It’s not just federal regulators and lawmakers that are complicating the business of mortgage servicing while the industry continues digging itself out of a housing market collapse of near-biblical proportions. States have become increasingly active and aggressive, and there’s little sign that’s about to end any time soon. “Three years ago, servicers were just beginning to understand the extent to which state legislative efforts could complicate, extend and expand the cost of the foreclosure process,” said Nanci Weissgold and Morey Barnes Yost, attorneys in the consumer financial services practice ...

The Democratic and Republican state attorneys general are scheduled to meet separately Monday, Jan. 23, to discuss the foreclosure practices settlement terms sent out last week, amidst varying criticism that the agreement will be either a shakedown for banks or an inadequate answer to homeowner woes. Monday’s meetings come after Housing and Urban Development Secretary Shaun Donovan announced last week that the pending settlement was “very close” and would benefit about 1 million families through principal reduction for homeowners and, in some cases, direct compensation for people wrongfully ...

The U.S. Department of Justice’s Office of Legal Counsel recently issued a 23-page opinion on the legality of the recess appointment President Barack Obama made of Richard Cordray as director of the Consumer Financial Protection Bureau, as well as three officials to the National Labor Relations Board, as an end run around the pro-forma sessions Republican opponents had used to block the appointments. The memo takes on added significance in light of increasing calls from the president’s allies that he make a similar appointment to dislodge Edward DeMarco as the acting head of the ...

The U.S. Court of Appeals for the Sixth Circuit recently took on Molosky v. Washington Mutual Inc., which addressed the preemption of certain state law claims under the federal Home Owners Loan Act. The plaintiffs in this case alleged that certain fees charged by their loan servicer in connection with the prepayment of their mortgage violated both the Michigan Usury Act and their mortgage contract.The lower court had previously rejected the suit on the basis of HOLA preemption, prompting the borrowers to appeal. The Sixth Circuit basically split the difference. On the one hand, the ...

In Marr v. Bank of America, N.A., the U.S. Court of Appeals for the Seventh Circuit has affirmed that borrower testimony alone can overcome the Truth in Lending Act’s “rebuttable presumption” that a borrower has received two notices of his right to rescind a refinance transaction, despite a written acknowledgement by the borrower to the contrary. In this case, the borrower argued that he wasn’t given two right-to-rescind notices as required under TILA, even though he had signed a document indicating he had. He said he had filed away and left undisturbed the documents he received when ...

California. In Balderas v. Countrywide Bank, N.A., the U.S. Court of Appeals for the Ninth Circuit recently ruled that the Truth In Lending Act’s delivery obligation requires borrowers be permitted to keep written copies of the right-to-rescind notice. The court noted that to “deliver” the notice as per TILA requires a “permanent physical transfer from one party to another,” as opposed to momentary delivery. Illinois. Earlier this month, the Department of Financial and Professional Regulations published amendments to the state’s mortgage originator licensing requirements. One change ...

Consumer Financial Protection Bureau. Comments Wanted on Mortgage-Related Rules. The Consumer Financial Protection Bureau is asking for public comment on currently approved information collections associated with certain recently published interim final rules having to do with mortgage lending. One such rule has to do with the Secure and Fair Enforcement for Mortgage Licensing Act (Regulation G) 12 CFR Part 1007.“The information collection will improve the flow of information to and between regulators; provide accountability and ...

The House Oversight and Government Reform Subcommittee on TARP and Financial Services plans to hold a hearing on the afternoon of Tuesday, Jan. 24, on the subject of how the Consumer Financial Protection Bureau will function under its new director, Richard Cordray. A witness list had not been provided as of press time. The event is scheduled to be streamed live on the committee’s website, http://oversight.house.gov/. The new Consumer Financial Protection Bureau is investigating PHH Corp. to see if the lender may have violated the Real Estate Settlement Procedures Act (and possibly ...

There has been little progress in the development of new ways to pay for credit ratings even though researchers have seven proposed systems designed to address the conflicts of interest that have plagued the non-agency MBS market, according to a new Government Accountability Office report. The GAO noted that there were five significant ratings compensation models when it last reported on the subject in 2010, and two more have since been proposed. But the authors of these models have done little additional work to flesh them out, and none has been adopted in the marketplace, the GAO said. “Given that the [rating...

Insurance companies will likely increase their investment in non-agency residential MBS, with market and regulatory influences encouraging movement toward hybrid and floating-rate securities as opposed to fixed-rate bonds, according to some top securities industry analysts. The primary driver on the regulatory level is the anticipated slight rise in capital requirements expected to result from a recent action by the National Association of Insurance Commissioners, the association of state insurance regulators. On Dec. 27, 2011, the NAIC released updated pricing designations that...