Last month’s surprise move by the Treasury Department to revise the preferred stock purchase agreements with Fannie Mae and Freddie Mac definitively settles the question of “when” not “if” the two government-sponsored enterprises are to be wound down but it also removes any remaining sense of urgency to push a legislative solution to GSE reform, according to industry analysts. On Aug. 17, Treasury announced it will require Fannie and Freddie to turn over any profits they earn to the government. Rather than continue to borrow from the Treasury to make a 10 percent dividend payment to the Treasury, the revised PSPA implements a “full income sweep” of GSE profits. Additionally, Treasury’s announcement calls...

One of the most worrisome elements to emerge so far in the Consumer Financial Protection Bureau’s proposed rule on mortgage loan originator compensation is the agency’s consideration of factors that may serve as proxies for prohibited transaction terms and how they may be used to restrict originator compensation. The CFPB proposal would implement statutory changes made by the Dodd-Frank Act to the Truth in Lending Act/Regulation Z loan originator compensation rule, including a new, additional restriction on the imposition of any upfront discount points, origination points or fees on consumers under certain circumstances. The proposal provides...

$7.5 Million FHA Mortgage Fraud Scheme. The Department of Justice has filed charges against top executives of a real estate brokerage for their participation in a mortgage fraud scheme that may cost the FHA $7.5 million in losses. Indictments were unsealed earlier this month in Manhattan federal court charging Mitchell Cohen and Erin Davis, the owner and sales manager, respectively, of Buy-A-Home, a real estate brokerage business in Queens, NY. The criminal charges follow a civil fraud lawsuit filed by the U.S. Attorney’s Office for the Southern District of New York last December against ...

The recent enactment of the Honoring America’s Veterans and Caring for Camp Lejeune Families Act of 2012 includes a number of changes to the Department of Veterans Affairs’ Loan Guaranty program, including reverting to the VA’s previous method of calculating maximum guaranty. The restoration of the previous method used to derive VA loan limits has resulted in the increase of some loan limits, according to guidance issued by the agency last week. While VA does not have a maximum loan amount, “county limits” must be used to calculate the maximum VA guaranty for a particular county. The maximum VA loan limit for 2012 in high-cost areas is ...

The Senate Finance Committee recently approved legislation by a bipartisan vote of 19-5 to extend tax relief for principal forgiven on a mortgage, which is set to expire at the end of this year, and restore the mortgage insurance deduction that expired at the end of 2011. The “Family and Business Tax Cut Certainty Act of 2012” approved by the Senate Finance Committee would extend both tax breaks through 2013. Prospects for the legislation are murky, according to industry analysts, as Republicans are working to limit the extension of certain tax breaks. “This markup is not...

The top priority in any effort to revamp, reform or otherwise reduce risk in the $1.8 trillion tri-party repurchase or repo market should be to clearly determine “who’s in charge from a federal perspective,” according to a top Senate Democrat. In holding this week’s hearing of the Senate Banking Subcommittee on Securities, Insurance and Investment, Chairman Jack Reed, D-RI, said the government needs to defuse potential risk to the tri-party repo credit market for funding as an act of emergency preparedness rather than allow another financial crisis, such as what crippled the market in 2008. “One of the lessons we learned...

A proposal by Sen. Jeff Merkley, D-OR, to help refinance non-agency borrowers with negative equity has support from the Obama administration and could begin tests without action from Congress. The proposed “Rebuilding American Homeownership” has been characterized as a Home Affordable Refinance Program for non-agency mortgages. “I think the policy is very good; it’s very well designed,” Treasury Department Secretary Timothy Geithner said in testimony last week before the Senate Committee on Banking, Housing and Urban Affairs ...

A large-scale refinance program proposed by Sen. Jeff Merkley, D-OR, would rely on a “risk transfer fee” for lenders and require participating lenders to consider all potential borrowers for the program. The “Rebuilding American Homeownership” program has support from the Obama administration, though analysts suggest approval from Congress is unlikely. Merkley recently proposed the RAH program to help “virtually all” non-delinquent borrowers with negative equity to refinance into a mortgage with a lower interest rate. The program could be based on a one-time federally-backed structure, similar to the Home Owners’ Loan Corp. established by the federal government during the Great Depression. The RAH trust would sell...

The American Securitization Forum opposes the notion of revising the federal bankruptcy code to enable overburdened student loan borrowers to lighten their debt loads, one of the suggestions in a new report on the state of private student loans that was released by the Consumer Financial Protection Bureau and the U.S. Department of Education. “The ASF continues to support strong underwriting standards and fully transparent disclosure to borrowers. At the same time, the ASF opposes reopening the bankruptcy code to allow borrowers to reduce or eliminate their student loan debt,” said ASF Executive Director Tom Deutsch. “Such action would eliminate educational opportunities for a broad swath of borrowers, as lenders would be less willing to offer loans, thereby curtailing credit availability.” Currently, consumers generally cannot discharge...

A bill introduced in the House earlier this month would allow privately-insured credit unions access to the Federal Home Loan Bank system for the first time. H.R. 6105, introduced by Rep. Steve Stivers, R-OH, would amend the Federal Home Loan Bank Act to allow non-federally-insured credit unions to become members of one of the 12 FHLBanks. Currently, only federally insured credit unions can access the FHLBanks’ low-cost, secured funds, and certain requirements must be met.