Ocwen Financial caught a potentially big break last week when the judge overseeing its dispute with the Consumer Financial Protection Bureau granted its request to invite the Department of Justice to weigh in. “There are at least two clear reasons to invite the Attorney General to participate here,” the company told Judge Kenneth Marra, of the U.S. District Court for the Southern District of Florida. First, it noted, district courts are required to notify the attorney general of a constitutional challenge in any action in which the U.S. government is not a party. Second, the U.S. attorney general recently filed...

The U.S. Court of Appeals for the Ninth Circuit recently held that mortgage underwriters are not “administrative employees” and, therefore, not exempt from the overtime protections of the Fair Labor Standards Act. The court’s ruling in McKeen-Chaplin v. Provident Savings Bank overturned a lower court decision and deepened a split among the circuit courts on whether certain employees of mortgage companies qualify for overtime pay. Given the conflicting circuit court opinions, attorneys are...

In a move that would benefit the secondary market for loans made by national banks, members in the Senate and the House of Representatives recently introduced legislation to clarify that interest rates on certain loans remain unchanged after the sale or transfer of the loan. In the Senate, Democrat Mark Warner of Virginia late last week introduced S. 1642, which would amend the National Bank Act to clarify that loans which are valid when made remain valid when they’re sold, even to buyers subject to different state law. Similar language would be added to the Home Owners’ Loan Act, the Federal Credit Union Act, and the Federal Deposit Insurance Act. Joining Warner in sponsoring the bill were...

Ocwen Financial reported a net loss of $44.44 million for the second quarter of 2017, with legal issues accounting for a large portion of the loss. The nonbank also agreed on terms with New Residential Investment to transfer mortgage servicing rights on non-agency mortgages. Ocwen had a $33.60 million expense in the quarter tied to legal settlements. “We settled additional legacy litigation matters further reducing future uncertainty,” said Ron Faris, the company’s president and CEO ...

Industry groups representing lenders, real estate agents and insurance providers are urging the FHA to adopt a policy allowing borrowers to purchase private flood insurance on FHA-insured loans. In a recent letter, eight industry groups said FHA’s current stance of accepting only policies authorized by the National Flood Insurance Program contradicts Congress’ intent to encourage the use of private flood insurance and conflicts with current lender requirements. Congress is putting together a comprehensive legislative package of flood-insurance reforms, which would extend the NFIP for another five years and require lenders to accept private flood insurance to meet statutory flood-insurance requirements. The group said FHA’s current policy appears to conflict with lender requirements in the Biggert-Waters Flood Insurance Reform Act of 2012. A number of home-loan transactions have failed to ...

Ginnie Mae this week announced the full automation of Platinum securities processing and issuance – a key step in modernizing the agency’s outdated technology and infrastructure. Automation went into effect in mid-July and nearly $1 billion of the Platinum pools have been processed through the MyGinnieMae portal, the agency said in a statement. MyGinnieMae is a self-servicing portal that connects users and enables collaboration and the sharing of organizational knowledge, the agency explained. The year-to-date volume for Platinum mortgage-backed securities is $6.1 billion. Ginnie’s Multiclass Securities Program allows participating issuers to pool some of their MBS into a single Platinum trust, which issues securities based on the pool. A Platinum security is designed to improve liquidity of Ginnie MBS through trades or use in structured finance and repurchase transactions. Previously, Platinum products were ...

The private mortgage insurance industry urged the Consumer Financial Protection Bureau this week to consider including the qualified-mortgage standards of the FHA, VA and the U.S. Department of Agriculture in its assessment of the ability-to-repay/QM rule. In a comment letter, industry trade group U.S. Mortgage Insurers said it would be impossible to perform a full assessment of the ATR/QM rule without considering the different federal agency QM rules. If it does not expand the scope of its assessment, the CFPB should at least consider the impact the rules have on consumers in relation to the agency QM rules. In May, the CFPB notified stakeholders of its plan to evaluate the effectiveness of the ATR/QM rule in terms of its benefits and costs. Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2010, which established new standards for mortgage lending, including requiring lenders to assess consumers’ ability to repay. The statute also established a class of “qualified mortgage” loans that cannot have certain risky product features and are presumed to comply with the ATR requirement.

NewLeaf Wholesale has announced Property Assessed Clean Energy (PACE) guidelines for its FHA and VA mortgage products. PACE financing allows homeowners to retrofit their homes to make them more energy-efficient. The homeowner pays the loan as part of their property tax bill. In some states, PACE liens have superior status over all other liens, including a mortgage loan. A PACE assessment is a debt of property, where the obligation is tied to the property as opposed to the property owner. Hence, when the property is sold the new owner assumes the PACE lien. Last year, the FHA and VA issued guidance for approving purchase and refinance of mortgaged properties with PACE liens provided certain requirements are met. One requirement is that past due PACE loan amounts retain a first-lien position and this has raised some concern among industry groups that are opposed to ...

A property management contractor for the Department of Housing and Urban Development has agreed to pay $4.3 million to resolve allegations that it billed the agency for FHA-related work it did not perform in violation of the federal False Claims Act. Cityside Management Corp. of Manchester, NH, allegedly failed to inspect the work of third-party vendors that it hired to perform termite inspections, treatments and repairs on repossessed houses in HUD’s real estate-owned inventory, as required by its contract with HUD. HUD’s inspector general investigated the case and referred it to the Department of Justice. Following the financial crisis, HUD held title to a large number of foreclosed homes acquired by borrowers with FHA financing. HUD contracted with various field service managers, including Cityside, to prepare the REO properties for resale. According to the Office of the U.S. Attorney for the ...

Housing finance groups are concerned that the Federal Housing Finance Agency’s idea to better serve borrowers with limited proficiency in English by adding a language preference question to loan applications could create a host of legal challenges and systemic risks. A year ago, the FHFA decided to defer a plan to include a question about a borrower’s language preference on the uniform residential loan application, and gather more input instead. The agency specifically asked for information on potential short-term and long-term improvements to help borrowers not fluent in English better understand the mortgage process. And from the looks of the comments, it appears...