The Supreme Court of the United States heard oral arguments last month in Freeman v. Quicken Loans (Case 10-1042), an important fee-splitting case under the Real Estate Settlement Procedures Act, and the initial consensus of leading industry attorneys following the case is that the high court appears to be favorably inclined towards Quicken’s side. “If questions raised by the justices are any indication of where the court is headed, I’d say the scales are tipped in the direction of a favorable decision for Quicken Loans,” said attorney Phillip Schulman, in the Washington, DC, office...

Consumer advocates may be railing against the $25 billion settlement the five largest mortgage servicers struck recently with 49 state attorneys general, but the participating banks are still vulnerable on a number of fronts, according to a top analyst at Moody’s Investors Service. On the one hand, “The settlement will have little to no financial effect on the banks and will remove some of the uncertainty surrounding mortgage servicing,” said Joseph Pucella, vice president and senior…

New Hampshire. In Dow v. Bank of New York Mellon Trust, the state Superior Court affirmed the role of MERS as the mortgagee of a mortgage loan, ruling that MERS has the authority to both hold and assign its interest in mortgages under state law. New Jersey. In U.S. Bank, N.A. v. Guillaume, the New Jersey Supreme Court last week ruled that state courts do not have to dismiss foreclosure actions if defects in the…

MBS investors continue to sweat over the impact of the $25 billion multistate servicing settlement, especially regarding potential conflicts of interest when banks own a second mortgage while servicing a securitized first lien. “The minimum requirement is that every time you modify a first lien, you have to modify the second lien to the same degree, or you have to write off the second lien entirely,” explained Shaun Donovan, secretary of Housing and Urban Development, at a housing conference earlier this week. Donovan characterized the treatment of home-equity loans in the settlement as a positive...

Wells Fargo & Co. is looking to hire an independent third-party expert to continue an investigation started by the bank in its capacity as corporate trustee of mortgage trusts that could compel lenders to repurchase soured mortgage loans contained in a 2007 non-agency MBS. According to reports, Wells Fargo wants to hire Law Debenture Trust Co. of New York to look into alleged defects in loans contained in Bear Stearns Mortgage Funding Trust 2007-AR2 and to force JPMorgan Chase and its servicer subsidiary to repurchase the bad loans. Requests for comment to both Wells Fargo and Law Debenture had not...

The Department of Housing and Urban Development and Flagstar Bank have agreed on a structured payment scheme to ease the financial impact of a $133 million settlement of a lawsuit alleging fraudulent mortgage lending practices and improper approval of FHA home loans. The settlement occurred on the same day the civil fraud lawsuit was filed under the False Claims Act by the U.S. Attorney for the Southern District of New York. The suit alleged that Flagstar, the ninth largest lender in 2011, issued false certifications that the loans met all FHA requirements for insurance even though the due diligence...

Bank of America is challenging new federal charges that it discriminated against loan applicants with disabilities, arguing that it applied conservative FHA underwriting standards in three cases covered by a lawsuit brought by the Department of Housing and Urban Development. HUD accused BofA of imposing unnecessary and burdensome requirements on borrowers who depended on disability income to qualify for their mortgages. The bank also allegedly required some disabled borrowers to provide physician statements to qualify for their mortgage financing. The charges are based on a HUD-initiated...

The U.S. Court of Appeals for the Second Circuit is apparently on the verge of deciding in which jurisdiction the pending $8.5 billion Bank of America/Countrywide residential MBS representations and warranties settlement with Bank of New York Mellon and investors will be finalized. The final outcome is expected to influence similar disputes involving other large mortgage originators, but probably on a smaller scale. Last week, the appeals court held a hearing to determine if the case should be moved back to New York state court, which would accelerate a conclusion of the settlement. “A final decision from...

The Federal Housing Finance Agency needs to do more to oversee the legal expenses of Fannie Mae and Freddie Mac, though it has limited tools at its disposal to curtail GSE litigation, according to the FHFA’s Office of Inspector General. The OIG’s report, issued this week, noted that the two GSEs have racked up a significant number of billable hours, both before and after being placed in government conservatorship in September 2008, for their defense in lawsuits, investigations and administrative actions.

Fannie Mae’s general counsel is in the running to replace the company’s outgoing CEO, Inside The GSEs has learned, but a promotion is by no means assured as the GSE is casting a wide net in search of a suitable replacement. A source familiar with the inner workings of the company confirmed a published report that Timothy Mayopoulos, Fannie’s chief administrative officer and general counsel, has the inside track among those candidates within the company seeking the job.