Default risk on non-agency jumbo mortgage-backed securities continues to improve gradually, according to economic risk factors applied to Fitch Ratings’ non-agency jumbo MBS loan loss model. The rating service released the economic risk factors for the second quarter of 2012 last week. Fitch said the improvement is tied to home price trends and it expects home prices to “touch bottom” in 2013. New Jersey and New York have the highest default risk in the country, with expected defaults well above ... [Includes three briefs]

The Department of Housing and Urban Development said it has received $1.2 billion in recent settlements with large mortgage lenders and servicers but HUD’s internal watchdog, which did much of the legwork in the investigations, reveals a much smaller amount. According to recent audit reports published by HUD’s Office of the Inspector General, only Bank of America and Flagstar Bank have made payments under settlement agreements with HUD and the Department of Justice to resolve government claims. In separate memos to HUD’s Office of General Counsel last month, Kim Randall, director of the HUD OIG Civil Fraud Division, sought clearance to ...

Two lenders lost their approval to underwrite and originate FHA loans under Credit Watch while two others may be ordered to indemnify the Department of Housing and Urban Development for potential losses on several ineligible FHA-insured loans. HUD recently stripped Community Central Mortgage Co. of Mount Clemens, MI, and Strategic Mortgage Co. of Columbus, OH, of their direct endorsement approval because of the exceedingly high default and claim rates of FHA-insured loans they originated in their business areas. The Credit Watch Termination Initiative allows HUD to terminate a direct endorsement agreement with any FHA lender if ...

In an unusual move, the federal judge overseeing the Federal Housing Finance Agency’s massive legal action against many of the nation’s biggest MBS issuers has granted a defendant the right to appeal her denial of its motion to dismiss. Last week, Judge Denise Cote of the U.S. District Court for the Southern District of New York granted permission to UBS Americas to go over her head to the U.S. Court of Appeals for the Second Circuit. UBS hopes the appellate court will reverse...

A federal judge earlier this month had ruled that the Federal Housing Finance Agency’s case against UBS Americas will serve as the “test case” in a series of lawsuits that FHFA has filed concerning failed residential mortgage-backed securities. However, in another ruling a week later, Judge Denise Cote of the U.S. District Court for the Southern District of New York granted a motion by UBS to appeal her May 4 denial of the bank’s motion to dismiss on statute of limitation grounds. Judge Cote’s June 13 decision denied UBS’ request that it should not be the first of 17 cases to proceed because it was not a loan originator and it was not accused of fraud.

The reallocation of hundreds of millions of dollars of funds paid by the nation’s five largest loan servicers to states as part of this year’s whopping $25 billion national foreclosure settlement has ignited intra-state feuding as to how best utilize the cash windfall, according to a mortgage industry attorney. During a webinar sponsored last week by the State Attorneys General Enforcement Network, Jeremiah Buckley, founding partner of BuckleySandler, noted “emerging controversies” among state elected officials as they do battle, in some cases via the courts, to ensure the funds are used for consumer/mortgage-related purposes. The landmark agreement finalized in April between Ally Financial, Bank of America, Citigroup, JP Morgan Chase and Wells Fargo with a coalition of state attorneys general...

Mortgage lenders and servicers face increased congressional and regulatory attention and pressure over how they should respond to the unique needs and problems active-duty U.S. military personnel face handling their mortgages, particularly when they are transferred. Sen. Richard Shelby, AL, ranking Republican on the Senate Banking, Housing and Urban Affairs Committee, emphasized during a hearing this week the disruptions that Permanent Change of Station orders can cause service members. “When PCS orders are issued, service members are required to move even if they owe more on their mortgage...

The Office of the Comptroller of the Currency and the Federal Reserve Board late last week put out guidance that will be used to calculate the compensation or other remedy that borrowers will receive for financial injury identified during the independent foreclosure review that was set up last spring in the wake of the industry’s foreclosure practice debacle. The Financial Remediation Framework provides examples of situations where compensation or other remediation is required for financial injury due to servicer errors, misrepresentations or other deficiencies...

The Township of Mount Holly, NJ, has formally asked the U.S. Supreme Court to consider a case that once again raises the question of whether disparate impact claims can be brought under the Fair Housing Act. The issues raised in this case are pretty much those in Magner v. Gallagher, the case that would have settled the disparate impact issue except for the last-minute decision by the City of Saint Paul to dismiss its appeal, according to Christopher Willis, a partner with Ballard Spahr, which represents one of the non-township defendants in the case. Township of Mount Holly, NJ, et al.,...

In Rosenfield v HSBC Bank, the U.S. Court of Appeals for the Tenth Circuit recently ruled that borrowers cannot seek rescission after the Truth in Lending Act’s three-year statute of repose expires, even if the borrower had sent a notice of rescission within the three-year period. Beyond the ruling of the facts of the case, the court’s decision is another blow to the Consumer Financial Protection Bureau. Early this year, the CFPB had argued in a friend-of-the-court brief that TILA Section 125 (U.S.C. Section 1635) gives consumers a statutory right to rescind qualifying mortgage...