The Consumer Financial Protection Bureau has proposed procedures it plans to use in exercising its supervisory and enforcement authority over how nonbank consumer financial service companies (like mortgage lenders and mortgage servicers) control their third-party vendors, such as subservicers, foreclosure trustees and law firms, and force-placed insurers. It’s all about controlling the potential risk to consumers. Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, the CFPB has authority to supervise any nonbank that it has “reasonable cause” to determine is posing a risk...

In Hogan v. Washington Mutual Bank, N.A. et al, the Arizona high court has dismissed the ‘show me the note’ claim in foreclosure litigation, throwing out a legal argument often used to block an impending foreclosure. “We granted review to decide whether a trustee may foreclose on a deed of trust without the beneficiary first having to show ownership of the note that the deed secures,” explained Arizona Supreme Court Chief Justice Rebecca White Berch. “We hold that Arizona’s non-judicial foreclosure statutes do not require the beneficiary to prove its authority or...

Last week, the Federal Reserve Board put out action plans for Citigroup and HSBC Finance Corp. to correct deficiencies in their residential mortgage loan servicing and foreclosure processing. These enforcement actions require the mortgage servicing subsidiaries to provide appropriate remediation to borrowers who suffered financial injury as a result of errors by the servicers. The Fed also released the engagement letter between Ally Financial Inc. and its independent consultant to review foreclosures that were in the firm’s pipeline in 2009 and 2010...

The U.S. Court of Appeals for the 11th Circuit recently reversed and remanded a lower court’s rejection of a Fair Debt Collections Practices Act claim, determining in Reese v. Ellis, Painter, Rattertree & Adams, LLP that the contents of a “dunning” notice from the lender’s foreclosing law firm amount to an effort to collect a debt under the act. In this case, the borrowers, Izell and Raven Reese of Roswell, GA, purchased a piece of property in 2004 with the help of a $650,000 loan from Provident Funding Associates, LP. To get that loan, the Reeses signed a promissory note and...

With his home state of Nevada leading the nation in foreclosures, Republican Sen. Dean Heller has introduced legislation that seeks to simplify and speed up the short-sale process via an amendment to the Truth in Lending Act. Heller has recently introduced SB 3177, the Stopping Ongoing Lender Delays Act (or SOLD Act). His legislation would require each servicer of a home mortgage to respond in writing within 30 calendar days to a mortgagor of a residential mortgage loan who has requested in writing a short sale of the dwelling or residential real property that is subject to the mortgage...

Improved subprime performance and a lack of new originations have prompted major nonbank firms involved in subprime servicing to expand their portfolios with acquisitions of nonperforming agency mortgages. Ocwen Financial, Nationstar Mortgage and Walter Investment Management, among others, have all recently acquired large volumes of nonperforming agency mortgages. An estimated $525.0 billion in subprime mortgages were outstanding as of the end of the first quarter of 2012, according to an Inside Nonconforming Markets analysis ... [Includes one data chart]

Residential Capital’s bankruptcy filing last week was part of an effort to settle repurchase claims sought by non-agency mortgage-backed security investors. In conjunction with the bankruptcy, 17 institutional investors agreed to an $8.7 billion claim that will need approval by the court and is unsecured, suggesting that the final settlement payout could be much lower. ResCap is a subsidiary of Ally Financial. Michael Carpenter, CEO of Ally, said the bankruptcy gives Ally further distance from “very large” rep and warrant claims ...

While non-agency mortgage-backed security investors did not file a formal challenge to the $25.0 billion servicing settlement, they remain concerned with the implementation of principal forgiveness loan modifications. The latest qualms were raised last week in a letter to Shaun Donovan, secretary of the Department of Housing and Urban Development, from Sens. Sherrod Brown, D-OH, and Bob Corker, R-TN. “Because any settlement could dramatically affect [pension funds and retirement funds], their managers should ...

The still-developing market for real estate-owned property rentals is starting to get crowded. A number of firms have formed in recent weeks hoping to benefit from low prices on REO properties. Homebuilder Beazer Homes announced this month that it formed a private real estate investment trust to acquire, refurbish and lease single-family homes on a large scale in select markets. Beazer Pre-Owned Rental Homes was arranged by affiliates of Kohlberg Kravis Roberts & Co. and has approximately $85 million in funding ...

Although mortgage delinquency rates have improved in recent quarters, industry participants say there are still plenty of opportunities to buy and sell distressed mortgages. Some $400 billion in nonperforming residential mortgages remain on U.S. banks’ balance sheets, according to estimates by officials at PennyMac Mortgage Investment Trust. “I don’t think we’ve come near working through this,” said Kevin Lahr, director of valuation services at Digital Risk. “We’re halfway through this, maybe.” Speaking at ...