The Securities and Exchange Commission this week approved a proposed conflict-of-interest rule that attempts to walk a tightrope between preventing abusive securitization practices and not interfering with legitimate competitive activity in the market. The agency got a lot of feedback on how to implement the Dodd-Frank Act conflict-of-interest provisions, including from the chief sponsors of the provisions in Congress. Senate Democrats Jeffrey Merkley (OR) and Carl Levin (MI) were largely inspired by dealings in which Goldman Sachs allegedly allowed a hedge fund to choose assets for a collateralized debt obligation and then...

Recent proposals by the Securities and Exchange Commission could eliminate or impose more regulatory burden on mortgage real estate investment trusts and complicate securitizations, experts warned. The SEC earlier this month launched a preliminary effort to reconsider the exemption that REITs currently have from the Investment Company Act. Although the agency did not propose any specific changes, the REIT industry and its supporters see the initiative as a potential game-changer for how they do business. The SEC concept release, at first blush, appears to “signal impending regulatory burdens for mortgage REITs and to...

Guarantee fees up, loan limits down. Reform of the government-sponsored enterprises is set to begin with subtle adjustments to Fannie Mae and Freddie Mac pricing, not with sweeping legislation from Congress. Federal Housing Finance Agency Acting Director Edward DeMarco noted that the guaranty fees charged by the GSEs have already started to increase, and further gradual increases will be implemented next year. ...

“Sept. 2 was the most significant day for mortgage crisis litigation since the onset of the crisis in 2007,” Isaac Gradman, managing member of IMG Enterprises, said in reference to the non-agency mortgage-backed securities lawsuits filed by the Federal Housing Finance Agency. He predicted that the involvement of the U.S. government in mortgage litigation will encourage more private litigants to file lawsuits seeking securities law claims and buybacks. Gradman, whose MBS consulting firm specializes in analyzing contractual rights, potential liabilities and MBS regulation, said the FHFA lawsuits could provide plaintiffs with a roadmap to recoveries. ...

The FHA is urging Congress to restore the authority of community banks to close FHA loans in their own names without having to maintain an FHA lender approval to do so. While it took a regulation by the Department of Housing and Urban Development to take away small banks’ FHA correspondent status, federal law requires lenders to have FHA approval before they can close an FHA-insured loan. Only Congress can make the changes necessary for non-direct endorsement lenders to return to the business of originating and closing FHA loans in their name, according to a former HUD official. Assistant Secretary for Housing and...

FHA lenders that fail to report mortgage record changes for mortgage sales, transfers and termination of mortgage insurance will be referred to the Mortgage Review Board for disciplinary action, including civil fines, the agency warned. In Mortgagee Letter 2011-33, the FHA reminded lenders of their responsibility to reconcile their portfolios and ensure all accounts are properly identified. When the FHA’s records do not match lenders’ records, the latter are required to take corrective action. The Department of Housing and Urban Development will not pay any claims if the name and identification number of the holder or the...

The Department of Housing and Urban Development is seeking public comment on a plan to eliminate an outdated appeals process, which HUD used to collect data to set FHA mortgage loan limits. Since the early 1980s, HUD has allowed interested parties to submit appeals for a higher FHA loan limit in any area of the country at any time in lieu of the limits set by the department for FHA loans. The process, however, is no longer in use – a victim of advances in data-collection technology. Previous guidance issued by HUD outlined the appeal process and later added requirements for data used in non-disclosure states as well as...

The Department of Housing and Urban Development recently called upon lawmakers to restore funding for its housing counseling, a key eligibility requirement for borrowers under the FHA’s Home Equity Conversion Mortgage program. Deborah Holston, HUD acting deputy assistant secretary for single-family housing, told members of the House Financial Services Subcommittee on Insurance, Housing and Community Opportunity that the department has identified ways to streamline and improve the housing counseling program. House appropriators did not restore funding for the program in the draft FY 2012 appropriations bill released...

Regulators should take stronger actions to ensure that homeowners in need of loan modification are treated fairly and that servicers increase their efforts to implement newer Making Home Affordable (MHA) programs, according to a new Government Accountability Office report. The GAO said that while the Department of the Treasury has taken a number of steps to implement its previous recommendations to improve the program, it has not yet taken steps to improve servicer oversight, among other recommendations made by the watchdog agency. Treasury began publishing quarterly assessments of servicer performance under the Home Affordable Modification Program and...

With additional rulemaking still expected from the Consumer Financial Protection Bureau to flesh out some loan originator compensation provisions of the Dodd-Frank Act, state regulators are getting ready to release their own examination guidelines related to mortgage originator compensation for non-depository institutions, based on the Federal Reserve’s rule issued earlier this year. The Conference of State Bank Supervisors and the American Association of Residential Mort-gage Regulators have been working together since May drafting guidelines for implementation of the...