A scathing criticism of the way the Federal Housing Finance Agency and Freddie Mac handled a $1.35 billion settlement with Bank of America could cause the regulator and the government-sponsored enterprises to tighten repurchase enforcement – and consequently inflate the buyback problem, according to litigation experts. Speaking on a recent webinar hosted by Inside Mortgage Finance, experts said a report by the FHFA’s Office of the Inspector General which found flaws in the BofA settlement approval process, could push the GSEs and their regulator to lean harder on major lenders to repurchase “bad loans.” This, in turn, could...

Mortgage Electronic Registration Systems has been at the center of two significant developments recently that bring more legal clarity to the mortgage industry’s foreclosure practices – and could portend a quicker resolution of an enormous number of cases currently tied up in foreclosure. Early this week, the U.S. Supreme Court denied certiorari in Gomes v. Countrywide, declining to reconsider lower court rulings in the case, essentially affirming MERS’ authority to foreclose in California in the process. “The petition for a writ of certiorari is denied,” the high court said in its certiorari summary dispositions. “The chief justice [John Roberts] took...

A ruling by a federal district court in Richmond awarding more than $40 million to a mortgage lender for covered losses should compel private mortgage insurers to be more circumspect about their MI agreements, according to industry attorneys. American International Group, parent company of United Guaranty Residential Insurance Co. of North Carolina, is appealing the court’s ruling that it pay SunTrust Mortgage more than $34.0 million for covered losses, $6.0 million in stipulated interest and about $5.4 million in legal fees and costs. Joseph Norton, AIG spokesman, said the insurer has appealed the decision to the...

Negotiations among major banks and state attorneys general to settle problems in foreclosure servicing practices reached a one-year anniversary this week with little apparent progress over the key issue of how much litigation relief the lenders will gain from the deal. “We worked out a tremendous amount of the settlement and gotten a lot done,” said a spokesman for Iowa Attorney General Tom Miller, who has been spearheading the negotiation on behalf of the states. However, he disputed applying the word “imminent,” which some bankers had used, to describe when the settlement might be finalized. “Let’s not jump...

The chairman of the House Committee on Oversight and Government Reform wants the Federal Housing Finance Agency to explain why it hired two outside law firms in a massive legal action to recover losses suffered by Fannie Mae and Freddie Mac on their investments in non-agency MBS. Rep. Darrell Issa, R-CA, wrote FHFA Acting Director Edward DeMarco on Sept. 29 asking why the agency hired outside counsel from Quinn Emanuel & Sullivan and from Kasowitz Benson Torres & Freidman to initiate lawsuits against financial institutions and how much the agency is paying them. Issa posed detailed questions and requested documents regarding...

A “who’s who” list of a number of the largest and most well-known mortgage lenders in the country – including Wells Fargo, Countrywide Home Loans, Bank of America, JPMorgan Chase, PNC Bank, GMAC Mortgage Corp., Citimortgage and Suntrust Mortgage – have been accused by two whistle-blower types of charging U.S. military veterans illegal fees to refinance their home mortgages. According to the accusations, made in a complaint unsealed in federal court in Atlanta late last week, the mortgage lending entities charged refinance fees that are prohibited by the Department of Veterans Affairs and hid the charges by padding or inflating other allowable charges so they could obtain government guarantees for the mortgages, all without telling the veterans.

The U.S. Attorney’s office in Manhattan has entered into an agreement with the law firm of Steven J. Baum, one of the largest volume mortgage foreclosure firms in New York state, that requires the firm to pay $2 million to Uncle Sam and to extensively change its mortgage foreclosure practices. The agreement resolves an investigation into Baum’s mortgage foreclosure-related practices, specifically whether the firm, on behalf of its lender clients, filed misleading pleadings, affidavits and mortgage assignments in state and federal courts in New York.

The Consumer Financial Protection Bureau has developed a portal that companies can use to view and respond to entries in the new complaint database, Inside Regulatory Strategies has learned. “The company portal serves as the interface between the CFPB and financial companies, enabling companies to view and respond to complaints submitted by consumers,” the bureau said in a presentation to industry representatives recently. “Using the portal, companies should provide an explanation of the resolution and the actions taken in the consumer’s situation, select a resolution status for the complaint and attach relevant documents, if necessary.” The CFPB also maintains a consumer portal so complainants can check the status of their cases. Here’s an overview of the complaint process: A consumer files a complaint, then the CFPB routes the complaint to the company.

The strategic default problem is not going away, keeping pressure on servicers and MBS investors to find ways to dis-incentivize these actions. House prices continue to fall, and more underwater homeowners are willing to batter their credit rating and default on their mortgage to get out of an uneconomic deal. In a recent report, analysts at Deutsche Bank said the threat of legal action and risks to assets other than the mortgaged property play a large role in a homeowner’s decision to strategically default. Eleven states are considered non-recourse states, either because they explicitly forbid deficiency judgments or...