In its first public enforcement action against a company in the for-profit college industry, the CFPB sued ITT Educational Services, Inc., over predatory lending allegations. The bureau alleges that ITT exploited its students and used high-pressure tactics to push them into high-cost private student loans that would probably end in default. The CFPB said it is seeking restitution for victims, a civil fine, and an injunction against the company. As far as the bureau is concerned, like the mortgage market in the lead-up to the financial crisis, the for-profit college industry may be experiencing misaligned incentives.

Late last month, briefs were filed in the U.S. Court of Appeals for the D.C. Circuit by the appellants in State National Bank of Big Spring, Texas, et al. v. Lew, et al., a case which includes a lingering challenge to the CFPB's constitutionality. The private appellants in the case are State National Bank of Big Spring, and two DC area non-profit organizations, the 60 Plus Association and The Competitive Enterprise Institute. Originally, they challenged the constitutionality of CFPB Director Richard Cordray's recess appointment, while also asserting that the bureau’s structure and authority were in violation of the Constitution's separation of powers.

Morgan Stanley has agreed tentatively to pay $275 million to the Securities and Exchange Commission to resolve an investigation into certain subprime MBS which the company sponsored and underwrote in 2007. The SEC has yet to sign off on Morgan Stanley's settlement proposal, which includes being charged for violation of federal securities laws and payment of disgorgement and penalties totaling $275 million without admitting to or acknowledging any wrongdoing. In an annual SEC filing, the New York-based bank said...

The Civil Division of the U.S. Attorney's Office for the Eastern District of New York is investigating Bank of America's compliance with the requirements of the FHA's Lender Direct Endorsement program. BofA disclosed the investigation in its recent filing with the Securities and Exchange Commission but withheld details. Department of Justice investigations of FHA-related fraud are based typically upon an alleged violation of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA) and/or the False Claims Act (FCA). Civil monetary penalties under FIRREA could go as high as $1.1 million per violation while treble damages are potentially available for FCA claims. Both laws have a 10-year statute of limitation. As a direct endorsement lender, BofA is authorized to originate, underwrite and certify loans for mortgage insurance without further reviews by the FHA or the Department of Housing and Urban Development. If the loan defaults, the holder of the loan may ...

Ginnie Mae has expressed concern about a new FHA policy accepting electronic signatures on most mortgage documents and will seek input and feedback from issuers. In a memo to participants this week, the agency said electronic documents "present unique challenges to implementation." In a Jan. 30 mortgagee letter, the FHA announced that it would begin accepting electronic signatures on most loan docs, including loan disclosures and loan servicing/loss mitigation documents. The FHA said it will accept electronic signatures only on "authorized" docs but delayed their use on notes until Dec. 31, 2014. This delay reflects considerations that are necessary in connection with electronic notes (eNote) and electronic mortgages (eMortgages), said Ginnie Mae. An electronic signature is a signature that is applied or affixed to a document by electronic means. Scanned images of paper docs that bear a physical or "wet" signature are not ...

The FHA's model mortgage form clearly makes the federally required flood-insurance amount the minimum, not the maximum, the borrower must have, according to a recent federal appeals court ruling. In Faire Feaz v. Wells Fargo Bank, et al. No. 13-10230, the U.S. Court of Appeals for the 11th Circuit determined that the language in the FHA's model form requiring borrowers to purchase the FHA's minimum required amount of flood insurance does not prevent lenders from demanding more insurance than the agency requires. With its ruling, the court upheld the dismissal of the claim for breach of contract, related claims for breach of the duty of good faith and fair dealing, and breach of fiduciary duty. The 11th Circuit ruling also agreed with the First Circuit's recent en banc ruling in Kolbe v. BAC Home Loans Servicing LP, F.3d -- 2013 WL 5394192 (1st Cir. Sept. 27, 2013). Noting a split among the district courts, the First Circuit recognized that ...

In what’s claimed to be the third-largest settlement of a class-action suit by investors in non-agency MBS, Royal Bank of Scotland agreed to pay $275 million in cash. Investors led by the New Jersey Carpenters Vacation Fund claimed that RBS did not disclose that loans included in Harborview MBS that it sold failed to meet the deals’ underwriting guidelines. The settlement is awaiting approval by U.S. District Judge Harold Baer in U.S. District Court for the Southern District of New York. Separately, the remains of Lehman Brothers settled...

Some five and a half years after it filed for Chapter 11 bankruptcy protection, the remains of Lehman Brothers settled the legal claim by Freddie Mac stemming from $1.2 billion in loans made by the GSE to the investment bank just before the financial collapse. Judge Shelley Chapman of U.S. Bankruptcy Court in Manhattan approved this week the settlement that would see Lehman Brothers Holdings Inc. pays $767 million to the GSE to close out Freddie’s bid to collect on the unpaid loan.

Countrywide Financial, now owned by Bank of America, is asking a federal judge to sanction the Federal Housing Finance Agency and to appoint a special master to investigate what CFC says is the FHFA’s “noncompliance” in producing Fannie Mae and Freddie Mac documents in the company’s defense against the GSEs’ $26.6 billion MBS lawsuit. According to a motion filed earlier this month in the U.S. District Court, Central District Court of California, CFC says the FHFA is defying the court’s October order to produce – either in a timely manner or not at all – documents from Fannie’s and Freddie’s single-family businesses.

The ink was barely dry on complex new mortgage-disclosure forms and regulatory requirements when the Consumer Financial Protection Bureau floated a new trial balloon: how to improve the mortgage-closing process and its “pain points” for lenders and consumers. Although some industry groups said it is too soon to get into another massive overhaul, others pointed to the forest of overlapping and confusing documents as a good place to start. Michael Heid, president of Wells Fargo Home Mortgage, told...