The withdrawal of one of the biggest opponents to Bank of America’s pending $8.5 billion settlement with non-agency mortgage-backed security investors will not necessarily speed approval of the deal, according to industry analysts. Last month, the hedge fund Baupost (known as Walnut Place in the lawsuit) dropped its objections to the settlement and moved to sell some its holdings on Countrywide Financial non-agency MBS. A number of other entities continue to oppose the settlement, including AIG and ...

In response to criticism that the Home Affordable Modification Program is susceptible to fraud, the Treasury Department recently established a fraud detection program with unprecedented penalties for the non-agency portion of HAMP. In certain circumstances, the Treasury will recapture any servicer, borrower or investor incentive payments, even for loan modifications completed before the new fraud detection program was announced. The process was detailed in HAMP Supplemental Directive 12-04. The Treasury said it hired ...

Chicago is the latest municipality to consider using eminent domain to seize mortgages from non-agency mortgage-backed securities in an effort to help borrowers with negative equity. Meanwhile, the conservator of two of the largest holders of non-agency MBS joined other investors in raising concerns about the plan and industry analysts suggest the plan has serious defects. Chicago will hold hearings to consider the eminent domain plan proposed by Mortgage Resolution Partners. In June, San Bernardino ...

The Department of Housing and Urban Development has expressed concern about a municipal proposal to invoke eminent domain to seize underwater mortgages and refinance them at a lower rate through the FHA Short Refi Program. HUD Press Secretary Derrick Plummer said that while the proposal to use eminent domain to help underwater homeowners remains a local issue, the department would neither support nor endorse such action. He said HUD has concerns about this approach but declined to elaborate. Eminent domain refers to the authority of states to ...

Revised VA HAMP. The Department of Veterans Affairs has updated the instructions for modifying mortgage loans with a VA guarantee. Changes include clarification concerning occupancy status, an updated reference to another VA guidance on prior approval procedures and extension of the applicability of the said guidance. The changes were announced in Circular 26-10-6. New VA REO Management and Servicing Contractor. The Department of Veterans Affairs has provided details for transferring VA property management (real estate-owned) and portfolio loan servicing contracts for the VA home loan guaranty program from ...

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...

One of the many concerns mortgage lenders have with the powerful and still largely untested Consumer Financial Protection Bureau is the expanded standard of “unfair, deceptive and abusive acts and practices” created by the Dodd-Frank Act – and how the CFPB is going to enforce it. Unfortunately, they’re more likely to learn about it on the fly during the examination process than they are in advance through careful, formal rulemaking or supervisory guidance, according to one of the presenters during an Inside Mortgage Finance webinar last week on the CFPB’s regulatory and supervisory landscape. “What I think you’re seeing develop here is examination beyond regulation, and the CFPB’s examination authority and supervision authority goes beyond...

A group of San Francisco-area homeowners has filed a federal RICO class-action lawsuit against JPMorgan Chase, alleging the company charges inflated fees to homeowners who go into default. In a suit filed last week in the U.S. District Court, Northern District of California, the three named plaintiffs, Diana Ellis, James Schillinger and Ronald Lazar, accuse JPMorgan of violating California business standards law. The suit also says JPMorgan’s use of mail and wire communications to perpetuate its fraud against homeowners violates the federal Racketeer Influenced and Corrupt Organizations Act. The homeowners contend that JPMorgan is using...

Consumer Financial Protection Bureau Director Richard Cordray this week sought to allay the concerns of some members of Congress that small businesses in the mortgage industry and other sectors are about to be overwhelmed by regulatory overload. One of the main issues in this regard being considered by the House Small Business Committee is the CFPB’s recent proposal to integrate and simplify the consumer disclosures mandated by the Truth in Lending Act and the Real Estate Settlement Procedures Act. “Our committee is interested in how the regulations will affect...

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...