The forthcoming combined Truth in Lending Act and Good Faith Estimate disclosure form and related rule pending at the Consumer Financial Protection Bureau is at the top of the list of greatest compliance concerns of mortgage lenders, according to the fourth annual compliance survey by QuestSoft, a provider of compliance software and services to the mortgage industry. Of the 426 lenders that were surveyed on their level of anxiety for regulatory changes, a whopping 81 percent identified this CFPB project as at least a medium (33 percent) or a high (48 percent) concern...

A homeowner does not have a private right of action against his mortgage servicer under the Obama administration’s Home Affordable Modification Program, the U.S. Court of Appeals for the Eleventh Circuit ruled late last week. In this case, the borrower, Jason Miller, owned a parcel of real property in Hiawassee, GA, which he was able to purchase by taking out a mortgage loan from the unidentified predecessor of the defendant, Chase Home Finance, LLC (Chase). In February 2009, Miller asked for a loan modification from Chase, citing financial difficulties. Chase agreed to...

The Financial Stability Board has published principles for sound residential mortgage underwriting practices, emphasizing that participating jurisdictions should make sure lenders are effectively verifying income and other financial information, insisting on reasonable debt service coverage and appropriate loan-to-value ratios, engaging in effective collateral management, and making prudent use of mortgage insurance. The FSB said some or all of the principles may not necessarily be appropriate or applicable for certain niche forms of finance. But jurisdictions should...

Illinois. Gifford State Bank, the defendant lender in Re Crane (Case 11-90592, U.S. Dist Ct, C.D. IL), recently appealed the February ruling of the U.S. Bankruptcy Court for the Central District of Illinois, a decision that let a bankruptcy trustee avoid an Illinois mortgage as to other creditors of the estate because the mortgage failed to expressly state the maturity date and interest rate of the underlying debt. Legislation that would contravene the Crane decision has been introduced in the state House of Representatives with the hope it can be passed before the May 31 end of the session...

Federal Reserve Board.Federal Deposit Insurance Corp.Office of the Comptroller of the Currency.Consumer Financial Protection Bureau.National Mortgage Servicing Standards Continue. The interagency group of federal banking regulators continues to work to develop prudential standards for mortgage servicing activities in parallel with the Consumer Financial Protection Bureau’s initiative, which focuses on certain aspects of mortgage servicing...

The Financial Crimes Enforcement Network’s latest report on mortgage loan fraud reported suspicious activity reports (MLF SARs) shows financial institutions submitted 92,028 MLF SARs last year, a 31 percent increase over the 70,472 submitted in 2010. FinCEN attributed the increase mostly to mortgage repurchase demands. On the other hand, financial institutions submitted 17,050 MLF SARs in the 2011 fourth quarter, a drop of 9 percent over the same period in 2010 when financial institutions filed 18,759 MLF SARs. “While too soon to call a trend, the fourth quarter of 2011 was the first time since...

Option One Mortgage Corp. this week agreed to pay $28.2 million to settle charges brought by the Securities and Exchange Commission over the former subprime lender’s MBS disclosures regarding its ability to cover repurchase demands. Much of the litigation over failed non-agency MBS has focused on alleged misrepresentation about the quality of the loans delivered to securitization trusts, the servicing of those loan pools and the performance of trustees. The Option One settlement stems from the SEC’s contention that the company, one of the leading subprime lenders and securitizers during the heyday of...

Germany’s second largest state-owned bank is looking to the U.S. courts for relief after accusing Deutsche Bank of perpetuating a fraud on it in the sale of over $810 million in toxic residential MBS. Last week, Bayerische Landesbank (BayernLB) filed suit against Deutsche in New York State Supreme Court in Manhattan alleging that Deutsche packaged risky and poor quality loans into securities while simultaneously taking short positions against the securities. According to the complaint, Deutsche officials internally disparaged the quality of the loans underlying the residential MBS even as it...

Facing a deadline set by the Dodd-Frank Act for the beginning of 2013, the Consumer Financial Protection Bureau is working on an ability-to-repay rule to define “qualified mortgages.” While industry participants have warned that few non-QMs will be originated, Raj Date, deputy director of the CFPB, said the regulator hopes to ensure that “prudent loans” will benefit from sufficient investor appetite and a competitive market. “We want to avoid any inappropriate disincentive that would prevent lenders from making ...

The company formerly known as Option One reached a $28.2 million settlement with the Securities and Exchange Commission this week regarding issuance of subprime mortgage-backed securities in early 2007. The SEC said Option One’s MBS “operated as a fraud or deceit” against non-agency MBS investors. “The offering documents misled investors about Option One’s precarious financial condition and, hence, its inability to fulfill its obligations on its own to repurchase ...