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.

The massive legal action initiated by the Federal Housing Finance Agency last year on behalf of Fannie Mae and Freddie Mac against many of the nation’s biggest lenders is getting ready to face its first legal challenge, and the federal judge’s ruling will determine the scope and direction of the cases, experts say. The FHFA lawsuits seek tens of billions of dollars in damages for losses incurred by Fannie and Freddie on purchases of approximately $200 billion in residential mortgage-backed securities.

The Supreme Court of the United States heard oral arguments this week in an important fee-splitting case under the Real Estate Settlement Procedures Act, and one issue that took up a lot of air time was whether RESPA is fundamentally a law barring kick-backs or a price-control statute. The key legal provision being examined in Freeman v. Quicken Loans is RESPA Section 8(b), which provides that, “No person shall give and no person shall accept any portion, split or percentage of any charge made or received for the rendering of a real estate settlement service in connection with a transaction involving a...

Citigroup acknowledged some responsibility for a portfolio of badly underwritten FHA loans that led to a $158.3 million settlement with the government, but the company managed to avoid an admission of wrongdoing. As part of the terms and conditions of the settlement, CitiMortgage “admits, acknowledges and accepts responsibility” for the conduct alleged in the government’s complaint. The FHA sought treble damages and civil penalties from CitiMortgage under the False Claims Act for fraud associated with FHA loans it originated. The default rate for FHA loans originated by Citi in 2006 and 2007 was 47...

The long-anticipated mortgage servicing settlement between the federal government, 49 state attorneys general and the nation's largest servicers isn’t just a big deal in terms of dollar amount and legal liability. It’s a critical shift in the legal and regulatory enforcement paradigm that will alter the landscape for years to come. “[T]he settlement is a strategic change in the legal and reputational risk landscape, and not just for what’s left of mortgage banking,” explained Karen Shaw Petrou, a managing partner at Federal Financial Analytics, a Washington, DC, think tank...

The Treasury Department’s Financial Crimes Enforcement Network recently put out final regulations that extend anti-money laundering program requirements and Suspicious Activity Report filing requirements to nonbank mortgage lenders. This means that nonbank mortgage lenders and originators are going to have to set up AML programs, assign a compliance officer and develop training programs, legal experts say, and compliance will be complex and costly. “Today, FinCEN is closing a regulatory gap by requiring nonbank mortgage lenders and originators to develop anti-money ...

It looks like 2012 is turning out to be the year of the settlement between top mortgage lender/servicers and federal and state government entities. Bank of America subsidiary BAC Home Loans Servicing LP – which did business as Countrywide Home Loans Servicing LP in a previous incarnation – recently agreed to reverse or refund $36 million in fees to settle charges by the Federal Trade Commission that it overcharged struggling homeowners, in violation of an earlier agreement with the government. BAC Home Loans Servicing has already reversed or refunded $28 million worth of ...