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...

The extension of the Home Affordable Modification Program announced in late January was coupled with changes, including the new eligibility of investor-owned properties. While the expansion of the program could allow for a half million more participants, there are complaints that it is no more than a taxpayer bailout of speculators. Timothy Massad, the assistant secretary for financial stability at the Department of Treasury, said the inclusion of investor-owned properties will help low- to moderate-income renters, because the foreclosure of investor-owned properties disproportionately affects them. An advocate for...

The Consumer Financial Protection Bureau has provided some potentially significant insight into some of the positions it may end up taking on the rules that will govern the final integrated mortgage disclosure it’s developing. The disclosures were released as part of the CFPB’s announcement that it is putting together a Small Business Review Panel under the provisions of the Small Business Regulatory Enforcement Fairness Act. The panel is part of the broader initiative to integrate the mortgage disclosure forms that borrowers receive when applying for and closing on a loan...

Last week, the Federal Reserve Board released action plans that Bank of America, Citigroup, EverBank, JPMorgan Chase, MetLife, PNC, SunTrust, US Bancorp and Wells Fargo developed and will have to implement per the consent orders issued last April in order to correct alleged deficiencies in residential mortgage loan servicing and foreclosure procedures. The Fed also released engagement letters between the institutions and the independent consultants they retained to review foreclosures that were in process in 2009 and 2010...

Bank of America may be prepared to pony up $8.5 billion to settle litigation with residential mortgage-backed securities investors, but it’s not conceding a point in the face of government accusations that it discriminated against mortgage borrowers with disabilities. Last week, the Department of Housing and Urban Development accused the bank of imposing unnecessary and burdensome requirements on borrowers who depended on disability income to qualify for their mortgages in violation of the Fair Lending Act. The bank also allegedly required some disabled borrowers to provide physician...

The Department of Housing and Urban Affairs and the U.S. Attorney for the Southern District of New York compelled Flagstar Bank FSB, one of the nation’s largest savings banks and originators of mortgage loans, to admit it provided false certifications to HUD in violation of the False Claims Act when seeking government insurance for residential mortgages. The government agencies said the false certifications induced FHA to accept loans for government insurance that were not eligible and that resulted in losses to HUD when the loans defaulted...