House Republicans may be able to pass tough FHA reform and solvency legislation out of committee but they may not have enough votes on the House floor or in the Senate to sustain such a bill, according to industry sources. Even after two successive hearings in the House Financial Services Committee this month, there has been no clear indication from Chairman Jeb Hensarling, R-TX, as to which proposals might go into a legislative package of FHA reforms. Hensarling is said to be operating “with a very strong hand,” and if it were up to him entirely, he would draft legislation that would contain some ...

Wells Fargo suffered a big legal setback after a federal judge denied its request to enforce a consent judgment under last year’s landmark $25 billion servicing settlement to prevent a New York lawsuit from proceeding. Judge Rosemary Collyer of the U.S. District Court for the District of Columbia rejected Wells Fargo’s argument that the new government suit filed in Manhattan district court was improper because it violated the consent judgment against Wells Fargo and flies in the face of the judgment’s “liability release” provision. Wells Fargo argued that the allegations in a civil mortgage fraud suit filed by ...

A modest decline in FHA endorsements of jumbo loans in the fourth quarter of 2012 could presage further declines this year, following the Department of Housing and Urban Development’s recent proposal to raise the downpayment requirement to 5 percent, from 3.5 percent, for loans above $625,500. The FHA already has raised its jumbo mortgage insurance premiums to 1.55 percent annually and increased the monthly premiums on new, non-jumbo FHA mortgages by 10 basis points. The agency retained the 3.5 percent downpayment for new forward mortgages below $625,500. The increased premiums are ... [2 charts]

The Department of Justice filed a civil action in Los Angeles this week against Standard & Poor’s Rating Services and its parent the McGraw-Hill companies for $5 billion, accusing S&P of defrauding investors by falsely representing that its ratings on certain collateralized debt obligations were “objective, independent and unencumbered by any conflicts of interest.” The Justice Department’s complaint alleges that S&P “knowingly and with the intent to defraud, devised, participated in, and executed a scheme to defraud investors” in its ratings of “trillions of dollars” of residential MBS and CDOs between 2004 and 2007. DOJ contends...

The securitization industry has successfully shot down high-profile attempts in San Bernardino County, CA, and in Chicago to use eminent domain to seize underwater, performing mortgages, write them down to fair market value and repackage them for sale to other investors. However, they’re not letting their guard down, as similar efforts continue in a number of other local jurisdictions throughout the country – most notably Brockton, MA, and Salinas, CA. In Brockton, the City Council recently voted 9-2 in favor of setting up a working group to further explore the concept. It also voted to invite a handful of local community activists and city officials, as well as a representative from Mortgage Resolution Partners – the architect of the proposal – to appear before the finance committee. The issue on their agenda is...

Assured Guaranty won a lawsuit this week against Flagstar Bank regarding a breach of representations and warranties on more than $900 million in non-agency mortgage-backed securities issued by Flagstar. Industry analysts suggest the ruling is significant as it is one of the first in favor of bond insurance companies trying to enforce breaches of reps and warrants, and U.S. District Judge Jed Rakoff endorsed many of the tactics they have used to seek buybacks, including ... [Includes two briefs]

Although unhappy about the demise of the popular, fixed-rate, standard Home Equity Conversion Mortgage, loan officers are not worried about any long-term adverse effect on their FHA businesses. In fact, members of the National Reverse Mortgage Lenders Association, support the FHA’s decision, which is a part of a broad effort to strengthen and better manage the risk of the agency’s Mutual Mortgage Insurance Fund. They said they have other HECM products to offer in lieu of the standard HECM loan. Beginning April 1, borrowers who choose a fixed interest rate will be limited to ...

FHA-approved lenders that engage in aggressive marketing to borrowers with a history of foreclosure, particularly advertisements about the ease of obtaining an FHA-insured mortgage after foreclosure, could face potential sanctions and severe penalties, the FHA warned. In a letter to lenders, FHA Commissioner Carol Galante said there has been a proliferation of web-based and print ads conveying the message that almost any borrower can get a new FHA loan three years after ...

The FHA will begin monitoring state housing finance agencies (HFAs) to ensure that the cash assistance they provide borrowers for closing costs, downpayment or rehabilitation costs are not coming from illegal sources. FHA Commissioner Carol Galante said there have been concerns about whether some HFA homeownership program funding models are in compliance with the Department of Housing and Urban Development’s current interpretive rule clarifying its prohibition on seller-funded downpayment assistance. Published in the Federal Register, the interpretive rule clarified that ...

A recent revision to the Department of Housing and Urban Development’s Office of the Inspector General Audit Guide has lifted a reporting burden for FHA investing mortgagees who are involved in servicing, according to Phillip Schulman, a top compliance expert and a partner at K&L Gates. Under the revised guide, an investing mortgagee or lender that purchases, sells or holds FHA-insured mortgages but cannot originate or fund FHA loans no longer needs to submit reports on internal controls and compliance, Schulman reported in a client alert. The new rule states that investing mortgagees are now required to ...