Failure by the five largest FHA mortgage servicers to establish effective controls and to comply with FHA foreclosure procedures resulted in improper servicing practices that may have exposed them to liability under the False Claims Act, the Department of Housing and Urban Development’s Office of the Inspector General concluded in separate, recently released audits. The HUD-OIG audits of the top five FHA servicers – Bank of America, Ally Financial, Wells Fargo, CitiMortgage and JPMorgan Chase – revealed a variety of questionable foreclosure practices involving the use of foreclosure “mills” and robo-signing of sworn documents in thousands of foreclosures throughout the country. The audits were ...

Origination of FHA-insured mortgage loans exceeding $417,000 were concentrated mostly in five states in 2011 even as jumbo loan production dropped further on both monthly and year-to-year bases, according to Inside FHA Lending’s analysis of the latest FHA data. California, New York, Virginia, New Jersey and Maryland accounted for 85.7 percent of the FHA jumbo market in 2011, with lenders reporting $18.2 billion in total originations, down 34.9 percent from 2010 and 2.5 percent from the third to the fourth quarter. California led all states in 2011 in FHA jumbo origination ($8.73 billion) and market share (48.0 percent). Production on a quarterly basis was ... [Two charts]

Industry experts digging through thousands of pages of legal documents associated with the $25 billion foreclosure settlement agreed to by five major servicers mostly found what they expected: a complex package of mixed forms of borrower support that the banks are expected to implement sooner rather than later. The settlements involving Bank of America, Wells Fargo, JPMorgan Chase, Citigroup and Ally Financial and 49 state attorneys general will have to be approved by the U.S. District Court in Washington, DC. Although critics found grounds for complaint about the varying incentives for loan modification and...

Dividend payments paid by Fannie Mae and Freddie Mac to the U.S. Treasury for its continued financial support held down the two government-sponsored enterprises during the fourth quarter as Freddie would have otherwise posted a profit, while Fannie narrowed its losses during the final three months of 2011. Freddie actually reported $619 million in net income during the fourth quarter of 2011, compared to the third quarter’s net loss of $4.4 billion, before having to repay $1.7 billion in preferred stock dividends to the government. Under the terms of the GSEs’ purchase agreement, the Treasury is entitled...

The director of the Consumer Financial Protection Bureau – himself a former state attorney general – is looking to work more closely with state officials. “Quite bluntly, we need your experience, your perspectives and your coordination in a strategic effort to root out fraud and unfairness in the financial marketplace,” said CFPB Director Richard Cordray in a speech to a convention of state AGs. The CFPB is already involved in several working groups that are actively cooperating with state AGs and their staff, one of which has to do with foreclosure scams and another on debt collection. “These...

Though Federal Reserve Chairman Ben Bernanke stated last week that the regulatory agencies would not hit the July 21 deadline for a finalized Volcker rule, such news only leaves the securitization industry with more time to stew in anxiety about a regulation that many feel should not apply to them. The controversial Volcker rule, one of the many required by the Dodd-Frank Act, is designed to limit the ability for financial institutions to benefit financially by shorting their customers, through the prohibition of federally insured banks engaging in proprietary trading, covered transactions with hedge funds or...

The Federal Housing Finance Agency Office of Inspector General took the FHFA to task this week for what the OIG considers the agency’s lax supervision of Freddie Mac’s relationship with its servicers. Specifically, the FHFA has not clearly defined its role regarding servicers, sufficiently coordinated with other federal banking agencies about risks and supervisory concerns with individual servicers, or timely addressed emerging risks presented by mortgage servicing contractors.

Bank of America and JPMorgan Chase will once again receive servicer incentives for modifying loans after more than seven months during which these payments were withheld by the Treasury Department for unsatisfactory performance in the Home Affordable Modification Program. The two banks will also get all the withheld incentives as part of the multistate foreclosure settlement. In June 2011, Bank of America, JPMorgan and Wells Fargo were all called to the carpet by the Treasury for their HAMP performance following a 10-month audit of participating servicers. The main issue was timeliness – while mods...

Mortgage lenders have become so risk-averse and sensitive to potentially punitive judicial or regulatory overkill that they’re demanding near-pristine credit histories and imposing their own credit overlays on top of existing underwriting standards that are already considerably tougher than they were during the years of the mortgage boom. And that’s unlikely to change and may in fact get worse unless federal policymakers make dramatic changes to the legislative and regulatory landscape. That was the main take-away that Paul Miller, managing director and group head of financial services research at...

The Justice Department and some members of Congress are unconvinced the mortgage industry is up to the task of fairly making and servicing mortgages in a tough housing market. That’s motivating them to use all of the tools at their disposal – and considering new ones – to combat discrimination and other abusive behavior. “In the coming year, we will continue our efforts to provide justice to those families who were harmed by discriminatory conduct during the mortgage boom and to hold lenders responsible for their actions,” U.S. Assistant Attorney General Thomas Perez said in testimony before the Senate Judiciary...