Wells Fargo last week reached an agreement to pay $1.2 billion to the federal government to resolve certification and reporting violations in connection with FHA-insured loans. The settlement is the largest recovery for loan-origination violations in FHA history, according to Housing and Urban Development Secretary Julian Castro. The April 8 court filing details an agreement in principle, which Wells Fargo announced in February, that resolves not only a pending lawsuit filed by the U.S. Attorney for the Southern District of New York, but also a number of potential claims dating as far back as 15 years in some cases, according to a statement issued by Wells Fargo. According to the settlement, Wells Fargo “admitted...

Litigation over legacy residential MBS deals that went sour in the run-up to the financial crisis continued last week, as California Attorney General Kamala Harris sued investment bank Morgan Stanley for alleged misrepresentations about RMBS investments, which she said contributed to huge losses by investors such as the state’s public pension funds. In what is just the second such use of the False Claims Act by a state, Harris’ complaint, filed in San Francisco Superior Court, alleges that Morgan Stanley violated the FCA, as well as California securities law and other state laws, by allegedly hiding or downplaying the risks of complex investments involving large numbers of underlying loans or other assets. Harris used...

Since the Federal Housing Finance Agency’s March filing to transfer lawsuits initiated by Fannie Mae and Freddie Mac shareholders to a new court, a number of plaintiffs have filed motions opposing the transfer, arguing that the cases are substantially different from one another. FHFA said it was looking to prevent future “copycat” cases and ensure a more consistent ruling across the board by having all of the cases heard in the U.S. District Court for the District of Columbia instead of scattered in different jurisdictions throughout the country. On April 6, the attorneys for plaintiffs David Jacobs and Gregory Hindes said...

Approximately 300 FHA lenders are seeing their recertifications held up because they failed to report in a timely manner events or changes that may affect their eligibility to participate in FHA programs.Delays are occurring because lenders have failed to notify the FHA of material events as soon as they have occurred and waited until the annual recertification to report them, according to industry sources. Under rules of the Department of Housing and Urban Development, a notice of material event alerts the agency to a significant change to the information provided by the lender at application that may affect its status as an FHA-approved lender. The department strongly encourages lenders to notify FHA within 10 days of the event to prevent delays during the annual recertification. Each FHA lender must complete the annual recertification process in order to retain its FHA approval. Lenders must ...

The FHA has issued new, more permissive loss-mitigation guidelines for Home Equity Conversion Mortgages, including an optional extension for mortgagees when submitting due-and-payable requests. Additionally, the guidelines allow mortgagees to cure a HECM borrower’s taxes and/or insurance defaults as long as the FHA incurs no cost and the mortgagee agrees to refrain from seeking loan assignment for at least three years. The guidelines further remove a previous restriction prohibiting the use of the permissive loss-mitigation options announced in Mortgagee Letter 2015-11 for borrowers in foreclosure. Accordingly, for HECM loans that were in the process of foreclosure prior to the issuance of ML-2015-11, mortgagees may assess those borrowers for a repayment plan in accordance with the mortgagee letter. The repayment plan must have the ...

Cutting back on its FHA business helped reduce JPMorgan Chase’s foreclosure inventory but made it harder for the bank to meet its community reinvestment goals, according to the bank’s top executive. In a letter to shareholders, Jamie Dimon, president/CEO of JPMorgan Chase, said he would rather see the bank no longer service defaulted loans. “If we had our druthers, we would never service a defaulted mortgage again,” he wrote. “We do not want to be in the business of foreclosure because it is exceedingly painful for our customers, and it is difficult, costly and painful to us and our reputation.” Chase has cut back on FHA lending and has reinstated overlays in response to stiff penalties it paid to resolve False Claims Act allegations brought by the federal government. In 2014, Chase agreed to a $614 million settlement with the Department of Justice over allegations of ...

In a follow-up development to earlier reports of the demise of W.J. Bradley Mortgage as a result of the CFPB’s integrated disclosure rule, affiliated newsletter IMFnews reported last week that at least $20 million worth of jumbo loans originally funded by the lender have hit the TRID “scratch-and-dent” market, citing an investor who plays in the space. The loans were offered by Texas Capital Bank, which several sources have identified as a key warehouse lender to WJB, a now defunct privately held non-depository. Early reports on the company’s voluntary closure suggest that TRID errors on non-agency mortgages played a key role in the firm’s demise. Sources contend that a few months back WJB tried to sell at least $30 million ...

The Association of Mortgage Investors wrote to the CFPB last week for guidance on the integrated disclosure rule known as TRID, warning that the marketplace woes stemming from the new rule may extend to the conforming mortgage loan market. “The recent evidence is that the rule, while extremely well-intentioned, has resulted in a climate of legal uncertainty and is chilling private investment in the U.S. mortgage market,” said Chris Katopis, executive director of the AMI. Further, “We urge the bureau to open a new public comment period to address the concerns of mortgage investors,” he added. “We seek formal written guidance clarifying the liability for a violation of each individual TRID requirement, as well as the scope and applicability of ...

A single mortgage would have to meet nearly 150 requirements to achieve compliance with the TRID integrated disclosure rule, according to a framework proposed last week by members of the Structured Finance Industry Group. Third-party due diligence firms will test loans for most of the rule’s requirements, according to a draft of the TRID compliance “review scope” obtained by Inside Nonconforming Markets, an affiliated publication. Since the integrated disclosure rule took effect in October, due diligence firms have found widespread violations on non-agency mortgages, limiting sales of loans with violations due to liability concerns. The SFIG proposal suggests that many of the TRID compliance violations could be cured after being uncovered by a due diligence firm, but violations of about ...

Although much of the oxygen in the room is being taken up these days with concerns about the CFPB’s integrated disclosure rule, industry participants need to mind their Ps and Qs when it comes to the bureau’s loan originator compensation rule. During a recent webinar sponsored by Inside Mortgage Finance, an affiliated publication, top legal experts discussed how the industry can navigate a safe passage, compliance-wise. “We know that they’re going to really be looking at loan originator compensation plans this year,” said Kristie Kully, a partner with the Mayer Brown law firm in Washington, DC. “We know that they expect to find some problems in the LO comp area, and often when they expect to find them, they will ...