Fannie Mae and Freddie Mac are obligated to comply with recently enacted Massachusetts law requiring creditors to take “commercially reasonable steps to avoid foreclosure,” according to a letter to the GSEs’ conservator from state Attorney General Martha Coakley. The AG’s Aug. 23 letter to Federal Housing Finance Agency Acting Director Edward DeMarco puts the agency on notice about a law signed Aug. 3 by Gov. Deval Patrick, D, “An Act to Prevent Unnecessary and Unreasonable Foreclosures,” which mandates loan modifications “when they make economic sense.”

The Federal Housing Finance Agency is suing a unit of Deutsche Bank demanding the bank repurchase loans backing now toxic mortgage securities. Acting as conservator to Freddie Mac, the FHFA filed suit on Aug. 24 in New York State Supreme Court in Manhattan against DB Structured Products Inc. The Finance Agency alleges that DBSP breached promises about loans that were pooled and securitized and failed to repurchase the loans as required, according to the agency’s court filing.

Two years after the enactment of the Dodd-Frank Act, banks with mortgage operations are faced with the question of whether to build up or scale back their mortgage lending operations, or simply divest and wait for a more favorable regulatory environment. Financial institutions are beginning to feel the impact of Dodd-Frank as the Consumer Financial Protection Bureau carries out its mandate to write rules based on the law’s goal of targeting systemic risk and protecting consumers. But while ...

The Securities and Exchange Commission revealed details last week on its battle for due diligence reports on non-agency MBS issued by Ally Financial’s Residential Capital. A number of other ongoing non-agency MBS lawsuits and SEC investigations have been based on information included in due diligence reports. The SEC is seeking due diligence reports prepared by Office Tiger Global Real Estate Services, a wholly-owned subsidiary of Donnelly, on behalf of investment banks that underwrote 17 non-agency MBS issued by ResCap. The SEC said it is investigating possible fraud in the offering and sale of residential MBS by ResCap. “The information in Donnelley’s possession is...

Last month’s surprise move by the Treasury Department to revise the preferred stock purchase agreements with Fannie Mae and Freddie Mac definitively settles the question of “when” not “if” the two government-sponsored enterprises are to be wound down but it also removes any remaining sense of urgency to push a legislative solution to GSE reform, according to industry analysts. On Aug. 17, Treasury announced it will require Fannie and Freddie to turn over any profits they earn to the government. Rather than continue to borrow from the Treasury to make a 10 percent dividend payment to the Treasury, the revised PSPA implements a “full income sweep” of GSE profits. Additionally, Treasury’s announcement calls...

The battle over legacy MBS continues to rage in courts across the country as Bank of New York Mellon filed repurchase-related lawsuits against two financial institutions, Massachusetts Mutual was allowed to proceed with its claims against Countrywide, and a federal banking regulator sued major banks for alleged MBS misrepresentations. On Aug. 21, BNY Mellon, in its capacity as trustee for a pool of loans known as GE-WMC Mortgage Securities Trust 2006-1, sued WMC Mortgage and GE Mortgage Holdings for their alleged failure to repurchase approximately $680 million in defective residential mortgages. According to the lawsuit filed in New York state court, a holder of more than 25 percent of the voting rights under the pooling and servicing agreement notified...

One of the most worrisome elements to emerge so far in the Consumer Financial Protection Bureau’s proposed rule on mortgage loan originator compensation is the agency’s consideration of factors that may serve as proxies for prohibited transaction terms and how they may be used to restrict originator compensation. The CFPB proposal would implement statutory changes made by the Dodd-Frank Act to the Truth in Lending Act/Regulation Z loan originator compensation rule, including a new, additional restriction on the imposition of any upfront discount points, origination points or fees on consumers under certain circumstances. The proposal provides...

Fannie Mae and Freddie Mac late this year will raise guaranty fees on single-family mortgages by another 10 basis points, under a directive that the government-sponsored enterprises’ conservator announced late last week. The g-fee increases will be effective on Dec. 1, 2012, for loans exchanged for mortgage-backed securities, and on Nov. 1, 2012, for loans sold for cash. According to FHFA Acting Director Edward DeMarco, who telegraphed the move in a notification to Congress earlier this summer, the g-fee increases are designed...

The initial progress report released last week on the national mortgage settlement drew attention to the early loss mitigation completed by the five banks participating in the settlement. However, Joseph Smith, the monitor of the $25.0 billion settlement, has also stressed that he is looking for noncompliance with the settlement’s 304 servicing standards. The Office of Mortgage Settlement Oversight allows borrowers and professionals assisting homeowners to detail experiences with servicers participating in the settlement. “It’s important for people in the marketplace to let me know if they see conduct that they think violates the settlement agreement,” Smith said. Smith said he has received...

The Small Business Administration is urging the Consumer Financial Protection Bureau to delay making any changes until it has fully analyzed the impact of a proposed rule establishing new disclosure requirements and forms under integrated federal consumer protection regulations. Speaking on behalf of small banks and settlement service providers, the SBA’s Office of Advocacy in a comment letter warned that proposed changes to the finance charge and to the high-cost mortgage coverage test could potentially lead some small businesses to leave the marketplace or stop making mortgage loans. In addition, the agency reiterated its concerns about the inadequate notice for small entities about the proposal. On Aug. 23, the CFPB published...