In Commonwealth Property Advocates LLC v. MERS, the 10th Circuit Court of Appeals in Denver recently ruled that Mortgage Electronic Registration Systems, Inc. must be granted the right to foreclose.The 10th Circuit Court of Appeals unanimously ruled that “by the clear language of the deeds of trust, MERS has the authority to foreclose and sell the property on behalf of both the original lender and the ‘lender’s successors.’”The judges rejected all of the plaintiff’s arguments that MERS lacked the authority under state law to foreclose, noting that the Utah Court of Appeals had previously decided this issue and found that MERS has the ability to foreclose and act as the beneficiary on a Utah deed of trust. The court also noted that the Utah Supreme Court declined to review the Utah Court of Appeals case.

Dozens of mortgage lender groups have jointly submitted amici curiae briefs before the Supreme Court of the United States in Magner v. Gallagher, a case in which the high court will address whether the disparate impact theory of discrimination is applicable under the Fair Housing Act or whether plaintiffs have to prove intentional discrimination instead.The Independent Community Bankers of America, the Consumer Mortgage Coalition and the American Financial Services Association argued jointly that proof of discriminatory intent is required to establish a violation of the act.The American Bankers Association, the Consumer Bankers Association, the Financial Services Roundtable and the Housing Policy Council joined dozens of state banking groups to argue that the text of the law provides no basis for claims of disparate impact, and that lenders are not subject to disparate-impact claims under the FHA.The International Municipal Lawyers Association, the National League of Cities and the League of Minnesota Cities sided with the mortgage lending industry...

This past week, a majority of participants in an Inside Regulatory Strategies online poll were dismissive of the Consumer Financial Protection Bureau and whether it’s needed and ought to be kept around. Participants were asked, “based on the agency’s regulatory pronouncements and announcements to date, how do you think the agency is doing?” As of press time, 43 percent agreed that, “It’s not needed and should be closed down.” Another 29 percent agreed that, “It’s doing the best it can, but it needs a permanent director.” The remaining 29 percent sided with the view that, “It’s too early to tell what kind of job the CFPB is doing.” No one agreed with the position that, “It’s doing a good job of balancing consumer protections with regulating the mortgage industry.”

When it comes to contemplating the wide range of mortgage lending compliance challenges in 2012, it might be useful to borrow from former Defense Secretary Donald Rumsfeld: there are “knowns,” things we know and things we know we don’t know, and there are “unknowns,” things we don’t know that we don’t know.In terms of some of the “knowns,” the mortgage servicing exam procedures released back in October by the Consumer Financial Protection Bureau provide a roadmap for some of the emphasis areas mortgage lenders can expect from their new regulator, according to Christopher Willis, partner in the Atlanta office of Ballard Spahr. “I think fair lending is going to be a very big emphasis area for them,” he said. The recent settlement between the Department of Justice and Bank of America “sets the stage for that to continue to be a very public, very big issue. And that was an origination case; that wasn’t even a servicing case.“And if you read the mortgage servicing exam procedures, the CFPB is saying they want to apply fair lending analysis to things like foreclosures and loan modifications,” he added. “I think that’s going to be a major source of activity.”

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.

The Countrywide Financial legacy continues to sour for Bank of America, which recently was compelled to agree to pay $335 million to settle charges that Countrywide allowed pricing discrimination against African American and Hispanic borrowers, along with unchecked steering to subprime loans, when similarly qualified Caucasian borrowers were given prime loans at lower cost. It’s the largest fair lending settlement to date. This is the first time that the Justice Department has alleged and obtained relief for borrowers who were steered into mortgages because of their race or national origin, government officials said. The settlement – which requires court approval – mandates that Countrywide implement policies and practices to prevent discrimination if it returns to the lending business during the next four years. Countrywide currently operates as a subsidiary of Bank of America but does not originate new loans.

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.”

The Department of Housing and Urban Development has entered into a partnership agreement with the National Community Stabilization Trust to facilitate the implementation of a “first look” program that will give preference to certain purchasers to acquire FHA real estate-owned properties. In a notice published in the Federal Register, HUD announced the issuance of a universal Name and Address Identification Number (NAID) to the NCST to assist eligible buyers in purchasing REO properties under the National Stabilization Program’s “First Look Sales Method.” The NAID requirement for purchasers is...

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...

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. ...