Fair lending, along with unfair, deceptive and abusive acts and practices (UDAAP), will become increasingly significant and potentially more problematic for the mortgage lending community as regulators at the Consumer Financial Protection Bureau pay more attention to such issues going forward, a top consultant told industry representatives last week. “The keys for mortgage lending, from the enforcement side, are going to be fair lending – the Community Reinvestment Act and fair lending have become very entwined – and UDAAP,” said Jo Ann Barefoot, co-chair of Treliant Risk Advisors and former deputy comptroller of the currency, to attendees of a mortgage regulatory conference sponsored in the nation’s capital by SourceMedia.

The 14 mortgage servicing firms hit by the enforcement actions brought by the Federal Reserve and the Office of the Comptroller of the Currency can expect to see soon a new process by which individual borrowers facing foreclosure can request an independent review, outgoing Acting Comptroller of the Currency John Walsh told industry representatives last week. “As we explored the best means of ensuring that injured homeowners had the opportunity to seek relief, it became clear that what was needed was a robust, transparent and accessible complaint process that will give borrowers the opportunity to request an independent foreclosure review,” Walsh said at a mortgage regulatory forum sponsored by SourceMedia. “I’m happy to say in the next several weeks you’ll see the roll out of just such a process.”

Top lender groups are asking the Consumer Financial Protection Bureau to provide a little more clarification to its recent interim final regulation on alternative mortgage transactions, particularly when it comes to the definition of such a transaction. The American Bankers Association and the Mortgage Bankers Association both support the CFPB’s inclusion of renegotiable rate balloon and shared appreciation mortgages within the AMT definition. However, they both asked that some of the reg’s commentary be clarified to explicitly state that preferred rate loans with fixed rates and price level adjusted mortgages, otherwise considered “variable rate transactions,” also be identified as examples of alternative mortgage transactions.

Certain elements of the Dodd-Frank Act such as the new standard related to unfair, deceptive and abuse acts and practices (UDAAP), along with the Federal Reserve’s “ability to repay” provisions proposal, present “significant litigation risk” to lenders, a top litigation attorney told industry representatives early this week. Speaking to attendees at the Mortgage Bankers Association’s regulatory compliance conference in Washington, DC, on Sunday, Andrew Stutzman, a partner with Stradley, Ronon, Stevens & Young LLP, said, “I’m very troubled by Dodd-Frank in many respects. I think it … and the regulations that are coming out and have come out – the Fed’s ability-to-repay proposal – are extremely complicated and extremely confusing.”

Among the sensitivities associated with the mortgage industry’s foreclosure struggles, none is more fraught with headline risk and the potential for political pressure than foreclosing on an active-duty servicemember of the U.S. military, a top industry attorney told compliance officials this week. “It’s bad enough when you get it wrong on a regular foreclosure action, but when you get it wrong for one of our servicemembers, that’s really where you’re going to have a reputation killer,” Leah Getlan, assistant general counsel at Capital One, told attendees this week at the Mortgage Bankers Association’s annual regulatory compliance conference in the nation’s capital. “I have seen it from time to time, but thankfully, not that often.”

The Consumer Financial Protection Bureau may be making substantial progress on its integrated consumer mortgage disclosure form, but the land title sector is concerned the prototype products generated to date are inadequate when it comes to the disclosure of specific settlement costs. The American Land Title Association told the bureau that the CFPB’s Know Before You Owe project has successfully identified ways to improve the disclosure of loan costs by making them more transparent. However, suggestions for how to disclose some settlement costs, in particular title insurance and attorney fees, have not reached a desired level of transparency and lack the necessary flexibility to avoid consumer confusion.

New Jersey. In northern New Jersey, 8 percent of mortgages are in foreclosure – twice the share for the United States as a whole, according to a new regional mortgage brief prepared by the Federal Reserve Bank of New York. An additional 4 percent of northern New Jersey mortgages are at least 90 days delinquent, the point at which a foreclosure filing can be initiated. “Combined, 12 percent – or about one in eight mortgages – are seriously delinquent,” the Fed said. “By comparison, the pre-crisis share of mortgages seriously delinquent in this region was less than 2 percent.” But flows of mortgages into foreclosure and delinquency are down from their peak levels, although still considerably up from pre-crisis levels. However, the pool of mortgages already in foreclosure continues to grow because there are more loans entering the foreclosure process than there are loans completing the process each month. Foreclosures are lengthy, often taking many months or even years.

While it will be nice if it materializes, MBS market watchers are taking a wait-and-see posture to the Federal Housing Finance Agency’s professed intention to explore new and alternative methods of sharing Fannie Mae and Freddie Mac’s credit risk with the private sector. In a speech early this week, FHFA Acting Director Edward DeMarco outlined efforts his agency is taking to ramp up private market discipline while reducing Fannie’s and Freddie’s risk to taxpayers. “The FHFA will be considering a number of alternatives, such as expanded use of mortgage insurance and securities structures that allow for...

The Securities and Exchange Commission this week approved a proposed conflict-of-interest rule that attempts to walk a tightrope between preventing abusive securitization practices and not interfering with legitimate competitive activity in the market. The agency got a lot of feedback on how to implement the Dodd-Frank Act conflict-of-interest provisions, including from the chief sponsors of the provisions in Congress. Senate Democrats Jeffrey Merkley (OR) and Carl Levin (MI) were largely inspired by dealings in which Goldman Sachs allegedly allowed a hedge fund to choose assets for a collateralized debt obligation and then...

Recent proposals by the Securities and Exchange Commission could eliminate or impose more regulatory burden on mortgage real estate investment trusts and complicate securitizations, experts warned. The SEC earlier this month launched a preliminary effort to reconsider the exemption that REITs currently have from the Investment Company Act. Although the agency did not propose any specific changes, the REIT industry and its supporters see the initiative as a potential game-changer for how they do business. The SEC concept release, at first blush, appears to “signal impending regulatory burdens for mortgage REITs and to...