Citigroup, Inc. was recently stung with a $158.3 million settlement and compelled to admit culpability to settle with the Justice Department and the Department of Housing and Urban Development after a former CitiMortgage employee raised concerns about the lender’s allegedly reckless mortgage lending practices. The former employee, Sherry Hunt, filed a private whistleblower lawsuit last August under the False Claims Act, alleging that Citi subverted FHA to push through poorly underwritten mortgages for a higher profit margin. Two weeks ago, the U.S. government joined the suit, seeking...

The Supreme Court of the United States heard oral arguments last month in Freeman v. Quicken Loans (Case 10-1042), an important fee-splitting case under the Real Estate Settlement Procedures Act, and the initial consensus of leading industry attorneys following the case is that the high court appears to be favorably inclined towards Quicken’s side. “If questions raised by the justices are any indication of where the court is headed, I’d say the scales are tipped in the direction of a favorable decision for Quicken Loans,” said attorney Phillip Schulman, in the Washington, DC, office...

Consumer advocates may be railing against the $25 billion settlement the five largest mortgage servicers struck recently with 49 state attorneys general, but the participating banks are still vulnerable on a number of fronts, according to a top analyst at Moody’s Investors Service. On the one hand, “The settlement will have little to no financial effect on the banks and will remove some of the uncertainty surrounding mortgage servicing,” said Joseph Pucella, vice president and senior…

Some leading Republicans in the House of Representatives recently wrote Consumer Financial Protection Bureau Director Richard Cordray requesting additional disclosures about the agency’s pending budget. “[W]hile we commend the CFPB’s efforts to draft better and more detailed budget justifications, we believe that the budget justification that was released with the president’s fiscal year 2013 budget request is not as good as it could be,” wrote House Financial Services Oversight and Investigations Subcommittee Chairman Randy Neugebauer, R-TX,…

New Hampshire. In Dow v. Bank of New York Mellon Trust, the state Superior Court affirmed the role of MERS as the mortgagee of a mortgage loan, ruling that MERS has the authority to both hold and assign its interest in mortgages under state law. New Jersey. In U.S. Bank, N.A. v. Guillaume, the New Jersey Supreme Court last week ruled that state courts do not have to dismiss foreclosure actions if defects in the…

Consumer Financial Protection Bureau.Bureau to Deal With Forced-Placed Insurance. Officials at the CFPB recently indicated the bureau plans to address the practice of force-placed insurance by mortgage servicers. Although few details have been made available, the CFPB will reportedly require servicers to show they have a reasonable belief that borrowers have fallen behind on necessary payments before charging them for forced-place insurance. The bureau has indicated it intends to permit borrowers to choose their own insurance, instead of depending on the...

Federal Housing Finance Agency Special Advisor Mario Ugoletti told attendees at the Mortgage Bankers Association’s National Mortgage Servicing Conference & Expo in Orlando that changes to servicing compensation practices have not been pushed to the backburner. However, he did concede that, in light of uncertainties in the marketplace and the legislative and regulatory environment, changes would not be promulgated in the next quarter or two. Any revisions to compensation practices ought to result in enhanced competition in mortgage servicing and be capable of replication ...

MBS investors continue to sweat over the impact of the $25 billion multistate servicing settlement, especially regarding potential conflicts of interest when banks own a second mortgage while servicing a securitized first lien. “The minimum requirement is that every time you modify a first lien, you have to modify the second lien to the same degree, or you have to write off the second lien entirely,” explained Shaun Donovan, secretary of Housing and Urban Development, at a housing conference earlier this week. Donovan characterized the treatment of home-equity loans in the settlement as a positive...

Wells Fargo & Co. is looking to hire an independent third-party expert to continue an investigation started by the bank in its capacity as corporate trustee of mortgage trusts that could compel lenders to repurchase soured mortgage loans contained in a 2007 non-agency MBS. According to reports, Wells Fargo wants to hire Law Debenture Trust Co. of New York to look into alleged defects in loans contained in Bear Stearns Mortgage Funding Trust 2007-AR2 and to force JPMorgan Chase and its servicer subsidiary to repurchase the bad loans. Requests for comment to both Wells Fargo and Law Debenture had not...

Increased mortgage insurance premiums combined with hefty penalties assessed on lenders will generate additional revenue that may keep the FHA mortgage insurance program afloat. Nevertheless, the price for keeping the fund solvent will make fewer borrowers qualified for an FHA loan, according to lenders. Lenders say the upfront mortgage insurance premium increase will have little effect on borrowers because the charge can be rolled into the loan amount. Changes to the annual MIP, however, will decrease FHA business in general because the cost of the annual MIP will have to be included in the ...