The Consumer Financial Protection Bureau’s recent proposed rule regarding loan originator compensation would expand and clarify anti-steering rules established by the Federal Reserve, in effect since April 2011. “Compensation structures frequently gave loan originators incentives to steer consumers into loans with higher rates or other unfavorable terms,” according to the CFPB. The regulator’s proposed rule cited a consent order issued by the Fed in 2011 regarding subprime steering by Wells Fargo ...

M&T Bank announced this week that it will acquire Hudson City Bancorp for $3.7 billion. The jumbo lender will merge into a subsidiary of M&T. Hudson City was the 10th-ranked non-agency jumbo lender in 2011, according to Inside Nonconforming Markets, with an estimated $3.15 billion in such originations. Officials at M&T said they acquired Hudson – which was having difficulties funding its jumbo originations – to expand M&T’s retail branch network. Officials at Hudson City said M&T will help expand ... [Includes five briefs]

The Treasury Department’s surprise announcement late last week that it will now “sweep” up any and all future profits from Fannie Mae and Freddie Mac in lieu of the dividends the GSEs had been paying in return for taxpayer support solves some problems but creates new ones, industry observers say. Rather than continue to borrow from the Treasury to make dividend payments to the Treasury – as the GSEs have since they were placed in conservatorship in September 2008 – the revised preferred stock purchase agreements will replace the 10 percent quarterly dividend with a “full income sweep” of “every dollar of profit that each firm earns going forward,” according to Michael Stegman, counselor to the Treasury for Housing Finance Policy.

Fannie Mae and Freddie Mac’s newly amended preferred stock purchase agreement with the U.S. Treasury requiring the companies to accelerate the rate at which they reduce their investment portfolios will have little immediate impact but will become more challenging to the GSEs as time goes on, analysts predict. The Treasury’s amended agreement calls for the GSE portfolios to be wound down at an annual rate of 15 percent, instead of the 10 percent annual reduction originally required of the two companies. The more aggressive 15 percent reductions will go into effect in 2013. Consequently, Fannie’s and Freddie’s portfolios must be reduced to the $250 billion target by 2018, four years earlier than initially scheduled.

A federal appeals court has agreed to hear a rare appeal by one of the non-agency mortgage-backed securities issuers and underwriters being sued by the Federal Housing Finance Agency for allegedly misrepresenting the deals that were sold to Fannie Mae and Freddie Mac. A three-judge panel of the Second Circuit Court of Appeals accepted UBS Americas’ appeal to re-argue and reverse a lower court’s denial of the bank’s motion to dismiss the FHFA’s suit as time-barred under the Housing and Economic Recovery Act.The FHFA sued UBS in July 2011 on behalf of Fannie and Freddie, seeking damages and civil penalties on behalf of the government-sponsored enterprises under the Securities Act of 1933.

The Federal Housing Finance Agency violated federal law when it rolled back the Property Assessed Clean Energy program without going through the required notice and comment period, a California federal judge ruled earlier this month. U.S. District Judge Claudia Wilken’s Aug. 9 ruling held that the FHFA was not acting as conservator of Fannie Mae and Freddie Mac but as a regulator that had improperly exercised substantive regulatory oversight in violation of the Administrative Procedure Act when the agency put a stop to GSE involvement with PACE programs.“The FHFA’s directives on PACE obligations amount to substantive rule-making, not an interpretation of rules that would be exempt from the notice and comment requirement,” wrote Judge Wilken. “The notice and comment process must be followed.”

A New York federal judge has denied a motion by former Fannie Mae top executives to dismiss a civil action brought against them by the Securities and Exchange Commission concerning the company’s misrepresentations about its exposure to subprime and Alt A mortgages in the two years leading up to the GSE’s government takeover. On Aug. 10, U.S. District Court Judge Paul Crotty rejected the motion brought by former Fannie CEO Daniel Mudd, former Chief Risk Officer Enrico Dallavecchia and former EVP for Single Family Thomas Lund. The defendant trio argued that investors had sufficient information to form their own conclusions about the viability of Fannie’s subprime and Alt A portfolio.

Plans to hasten the resolution of Fannie Mae and Freddie Mac through an amended preferred stock purchase agreement (PSPA) announced last week by the Treasury Department and the Federal Housing Finance Agency has elicited mixed responses from stakeholders. Views vary as to whether the new deal will actually benefit taxpayers or simply protect holders of government-sponsored enterprise debt. The revised agreement will speed up the reduction of both GSEs’ investment portfolios, from an annual rate of 10 percent to ...

Lenders won a number of concessions from the Consumer Financial Protection Bureau last week when the regulator proposed rules for loan originator compensation. However, the proposal also includes significant provisions that would impact lender profitability and originator compensation. For firms currently offering compensation arrangements that would be prohibited by the proposal, the CFPB said its proposed prohibition on compensation based on transaction terms “may contribute to adverse selection ...

The Consumer Financial Protection Bureau late last week released a proposed mortgage loan origination regulation, and perhaps most notable is what’s not in it – a required flat fee – a decision likely to be embraced by mortgage lenders. In a conference call with reporters, bureau officials said that after consulting with industry representatives and community advocates, the CFPB concluded a flat fee proposal would not be in consumers’ best interests. The Dodd-Frank Wall Street Reform and Consumer Protection Act places...