The federal government this week filed a lawsuit against Bank of America regarding stated income mortgages originated by Countrywide Financial’s former subprime unit and sold to the government-sponsored enterprises in 2007 through 2009. The lawsuit is the first of its kind, though some legal analysts question the strength of the claims. U.S. v. BofA was filed by the U.S. Attorney for the Southern District of New York, the Inspector General of the Federal Housing Finance Agency and the Special Inspector General ...

With the help of consumer advocates, five borrowers filed a class-action lawsuit last week against Morgan Stanley alleging racial discrimination tied to the issuance of subprime mortgage-backed securities. The case appears to be the first to connect securitization and racial discrimination and the first class-action by borrowers against an investment bank. “It literally is the first case of Main Street holding Wall Street accountable for the abuses that happened and the aftermath in the Great Recession,” ...

Republicans in the House will approve a package of legislation to reform the government-sponsored enterprises next year, according to the chief of staff for Rep. David Schweikert, R-AZ. The Arizona lawmaker is also working on a bipartisan bill to establish a framework for the non-agency mortgage-backed security market. Speaking at the ABS East conference sponsored by Information Management Network this week in Miami, Matthew Tully, chief of staff for Schweikert, said GSE reform is a top agenda item for House ...

Rep. David Schweikert, R-AZ, said this week that in the coming months he will introduce bipartisan legislation to establish a regulatory framework for prime non-agency MBS. “I’ve spent the last two years trying to figure out what the box will look like,” he said. Non-agency MBS participants continue to debate whether reform of the government-sponsored enterprises is necessary before the non-agency MBS market can return in a meaningful manner. At the ABS East conference sponsored by Information Management Network this week in Miami, Schweikert said a functioning non-agency MBS market is necessary before members of Congress can be convinced to move forward with GSE reform. “I need to have...

Recent efforts by the government-sponsored enterprises and the Federal Housing Finance Agency to offer clarity and consistency about repurchase demands may or may not bear fruit as neither agency officials nor industry observers can speak confidently as to its ultimate effectiveness. According to participants at an Inside Mortgage Finance webinar this week, the GSE representation and warranty framework unveiled by the FHFA last month and the GSEs’ new quality control guidelines announced last week are steps in the right direction but there are a lot of moving parts to take into account. “We tried the best we could to address...

It increasingly appears that the Consumer Financial Protection Bureau will come out with a qualified mortgage/ability-to-repay rule that will include a legal “safe harbor” for most mortgages – and a “rebuttable presumption” for the rest. Industry attorneys, lobbyists and consumer advocates indicate the CFPB is leaning towards granting a safe harbor for what will be defined as “prime” mortgages – presumably most of the loans that are backed by the federal government. “What we’re hearing is there could be...

The Mortgage Insurance Companies of America urged U.S. banking regulators not to exclude private mortgage insurance as they consider the proposed Basel III risk-based capital framework for the nation’s banks. Commenting on the proposed rules this week, MICA urged regulators to acknowledge the crucial role private mortgage insurance plays in the single-family residential market and recognize it in the proposed capital rules “with a reduced capital charge.” “Exclusion of private mortgage insurance in the proposed rules is a departure from accepted banking practices and would have ‘unintended adverse consequences on housing finance and the broader U.S. economy,’” said Suzanne Hutchinson, MICA executive vice president. Under the proposed U.S. implementation of Basel III, conventional residential mortgages with loan-to-value ratios in excess of 80 percent, regardless of the presence of private mortgage insurance, could trigger...

Regulatory uncertainty continues to frustrate mortgage bankers who can see the outlines of major pending changes in consumer protection, securitization rules and capital requirements that remain largely enshrouded in bureaucratic fog. “We have these new concepts, qualified mortgages and qualified residential mortgages, but we don’t know what their exact definitions are,” said Michael Heid, president of Wells Fargo Home Mortgage, during a panel session at this week’s annual convention of the Mortgage Bankers Association in Chicago. “We are in a gray state; the concepts are there, but the rules aren’t. At the same time we’re having to clean up issues from the past.” Debra Still, president and CEO of Pulte Mortgage, said...

The mortgage industry does not appear to be making much headway when it comes to reducing the volume of complaints consumers lodge with the Consumer Financial Protection Bureau. In fact, according to the CFPB’s latest consumer complaint report, mortgage-related issues are becoming more prevalent. As of the end of the third quarter, the CFPB had received approximately 79,200 consumer complaints, including approximately 36,300 related to mortgages (46 percent), 23,400 for credit cards (30 percent), 12,900 related to bank accounts and services complaints (16 percent), and 2,900 having to do with private student loans (4 percent). Three months earlier, mortgages accounted...

Major banks reported increased charge offs and nonperforming assets for home-equity loans in the third quarter of 2012 due to new guidance from the Office of the Comptroller of the Currency. However, bank officials and industry analysts suggest that banks have largely already reserved for the new reported losses and that overall trends point toward improvements in HEL performance. In June, the OCC updated its accounting guidance to require banks to classify mortgages and other loans discharged by troubled borrowers in bankruptcy as troubled debt restructurings. The agency said a bank should charge off the excess of the loan’s carrying amount over the fair value of the collateral with the remaining balance of the loan placed into non-accrual status. “The bankruptcy court ‘removed’...