The Federal Housing Finance Agency will employ a new, more comprehensive examination rating system which would be used to inspect Fannie Mae, Freddie Mac, the Federal Home Loan Banks and the Banks’ Office of Finance under a final rule issued earlier this month. The new system, published in the Nov. 13 Federal Register, will implement a single risk-focused examination system for all three entities that would be similar to the “CAMELS” ratings used by federal prudential regulators for depository institutions.

For the third time in as many months, a federal judge has summarily dismissed a securities class action lawsuit against a former Fannie Mae executive. U.S. District Judge Richard Leon threw out the case against Leanne Spencer, Fannie’s former controller, brought nearly a decade ago by investors hoping to recover damages. Two Ohio pension funds – the Ohio Public Employees Retirement System and the State Teachers Retirement System of Ohio – filed suit in 2004 related to a $6.3 billion overstatement of earnings against Fannie and three former GSE executives, including CEO Franklin Raines.

Fannie Mae and Freddie Mac earlier this month announced new, synchronized requirements regarding the management of law firms for default servicing, bankruptcies, foreclosures and related litigation involving mortgages owned or guaranteed by the two GSEs. Effective June 1, 2013, Fannie’s and Freddie’s servicers will be allowed to choose their own attorneys, create their own processes for managing foreclosure processing and maintain direct relationships with their law firms. The new rules also require servicers to establish procedures to manage and monitor all aspects of the law firm’s performance and compliance with applicable requirements. Upon request, servicers will be required to perform a due diligence review and notify the GSEs of the result.Fannie’s and Freddie’s new rules were issued at the direction of the GSEs’ conservator, the Federal Housing Finance Agency. The directive comes more than a year after the FHFA’s Office of Inspector General dinged the agency for lax oversight of the GSEs and problems involving improper foreclosure practices with their affiliated law firms.

A law professor says there is no quick solution to the mortgage industry’s foreclosure mess and the resulting legal chaos, but moving to a single electronic note/mortgage transfer system would solve much of what caused the crisis to begin with. “Massive originations of mortgage loans relying on the sell-to-distribute model, followed by massive foreclosures, have led to chaos in the legal processes to track who may foreclose and sell homes,” said Alan White, professor of law at Valparaiso Law School ...

The former chief executive of DocX admitted to her role in a fraud scheme that duped servicers and relied on forged signatures and employees that could sign thousands of mortgage-related instruments a day. Lorraine Brown pled guilty to charges from the Department of Justice of conspiracy to commit mail and wire fraud. “She was responsible for more than a million fraudulent documents entering the system, directing company employees to forge and falsify documents relied on by property recorders ...

The conforming mortgage market continued to dominate new loan originations during the third quarter of 2012, accounting for a whopping 85.7 percent of the period’s robust $475 billion in new originations, according to a new Inside Mortgage Finance analysis and ranking. The conforming market – which includes loans with government insurance and conventional mortgages up to the eligible loan limit for Fannie Mae and Freddie Mac – represented 84.5 percent of new originations in 2011. During 2010, the conforming market accounted for a record 90.1 percent of new loan production. The jumbo sector made...[Includes two data charts]

Federal Reserve Chairman Ben Bernanke late last week reiterated his view that tight underwriting standards set by lenders are hindering a broader recovery of the housing market. Lenders, meanwhile, cite concerns with repurchases and regulatory uncertainty. Bernanke noted that low home prices and historically low interest rates have not prompted the “powerful housing recovery” that has typically occurred in the past after housing problems. “Unfortunately, while some tightening of the terms of mortgage credit was certainly an appropriate response to the earlier excesses, the pendulum appears to have swung too far, restraining the pace of recovery in the housing sector,” he said. More than half of the lenders that responded to the Fed’s senior loan officer opinion survey earlier this year said...

The recent actuarial report that showed the FHA’s insurance fund is underwater to the tune of $16.3 billion ought to sound an alarm for policymakers to refocus the agency on its original public mission, some leading policy experts say, and perhaps even motivate them to resolve Fannie Mae and Freddie Mac while they’re at it. “I think FHA’s financial condition is extremely precarious – much worse than FHA and HUD are making it out to be,” said long-time critic Edward Pinto, a resident fellow at the American Enterprise Institute, a conservative think tank in Washington, DC, and a former official at Fannie Mae. As he sees it, today’s very low interest rate environment means the economic value of FHA’s forward mortgage fund really is a far worse at a negative $31 billion. “And when you throw in the negative on the reverse [mortgage] program, you get close to $35 billion.” Compounding the problem is...

The CFPB and the Federal Trade Commission last week issued warning letters to approximately a dozen nonbank mortgage lenders and brokers about potentially misleading advertisements geared towards military veterans and older Americans that could be in violation of the 2011 Mortgage Acts and Practices Advertising Rule. The so-called MAP rule prohibits misleading claims concerning government affiliation, interest rates, fees, costs, payments associated with the loan, and the amount of cash or credit available to the...

In what may prove to be the first of many announcements dealing with the January 2013 mandate for changes under the Dodd-Frank Wall Street Reform and Consumer Protection Act, the CFPB has decided to give the mortgage lending industry extra time to implement certain new required consumer disclosures. Per the CFPB’s announcement in a new final rule, mortgage lenders will not be required to provide those disclosures until after the bureau’s other previously proposed mortgage disclosure rules are finalized...