California. Late last month, the state Department of Real Estate warned consumers about illegal loan modification schemes and urged victims to submit formal complaints. The most common ploy is for a scammer to guarantee a loan mod in exchange for a fee paid ahead of time (which is against the law in the state), and then to do little or nothing to obtain the loan mod for the borrower once the fee has been paid. The DRE advised consumers who are looking for a loan mod to never pay an upfront fee for such services, and to be wary of guaranteed success. Indiana. The state Department of Financial Institutions recently expanded the purpose of Title 750, Article 9 of the Indiana Administrative Code to conform the mortgage lending regulation to state and federal laws, rules and regulations, as well as policies and guidance from state and federal authorities. The DFI also revised the IAC to specify that an expunged criminal conviction does not result in an automatic denial or revocation of a mortgage lender or originator’s license. However, the underlying facts of the crime at issue can still be considered.

U.S. Supreme Court.Oral Arguments in RESPA Case Scheduled. The U.S. Supreme Court has scheduled oral arguments in the RESPA case, Tammy Foret Freeman, et vir, Petitioners v. Quicken Loans, Inc. for Tuesday, Feb. 21, 2012.The SCOTUS is expected to decide whether a plaintiff has to prove that an unearned fee for a real estate settlement service was divided between two or more persons. Industry attorney observers say the court’s ruling will probably determine the ability of the mortgage lending industry to decide on its own what to charge borrowers at the point of origination.Also, parties in the case are said to have finalized the arguments they will present.Consumer Financial Protection Bureau. Raj Date Named Deputy Director. New Consumer Financial Protection Bureau Director Richard Cordray has named Treasury Special Advisor Raj Date the bureau’s first deputy director. Date had been leading the day-to-day operations of the CFPB since it launched in July. Date’s background includes more than a decade in the financial services industry. He first joined the CFPB as head of the bureau’s Research, Markets, and Regulations division and was later named the special advisor for the agency.

Wells Fargo last week agreed to a $940,056 settlement with Maryland’s attorney general over allegedly deceptive marketing of adjustable rate mortgages originated by Wachovia and Golden West Financial, both of which Wells acquired in 2008.According to the agreement, Wachovia and Golden West offered borrowers a choice among several programs. Borrowers could choose a traditional, 30-year fixed rate, fully amortizing loan; a traditional, 15-year fixed rate, fully amortizing loan; a loan with payments of interest only; or a loan with payments that were less than the interest actually due. According to the Maryland Consumer Protection Division, Wachovia and Golden West did not fully explain to “Pick-a-Payment” borrowers who chose the fourth option that their minimum payments would not cover the full interest and that their principal debt would actually increase over time.Wells has agreed to consider loan modifications for Maryland homeowners who have “Pick-a-Payment” contracts via the Home Affordable Modification Program. If the homeowner is not eligible for a HAMP loan mod, then Wells will tap its own proprietary loan mod program. The Consumer Protection Division will contact consumers who may be eligible for restitution under the settlement.

Gibbs & Brun, the Houston-based law firm that spearheaded a massive investor lawsuit against Bank of America, has drawn a bead on Wells Fargo. The company announced this week that its non-agency MBS investor clients have asked two trustees – U.S. Bank and HSBC – to investigate whether ineligible mortgages were pooled in some $19 billion of Alt A and jumbo MBS issued by Wells Fargo between 2005 and 2007. Some 48 securitization trusts are covered by the action, and Gibbs & Brun said it represented investors who collectively held over a quarter of the voting rights in those trusts. “Clients...

MBS issued or guaranteed by the U.S. government will continue to maintain a zero-risk weighting under the Federal Reserve’s proposed supervisory rules for large bank holding companies, but that won’t necessarily include Fannie Mae or Freddie Mac MBS. The Fed proposal includes a wide range of issues such as capital, liquidity, credit exposure, stress testing, risk management and early remediation. It applies to bank holding companies with assets of $50 billion or more and non-bank institutions that could pose systemic risk to the financial system. The proposal reflects substantially all of the...

The Consumer Financial Protection Bureau announced this week that it will immediately begin supervision of non-bank servicers and lenders. The supervision became possible due to President Obama’s controversially executed appointment of Richard Cordray as director of the CFPB. “Since most of these businesses are not used to any federal oversight, our new supervision program may be a challenge for them,” Cordray said this week of non-banks. “But we must establish clear standards of conduct so that all financial providers play by the rules.” ...

Bank of America and the Department of Justice recently agreed to the largest residential fair lending settlement in history – for $335 million. The DOJ claimed that Countrywide Financial allowed pricing discrimination against minority borrowers as well as unchecked steering to subprime loans. The settlement, which is subject to court approval, will mark the first time that the DOJ has obtained relief for borrowers who were steered into loans based on race or national origin. The DOJ said the practice “systematically placed borrowers of color into subprime mortgage loan products while placing non-Hispanic white borrowers with similar creditworthiness in prime loans.” ...

The government-sponsored enterprises’ increased subprime activity in the mid-part of the last decade was driven by compensation incentives for former executives, the Securities and Exchange Commission claims. The allegations were included in recent lawsuits filed by the SEC regarding Fannie Mae’s and Freddie Mac’s disclosure of non-prime activity. In December, the SEC filed securities fraud lawsuits against six former GSE executives. The SEC claims the executives – including former Fannie CEO Daniel Mudd and former Freddie CEO Richard Syron – knew of and approved misleading statements in 2007 and 2008 claiming that the companies had minimal holdings of higher-risk mortgages. ...

Loan modifications with principal reduction have significantly increased in the past year, with servicers seeing improved performance compared with other types of mods. The mods remain concentrated on securitized non-agency mortgages as well as portfolio loans, but performance varies considerably. After falling to a 2.7 percent share in the fourth quarter of 2010, principal reduction mods have accounted for a growing share of bank and thrift mod activity, according to the Office of the Comptroller of the Currency. Principal reduction was used in 7.8 percent of the mods completed by nine major bank and thrift servicers in the third quarter of 2011. ...

The FHA has extended for one more year a temporary waiver of a regulation prohibiting property flipping in order to facilitate faster sale of its bulging real estate-owned inventory. The agency hopes that having the waiver in place until Dec. 31 will stimulate the rehabilitation of foreclosed and abandoned homes for another year, including properties being resold within 90 days of acquisition. The waiver is not limited to the resale of foreclosed properties. “Property flipping” occurs when a property acquired at a discounted price is resold for a considerable profit with an...