The number of major fair lending settlements brought by federal regulators over the last year highlights the increasing importance of mortgage lenders properly evaluating their risk of being out of compliance and responding appropriately and preemptively, according to top banking agency officials. Since November 2011, the Department of Justice has settled seven fair lending cases against Bank of America, Countrywide Financial, GFI Mortgage Bankers, Luther Burbank Savings, Mortgage Guaranty Insurance Corp., SunTrust Mortgage, and Wells Fargo mostly related to steering, pricing and underwriting. In the aggregate, these settlements have produced more than $550 million in monetary relief in compensation for more than 250,000 victims, according to Jon Seward, head of housing and civil enforcement for the Justice Department. All seven cases resulted from referrals as the regulators are...
The Supreme Court of the United States has delayed a decision to review a case that rests on the disparate impact theory of discrimination in housing and mortgage lending. The case, Township of Mount Holly, NJ, et al., Petitioners v. Mt. Holly Gardens Citizens in Action, Inc., et al., was listed on the courts conference schedule at the end of last week, but the justices took no action. Mount Holly is now scheduled to be considered at the courts next conference on Oct. 26. If certiorari is granted...
Opponents of the Dodd-Frank Wall Street Reform and Consumer Protection Act that created the CFPB are finding some initial success in chipping away at various provisions of the law through legal challenges. So far, authorities of the bureau itself have escaped the crosshairs of such legal challenges. However, the legitimacy of President Barack Obamas appointment of Richard Cordray as director of the CFPB has been challenged in a round-about manner. So far, federal regulators have twice lost in court in their efforts to defend some of the rules they put in place...
A federal district court in Minnesota rejected a mortgage securitization trustees plea to compel a lender to repurchase defective home loans after finding that the loans no longer existed following the foreclosure and sale of the mortgaged properties. Ruling in MASTR Asset-Backed Securities Trust 2006-HE3 v. WMC Mortgage Corp., U.S. District Court Judge John Tunheim granted the lenders motion for partial summary judgment after determining that the loans had been extinguished when the trustee foreclosed on the properties and charged off the remaining principal balances. The dispute boiled down...
In collaboration with the Residential Mortgage-Backed Securities Working Group, New York Attorney General Eric Schneiderman filed a lawsuit last week against JPMorgan Chase and two related entities. The lawsuit targets underwriting on nonprime MBS deals, and Schneiderman said it could serve as a model for future planned actions by the Obama administrations RMBS Working Group. There are more cases to come, he said. We believe that this is a workable template for future actions against issuers of ...
Fitch Ratings completed a review of ratings of jumbo mortgage-backed securities last week, resulting in downgrades of 6 percent of outstanding jumbo MBS. The downgrades were concentrated on pre-2005 MBS. Adverse selection and structural features vulnerable to tail-risk have increased negative rating pressure for seasoned jumbo MBS, Fitch said. The rating service noted that 14 percent of jumbo MBS remains on watch for downgrade and a determination on the ratings is expected by the end ... [Includes two briefs]
While President Barack Obama and his Republican challenger, Gov. Mitt Romney, differ widely on key issues, both candidates appear to agree on the need to reduce the governments role in housing and bring private capital back to the mortgage market, industry observers say. Nothing much has been said in public forums or in the first presidential debate (except for a brief mention of the qualified mortgage proposal) about the housing issue, but observers say their positions on FHA may not be far apart. Obamas approach to the housing crisis is ...
A significant increase in the volume of claims following the announcement of the $25 billion joint servicer settlement earlier this year has created a huge backlog that could potentially threaten the FHA Mutual Mortgage Insurance Fund, warned the Department of Housing and Urban Developments Office of the Inspector General. Separate OIG audits of the five mortgage servicers that signed the groundbreaking settlement pact with federal agencies and state attorneys general in February found that if those servicers were to file all ...
The FHA Mutual Mortgage Insurance Fund appears poised for another potential settlement infusion following this weeks announcement of a federal lawsuit against Wells Fargo Bank for alleged reckless underwriting and fraudulent loan certifications on thousands of FHA-insured loans that ultimately defaulted. Filed by the U.S. Attorneys Office in Manhattan, the lawsuit accuses Wells Fargo of engaging in a long standing and reckless trifecta of deficient training, deficient underwriting and deficient disclosure, while relying on the convenient backstop of government insurance. Ten years of Wells Fargos alleged misconduct ...
New York Attorney General Eric Schneiderman this week sued JPMorgan alleging fraudulent and deceptive acts in the pooling and sale of residential MBS by now-defunct Bear Stearns. Filed in the New York Supreme Court in Manhattan, the lawsuit is the first of several legal actions contemplated by the Residential MBS Working Group, a state-federal task force created by President Obama earlier this year to investigate those suspected of contributing to the financial crisis through the sale of defective mortgage certificates. Bear Stearns, which was taken over by JPMorgan, and co-defendant EMC Mortgage perpetuated...