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...

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 ...

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...

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…

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,…

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…

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...

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...

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...