PHH Corp. over the last month has felt the pinch of being the largest mortgage banking business not associated with a depository institution as it faced some setbacks in lining up financing for its operations. The company this week priced a $220 million offering of 6.00 percent convertible senior notes that is being co-managed by JPMorgan Securities and BofA Merrill Lynch. That was up from the $150 million offering originally announced, and PHH gave the underwriters the option to purchase an additional $30 million. PHH will use the money to pay off $250 million of 4.00 percent convertible senior...

The Federal Reserve is urging government policy makers to consider more aggressive responses to the housing debacle, including a government-backed program to transform much of the real estate owned overhang into rental housing. In a white paper sent to Congress, the Fed suggested that a government-facilitated REO-to-rental program can boost the housing market and improve loss recoveries on REO. Such a program could take many forms, the Fed noted. “The REO holder could rent the properties directly, sell the properties to a third-party investor who would rent the properties, or enter into a joint...

Demands to repurchase poorly performing mortgages have resulted in a spike in the number of mortgage fraud-related Suspicious Activity Reports (SARs) filed by banks in 2011, according to the Department of the Treasury’s Financial Crimes Enforcement Network. In its 2011 annual report, FinCEN said increased buyback demands by investors have forced large mortgage lenders to conduct additional reviews of loans they originated, resulting in higher SARs filings last year. A review of SAR filings in the first quarter of 2011 found that the number of mortgage fraud reports rose to 25,485, up 31 percent from...

A growing consensus is emerging among legal experts that someone will challenge in court President Obama’s contentious recess appointment of Richard Cordray as the first director of the Consumer Financial Protection Bureau. But a final outcome could take years and have no impact on the agency’s actions while the case is unfolding. “These appointments establish a dangerous precedent that threatens the confirmation process and undermines the system of checks and balances embedded in the Constitution,” a number of House Republicans said in a letter they fired off to the president after he made his...

Fed Governor Sarah Bloom Raskin late last week stumped for creating an effective enforcement system to deal with shortcomings in the mortgage servicing industry that have come to light since the foreclosure crisis, as state officials pressed to expand a potential settlement over past abuses. “The law is not a scarecrow where the birds of prey can seek refuge and perch to plan their next attack,” Raskin said in a speech to a group of attorneys. The Fed governor said it’s important for servicers to have transparent, enforceable and sensible rules, adding that deferring to “standard industry...

Mortgage industry groups are urging the U.S. Supreme Court to pay close attention to the wording of the Fair Housing Act – specifically phrasing that’s not in the 1968 law – in deciding whether fair lending charges can be brought on the basis of disparate impact. In an amicus brief filed in the case of Magner v. Gallagher, mortgage trade groups said the Fair Housing Act “requires proof of intentional discrimination and does not envision a violation based on disparate impact.” The brief was filed by K&L Gates on behalf of the Independent Community Bankers of America, the Consumer Mortgage...

The N.Y. Supreme Court Appellate Division overturned a ruling that dismissed a foreclosure case because attorneys representing the lender failed to meet a deadline for filing a conflict-of-interest document. Judge Arthur Schack dismissed the case brought by U.S. Bank because its attorneys, the now infamous Steven J. Baum law firm, submitted a conflict-of-interest filing 123 days after it was due. The case involved Kelvy Guichardo, a defendant who defaulted on his mortgage. Schack was concerned that there might be a conflict of interest for Steven J. Baum and ordered the law firm to submit an...

It didn’t take long for the Consumer Financial Protection Bureau to get its regulatory groove on after President Obama made a recess appointment of Richard Cordray as the agency’s first director. Just hours after the appointment was announced Jan. 4, Cordray revealed the newly empowered bureau was beginning its supervision of non-bank mortgage lenders and other non-bank entities.“One difficulty we faced until now was that, without a director, we were unable to address all the problems we were created to tackle. In particular, we lacked the ability to supervise financial institutions other than big banks – like non-bank mortgage lenders and servicers and payday lenders,” Cordray said in a speech. “Many of these institutions had no regular federal oversight in the run-up to the financial crisis. They led a race to the bottom that pushed aside responsible businesses, including community banks and credit unions, and greatly harmed consumers. “I am pleased to say that we will now be able to exercise the full authorities granted to us under the law and begin to supervise these non-banks,” the new director added.

President Barack Obama surprised the mortgage lending industry and friend and foe alike with a controversial decision to make a recess appointment of Richard Cordray as director of the Consumer Financial Protection Bureau, even though Congress technically remains in session. Assuming the recess appointment of Cordray proceeds without a challenge (see related story on page 2), it’s now “game on” for the CFPB and the mortgage lending industry, according to Christopher Willis, a partner in the Atlanta office of the Ballard Spahr law firm. “Unless the appointment is successfully challenged, this move will open up a whole range of powers to the bureau, including the power to regulate non-bank players and the authority to act under the ‘unfair, deceptive or abusive’ provisions in the Dodd-Frank Act,” he said. “That sets the stage for whether someone wants to challenge that power.”

President Obama’s contentious recess appointment of Richard Cordray, his nominee to head the Consumer Financial Protection Bureau, sets the stage for legal challenges by mortgage lenders affected by actions of the CFPB. One interesting angle that has emerged in discussions with industry attorneys so far is the possibility that, sometime in the future, an aggrieved mortgage lender or servicer that becomes the focus of a CFPB enforcement action could block it by challenging the legality of the action. A company might be able to do so on the basis that the bureau may have acted unlawfully by utilizing an authority it really didn’t have because the CFPB director might not have been legally confirmed by the Senate. “There are issues with this appointment,” said Anne Canfield, executive director of Canfield & Associates, the first of which is the question of whether the Senate is in session or in recess.