3 percent to $60.9 billion in the third quarter of this year, the highest level it has been in almost two years, according to Inside FHA Lending’s latest analysis of FHA data. The third-quarter volume reflected an upward trend that began in the first quarter with nearly $48.5 billion in total FHA single-family production and which later rose to $57.8 billion in the second quarter. The last highest point in FHA production was in the fourth quarter of 2010 when ... (2 charts)

New pool level data issued by Ginnie Mae reveal a rising share of FHA-insured loans that have refinanced with grandfathered mortgage insurance premiums (MIP) in new Ginnie Mae mortgage-backed securities issuances, according to analysts. Of particular interest to investors is the share of borrowers with existing FHA-insured home loans who took advantage of an opportunity to refinance on advantageous terms under the FHA Streamline Refinance program, said analysts at Bank of America Merrill Lynch. Under the revised rules of the FHA Streamline Refi program, FHA-insured mortgages endorsed before June 1, 2009, were ...