Despite buying back some $5.4 billion in mortgages during the third quarter of 2011, mortgage lenders made only a small dent in the huge number of unresolved disputes with Fannie Mae and Freddie Mac over representations and warranties. According to third-quarter financial reports from the government-sponsored enterprises, Fannie and Freddie still had a whopping $12.2 billion of outstanding repurchase claims as of the end of September. That was down only slightly from the $12.7 billion in unresolved buybacks at the midway point in the year. The GSEs reported that seller-servicers...(Includes one data chart)

The Consumer Financial Protection Bureau will follow the practice of other federal regulators by providing advance notice of potential enforcement actions to individuals and firms under investigation. The bureau said its Early Warning Notice process allows the subject of an investigation a chance to respond to any potential legal violations that CFPB enforcement personnel believe have been committed before the agency ultimately decides whether to initiate legal action. But there are no guarantees. “The decision whether to give such notice is discretionary, and a notice may not be appropriate in some situations, such as in...

Delays, staff shortages and changes in leadership have put a damper on FHA efforts to identify risks in its single-family mortgage insurance programs, which could affect its ability to minimize financial risks, according to the Government Accountability Office. In a report to the chairman and the ranking minority member of the Senate Banking, Housing and Urban Affairs Committee, the GAO concluded that while the FHA has taken steps to assess credit and operational risks, the assessment strategy is not comprehensive. The risk assessment efforts are not integrated, and the FHA lacks annual assessments and mechanisms to...

The Obama administration’s refinance program for underwater mortgages got a much-publicized jolt of expanded guidelines that could stimulate new business, but the older Home Affordable Modification Program appears to be slowing down. An Inside Mortgage Finance analysis of recently released HAMP data reveals that only 74,630 new trial mods were started under the program during the third quarter. That was down 7.1 percent from the second quarter and represented the lowest number since the program began. Although there was an 11.8 percent increase in...(Includes one data chart)

The U.S. Supreme Court will determine whether disparate impact claims can be applied to the Fair Housing Act and lending discrimination cases by reviewing a Minnesota case involving rental housing. Although many fair lending cases based on disparate impact have been brought and settled over the years, the standard has not been universally interpreted by federal appeals courts. In Magner v. Gallagher, private landlords sued the city of St. Paul, MN, for enforcing its housing code, leading to claims by the landlords that shutting down their properties made it too difficult for minority renters to find...

Despite its fairly impressive success rate in fending off hostile litigation, MERSCorp and its Mortgage Electronic Registration Systems remain popular targets. This time around, it’s Delaware Attorney General Beau Biden filing suit in Delaware Chancery Court against them, alleging repeated violations of the state’s Deceptive Trade Practices Act. “Since at least the 1600s, real property rights have been a cornerstone of our society,” said AG Biden. “MERS has raised serious questions about who owns what in America. A man or woman’s home is not just his or her largest investment, it’s their castle. Rules matter. A homeowner has the obligation to pay the mortgage on time, and lenders must follow the rules if they are seeking to take away someone’s house through foreclosure. The honor system won’t work.”

The nation’s five largest mortgage servicing companies now face a tab of $25 billion to bring to a conclusion the long-running negotiations with the state attorneys general over industry foreclosure practices, according to published reports of the latest behind-the-scenes developments. The deal with the big five servicers – Ally Financial Inc., Bank of America Corp., Citigroup Inc., JPMorgan Chase & Co. and Wells Fargo & Co. – is now said to include $5 billion in cash penalties, along with the requirement to produce $3 billion in mortgage refinances. Other aspects of the settlement are said to include principal reductions and other forms of aids to struggling homeowners. The top servicers would be released from certain claims having to do with loan servicing and origination, according to the reports – but to what extent exactly remains unclear. And there would be no release from claims related to mortgage securitization.

Last week, the 14 mortgage servicers covered by the enforcement actions taken by the banking regulators in April 2011 began mailing letters to eligible borrowers that explain how to request a review of their case if they believe they suffered financial injury as a result of errors, misrepresentations or other deficiencies in foreclosure proceedings related to their primary residence between Jan. 1, 2009, and Dec. 31, 2010. Borrowers may also visit www.IndependentForeclosureReview.com for more information about the review and claim process. Assistance with requesting a review and answers to questions about the process are available. Requests for review by the servicers’ independent consultants must be received by April 30, 2012. As part of the enforcement actions taken by the Federal Reserve, the Office of the Comptroller of the Currency and the Office of Thrift Supervision, the servicers had to correct deficiencies in their servicing and foreclosure processes and to enlist independent firms to conduct a multi-faceted independent review of foreclosure actions taken during 2009 and 2010.

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.

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.