Failure by the five largest FHA mortgage servicers to establish effective controls and to comply with FHA foreclosure procedures resulted in improper servicing practices that may have exposed them to liability under the False Claims Act, the Department of Housing and Urban Development’s Office of the Inspector General concluded in separate, recently released audits. The HUD-OIG audits of the top five FHA servicers – Bank of America, Ally Financial, Wells Fargo, CitiMortgage and JPMorgan Chase – revealed a variety of questionable foreclosure practices involving the use of foreclosure “mills” and robo-signing of sworn documents in thousands of foreclosures throughout the country. The audits were ...

Dividend payments paid by Fannie Mae and Freddie Mac to the U.S. Treasury for its continued financial support held down the two government-sponsored enterprises during the fourth quarter as Freddie would have otherwise posted a profit, while Fannie narrowed its losses during the final three months of 2011. Freddie actually reported $619 million in net income during the fourth quarter of 2011, compared to the third quarter’s net loss of $4.4 billion, before having to repay $1.7 billion in preferred stock dividends to the government. Under the terms of the GSEs’ purchase agreement, the Treasury is entitled...

Bank of America and JPMorgan Chase will once again receive servicer incentives for modifying loans after more than seven months during which these payments were withheld by the Treasury Department for unsatisfactory performance in the Home Affordable Modification Program. The two banks will also get all the withheld incentives as part of the multistate foreclosure settlement. In June 2011, Bank of America, JPMorgan and Wells Fargo were all called to the carpet by the Treasury for their HAMP performance following a 10-month audit of participating servicers. The main issue was timeliness – while mods...

The extension of the Home Affordable Modification Program announced in late January was coupled with changes, including the new eligibility of investor-owned properties. While the expansion of the program could allow for a half million more participants, there are complaints that it is no more than a taxpayer bailout of speculators. Timothy Massad, the assistant secretary for financial stability at the Department of Treasury, said the inclusion of investor-owned properties will help low- to moderate-income renters, because the foreclosure of investor-owned properties disproportionately affects them. An advocate for...

The Consumer Financial Protection Bureau has provided some potentially significant insight into some of the positions it may end up taking on the rules that will govern the final integrated mortgage disclosure it’s developing. The disclosures were released as part of the CFPB’s announcement that it is putting together a Small Business Review Panel under the provisions of the Small Business Regulatory Enforcement Fairness Act. The panel is part of the broader initiative to integrate the mortgage disclosure forms that borrowers receive when applying for and closing on a loan...

Last week, the Federal Reserve Board released action plans that Bank of America, Citigroup, EverBank, JPMorgan Chase, MetLife, PNC, SunTrust, US Bancorp and Wells Fargo developed and will have to implement per the consent orders issued last April in order to correct alleged deficiencies in residential mortgage loan servicing and foreclosure procedures. The Fed also released engagement letters between the institutions and the independent consultants they retained to review foreclosures that were in process in 2009 and 2010...

The Supreme Court of the United States heard oral arguments last month in Freeman v. Quicken Loans (Case 10-1042), an important fee-splitting case under the Real Estate Settlement Procedures Act, and the initial consensus of leading industry attorneys following the case is that the high court appears to be favorably inclined towards Quicken’s side. “If questions raised by the justices are any indication of where the court is headed, I’d say the scales are tipped in the direction of a favorable decision for Quicken Loans,” said attorney Phillip Schulman, in the Washington, DC, office...

The Supreme Court of the United States heard oral arguments this week in an important fee-splitting case under the Real Estate Settlement Procedures Act, and one issue that took up a lot of air time was whether RESPA is fundamentally a law barring kick-backs or a price-control statute. The key legal provision being examined in Freeman v. Quicken Loans is RESPA Section 8(b), which provides that, “No person shall give and no person shall accept any portion, split or percentage of any charge made or received for the rendering of a real estate settlement service in connection with a transaction involving a...

The Multi-State Mortgage Committee and the American Association of Residential Mortgage Regulators have issued Secure and Fair Enforcement for Mortgage Licensing Act (SAFE) Act Examination Guidelines for use by state nondepository mortgage regulators. The primary purpose of the guidelines is “to ensure that all individuals acting as mortgage loan originators are properly licensed and registered under the SAFE Act in all states in which they are conducting business,” said John Ducrest, commissioner of the Louisiana Office of Financial Institutions and chairman of the ...

Supreme Court of the United States.Oral Arguments This Week in RESPA Case. The Supreme Court is scheduled to hear oral arguments Tuesday, Feb. 21, in Tammy Foret Freeman, et vir, Petitioners v. Quicken Loans, Inc. The central issue is the legitimacy of fee-splitting under the Real Estate Settlement Procedures Act. At the crux of the legal debate is Section 8(b) of the Real Estate Settlement Procedures Act, 12 U.S.C. §2607(b), which states that no person “shall give and no person shall accept any portion, split or percentage of any charge made ...