Secondary mortgage market participants have expressed support for the Consumer Financial Protection Bureau’s efforts to establish clear standards for mortgage servicing that would balance investor and borrower interests. Issued last week, the proposed rules focus primarily on borrower protection and are described as measures that would benefit borrowers by eliminating surprises and run-arounds. However, they do not address servicers’ conflicts of interest that result in servicer breaches, which mortgage-backed securities investors have raised in the past, and other investor complaints. Specifically, the proposed rules implement...

A three-judge federal panel this week agreed to hear a rare interlocutory appeal by one of the defendants in a series of lawsuits that the Federal Housing Finance Agency has filed in connection with non-agency MBS purchased by Fannie Mae and Freddie Mac. The Second Circuit Court of Appeals accepted UBS Americas’ appeal, which had been certified by Judge Denise Cote of the U.S. District Court of New York in late June. UBS seeks to re-argue and reverse Judge Cote’s May 4 denial of the bank’s motion to dismiss on statute of limitation grounds. The FHFA sued...

It has been another busy week in the turbulent world of litigation over non-agency mortgage-backed securities. The Federal Deposit Insurance Corp. filed lawsuits regarding non-agency MBS, Wells Fargo agreed to settle non-agency MBS-related charges with the Securities and Exchange Commission and the Department of Justice and the SEC dropped its non-agency investigation into actions by Goldman Sachs. The FDIC lawsuits against 15 issuers and underwriters relate to $1.46 billion in AAA tranches of non-agency MBS ...

The Consumer Financial Protection Bureau late last week issued its long-awaited proposal to establish national mortgage servicing standards for banks and nonbanks alike, extending a number of key aspects of the big national servicing settlement to the entire industry in the process. The proposed rule covers nine major topics and would implement changes made by the Dodd-Frank Act to the Truth in Lending Act and the Real Estate Settlement Procedures Act. The proposed rule generally requires servicers of closed-end residential mortgage loans (other than reverse mortgages) to send a periodic statement for each billing cycle, and the CFPB’s proposal spells out the timing, form and content requirements of such statements, and includes sample forms that servicers can use. Special rules will apply...

As the “shadow” banking sector has grown and evolved since the 1970s, questions have arisen as to the extent to which traditional banks may have been displaced by other financial institutions, insurance companies and entities as alternate sources of financing and the credit enhancement to securitization transactions. However, three economists at the New York Federal Reserve Bank recently found that, contrary to the notion that banks are being eclipsed by other institutions, banks have held their own against insurance companies involved in the enhancement business, despite their underdog status. “The first thing to note is that enhancements by insurance companies outnumber...

On recommendation by its Inspector General, the Department of the Treasury is developing written policies and procedures for selecting financial agents that will require full and timely documentation of the selection process. The recommendation was prompted by an IG audit of Treasury’s selection of financial agents for the Agency MBS Purchase Program, which is no longer in operation. Treasury acquired a total of $225 billion of agency MBS under the program, which the agency began selling in March last year when market conditions improved. Sales were completed in March 2012. State Street Bank and the New York branch of Barclays Bank were selected...

The Office of the Comptroller of the Currency and the Federal Reserve are implementing third-party recommendations to improve borrower outreach and provide more opportunity for borrowers to request an independent foreclosure review (IFR), and giving consumers more time to ask for a review. Borrowers can request a review if they believe they have suffered financial injury from improper foreclosure actions in 2009 and 2010. The IFR process is being conducted by 14 mortgage servicers that are subject to the consent orders issued by the OCC and the Fed in April 2011. The orders required servicers to take steps to establish strong and comprehensive standards for mortgage servicing and foreclosure processing and to carry out...

Home Affordable Modification activity in the second quarter of 2012 was well below HAMP activity in the second quarter of 2011, according to an Inside Mortgage Finance analysis of reports from the Special Inspector General for the Troubled Asset Relief Program and Treasury Department. The number of permanent HAMP mods outstanding hit 818,803 at the end of the second quarter of 2012, an increase of 24,055 compared with the previous quarter. But activity in the second quarter of 2012 was down 65.7 percent compared with activity a year ago. HAMP activity spiked in the second quarter of 2011 and has declined each quarter since. A recent audit completed by the SIGTARP suggested that activity has been limited...

Mortgage lenders and appraisers widely agree that the appraisal process needs to be improved, as the industry faces a fresh wave of new federal regulations. During a conference sponsored this week by the Collateral Risk Network and the American Enterprise Institute, John Brenan, director of appraisal issues at The Appraisal Foundation, suggested that lenders have stymied appraiser efforts to change the process. “You can’t ignore the fact that the banking lobby is one of the strongest in the country,” he said. Penny Reed, a vice president of strategic partner management at Wells Fargo Home Mortgage, acknowledged...

The Consumer Financial Protection Bureau has been feeling the heat over the size of its proposed rule to streamline and integrate the disclosures consumers get when taking out a home loan, so agency officials engaged in a little bit of push-back last week in an effort to fend off the criticism. The push-back started early in the week during a hearing of the House Small Business Committee, during which Rep. Scott Tipton, R-CO, took issue with the rulemaking’s size that exceeded 1,000 pages in draft form, a fraction of which is new...