State attorneys general and federal officials this week announced a massive legal settlement with five major mortgage servicers, finally concluding a torturous 16-month-long negotiation. Some 49 states – including New York, California and Florida – agreed to the $25 billion settlement with JPMorgan Chase, Bank of America, Wells Fargo, Ally Bank and Citigroup. The agreement does not provide blanket immunity for the lenders, which can still face criminal charges and are subject to claims over securitization practices and claims brought by individual borrowers. The agreement is based on investigations by...

The newly announced $25 billion settlement over foreclosure servicing practices is not expected to have much impact on MBS investors because most of the principal reductions that the five banks agreed to make will involve unsecuritized mortgages they hold in portfolio. The settlement involves all states except Oklahoma, two federal agencies and five major servicers, and requires the banks to “work off up to $17 billion in principal reduction and other forms of loan modification relief nationwide,” according to a summary of the agreement. Although the actual settlement had not been released as...

Six financial services trade associations presented the mortgage lending industry’s views to the Department of Housing and Urban Development regarding the agency’s proposed rule to implement a disparate-impact legal standard under the Fair Housing Act. One of their arguments was that HUD should postpone its rulemaking pending the United States Supreme Court’s disposition of Magner v. Gallagher (No. 10-1032). The primary issue in the case is whether the disparate-impact theory of discrimination applies under the Fair Housing Act or whether plaintiffs have to prove intentional ...

Federal Reserve.Federal Deposit Insurance Corp. Office of the Comptroller of the Currency.National Credit Union Administration. Guidance on Junior Liens Reissued. Federally regulated financial institutions have to monitor all credit quality indicators relevant for home loan borrowers, under guidance that was reissued by the Federal Reserve, the Federal Deposit Insurance Corp., the Office of the Comptroller of the Currency and the National Credit Union ...

Both the Federal Housing Finance Agency and Freddie Mac are refuting a published report suggesting that a mortgage finance vehicle at one time employed by the government-sponsored enterprise was designed to profit the company by preventing homeowners from refinancing. An article published this week by ProPublica and National Public Radio contended that Freddie stood to profit from hedging investments known as inverse floaters that would pay higher returns if interest rates rose and more homeowners remained in mortgages with high interest rates. According to ProPublica, Freddie purchased inverse floaters...

A new proposal by the Obama administration to refinance non-agency mortgages with negative equity could have a major impact on the non-agency market, though approval by Congress appears unlikely. “Borrowers with standard non-GSE loans will have access to refinancing through a new program run through the FHA,” the Obama administration said in a fact sheet released this week. “For responsible borrowers, there will be no more barriers and no more excuses.” The program would require that borrowers ...

The mortgage industry is skeptical about President Obama’s proposal for low-cost, non-agency loan refinancing program, administered by the FHA for current, underwater borrowers. Some industry participants called the plan nothing but smoke and mirrors that would likely create unrealistic expectations. But deceptive or not, the proposal first announced by the president in his State of the Union address promises to be different from the earlier, huge unsuccessful FHA experiments in foreclosure prevention – Hope for Homeowners and FHA Short Refinance programs. The proposed refi plan is a combination of ...

With the recent issuance of streamlined regulations on lender indemnification, mortgagees participating in the FHA Lender Insurance program may increasingly find themselves the targets of HUD enforcement actions. Industry compliance experts anticipate an increase in agency audits and monitoring reviews because of the Department of Housing and Urban Development’s tightening of its indemnification rules. This could raise lenders’ compliance costs as well as legal costs if they find themselves the subject of an enforcement action, experts warned. “At an unprecedented time of change in the mortgage industry ...

The Department of Housing and Urban Development has announced a new regulation prohibiting lenders from using sexual orientation or gender identity as a basis for determining borrower eligibility for FHA-insured mortgage financing. The regulation specifically extends federal anti-discrimination protections to lesbians, gays, bisexuals, transgender persons and their families when applying for HUD-assisted or HUD-financed rental housing or an FHA-insured mortgage loan. The regulations will become effective 30 days after their publication in the Federal Register. HUD Secretary Shaun Donovan said the policy will ...

The National Association of Realtors recently asked the Department of Housing and Urban Development to allow investors to participate in the FHA’s property rehabilitation program. The FHA’s 203(k) Rehabilitation Mortgage Insurance Program allows homebuyers to take out a mortgage to purchase a house, including the cost of its rehabilitation. The program also allows the current owners to finance the rehabilitation of their own homes. Currently, investors and cooperative units are barred from using the 203(k) programs. Individual condominium units may be insured if ...