The proposal by the Office of the Comptroller of the Currency to create a special-purpose national bank charter for financial technology companies, including marketplace lenders, stirred up significantly different views during a panel discussion sponsored this week by the Brookings Institute. “The fact that this charter will be designed as one not to support innovation, but to support the biggest and most well-funded players, ends up being bad for consumers because it tilts the market against the true innovators,” said Margaret Liu, senior vice president and deputy general counsel for the Conference of State Bank Supervisors. But, Richard Neiman, head of regulatory and government affairs for Lending Club and former New York state banking commissioner, said...

President Trump late last week signed an executive order laying out his “core principles” for regulating the U.S. financial system, and giving the head of the Treasury Department 120 days to detail how the current massive regulatory regime measures up. Trump’s core principles include fostering informed consumer choices, preventing bailouts, promoting economic growth, tailoring regulations and ensuring regulatory accountability. The broadly-worded order specifies, “Nothing in this order shall be construed to impair or otherwise affect ... the authority granted by law to an executive department or agency, or the head thereof.” The order was...

In a new annual letter to shareholders, Fairholme Capital Management once again lays out its argument for investing in Fannie Mae and Freddie Mac stock, trying to explain to its wealthy investors that it feels more secure in owning junior preferred shares than common stock. Among other things, Fairholme said the preferred stock “provide(s) us with greater security and certainty than the common stock and, as you know, we are not speculators.” When it comes to a liquidation preference, preferred shareholders are senior to common shareholders, who often receive nothing when a company goes bust. But Fairholme’s problem – one shared by other firms that still own this class of stock – is...

A federal appeals court has rejected government efforts to reverse a September ruling by Federal Claims Court Judge Margaret Sweeney ordering the government to turn over various memos, emails and presentations to investors in litigation involving the Fannie Mae and Freddie Mac net worth sweep. On Jan. 30, the U.S. Court of Appeals for the Federal Circuit ruled in favor of investors in the two government-sponsored enterprises, upholding Sweeney’s earlier decision, and ordered the government to release 48 of the 56 documents because they don’t merit privilege treatment. Eight of the documents were...

The Federal Reserve’s Open Market Committee, as expected, held the line on interest rates this week at its first meeting of 2017, but still presumably stayed on track for multiple increases later in the year. What’s new is a recent resurgence of talk about how the central bank will shrink its massive balance sheet and its huge portfolio of agency MBS and debt, perhaps as early as next year. “In view of realized and expected labor market conditions and inflation, the committee decided to maintain the target range for the federal funds rate at 1/2 to 3/4 percent,” the FOMC said. It added that committee members expect that economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate. The Fed will...

Housing and Urban Secretary-Designate Ben Carson said he would want an expert in housing finance to lead the FHA and help draw disillusioned lenders back into the FHA single-family mortgage program. In a written response to questions from Sen. Sherrod Brown, D-OH, ranking minority member of the Senate Committee on Banking, Housing and Urban Affairs, Carson provided no detail on how he would entice previous lenders to return to the FHA. Carson made clear, however, that if confirmed he would seek a “strong housing finance practitioner who believes in the mission of the FHA” for the job of FHA commissioner. “We will work hard to balance mission and risk to preserve and sustain FHA now and into the future,” he wrote. “We will also use existing authorities to increase the certainty of loan eligibility in an effort to attract back many of the lenders who are no longer ...

Final Civil Action: Primary Residential Mortgage. The Department of Housing and Urban Development’s Office of the Inspector General has recommended that the department’s Office of Legal Counsel acknowledged $3.13 million of a $5 million settlement agreed to by Primary Residential Mortgage is due HUD. Primary agreed last September to a $5 million settlement with the Department of Justice to resolve allegations of failing to comply with FHA requirements in connection with its origination, underwriting and endorsement of 100 FHA-insured loans. Primary’s settlement is neither an admission of guilt nor assumption of any liability that may arise from the flawed transactions, the IG said. As of Oct. 4, 2016, the settlement amount due HUD had been paid in full. Moody’s Downgrades $243 Million of FHA/VA Residential MBS. Moody’s Investors Service has downgraded the ...

The Consumer Financial Protection Bureau this week announced a Real Estate Settlement Procedures Act enforcement action against a nonbank lender that appears to reflect a traditional interpretation of the law’s anti-kickback provisions, while a flurry of new paperwork fell on its controversial legal battle with PHH Mortgage. The bureau this week brought a $3.5 million enforcement action against Prospect Mortgage, accusing the firm of illegal kickbacks for mortgage business referrals from real estate brokers, and in an unusual twist, a mortgage servicing operation. The CFPB said...

A day after Democrats on the Senate Finance Committee delayed a vote on some of President Trump’s nominations by refusing to attend a confirmation hearing, Republicans used a parliamentary maneuver to push through a unanimous favorable vote on two of them. Mortgage industry observers were expecting positive votes this week from the committee on the nominations of Steve Mnuchin as the new head of the U.S. Treasury and Sen. Jeff Sessions, R-AL, as the next U.S. Attorney General. However, Democrat members of the committee refused...

The Independent Community Bankers of America is urging the Trump administration to push for the elimination of disparate impact from federal fair lending laws to curb “fair lending overreach” and unwarranted enforcement actions against community banks. The ICBA is seeking an amendment to federal fair lending laws to bar certain disparate-impact causes of action. The amendment would clarify that disparate impact without a finding of an intent to discriminate is not a fair lending violation. “This would ensure that community banks that uniformly apply sound and neutral lending standards are not subjected to unnecessary regulatory enforcement actions or frivolous and abusive lawsuits,” said Lilly Thomas, ICBA senior vice president and senior regulatory counsel. Thomas said...