Despite some commendable improvements in its monitoring of the 12 Federal Home Loan Banks, the Federal Housing Finance Agency’s failure to establish policies, systems and documentation standards threatens to undermine the FHFA’s oversight of troubled FHLBanks, according to a new report by the FHFA’s overseer.The FHFA Office of Inspector General’s first report of 2012 picks right up where it left off last year in the OIG’s persistent criticism of the FHFA’s oversight of the GSEs.Since 2008, four FHLBanks – Boston, Chicago, Pittsburgh and Seattle – have faced “significant financial and operational difficulties,” primarily due to their investments in high-risk mortgage-backed securities. In 2009 and 2010, the four Banks posted losses of nearly $2.0 billion on non-agency MBS investments, the FHFA-OIG noted.

The Securities and Exchange Commission has adopted a modified policy that will require defendants in settlement agreements to admit to wrongdoing if they have already pled guilty in parallel criminal cases. “Following a review by senior enforcement staff that began this spring and separate discussions with the commissioners over the last several months, last week we modified our settlement language for cases involving criminal convictions where a defendant has admitted violations of the criminal law,” said SEC Enforcement Director Robert Khuzami.The new policy does not require admissions...

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...

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...

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...

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...

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.

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.

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.

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.