The CFPB has finally issued its long-awaited final rule banning mandatory arbitration in consumer financial contracts. For starters, the final rule prohibits “covered providers of certain consumer financial products and services from using an agreement with a consumer that provides for arbitration of any future dispute between the parties to bar the consumer from filing or participating in a class action concerning the covered consumer financial product or service.” Further, the final rule requires “covered providers that are involved in an arbitration [proceeding] pursuant to a pre-dispute arbitration agreement to submit specified arbitral records to the bureau and also to submit specified court records.” The new rule applies to the major markets for consumer financial products and services overseen by...

Prospect Mortgage of Sherman Oaks, CA, this week joined a growing list of FHA lenders that have opted to settle federal false claims allegations arising from flawed underwriting and poor quality control. Prosecutors with the U.S. Attorneys Offices for the Northern Districts of Georgia and California announced a $4.16 million settlement with Prospect stemming from alleged fraudulent FHA lending practices at two of its Southeastern branches. An FHA direct endorsement lender, Prospect’s branches in Florida and North Carolina allegedly violated the False Claims Act by falsely certifying compliance with FHA underwriting and quality control requirements. Consequently, the FHA suffered substantial losses in claim payments when the loans defaulted. HUD’s Atlanta Home Ownership Center reported that Prospect had a 12.29 percent default rate, well in excess of the national average, between December 2007 and ...

The Department of Veterans Affairs has awarded a 10-year contract to VRM Mortgage Services to manage VA’s real estate-owned assets and service its loan portfolio. The contract requires VRM, a 10-year-old California-based real estate services contractor, to manage, market and sell VA REO properties, and provide other real estate services as well. The new contract was negotiated from a previous five-year contract that was awarded to VRM when VA consolidated both REO management and portfolio servicing into a single contract.VA has often sold conveyed properties with seller loan financing, known as vendee loans, to help keep distressed vet homeowners in their homes. Vendee lending is an arrangement whereby a buyer uses VA financing to purchase a property in the agency’s REO inventory. “Once a loan is sold under the vendee financing program, we would monitor that loan as well as ...

The Department of Veterans Affairs is seeking approval from the Office of Management and Budget to continue collecting information considered crucial in approving certain lender requests to close VA loans automatically. Currently, non-supervised VA lenders requesting approval to close VA loans on an automatic basis use VA Form 26-8736 to submit the information needed for VA approval. Upon receiving the form, the appropriate VA regional loan center processes and evaluates the information. Without the required data, VA would not be able to determine if a non-supervised lender is qualified for automatic loan processing. The required data include, among other things, a resume of each principal officer’s experience in mortgage lending in a managerial capacity and the latest financial statements audited and certified by a certified public accountant. The form also requires a listing of all ...

The latest issue of FHA’s Lender Insight provides additional information to lenders regarding the new Loan Review System that was launched on May 15, 2017. FHA urged lenders to keep their contact information current in FHA Connection and in the Lender Electronic Appraisal Portal so that they receive automated system notifications on time. Also, lenders should review current FHAC user access for appropriate roles, the agency added. Lenders’ in-house FHAC application coordinators are authorized to grant access to, and assign roles within, the LRS. Having the correct roles should enable users to access the system from the FHAC menu, the FHA said. In addition, the lender must take a photo of any error messages that might appear on screen before contacting the FHA Resource Center, the agency advised. Be prepared to provide the date and time of the attempted login, user ID, lender user ID and the ...

Chicago HECM Lender Arraigned on Fraud Charges. Mark Steven Diamond, a mortgage loan originator with offices in Chicago and Calumet City, IL, was arraigned on fraud charges in connection with a $7 million reverse mortgage scheme that targeted elderly homeowners and FHA lenders. According to the Department of Justice, Diamond deceived lenders into making FHA-insured reverse mortgage loans to homeowners who did not apply for a loan or had been beguiled to do so by the smooth-talking suspect. Diamond allegedly pocketed title-company checks intended for the borrowers, with the help of an unindicted co-schemer. Cynthia Wallace, who posed as a representative of the Department of Housing and Urban Development, was indicted along with Diamond. Using at least three aliases, Wallace allegedly collected money from victims for home repairs, which she claimed Diamond would ...

Compliance issues involving nonbank servicers remain an ongoing problem, according to new reports from state regulators. And the regulators raised concerns about how a shift by lenders to purchase mortgages increases compliance risks. “The increase in transfers of mortgage servicing rights to non-depositories in recent years has stressed these servicers’ sometimes inadequate operating systems and infrastructures, requiring greater regulatory attention,” the Multi-State Mortgage Committee said in a report to state regulators. The MMC was established by state regulators to supervise multi-state nonbank mortgage entities. Eight mortgage-related exams were...

Mortgage lenders will not be subject to supervisory or enforcement actions for violations of the early implementation guidance for the revised 2016 mortgage servicing rule, according to the Consumer Financial Protection Bureau. The CFPB issued “non-binding” policy guidance last week to allay lenders’ fear of being penalized if they fail to implement the 2016 servicing amendments up to three days early, said industry attorneys. Issued in August last year, parts of the rules take effect on Oct. 16, 2017, and April 16, 2018. Technically, the “relief” applies...

A representative of the Conference of State Bank Supervisors testified before the U.S. Congress recently, telling lawmakers that smaller financial institutions can’t engage in as much residential mortgage lending activity as they otherwise would because of the growing reporting requirements under the Home Mortgage Disclosure Act, as well as the CFPB’s ability-to-repay/qualified mortgage rule. In his testimony before the Senate Banking, Housing and Urban Affairs Committee, Charles Cooper, commissioner of the Texas Banking Department and immediate past chairman of CSBS, said the CFPB’s recent expansion of HMDA reporting requirements has placed a disproportionate burden on smaller and less complex institutions, potentially restricting mortgage lending as well. “In 2018, the number of data points required to comply with HMDA reporting standards ...

One emerging issue identified by state mortgage regulators over the last year has to do with the Home Mortgage Disclosure Act, according to a new report issued by the Multistate Mortgage Committee.Specifically, MMC examination teams found numerous data discrepancies in the Loan Application Register (LAR) submissions, when compared to the data contained in the reportable loan files. “Within the review process, examiners seek to validate the accuracy of the LAR data submitted to meet the requirements of HMDA, and in multiple instances it was determined that the data was either inaccurate or incomplete,” the report said. As the CFPB works to update the HMDA submission process, which may eliminate some of these issues, the MMC said it will also ...