Even as it awaits the outcome of a government fair-lending investigation that it helped initiate, the National Community Reinvestment Coalition says the majority of lenders under review have reacted favorably but the widespread use of “credit overlays” remains a problem in the industry. In December 2010, the NCRC filed complaints with the Department of Housing and Urban Development after its investigation found that 22 lenders set minimum borrower credit scores as high as 640 for FHA loans, even though FHA guarantees loans to borrowers with scores as low as 580. The NCRC claims the credit...

Comptroller of the Currency Thomas Curry urged elected officials, businesses and grassroots leaders to encourage borrowers to ask for an independent review of their foreclosure files to determine whether they have been damaged financially by improper servicing practices. In remarks to the Greenlining Institute in Los Angeles last week, Curry called upon conference participants to spread the word to borrowers about the independent foreclosure review, a stipulation in the consent orders that 14 major mortgage servicers agreed to a year ago in a deal with federal banking regulators to settle allegations of deficient...

The Obama administration’s Residential MBS Working Group, set up in January to probe misconduct that drove the financial crisis, is apparently trying to tap the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 to make such cases easier to bring. Although it hasn’t been used that much, the appeal of pursuing criminal investigations under FIRREA is apparently the relatively lower burden of proof than bringing more traditional criminal charges. Also, FIRREA has a longer statute of limitations than do other finance-related laws, along with the potential for large fines...

The Treasury Market Practices Group this week issued new guidance on the system of charges for failed agency MBS trades that went into effect earlier this year, hoping to address lingering industry concerns about the voluntary program. The group acknowledged that market participants will likely see an increase in operational expenses from the system, but participants should see a decline in the amount of resources they have to commit to addressing these issues as the number of failed trades declines. For the agency MBS market, the TMPG said its recommended two-day resolution period should allow...

A Chicago police officers’ pension fund has filed suit against Bank of America and U.S. Bancorp, claiming that the two banks failed to protect investors during their turn as MBS trustees and violated an obscure, seven-decade-old federal securities statute. The lawsuit, brought last week by the Chicago Policeman’s Annuity & Benefit Fund, said that BofA, and later U.S. Bank as successor trustee, “regularly disregarded their contractual and statutory duties” by failing to oversee some 41 Washington Mutual trusts backed by home loans. “By failing to perform their duties, defendants have caused MBS holders...

After months of hearing Congressional Democrats and White House allies suck up the public debate oxygen in favor of GSE principal reduction, mortgage writedown opponents are speaking up as the Federal Housing Finance Agency looks to be reconsidering its stand against loan forgiveness. Industry groups are expressing with greater volume their concern that principal forgiveness on loans guaranteed by Fannie Mae and Freddie Mac would ultimately hurt the housing market.

Four and a half years after it was placed on a form of probation, the Federal Home Loan Bank of Chicago was officially released from its consent cease-and-desist order by the Federal Housing Finance Agency this week. FHFA Acting Director Edward DeMarco said the Finance Agency terminated the order because of improvements in the Bank’s financial condition and capital position, resolution of the agency’s risk management concerns and consideration of “specific comments and assurances made by the FHLBank’s board of directors to FHFA.”

The Federal Housing Finance Agency has revised and consolidated its categories for safety and soundness and Affordable Housing Program examination findings pertaining to Fannie Mae, Freddie Mac and the Federal Home Loan Banks, the FHFA announced in a recent advisory bulletin. Examination findings are deficiencies related to risk management, risk exposure, or violations of laws, regulations or orders that affect the performance or condition of a regulated entity, according to the FHFA.

Fannie Mae and Freddie Mac’s mortgage servicers will soon be required to review and respond to short sale requests within 30 days of an offer on the property and to provide weekly status updates if the offer is still under review after that, under new standards issued this week by the Federal Housing Finance Agency. Under the new guidance, effective June 15, servicers will have to make a final decision within 60 days of receiving an offer on a short sale property. The FHFA said the change is an attempt to hasten the traditionally time-consuming and difficult primary alternative to foreclosure.

New mortgage servicing rules unveiled recently by the Consumer Financial Protection Bureau will likely result in higher mortgage servicing costs and reduced revenue for servicers although some analysts say the rules could have a positive effect on large banks. The CFPB recently previewed some of the servicing rules it plans to issue this summer and finalize by January 2013. Specifically, the rules would require monthly mortgage statements that include mortgage terms, detailed payment information, fee disclosures and loss-mitigation information for delinquent borrowers. They also call for...