Although the new rules for surviving spouses of borrowers with FHA-insured reverse mortgages address many of the issues raised by non-borrowing spouses, some questions remain unanswered, according to legal experts. The guidance in Mortgagee Letter 2015-03 provides insufficient answers to the issues it was meant to address, said Robert Couch, a partner with the Birmingham, AL, law firm of Bradley Arant Boult Cummings and former general counsel at the Department of Housing and Urban Development. Servicers should take note of those issues and seek further clarification, he said. Issued on Jan. 29, the guidance provides a way for lenders to proceed after a borrower with a Home Equity Conversion Mortgage loan dies and is survived by a non-borrowing spouse. It allows a lender to assign to HUD HECMs that are in default due to the death of the borrower, as long as certain ...

Most companies engaged in mortgage banking made a profit last year despite a rough first quarter, but nearly all participants earned less than in 2013. A new analysis by Inside Mortgage Trends, an affiliated newsletter, found that a diverse group of 30 public companies reported a combined $13.942 billion in mortgage-banking income for 2014. Different lenders report these earnings differently, but they generally include production, servicing, secondary market and the net effect of hedges and legal costs. For the 30 lenders, mortgage-banking earnings for the year were...[Includes one data chart]

Morgan Stanley has agreed in principle with the Department of Justice to pay $2.6 billion to resolve MBS claims the agency’s civil division indicated it would bring against the company, according to a new disclosure from the Wall Street firm. Morgan Stanley’s disclosure about a potential MBS lawsuit by the U.S. Attorney for the Northern District of California contained no other details. However, the firm increased its legal reserves by $2.8 billion to cover any potential settlement and other pending legacy-related MBS disputes. The adjustment increased...

A series of court decisions have affirmed the supremacy of the executive branch of government in its regulation of Fannie Mae and Freddie Mac to the chagrin of private-equity investors seeking compensation in the wake of the financial crisis, according to a recent analysis by Kroll Bond Rating Agency. Those recent court decisions confirm the fact that the two GSEs are “instrumentalities of the federal government and not private corporations,” Kroll analysts said. “While this reality may bother some equity investors – and rightly so – this is good news for bond investors,” they noted. For equity investors, the court decisions underscore the fact that the GSEs are “creatures of Congress,” the analysts pointed out. In contrast, private corporations are governed by ...

The Federal Housing Finance Agency recently updated its regulatory guidance for the Federal Home Loan Banks on the reporting of fraudulent financial instruments. The new guidance instructs the FHLBanks to implement policies and procedures for complying with the reporting requirements regarding anti-money laundering and suspicious activity that the Financial Crimes Enforcement Network published Feb. 25, 2014. The FinCEN regulation takes some of the provisions of the Bank Secrecy Act and applies them to the FHLBanks, and delegates examination responsibility to the FHFA to determine compliance. “Generally, the FinCEN regulation requires that each regulated entity develop an anti-money laundering program and file suspicious activity reports (SARs), among other requirements,” the FHFA said. The FinCEN reg took effect April 28, 2014. The ...

Conversations with executives at leading industry technology vendors suggest that if mortgage lenders are not already testing their systems and processes for compliance with the impending integrated disclosure rule from the Consumer Financial Protection Bureau, they are already behind the curve. Tech vendors have been working with some of their clients for months already, and in some cases for more than a year, testing systems and process as they prepare for “TRID,” the Truth in Lending Act/Real Estate Settlement Procedures Act integrated disclosure rule. Scott Stucky, chief strategy officer at DocuTech, said...

Lenders should stay as far away as possible from even the appearance of basing any part of a loan officer’s pay on the terms of a mortgage. During an Inside Mortgage Finance webinar this week, Amy Durant, an attorney with the Bodman law firm in Ann Arbor, MI, emphasized the importance of the restrictions on compensation that are embedded in a Consumer Financial Protection Bureau rule. The rule states...

The CFPB brought the hammer down on a handful of nonbank mortgage companies in the last two weeks over advertising practices the bureau asserts are deceptive and misleading because, in three of the cases, the lenders allegedly implied U.S. government approval of their products or otherwise suggested the companies were agencies of the federal government when in point of fact they were not. The actions are a confirmation to the industry that lenders don’t have to be big players with deep pockets or even depository institutions to earn the bureau’s wrath. They are also a big wake-up call in terms of compliance. “For decades, many lenders which have used direct mail to market to consumers have emphasized the government-insured nature ...

Despite the comparatively small staff of examiners at the CFPB – close to 500 – Deputy Director Steven Antonakes said in a speech last week that his staff is an “x-factor,” in that the bureau works closely with other state and federal exam teams to leverage its resources. In military terms, that’s known as a force multiplier. “The bureau does not have a safety and soundness mandate. Nevertheless, we very much care about the financial health of banks and nonbanks,” Antonakes said. “As a veteran of two banking crises, I can tell you unequivocally that, in my view, consumer protection is not in conflict with safety and soundness. Consumers benefit from a healthy, competitive, and diversified financial services system through greater access ...

A number of industry groups ramped up their efforts to convince the CFPB to revisit its auto financing enforcement policy, after the release of an industry-funded report that challenged the analysis that undergirds it. The impetus behind the challenge is a Charles River Associates study commissioned by the American Financial Services Association that analyzed the complexities of the indirect finance market and evaluated the CFPB’s current fair lending investigations, with special attention to the proxy methodology used by the bureau. The CRA study concluded that “observed variations in ‘dealer reserve’ at the financial institution portfolio level are mitigated when market complexities are considered and adjustments are made for proxy bias and error.” This suggests to industry representatives that there are ...