Deutsche Bank and its mortgage subsidiary MortgageIT this week agreed to pay $202 million to settle civil claims that they engaged in a decade of misconduct and deception to qualify risky mortgage loans for FHA insurance. The civil fraud lawsuit was brought against the two companies by the Department of Justice as a result of a referral from the Department of Housing and Urban Development. Filed in May last year, the government lawsuit sought damages and civil penalties under the False Claims Act. The suit alleges that MortgageIT, which Deutsche Bank acquired in 2007, used its authority as a direct endorsement lender (DEL) to ...

Bank of America’s pending $8.5 billion settlement with non-agency MBS investors appeared to gather some momentum last week following a BofA-favorable ruling by a New York state court. New York State Supreme Court Justice Barbara Kapnick ruled the case will move forward under Article 77 rather than a broader plenary action sought by investors opposed to the amount of the settlement. The proposed settlement reached last June with 22 institutional investors would resolve BofA’s liability related to non-agency MBS issued by Countrywide. Supporters of the settlement, including the trustee, Bank of New York Mellon...

Even as the still-regenerating Home Affordable Refinance Program is already proving itself to be a boon for banks’ bottom lines, participants of an exclusive Inside Mortgage Finance webinar last week said so far there’s little indication borrowers are disadvantaged because there are currently fewer new lenders originating HARP 2.0 as same servicers. Since January, one month after the revised program took effect, lenders have reported intense interest and a more significant uptick in new refinance applications.

Ally Financial announced a deadline for borrowers seeking a modification under the $25 billion multistate servicing settlement finalized in February. In a financial filing last week, Ally wrote, “We are committed to providing loan modifications to all eligible borrowers who accept a modification offer within three months of the solicitation. We have also agreed to provide loan modifications to borrowers who accept a modification offer within six months of the solicitation, unless and until total borrower relief provided exceeds $250 million.” Of the five banks in the settlement, Ally is on the...

The Consumer Financial Protection Bureau must structure the definition of a “qualified mortgage” under its forthcoming ability-to-repay rule as a legal safe harbor with clear, well-defined standards if regulators want to make sure that qualified borrowers across the credit spectrum maintain access to affordable financing, representatives of the financial services, home building and real estate industries said. Writing to the CFPB late last week, a group of 23 trade associations said, “Structuring the QM as a safe harbor and focusing litigation and enforcement activity on...

A handful of mortgage lending-related trade groups joined together to express their strong support of the Consumer Financial Protection Bureau’s proposed rule to codify the legal protections for privileged information that CFPB-regulated financial institutions submit to the bureau. The proposal would make clear that an institution that submits privileged information to the CFPB does not waive any applicable privilege having to do with third parties. It also would make clear that the bureau’s transfer of privileged information to another federal or state agency does not result in a...

The forthcoming combined Truth in Lending Act and Good Faith Estimate disclosure form and related rule pending at the Consumer Financial Protection Bureau is at the top of the list of greatest compliance concerns of mortgage lenders, according to the fourth annual compliance survey by QuestSoft, a provider of compliance software and services to the mortgage industry. Of the 426 lenders that were surveyed on their level of anxiety for regulatory changes, a whopping 81 percent identified this CFPB project as at least a medium (33 percent) or a high (48 percent) concern...

A homeowner does not have a private right of action against his mortgage servicer under the Obama administration’s Home Affordable Modification Program, the U.S. Court of Appeals for the Eleventh Circuit ruled late last week. In this case, the borrower, Jason Miller, owned a parcel of real property in Hiawassee, GA, which he was able to purchase by taking out a mortgage loan from the unidentified predecessor of the defendant, Chase Home Finance, LLC (Chase). In February 2009, Miller asked for a loan modification from Chase, citing financial difficulties. Chase agreed to...

Illinois. Gifford State Bank, the defendant lender in Re Crane (Case 11-90592, U.S. Dist Ct, C.D. IL), recently appealed the February ruling of the U.S. Bankruptcy Court for the Central District of Illinois, a decision that let a bankruptcy trustee avoid an Illinois mortgage as to other creditors of the estate because the mortgage failed to expressly state the maturity date and interest rate of the underlying debt. Legislation that would contravene the Crane decision has been introduced in the state House of Representatives with the hope it can be passed before the May 31 end of the session...

Option One Mortgage Corp. this week agreed to pay $28.2 million to settle charges brought by the Securities and Exchange Commission over the former subprime lender’s MBS disclosures regarding its ability to cover repurchase demands. Much of the litigation over failed non-agency MBS has focused on alleged misrepresentation about the quality of the loans delivered to securitization trusts, the servicing of those loan pools and the performance of trustees. The Option One settlement stems from the SEC’s contention that the company, one of the leading subprime lenders and securitizers during the heyday of...