The Department of Justice this week flexed its muscle against mortgage redlining in a settlement with a Michigan lender while expressing growing concern over a possible re-emergence of redlining as access to credit becomes more difficult. Industry attorneys noted with some alarm the message the DOJ is sending mortgage lenders through its settlement with Citizens Republic Bancorp and Citizens Bank of Flint, MI. They say the message reflects disturbing trends that defense lawyers have been seeing in their representations of lenders accused of redlining. The proposed settlement, which requires court approval, was filed in conjunction with...

A proposed “qualified mortgage” standard to determine a borrower’s ability to repay a mortgage loan creates many pitfalls for loan originators and subjects them to enormous liability if they fail to comply, warned compliance experts. The risk of making non-qualified mortgages for lenders is the borrower’s defense to foreclosure and the higher damages that would be incurred for noncompliance, as well as the impact on the liquidity of those loans if lenders were to sell them down the road, according to panelists on a webinar hosted last week by Inside Mortgage Finance. The proposed ability-to-repay rules and alternative definitions of a “qualified mortgage” (QM) are out for...

The requirement from last year’s landmark financial services legislation that MBS issuers retain some of the risk associated with residential mortgages will raise the costs of securitizing them to prohibitive levels, discouraging the return of private capital and maintaining the market’s dependence on Fannie Mae and Freddie Mac, industry experts warn. The proposed definition of “qualified residential mortgages” under the terms of the Dodd-Frank Wall Street Reform and Consumer Protection Act was a major focus of concern raised during a webinar last week sponsored by Inside Mortgage Finance. “I think the big-picture news is that certainly the risk-retention regulations do what Dodd-Frank mandates that they do. But in some very important ways they go beyond that...

The battle over the Dodd-Frank-mandated risk-retention rules continues on Capitol Hill, with lawmakers rehashing concerns about either the detrimental or beneficial effects the proposed rule may have on the market. The Dodd-Frank Act required federal regulators to come up with a definition of “qualified residential mortgages” that would be exempt from a 5 percent risk-retention requirement when securitized. During a hearing this week in the House Oversight Subcommittee on TARP, Financial Services and Bailouts of Public and Private Programs, Republican lawmakers argued that transparency is a better solution to restoring investor confidence and reviving the non-agency MBS market. But according to Rep. Elijah Cummings, D-MD, lenders shouldn’t be let off the hook, and the risk-retention rules do furnish necessary...

The mortgage banking industry is concerned that the Federal Reserve’s proposed rule on escrow accounts for higher-priced mortgage loans – especially the vast expansion of escrow account disclosure – is duplicative, unduly burdensome, and may be superseded shortly after it is implemented by the Consumer Financial Protection Bureau...

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 is the greatest mortgage compliance concern for lenders, according to the third annual survey by QuestSoft, a compliance software and services firm serving the mortgage, banking and credit union industries...

The Treasury Market Practices Group wants to improve efficiency in the agency MBS market by imposing charges for failure to complete transactions. “The TMPG is proposing fails charges in the agency debt and agency MBS markets in order to reduce the incidence of delivery failures in the market,” said Tom Wipf, chair of...

Securitization markets would gain more certainty regarding securities issuance going forward under legislation passed out of a House subcommittee this week that would restore to credit rating agencies their previous exemption from expert liability under the Securities Act of 1933. The exemption was removed with...

Mandatory risk-retention requirements will severely limit non-agency mortgage originations and securitization, according to market participants. Even portfolio originations could be hindered due to the pending rule from federal regulators. “Loan availability is likely to be quite restricted in the...

Non-bank servicers are likely to face regulatory scrutiny and mandated changes, according to industry lawyers. And the consent orders recently issued by federal regulators to 14 large banks and thrifts could serve as best practices for non-bank servicers until the expected punishments are levied. “If history is any guide, it’s not going to be...