The Obama administration this week proposed a new rule that would establish uniform procedures for the resolution of disparate impact allegations under the Fair Housing Act at a time when the whole legal underpinnings of disparate impact are slated for review by the U. S. Supreme Court. In a proposed rule that has been in preparation for months, the Department of Housing and Urban Development argued that it has the authority to apply the disparate impact theory of discrimination in the context of fair housing, including fair lending charges. The purpose of the proposed rule, HUD says, is to clear up uncertainty about...

The new system built by the Consumer Financial Protection Bureau to process consumer complaints about their mortgages needs to be fixed before it becomes operational, industry groups say. In a joint letter to the CFPB, the American Bankers Association, Consumer Bankers Association, Financial Services Roundtable and its Housing Policy Council and Mortgage Bankers Association said the bureau should consult with financial services companies, which have in place a range of systems to address consumer complaints. “We believe that CFPB should provide a more transparent process that allows all stakeholders...

After years of on-again, off-again activity behind the scenes while the House of Representatives has repeatedly taken tentative steps toward creating a covered bond marketplace, the Senate finally got into the game with the introduction this week of legislation nearly identical to the bill introduced in the House earlier this year. On Wednesday, a small bipartisan group from the Senate Banking, Housing and Urban Affairs Committee introduced the “United States Covered Bond Act of 2011,” which is designed to create a legislative framework to expand funding options for U.S. financial institutions. Co-sponsors include...

In today’s dramatically changed mortgage lending and regulatory environment, lenders must aggressively manage their originator compensation structures if they want to guarantee their compliance with all applicable laws and regulations, according to a top industry consultant. The first step is “to eliminate all incentive arrangements that pay commissions or bonuses based on any of the terms or conditions of the loans such as interest rates, demand features, prepayment penalties or proxies for these loan terms,” said Henry Oehmann, national executive compensation services executive director for Grant Thornton. Lenders...

The Consumer Financial Protection Bureau will follow the practice of other federal regulators by providing advance notice of potential enforcement actions to individuals and firms under investigation. The bureau said its Early Warning Notice process allows the subject of an investigation a chance to respond to any potential legal violations that CFPB enforcement personnel believe have been committed before the agency ultimately decides whether to initiate legal action. But there are no guarantees. “The decision whether to give such notice is discretionary, and a notice may not be appropriate in some situations, such as in...

Delays, staff shortages and changes in leadership have put a damper on FHA efforts to identify risks in its single-family mortgage insurance programs, which could affect its ability to minimize financial risks, according to the Government Accountability Office. In a report to the chairman and the ranking minority member of the Senate Banking, Housing and Urban Affairs Committee, the GAO concluded that while the FHA has taken steps to assess credit and operational risks, the assessment strategy is not comprehensive. The risk assessment efforts are not integrated, and the FHA lacks annual assessments and mechanisms to...

The Obama administration’s refinance program for underwater mortgages got a much-publicized jolt of expanded guidelines that could stimulate new business, but the older Home Affordable Modification Program appears to be slowing down. An Inside Mortgage Finance analysis of recently released HAMP data reveals that only 74,630 new trial mods were started under the program during the third quarter. That was down 7.1 percent from the second quarter and represented the lowest number since the program began. Although there was an 11.8 percent increase in...(Includes one data chart)

The U.S. Supreme Court will determine whether disparate impact claims can be applied to the Fair Housing Act and lending discrimination cases by reviewing a Minnesota case involving rental housing. Although many fair lending cases based on disparate impact have been brought and settled over the years, the standard has not been universally interpreted by federal appeals courts. In Magner v. Gallagher, private landlords sued the city of St. Paul, MN, for enforcing its housing code, leading to claims by the landlords that shutting down their properties made it too difficult for minority renters to find...

Life isn’t getting any easier for mortgage lending giant Wells Fargo when it comes to litigation. The top-ranked mortgage lender through the first nine months of the year took a couple of high-profile shots in just the last two weeks or so. Last week, Illinois’s Cook County Judge Carolyn Quinn gave the green light to a suit filed by state Attorney General Lisa Madigan against Wells, which accuses the lender of offering financial incentives to employees to put minority borrowers who qualified for prime mortgages into subprime loans during the 2005-2007 time frame. Illinois has a similar axe to grind against Countrywide Financial Corp., which was acquired by Bank of America Corp. three years ago.