The Department of Housing and Urban Development’s proposed “qualified mortgage” rule attaches certain conditions to QM treatment that may complicate matters for participating lenders, said attorneys with K&L Gates in Washington, DC. On Sept. 30, the Department of Housing and Urban Development published its own proposed QM rule for FHA loans. The CFPB rule takes effect on Jan. 14, 2014, and will apply to FHA loans until HUD issues a final rule. Under the CFPB rule, many FHA loans would not qualify for the rule’s safe harbor because the higher mortgage insurance premiums would make them “higher priced mortgage loans.” Thus, in order to ...

Two surviving spouses of deceased reverse mortgage borrowers won their case against the Department of Housing and Urban Development after a U.S. court found HUD in violation of federal law for failing to protect the spouses from foreclosure. The court’s decision marks a turning point for surviving spouses, such as Robert Bennett of Annapolis, MD, and Leila Joseph of Brooklyn, NY, and ensures that they will be protected against eviction and foreclosure, despite the loss of their husband or wife, said Jean Constantine-Davis, a senior attorney with the AARP Foundation Litigation. In March 2011, the AARP and the law firm of Mehri & Skalet of Washington, DC, filed ...

The nation’s top court this week may have sent a subtle hint to the more than dozen big bank defendants being sued by the Federal Housing Finance Agency when it flatly declined to receive their petition to dismiss their cases, notes a legal expert. The 13 financial institutions – including Bank of America, Deutsche Bank, Goldman Sachs and JPMorgan Chase – sought to argue before the Supreme Court of the United States that the FHFA waited too long when it filed suit against the banks in 2011 over non-agency MBS the government-sponsored enterprises purchased prior to the 2008 financial crisis. SCOTUS said...

The Mortgage Bankers Association last week won affirmation of its July victory over the Department of Labor in the trade group’s appeal of a government policy that declared mortgage loan officers did not qualify under the administrative exemption to overtime pay. On Oct. 2, the U.S. Court of Appeals for the District of Columbia refused to grant a full-court review of its decision exactly three months earlier that sided with the MBA on how the DOL imposed overtime compensation requirements under the Fair Labor Standards Act. The MBA filed...

The Department of Justice recently announced settlements from three fair lending actions, all of which included allegations related to wholesale mortgage lending operations. In the first case, Southport Bank of Kenosha, WI, agreed to pay $687,000 to African-American and Hispanic wholesale mortgage borrowers as part of a settlement to resolve allegations that it engaged in a pattern or practice of discrimination on the basis of race and national origin. The proceeds of the settlement will be used...

Clayton Holdings has long cooperated with members of the Residential MBS Working Group, but a change in personnel at the interagency group and a wide-ranging subpoena have strained the due diligence firm’s relationship with prosecutors, according to court filings. The U.S. Attorney’s Office for the District of Connecticut, on behalf of the RMBS Working Group, is seeking an order to compel Clayton to cooperate with a subpoena issued in early July. The subpoena relates to an investigation into 16 firms that participated in the issuance and underwriting of non-agency MBS from 2005 through 2007. The RMBS Working Group is looking into possible violations of the Financial Institutions Reform, Recovery and Enforcement Act. The subpoena essentially seeks...

A Manhattan federal judge last week rebuffed a motion by a number of major lenders to dismiss a bid by the Federal Deposit Insurance Corp. against the firms in connection with $388 million of non-agency MBS sold to the now-defunct Colonial Bank. The FDIC filed its complaint in August 2012, alleging that the defendants – including JPMorgan, CitiGroup, Ally Securities, First Horizon, Credit Suisse, Deutsche Bank, Merrill Lynch and Wells Fargo – placed poor-quality loans in the 11 underlying residential MBS and then misled investors by marking them as safe investments. Montgomery, AL-based Colonial Bank failed...

A year and a half after the $25 billion national servicing settlement took effect, attorneys general and the settlement’s monitor turned up the heat this week on the five banks participating in the settlement. Wells Fargo faces a new lawsuit, Bank of America settled similar claims, and all five servicers face additional testing standards and procedures, with BofA and Wells agreeing to even more stringent process improvements. New York Attorney General Eric Schneiderman, D, announced a lawsuit against Wells. He said consumer advocates have documented hundreds of violations to the settlement by Wells, including delays, lost paperwork and wrongful denials. BofA avoided...

The Department of Housing and Urban Development this week proposed its own “qualified mortgage” rule for FHA-insured mortgage loans that builds off the existing QM rule finalized by the Consumer Financial Protection Bureau earlier this year. The proposed rule aligns with the ability-to-repay criteria in the Truth in Lending Act as required by the Dodd-Frank Act. Once the proposal becomes final and takes effect, it would replace the CFPB’s rule for FHA loans. The DFA has set a seven-year timetable for FHA, the VA and the Rural Housing Service to promulgate their own QM rules. HUD’s proposed QM rule would ...

The FHA was still able to endorse single-family mortgage loans during the first week of the partial government shutdown, although no FHA staff were available to underwrite and approve loans. A significant delay in the processing of new FHA insurance applications might have occurred this week because only 64 employees are still at work in HUD’s Office of Housing, which includes the FHA. HUD said it might need more essential employees per day, on an intermittent basis, to perform key activities. The department expects these calls for reinforcement to ...