Federal Housing Finance Agency.FHFA Office of Inspector General. FHFA’s Supervision of Freddie Mac’s Controls over Mortgage Servicing Contractors Faulted. The Federal Housing Finance Agency’s Office of Inspector General found some areas in which the Finance Agency could improve its supervision of Fannie Mae’s and Freddie Mac’s controls over its mortgage servicing contractors. “FHFA has not clearly defined its role regarding oversight of servicers, sufficiently coordinated with other federal banking agencies about risks ...

Senate Banking, Housing and Urban Affairs Committee member Jerry Moran, R-KS, and Sen. Joe Manchin, D-WV, recently introduced the industry-supported S. 2160, the Financial Institutions Examination Fairness and Reform Act, which would provide critical balance and additional transparency to decisions the regulatory agencies make in the examination process. S. 2160, like its counterpart in the House, H.R. 3461, would, among other things, require more timely examination reports; more information about the facts the agency relied upon to make its exam decisions; and more precise ...

Even though approximately $10.0 billion in non-agency representation and warranty payouts have already been included in proposed or completed settlements, another $34.0 billion in payouts are probably waiting in the wings, with Bank of America and JPMorgan facing the largest exposure by far, according to analysts at Barclays Capital. “Total payouts to non-agency investors from rep and warranty related recoveries will be $26.0 billion to $52.0 billion, using the $8.5 billion Countrywide settlement deal as a template. This corresponds to an average of 3-6 points of recoveries on non-agency securities...

Many non-agency MBS investors are upset with the $25 billion servicing settlement involving 49 state attorneys general, eight federal agencies and the nation’s five largest servicers, the full terms of which were filed in U.S. District Court this week. Bank of America, Wells Fargo, JPMorgan Chase, Citigroup and Ally Financial will receive some credit for modifying loans they service but do not own, although several of these firms have indicated that they plan to focus their efforts on portfolio loans. The Association of Mortgage Investors said the settlement establishes a precedent under which the bad debts of...

The documents governing a proposed $25.0 billion settlement involving five major banks include greater incentives for principal reduction loan modifications on portfolio loans rather than loans in non-agency mortgage-backed securities. However, non-agency MBS investors remain concerned that they could take losses due to the settlement. The consent judgments against Ally Financial, Bank of America, Citigroup, JPMorgan Chase and Wells Fargo were filed in federal court this week, a month after the settlement was announced by 49 state attorneys general and the federal government ...

The Securities and Exchange Commission this week filed a lawsuit against three former executives of Thornburg Mortgage regarding disclosure and accounting issues in early 2008. The former executives of the now bankrupt jumbo lender denied the charges and vowed to prevail in court. “Thornburg’s executives schemed to drop a disingenuous annual report into the public realm at the most opportune moment possible while knowing it was merely the calm before the next storm,” said Donald Hoerl, director of the SEC’s Denver regional office. Larry Goldstone and Clay Simmons, the former CEO and chief financial officer of Thornburg, respectively, countered that ...

The Treasury Department announced last week that it will restore Home Affordable Modification Program incentive payments previously withheld from Bank of America and JPMorgan Chase. The move was prompted by the servicers agreeing to participate in the proposed $25.0 billion servicing settlement and not necessarily by improved HAMP performance. In fact, the consent judgments filed against BofA and Chase specifically cite deficiencies in the servicers’ HAMP performance. “The United States contends that it has certain civil claims based on conduct of the company and its affiliated entities in servicing of mortgage loans,” the complaint against each servicer states, later citing implementation of the Making Home Affordable Program and all of its components, among other deficiencies ...

RPM Mortgage announced last week that it is offering jumbos with balances of up to $2.5 million for no-limit cash-out refinances or home purchase. Fully amortized and interest-only payment options are available. The lender said it will hold the loans in portfolio. “Between extremely low interest rates and smart prices for homes, either on the move-up market or creating liquidity for investment purposes, this product has the ability to serve both types of borrowers,” said Rob Hirt, CEO of RPM Mortgage. “This exclusive RPM product was eleven months in the making and is our contribution toward helping the real estate market to get back on its feet.” [Includes three briefs]

Flagstar Bank’s recent $133 million settlement with the Department of Justice to resolve fraudulent FHA lending practices could increase lender overlays on the FHA product, resulting in fewer borrowers being able to qualify for an FHA-insured loan, according to analysts. The Flagstar settlement, which came in the wake of the $25 billion national settlement between servicers and state and federal agencies, exacerbates the situation for lenders that already have previous concerns about the severity of FHA fines, including treble damages, for violations of FHA’s highly complex and technical rules, analysts said. Whatever relief FHA lenders may have drawn from the robo-signing settlement was ...

Failure by the five largest FHA mortgage servicers to establish effective controls and to comply with FHA foreclosure procedures resulted in improper servicing practices that may have exposed them to liability under the False Claims Act, the Department of Housing and Urban Development’s Office of the Inspector General concluded in separate, recently released audits. The HUD-OIG audits of the top five FHA servicers – Bank of America, Ally Financial, Wells Fargo, CitiMortgage and JPMorgan Chase – revealed a variety of questionable foreclosure practices involving the use of foreclosure “mills” and robo-signing of sworn documents in thousands of foreclosures throughout the country. The audits were ...