PHH Mortgage – and the rest of the mortgage industry, for that matter – came out with a clear and decisive win against the CFPB last week when the U.S. Court of Appeals for the District of Columbia Circuit vacated the $109 million disgorgement order imposed on the lender by the director of the bureau, Richard Cordray. PHH argued that the CFPB incorrectly interpreted RESPA Section 8 to bar so-called captive reinsurance arrangements involving mortgage lenders such as PHH, their affiliated reinsurers and private mortgage insurers. The lender also asserted that, in any event, the CFPB departed from the consistent prior interpretations issued by the Department of Housing and Urban Development, and that the bureau then retroactively applied its new interpretation of ...

One year into the TRID rule, the mortgage industry has gotten used to the new disclosure landscape. But until consistent legal precedents are established by the courts, true certainty will be elusive, and that likely means years will have to transpire before the rule’s full impact will be known. “I think the industry as a whole has met the challenge and settled into the TRID process, which everyone knows was radically different than what it replaced,” said Donald Lampe, a partner in the financial services group in the Washington, DC, office of the Morrison & Foerster law firm. “And so I see the industry settling in to the use of these new forms and the changes that these disclosures imposed ...

MBA Presses CFPB to Review PACE Lending. Earlier this year, the Mortgage Bankers Association wrote to the CFPB to express its concerns about Property Assessed Clean Energy (PACE) lending programs, one of which has to do with a borrower’s ability to repay the financing.... CFPB Brings $28.5 Million Enforcement Action Against Navy Fed. Last week, the CFPB and Navy Federal Credit Union, the largest CU in the U.S., signed a consent order requiring the institution to pay roughly $23 million in redress to victims harmed by its allegedly improper debt collection actions, along with a civil money penalty of $5.5 million to the bureau.... CFPB Announces Senior Leadership Changes. The CFPB recently announced some senior leadership changes at the bureau, such as John Coleman, who will serve as deputy general counsel for litigation and oversight in the legal division....

Documents revealed to plaintiffs’ attorneys in a prominent GSE shareholder case is causing some to question what President Obama was told about Fannie Mae’s and Freddie Mac’s profitability when the Treasury sweep took place in 2012. Judge Margaret Sweeney released her 80-page opinion last week and it gave more insight into her decision. While only a short summary sentence of each of the 56 documents is available now, it does show communication between high-level officials at the Treasury Department, Federal Housing Finance Agency and the White House regarding the Treasury’s sweep of Fannie and Freddie profits.Investors Unite, a GSE shareholder group, noted that the government might have been trying to keep the documents hidden because...

A judge ruled that the city of Chicago cannot impose a real estate transfer tax on buyers who purchased homes sold by the GSEs. Even though federal law does not allow local governments to collect taxes to property held by federal lenders, the GSE accused the city of circumventing the law by waiting for properties to be sold then sending the buyers a tax bill. This ruling stems from a federal court case last October in which Fannie Mae and the Federal Housing Finance Agency sued the city for trying to collect taxes from buyers who purchased foreclosed homes from the GSE.

Financial institutions that are under scrutiny for questionable practices involving residential MBS can avoid a lot of grief and legal expenses if they cooperate early in the investigation, according to the Department of Justice’s chief overseer of civil litigation. In recent remarks at the Society of Corporate Compliance and Ethics’ annual conference in Chicago, Principal Deputy Associate Attorney General Bill Baer underscored the wisdom and benefits of early cooperation in a government RMBS inquiry. There would have been...

U.S. Court of Federal Claims Judge Margaret Sweeney’s ruling, released last week, raises new questions about the validity of government efforts to keep thousands of other documents secret in a Fannie Mae and Freddie Mac shareholder case over the net worth sweep imposed by the Treasury Department and the Federal Housing Finance Agency, according to shareholder advocates. In Fairholme Funds Inc. v. United States, et al, shareholders argue that the net worth sweep of the government-sponsored enterprises’ profits is unfair, and they have scored significant victories in getting access to various written communications to prove their claim. The recent batch of documents Sweeney released to the plaintiff’s attorneys show...

Since the repurchase and indemnification phenomenon is unlikely to disappear anytime soon, many correspondent lenders, credit unions and other recipients of a repurchase/indemnification demand want to know how best to respond in order to mitigate potential damages. During a recent webinar sponsored by American Mortgage Law Group, AMLG Senior Managing Member James Brody said there are many different factors to consider. “One of the things that really helps in getting any resolution is...

PHH Corp. this week scored a key legal victory in its battle with the Consumer Financial Protection Bureau over captive reinsurance and the Real Estate Settlement Procedures Act. But despite this good news, there are still clouds over the nonbank. The “worst” of the recent spate of bad news for the company surrounds the early October disclosure that Merrill Lynch is breaking all ties to PHH when it comes to private-label originations and servicing. The effective date for the end of the contract is...

The traditional interpretation of Section 8 of the Real Estate Settlement Procedures Act that the mortgage industry has relied on for decades was vindicated this week when a three-judge panel of the U.S. Court of Appeals for the District of Columbia Circuit sided with most of the arguments advanced by PHH Mortgage in its dispute with the Consumer Financial Protection Bureau. The crux of the dispute has been the bureau’s assertion that PHH violated RESPA by steering business to private mortgage insurers that purchased reinsurance from a captive insurer owned by PHH. Most large lenders and all private MIs engaged in these arrangements prior to the housing market collapse. Early on in the case, an administrative judge agreed...