The U.S. Supreme Court did FHA lenders a small favor recently by limiting the use of evidence obtained from government sources in cases brought under the False Claim Act, lately the bane of mortgage lenders that originate government-insured loans and are accused of fraud and abusive lending practices. The opinion could discourage whistleblowers from bringing FCA lawsuits if they base their allegations not on their own experience but on information obtained through the federal Freedom of Information Act. In a May 16 decision in Schindler Elevator Corp. v. United States ex rel. Kirk, No. 10-88, the Supreme Court ruled ...

Congressional Republicans have at least temporarily prevented the Obama administration from appointing Elizabeth Warren as the first director of the Consumer Financial Protection Bureau. There was speculation that the White House would use the recess scheduled for the Senate this week to appoint Warren to lead the CFPB, an agency she helped design. Last week, 20 Senate Republicans wrote House Speaker John Boehner, R-OH, urging him not to pass the Senate’s adjournment resolution, keeping the Senate at least nominally in session and preventing Pres. Obama from making any recess appointments. In 2007, Democrats in the Senate used...

The Department of Justice has stepped up its fair lending enforcement initiatives and more cases are anticipated in the future, but with them comes a dilemma, according to industry sources. The DOJ currently has five lawsuits pending against lenders and several investigations, a DOJ insider said. The official said cases involve redlining, wholesale pricing, product steering and retail pricing. Wholesale issues and broker fee cases are likely to continue popping up, the source said. “The other big development for 2011 is going to be the...

Federal regulators should adopt a fair value method for measuring an MBS sponsor’s retained interest in non-agency transactions and make subtle changes in the proposed premium capture provisions in order to provide a framework that’s feasible for issuers, according to Redwood Trust officials. In a briefing with the Federal Housing Finance Agency, the company explained several key changes to the proposed inter-agency rule on risk retention as it would affect non-agency MBS. Redwood, the only company that has issued non-agency MBS backed by newly originated mortgages over the past few years, was joined by officials from Wells Fargo, which had been one of the most...

Savings institutions reported a total of $200.9 billion of residential MBS in their retained portfolios at the end of the first quarter of 2011, up marginally from the end of the previous year. But the heart of the industry – firms regulated by the Office of Thrift Supervision – actually posted a small decline in their MBS holdings during the period. The OTS itself is being phased out as a separate federal regulator, although the savings association charter will continue under the supervision of a dedicated unit in the Office of the Comptroller of the Currency. OTS-regulated thrifts held $157.6 billion of MBS in their portfolios at the end of... [Includes two data charts]

Pending inter-agency proposals to implement risk-retention requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act could undermine the return of private capital to the housing finance market, warned industry participants. Testifying this week during a House subcommittee hearing, the Mortgage Bankers Association and other critics of risk retention said that a narrow definition of a “qualified residential mortgage” and overemphasis on higher downpayment may have an adverse impact on credit availability. MBA Chairman Michael Berman told members of the House Financial Services Subcommittee on Insurance, Housing and Economic Opportunity that while...

Mortgage lenders that are anxious about complying with the call report requirements of the National Mortgage Licensing System might want to consider a new automated solution developed by LendingSpace, a Fulton, MD-based technology firm. “Lenders who find themselves using a patchwork of their existing technologies to meet these requirements will spend a great deal of time and resources to ensure impeccable compliance,” said Ravi Varma, CEO of LendingSpace. “With a click of a mouse, the Automated Mortgage Call Report function in our ComplianceOne suite gathers the information from the loan origination system, and formats it so that it’s ready for...

The Federal Housing Finance Agency last week issued a final rule regarding the FHLBanks which limits the Banks’ mortgage-backed securities holdings, especially non-agency MBS. In its notice, published in the May 20 Federal Register, the FHFA said it is re-organizing and re-adopting existing investment regulations that were previously issued by the Federal Housing Finance Board. The final rule will retain the Finance Board’s Financial Management Policy provision limiting MBS holdings to 300 percent of a Bank’s capital. “Contrary to suggestions that the 300 percent of capital limit was inflexible and outdated, FHFA believes the limit reasonably serves to control Bank investment activity that does not...

The Government Accountability Office noted there is a little room for improvement in the Federal Housing Finance Agency’s internal controls and accounting procedures but the Finance Agency is otherwise operating well. Mandated by the Housing and Economic Recovery Act of 2008, the GAO said its audit of the FHFA’s fiscal years 2010 and 2009 financial statements revealed deficiencies in the way the Finance Agency disposed of its information technology property and equipment. The GAO also found that the FHFA did not always verify vendor invoice amounts prior to payment. Although the two issues do not represent “material weaknesses or significant deficiencies” on an order that...

Testifying before the House Financial Services Subcommittee on Capital Markets and GSEs this week, the head of the Federal Housing Finance Agency took issue with some of the proposed bills in the legislative package intended to wind down Fannie Mae and Freddie Mac. “I appreciate the effort in these and other bills to begin moving towards a final resolution of the enterprises in conservatorship, but I also recognize the critical and contemporaneous need to provide market participants with greater clarity and assurance about the ultimate role of the government in housing finance beyond the issues surrounding the enterprises,” said...