Flagstar in Talks with CFPB Over Alleged Loss Mitigation Violations. Flagstar Bancorp, the parent of the nation’s 17th largest residential servicer, disclosed in a new regulatory filing that it is in talks with the CFPB over alleged violations of federal law arising from the bank’s loss mitigation practices and default servicing operations dating back to 2011. Flagstar Bank FSB, which owns roughly $69 billion in mortgage servicing rights, said it has already provided the CFPB with documents and “other information” regarding the matter in response to a civil investigative demand. “While the bank intends to vigorously defend against any enforcement action that may be brought, it has commenced discussions with the CFPB staff to determine if a settlement can be ...

Roughly $1 billion in damages will flow through to the FHA and Ginnie Mae from Bank of America’s record $16.65 billion global mortgage-backed securities settlement with the Department of Justice. Although most of the DOJ’s case centered around faulty private-label MBS that BofA and its forbears (namely Countrywide and Merrill Lynch) underwrote during the housing boom, a small piece of the settlement is tied to servicing chores that the bank did for Ginnie Mae. And apparently, BofA didn’t do a very good job of servicing the underlying product. The bank took over as the subservicer on roughly $26.2 billion in mortgage servicing rights that once belonged to Taylor, Bean & Whitaker, a large nonbank based in Ocala, FL. When TBW went bust in the second half of 2009, BofA was given the subservicing contract. “BofA serviced the loans for us,” said Ginnie Mae president Ted Tozer. “And they did a ...

The FHA has issued two final rules enhancing consumer protections – one prohibiting lenders from charging additional interest on FHA-insured mortgages that are paid in full and another ensuring that borrowers of adjustable-rate mortgages receive earlier notice of rate changes. Both rules were published in the Aug. 26 Federal Register. The first rule eliminates the practice of charging the borrower a full-month’s interest even if the mortgage is prepaid in full before the end of the month. It adopted the proposed rule, which was issued for comment on March 13, 2014, without change. Effective Jan. 21, 2015, charging borrowers post-settlement interest, which is broadly defined by the Consumer Financial Protection Bureau as a “prepayment penalty,” will be prohibited for all FHA single-family mortgage products and programs. In the rule’s preamble, HUD said it expects lenders to ...

A decision by the Department of Housing and Urban Development to suspend a Texas mortgage firm and its top executive was not “arbitrary and capricious” and did not violate due process, according to a recent Houston district court ruling. The court granted HUD’s motion for summary judgment and dismissed all of the plaintiffs’ claims with prejudice. In Allied Home Mortgage Corp. v. Donovan, (No. H-11-3864, 2014 WL 3843561, S.D. Tex. Aug. 5, 2014), a U.S. Attorney’s Office sued Allied Home Mortgage Corp. and its chief executive officer, James Hodge, in Manhattan federal district court for allegedly lying about its compliance with FHA requirements. Specifically, the former Houston-based mortgage net branch operator (currently doing business as Allquest Home Mortgage Corp.) allegedly violated the False Claims Act and the Financial Institutions Reform, recovery and Enforcement Act by ...

The Financial Accounting Standards Board has updated its guidance on troubled debt restructurings (TDRs) to provide lenders some uniformity in accounting for government-backed mortgages upon foreclosure. The changes to FASB’s rule, “Receivables – Troubled Debt Restructurings by Creditors,” affect FHA and VA lenders and would take effect for public entities with reporting periods after Dec. 15, 2014. All other entities will have to comply after Dec. 15, 2015. “In addition to accounting consistency, the updated rule provides greater certainty as to the amount that can be expected to recover through the government guarantees,” the board said. The changes became necessary because the accounting varied among lenders, resulting in diverse practices, according to the Emerging Issues Task Force, which promulgates implementation guidance within the ...

Two states have passed legislation placing varying spins on the Department of Housing and Urban Development’s counseling requirements for lenders and borrowers of FHA-insured reverse mortgages. In California, the state Senate unanimously approved AB 1700, which would mandate a seven-day “cooling off” period between the time a borrower receives counseling and when an application is taken. AB 1700 passed the CA Assembly by a vote of 73 to 1. In addition, the bill would require a lender to provide a worksheet guide that addresses certain issues the borrower should consider and discuss with the counselor, such as income and ability to repay as well as taxes and insurance. The counselor and the borrower are both required under the bill to sign the worksheet guide before any reverse mortgage application is taken. No schedule has been set for ...

The Department of Housing and Urban Development is requesting feedback from stakeholders regarding proposed policy drafts covering appraiser eligibility and oversight, and conducting appraisals, among other things. The documents will be part of the FHA’s Single-Family Housing Policy Handbook, a consolidated and authoritative agency handbook that will make it easier for stakeholders to do business with the FHA. The drafts also cover appraiser requirements for performing an FHA appraisal, including property eligibility requirements for Title II forward and reverse mortgages, as well as forms and data delivery requirements. Comments must be submitted by Sept. 2, 2014. The Single-Family Policy handbook is a multi-phased initiative to develop a single, comprehensive source for FHA single-family housing policy using clear and direct language and an improved organization structure. In fall 2013, the FHA posted its first draft section, Application Though Endorsement for Title II Forward Mortgages. The FHA is finalizing ...

Revised HUD/VA Addendum to the Uniform Residential Loan Application. On July 30, the FHA has posted on its HUDCLIPS website a revised Addendum to the Uniform Residential Loan Application (Form HUD-92900-A/VA Form 26-1802). This form is used for both FHA and VA mortgage originations.The Department of Veterans Affairs has updated its form to clarify what constitutes a valid marriage for the purpose of obtaining VA benefits. Although the changes to the form do not apply to FHA-insured mortgages specifically, lenders should begin using the revised form for new FHA mortgage originations as soon as possible, the FHA recommended. Processing Request for Execution of VA Quitclaim Deeds. The Department of Veterans Affairs has issued guidance (Circular 26-14-19) for handling of requests for execution of quitclaim deeds. A quitclaim deed is a legal document that is used to transfer a person’s rights to real estate to ...

Pershing Square Capital Management – reportedly the largest investor in Fannie Mae and Freddie Mac common shares – filed two separate lawsuits last week demanding the federal government cease and desist its “net worth sweep” of GSE profits. The New York hedge fund contends that the government’s action not only illegally shortchanges investors of the GSEs’ common, it also amounts to a de facto liquidation of the two firms, according to its first complaint filed with the U.S. Court of Claims in Washington. The first complaint lists the U.S. as a defendant, as well as Fannie and Freddie as nominal defendants.

The Department of Housing and Urban Development failed to bill lenders for 486 loans with enforceable indemnification agreements that created losses for the FHA, according to the HUD Inspector General. The loans were originated between 2004 and 2014 and were either in the Accelerated Claims Disposition program or the Claims Without Conveyance of Title program, or they went into default before an indemnification agreement expired. Due to procedural errors and apparent lack of oversight, HUD failed to recover $37.1 million for 486 loans that had enforceable indemnification agreements. The unbilled loans represented 8.0 percent of total activity in the programs during that period. In addition, HUD did not ensure that indemnification agreements were extended to 64 of 2,078 loans that were streamline financed. As a result, HUD incurred losses of ...