The U.S. Department of Justice will reportedly decide within the next few months whether or not to bring the hammer down on Moody’s Corp. for allegedly overstating its ratings on MBS transactions in the run-up to the financial crisis, Bloomberg reported last week, citing “people familiar with the matter.” According to the news account, the Justice Department is scrutinizing credit ratings that Moody’s assigned during the housing boom and trying to determine if the firm massaged its criteria to earn business from Wall Street banks that were bundling residential mortgages into securities. A proposed settlement has apparently been...[Includes one data table]

The great irony of the mortgage market can be found in the MBS holdings of depositories: Even though banks are ceding origination market share to nondepositories, they continue to gobble up bonds backed by home mortgages. As Inside MBS & ABS noted last month, bank holdings of residential MBS hit a record $1.643 trillion at yearend 2015, a 2.2 percent sequential gain. Of course, a large chunk of that gain can be explained by Bank of America increasing its MBS holdings by a hefty $36.7 billion during the fourth quarter. The big question for banks – as well as real estate investment trusts – is...

The Ninth Circuit Court of Appeals has dismissed an argument in a whistleblower case, ruling that Fannie Mae and Freddie Mac are not “federal instruments” for the purposes of the False Claims Act, a federal statute that’s been used aggressively against FHA lenders. The FCA imposes liability on persons that defraud government programs and was originally enacted to penalize private parties that profited illegally in selling supplies to the U.S. Army during the Civil War. In the case of United States ex rel. Adams v. Aurora Loan Services, Inc., et al., the government argued...

Forty-five congressmen signed a letter addressed to the head of the Federal Housing Finance Agency on March 1 citing the need to reform the way nonperforming loan sales are conducted and singled out Lone Star Funds as a “bad actor” in the transactions. The letter, addressed to FHFA Director Mel Watt as well as Secretary Julian Castro of the U.S. Department of Housing and Urban Development, noted that there are improvements both agencies should take to better align the programs with the goals of stabilizing neighborhoods, alleviating the affordable housing crisis and working with organizations that have a track record of homeownership preservation.

One of the companies that purchased a large number of distressed homes from Fannie Mae following the housing crisis was the focus of a recent New York Times piece highlighting the problems brought on by investor-purchased homes that still linger today. Harbour Portfolio Advisors of Dallas is an investment firm that purchased thousands of single-family homes from Fannie in states like Florida, Georgia, Illinois, Michigan and Ohio, by way of a pool sales program that existed from 2010 to 2014. The article accused the firm of targeting and taking advantage of low-income buyers who don’t know what they’re getting themselves into once agreeing to buy a fixer-upper home from Harbour. The investment firm bought...

The Consumer Financial Protection Bureau plans to host a call-in with a handful of trade groups shortly regarding delays and secondary market snafus caused by its integrated disclosure rule, but whether any true regulatory relief will be offered remains to be seen. In the meantime, industry officials continue to complain about delays in loan closings caused by the so-called TRID rule and the losses incurred by some nonbanks because loans are sitting on warehouse lines longer, especially non-agency jumbo loans. Late this week, Dave Stevens, president and CEO of the Mortgage Bankers Association, told...

The House Financial Services Committee this week passed the “SAFE Transitional Licensing Act,” H.R. 2121, which creates a 120-day grace period to let licensed mortgage originators continue originating loans after they leave a federally-insured institution and go to work for a nonbank. The bill was introduced by Rep. Steve Stivers, R-OH, in April 2015 to amend the 2008 Secure and Fair Enforcement for Mortgage Licensing Act. It would give loan originators who work for depository institutions and do not have to be licensed time to meet the licensing requirements that nonbank LOs have. Currently, bank LOs are registered...

The list of reasons to reform Fannie Mae and Freddie Mac is growing and taxpayer risk is increasing the longer the current housing finance system lingers in uncertainty, according to speakers at a Capitol Hill briefing on government-sponsored enterprise reform sponsored by the Mortgage Bankers Association. Fowler Williams, president and CEO of Crescent Mortgage, said that without the secondary mortgage market outlet, smaller institutions like his would not be able to make 30-year fixed-rate mortgages available in rural and small towns. Ethan Handelman, vice president for policy and advocacy at the National Housing Conference, said...

Some of the most well-known names in mortgage lending and servicing continue to deal with a variety of regulatory crackdowns and judicial disputes, some of which stem from the 2008 mortgage market collapse. In Massachusetts, HSBC has agreed to pay $4.1 million to resolve allegations that it violated state consumer protection laws by receiving commissions and other kickbacks from insurer Assurant Inc. relating to force-placed insurance policies that it procured for struggling homeowners in the state. Under the terms of the settlement, HSBC will provide...

Following up on limited guidance the Consumer Financial Protection Bureau issued in January on the disclosure of construction-to-permanent loans under the TRID integrated disclosure rule, CFPB officials this week participated in a webinar and provided some specific answers to a number of detailed questions they have received from the industry on the topic. A number of industry participants inquired, first of all, as to the kinds of options available to a lender for disclosing construction loans. Lenders have several possible ways to disclose construction loans under the integrated disclosure rule, according to Nick Hluchyj, senior counsel in the bureau’s office of regulations. “Regulation Z and Appendix D have...