The number of loans potentially subject to strict rules for “high-cost” mortgages would dramatically increase, based on a proposal last week by the Consumer Financial Protection Bureau. However, because so few lenders actually originate loans subject to Home Ownership and Equity Protection Act requirements, the CFPB said it believes that such loans will continue to constitute a small percentage of mortgage originations. The CFPB proposed expanding the high-cost definition to include essentially all closed-end mortgages and ...

Manipulation of the London Interbank Offered Rate could have resulted in lower interest rates for subprime ARM borrowers, according to Laurie Goodman, a senior managing director at Amherst Securities Group. Interest rates on close to 80.0 percent of subprime ARMs outstanding in May were linked to LIBOR, according to data from Lender Processing Services, whose data covers about two-thirds of outstanding mortgages. As of the end of May, 70.3 percent of eligible second liens have received a modification via ... [Includes six briefs]

The U.S. Department of Justice, the Illinois Attorney General’s office and the Pennsylvania Human Relations Commission struck a $175 million fair lending settlement with Wells Fargo over allegations that minority customers in its wholesale broker channel were steered to higher-cost loans. According to the federal government’s complaint, Wells placed approximately 2,350 African-American and 1,650 Hispanic wholesale borrowers, along with a number of retail borrowers, into subprime mortgages while putting similarly qualified white borrowers into prime loans. As a result, the minority borrowers paid tens of thousands of dollars more for their mortgages, and were subject to possible prepayment penalties and increased risk of credit problems, default and foreclosure. Wells denied all the accusations leveled against it, and suggested that the problem was due to...

Fitch Ratings released revised non-agency MBS surveillance criteria, but most of the changes had been implemented earlier and the updated procedures for reviewing credit ratings are not expected to have a material impact on existing deals. The rating service did note that it is in the process of developing a new nonprime MBS loan loss model that likely will have a negative impact on current ratings. The new nonprime model incorporates a new regression analysis and more conservative rating stress scenarios, Fitch said. The updated surveillance criteria include an updated model for prime MBS that was released in August 2011.

Moody’s Investors Service is warning that the booming market for subprime auto ABS is poised to potentially overheat as growing demand could push lenders to loosen underwriting standards to boost volume, repeating what occurred during the 1990s. A recent Moody’s report cites emerging parallels between the U.S. subprime auto lending mar-ket today and the early 1990s when investor capital flocked into the sector by charging high loan rates while enjoying low funding costs. When the ‘90s lending boom went bust, net losses in subprime auto ABS jumped from under 3 percent in early 1995 to over 10 percent in 1997, according to Moody’s.

House Oversight and Government Reform Committee Chairman Darrell Issa, R-CA, released a report last week that took another look at Countrywide Financial’s “Friends of Angelo” and “VIP Program,” concluding that Countrywide used the latter to lobby policymakers as well as to strengthen its relationship with Fannie Mae. According to the report, Countrywide reached an exclusive agreement with Fannie in 1999 to sell the government-sponsored enterprise billions of dollars in mortgages at a discounted rate. “The agreement led to a period of codependence and mutual growth,” the report noted...

Credit Suisse last week issued its second non-agency MBS backed by prime jumbo loans, structuring slightly higher credit-enhancement levels than those seen on Redwood Trust jumbo deals. As was the case with its first jumbo MBS of 2012, the new Credit Suisse transaction (CSMC Trust 2012-CIM2) is backed largely by loans from the investment portfolio of MetLife Home Loans, which shut down its primary market originations activity early this year. The insurance company will continue to provide reps and warranty guaranties on MetLife loans, which accounted for 85.2 percent of the $425.1 million mortgage...

A subsidiary of Credit Suisse Group issued its second non-agency jumbo mortgage-backed security of the year last week. The transaction was backed by $425.09 million of jumbo mortgages, largely originated by MetLife Home Loans, which ceased originations at the beginning of this year. The privately-placed deal – CSMC Trust 2012-CIM2 – received AAA ratings from Standard & Poor’s and DBRS with credit enhancement of 8.25 percent on the AAA tranche. S&P also placed a AAA rating on CSMC Trust 2012-CIM1, the $741.94 million ...

Redwood Trust completed whole loan sales of jumbo mortgages during the second quarter of 2012, according to Mike McMahon, managing director of the real estate investment trust. Redwood also completed an issuance of a non-agency jumbo mortgage-backed security last week, the third of the year for the REIT. While Redwood’s two most recent non-agency securities have been backed by 30-year fixed-rate mortgages, the whole loan sales consisted of hybrid ARMs, according to McMahon. “We have completed some whole loan sales of ...

Delinquencies on home-equity loans increased in the first quarter of 2012 and industry analysts expect further increases even though first-lien mortgage performance has been improving. The top two holders of HELs have differing strategies on HEL originations, and some smaller banks are also pushing the products. The serious delinquency rate on HELs hit 2.83 percent in the first quarter of 2012, according to the Inside Mortgage Finance Bank Mortgage Database. Delinquencies increased 34.1 percent from the end of 2011 and ...