A federal jury in late June ruled in favor of former officials from Thornburg Mortgage in a lawsuit brought by the Securities and Exchange Commission in 2012. The charges centered on disclosure and accounting issues the jumbo lender faced in early 2008. The trial involved 10 counts against Larry Goldstone and Clay Simmons, the former CEO and chief financial officer of Thornburg, respectively. The jury ruled in favor of the former Thornburg officials on six counts and was ...

House Republicans this week accused the Department of Housing and Urban Development of giving preferential treatment to political favorites in changes to FHA distressed asset sales. House Financial Services Committee Chairman Jeb Hensarling, R-TX, denounced changes HUD Secretary Julian Castro made to the Distressed Asset Sale Program (DASP), saying the moves help liberal special interests at the expense of private investors. Hensarling said the changes would create “preferential bidding” for certain buyers and restrict investor options. HUD expanded DASP in 2012 as a conduit for selling nonperforming FHA loans to investors with the proviso they must first help borrowers save their homes from foreclosure and foreclose only if all loan-modification options have been exhausted. Distressed note sales also helped stabilize FHA’s Mutual Mortgage Insurance Fund and have contributed more than ...

The U.S. Senate this week passed legislation that includes reforms to current FHA restrictions on condominium financing, among other provisions. H.R. 3700, the Housing Opportunity Through Modernization Act of 2016, was approved without amendment by unanimous consent. The bill passed in the House of Representatives by a vote of 427-0 in February. The bill addresses problems facing buyers and sellers of condominiums. Specifically, the bill modifies the Department of Housing and Urban Development’s rental assistance and public housing programs, FHA’s requirements for condo mortgage insurance and the U.S. Department of Agriculture’s single-family housing guaranteed loan program. Among other things, the bill requires the FHA to make recertifications “substantially less burdensome,” while lowering the ownership-occupancy requirement from 50 percent to 35 percent. The current ...

Secondary market participants’ reluctance to invest in mortgages out of fear of liability from the loans being originated with TRID errors seems misplaced or overblown, a new report from Moody’s Investors Service suggests. Violations of the CFPB’s integrated-disclosure rule will not notably increase losses in prime jumbo residential mortgage-backed securities, according to a recent analysis by the ratings service.As Moody’s sees it, TRID violations in prime jumbo RMBS will be minimal and often curable. “Prime jumbo RMBS exposure to loans that violate TRID will largely be kept in check thanks to third-party due diligence reviews,” Moody’s said. On top of that, lenders and aggregators will be able to correct most TRID violations before issuers place the affected mortgages in ...

Fitch Ratings recently updated its U.S. residential mortgage-backed securities rating criteria, partly to include adjustments to due diligence grades having to do with the CFPB’s Truth in Lending Act/Real Estate Settlement Procedures Act Integrated Disclosure rule, otherwise known as TRID. Fitch said it expects that participating third-party due-diligence review firms will determine whether mortgages being reviewed for inclusion in MBS have been closed in compliance with the disclosure rule. Further, the ratings service said it would request that due diligence firms grading loans determine whether the findings are more likely to carry statutory damages and assignee liability or just assignee liability. When it comes to grading TRID loans under the revised criteria, Fitch said unresolved errors that carry an increased ...

The CFPB and the Department of Justice late last month announced a $10.6 million enforcement action against BancorpSouth, a regional bank headquartered in Tupelo, MS, alleging the lender engaged in discriminatory mortgage lending practices that harmed African-Americans and other minorities. Of particular note, the bureau said, “This is the CFPB’s first use of testing, sometimes referred to as ‘mystery shopping,’ to support an allegation of discrimination.” The government’s complaint accuses BancorpSouth of illegally redlining in Memphis, TN, denying certain African-Americans mortgage loans more often than similarly situated non-Hispanic white applicants, and charging African-American customers more for certain mortgage loans than non-Hispanic white borrowers with similar loan qualifications. The agencies also alleged the lender implemented an explicitly discriminatory loan denial policy...

The redlining risk that lenders face these days is morphing to include not just a consideration of a bank’s internal behavior but also a comparison of the bank’s performance against its peers – a far more nebulous and uncertain standard of accountability. During a presentation at the American Bankers Association’s regulatory compliance conference last month in San Diego, Carl Pry, a managing director at Treliant Risk Advisors, told attendees, “Regulators are defining redlining risk a little bit differently these days. Traditionally, redlining involved looking at your own bank’s map: you plot out where your applications are, where the loans are, where the denials are – and you stand back and take a look and see, perhaps, that there are a lot of ...

Among a host of best practices and other tips lenders should consider for complying with the CFPB’s new Home Mortgage Disclosure Act rule is coordinated institutional planning, according to Ellen Costa, vice president of strategy and business capability development at Wells Fargo Home Lending. Speaking to attendees at the recent regulatory compliance conference sponsored by the American Bankers Association, Costa said, “All of the CFPB's regulatory changes – HMDA in particular – mean significant change management within your institution. It is a best practice to be very agile and proactive about coordinating a project plan that includes a strategy upfront, really understanding what the regulations are driving at.” A solid plan developed ahead of time and properly executed will allow a clear ...

Mortgage lenders may get greater clarity on the legal question of just who may sue them for alleged racial discrimination, after the Supreme Court of the United States announced recently it would take on separate lawsuits filed by the city of Miami against Bank of America and Wells Fargo. The city accused the pair of perpetrating discriminatory mortgage lending within its jurisdiction over a long period of time. The city alleged that the banks’ conduct violated the Fair Housing Act in that they intentionally discriminated against minority borrowers and that their conduct had a disparate impact, resulting in an unbalanced number of foreclosures on minority-owned properties. The precise legal issue before the high court is...

Pleas from the securitization industry for the Supreme Court of the United States to hear an appeal of Midland Funding v. Madden were rejected this week, prolonging uncertainty in sectors of the secondary market. SCOTUS may still consider the issue at some point going forward, according to analysts, providing hope for the industry. Richard Johns, executive director of the Structured Finance Industry Group, said the denial of certiorari for Madden will result in significant challenges for borrowers of credit cards, mortgages, auto loans and other financial products. “The injection of uncertainty into the credit markets will ultimately increase the cost of credit for all and directly impact the real economy,” he said. The Madden case involved...