The New York State Supreme Court recently reversed a ruling in a foreclosure case, providing a favorable decision for lenders and servicers. New York Community Bank v. Daphne McClendon involved a foreclosure that was initiated in 2012. The mortgage in question was originated in 2008 by AmTrust Bank for $544,000. The note accompanying the mortgage was signed by electronic signature. The borrower challenged...

Freedom Mortgage Corp. has agreed to pay the federal government $113 million to resolve alleged violations of the federal False Claims Act and FHA requirements in connection with the origination of FHA-insured single-family mortgages. The April 15 settlement agreement between the New Jersey-based mortgage lender and the Department of Justice comes in the wake of a record $1.2 billion settlement between DOJ and Wells Fargo, which earlier admitted to false certification of defective mortgages for FHA insurance and failure to file timely reports on several thousand loans that were materially defective or badly underwritten. Like Wells Fargo, Freedom Mortgage failed...

A pilot effort by the Treasury Department’s Financial Crimes Enforcement Network is underway in New York City and Miami to track suspicious “all cash” purchases of high-end residential properties as part of the government’s anti-money laundering (AML) enforcement. In remarks during a recent AML conference in Florida, FinCEN Director Jennifer Shasky Calvery said geographic targeting orders (GTOs) were issued by the agency in January this year and went into effect on March 1. They require identification of high-end cash buyers to ensure luxury residences purchased with cash are not masking money laundering activities. Specifically, U.S. title insurance companies are temporarily required...

Former Federal Trade Commission official Todd Zywicki had a blunt message for the U.S. Senate Banking, Housing and Urban Affairs Committee recently when it comes to the CFPB and its voluminous new mortgage rules: Many smaller banks have simply chosen to exit the residential finance sector rather than bear the increased regulatory costs and risks. The former director of policy planning at the FTC cited a survey conducted by George Mason University’s Mercatus Center which found “64 percent of small banks reported that they were making changes to their mortgage offerings because of [the] Dodd-Frank [Act], and 15 percent said that they had either exited or were considering exiting residential mortgage markets entirely.” Also, almost 60 percent of small banks ...

Many mortgage industry attorneys seem convinced that PHH Corp. will succeed – at least at the appellate court level – in defying the CFPB in its ongoing legal dispute with the bureau. The crux of the dispute is the bureau’s assertion that PHH violated the Real Estate Settlement Procedures Act and harmed consumers through a mortgage insurance kickback scheme tied to a captive MI. Last week, the U.S. Court of Appeals for the District of Columbia heard oral arguments in the case, PHH Corp. v CFPB, and the day did not go well for the bureau. Former CFPB enforcement attorney Jennifer Lee, now a partner with the Dorsey & Whitney law firm in Washington, DC, succinctly summarized the tough day the bureau ...

This week, a judge removed the protective order on seven documents related to the U.S. Treasury’s sweep of GSE profits, revealing what shareholders and industry groups have been arguing for years: that Fannie Mae and Freddie Mac were in a position to post profits on a sustained basis. In a whirlwind of court activity over the past month involving GSE shareholders, Court of Federal Claims Judge Margaret Sweeney decided on April 12 to release certain documents that appellants in Fairholme Funds, Inc. et. al. v. United States and Perry Capital v. Lew, moved to be made public. This is ahead of the D.C. Circuit schedule oral argument for the Perry case on April 15 and it intensified talks of government corruption and false claims of protecting taxpayers via the sweep.

The Department of Justice helped lead other federal and state entities in a $5.06 billion settlement with Goldman Sachs. The settlement announced this week involves non-agency MBS underwritten by Goldman between 2005 and 2007. The charges were centered on representations made by Goldman to investors in about 530 non-agency MBS. The offering documents for the MBS stated that mortgages in the deals were originated “generally in accordance with the loan originator’s underwriting guidelines,” other than possible situations where “when the originator identified ‘compensating factors’ at the time of origination.” Findings by third-party due diligence firms helped...

The mortgage industry found some justification to hope for a return to a more traditional interpretation of the Real Estate Settlement Procedures Act, after the Consumer Financial Protection Bureau took some judicial fire during oral arguments early this week in its dispute with PHH Corp. over the company’s captive mortgage reinsurance activity. The crux of the dispute is the bureau’s assertion that PHH violated RESPA and harmed consumers through a mortgage insurance kickback scheme tied to a captive MI company. Virtually all the major mortgage lenders used similar captive reinsurance entities prior to the financial collapse. In the run-up to this week’s oral arguments before the U.S. Court of Appeals for the District of Columbia, the justices seemed...

Wells Fargo last week reached an agreement to pay $1.2 billion to the federal government to resolve certification and reporting violations in connection with FHA-insured loans. The settlement is the largest recovery for loan-origination violations in FHA history, according to Housing and Urban Development Secretary Julian Castro. The April 8 court filing details an agreement in principle, which Wells Fargo announced in February, that resolves not only a pending lawsuit filed by the U.S. Attorney for the Southern District of New York, but also a number of potential claims dating as far back as 15 years in some cases, according to a statement issued by Wells Fargo. According to the settlement, Wells Fargo “admitted...

Litigation over legacy residential MBS deals that went sour in the run-up to the financial crisis continued last week, as California Attorney General Kamala Harris sued investment bank Morgan Stanley for alleged misrepresentations about RMBS investments, which she said contributed to huge losses by investors such as the state’s public pension funds. In what is just the second such use of the False Claims Act by a state, Harris’ complaint, filed in San Francisco Superior Court, alleges that Morgan Stanley violated the FCA, as well as California securities law and other state laws, by allegedly hiding or downplaying the risks of complex investments involving large numbers of underlying loans or other assets. Harris used...