The Securities and Exchange Commission has adopted a modified policy that will require defendants in settlement agreements to admit to wrongdoing if they have already pled guilty in parallel criminal cases. Following a review by senior enforcement staff that began this spring and separate discussions with the commissioners over the last several months, last week we modified our settlement language for cases involving criminal convictions where a defendant has admitted violations of the criminal law, said SEC Enforcement Director Robert Khuzami.The new policy does not require admissions...
PHH Corp. over the last month has felt the pinch of being the largest mortgage banking business not associated with a depository institution as it faced some setbacks in lining up financing for its operations. The company this week priced a $220 million offering of 6.00 percent convertible senior notes that is being co-managed by JPMorgan Securities and BofA Merrill Lynch. That was up from the $150 million offering originally announced, and PHH gave the underwriters the option to purchase an additional $30 million. PHH will use the money to pay off $250 million of 4.00 percent convertible senior...
Demands to repurchase poorly performing mortgages have resulted in a spike in the number of mortgage fraud-related Suspicious Activity Reports (SARs) filed by banks in 2011, according to the Department of the Treasurys Financial Crimes Enforcement Network. In its 2011 annual report, FinCEN said increased buyback demands by investors have forced large mortgage lenders to conduct additional reviews of loans they originated, resulting in higher SARs filings last year. A review of SAR filings in the first quarter of 2011 found that the number of mortgage fraud reports rose to 25,485, up 31 percent from...
A growing consensus is emerging among legal experts that someone will challenge in court President Obamas contentious recess appointment of Richard Cordray as the first director of the Consumer Financial Protection Bureau. But a final outcome could take years and have no impact on the agencys actions while the case is unfolding. These appointments establish a dangerous precedent that threatens the confirmation process and undermines the system of checks and balances embedded in the Constitution, a number of House Republicans said in a letter they fired off to the president after he made his...
Fed Governor Sarah Bloom Raskin late last week stumped for creating an effective enforcement system to deal with shortcomings in the mortgage servicing industry that have come to light since the foreclosure crisis, as state officials pressed to expand a potential settlement over past abuses. The law is not a scarecrow where the birds of prey can seek refuge and perch to plan their next attack, Raskin said in a speech to a group of attorneys. The Fed governor said its important for servicers to have transparent, enforceable and sensible rules, adding that deferring to standard industry...
Mortgage industry groups are urging the U.S. Supreme Court to pay close attention to the wording of the Fair Housing Act specifically phrasing thats not in the 1968 law in deciding whether fair lending charges can be brought on the basis of disparate impact. In an amicus brief filed in the case of Magner v. Gallagher, mortgage trade groups said the Fair Housing Act requires proof of intentional discrimination and does not envision a violation based on disparate impact. The brief was filed by K&L Gates on behalf of the Independent Community Bankers of America, the Consumer Mortgage...
The N.Y. Supreme Court Appellate Division overturned a ruling that dismissed a foreclosure case because attorneys representing the lender failed to meet a deadline for filing a conflict-of-interest document. Judge Arthur Schack dismissed the case brought by U.S. Bank because its attorneys, the now infamous Steven J. Baum law firm, submitted a conflict-of-interest filing 123 days after it was due. The case involved Kelvy Guichardo, a defendant who defaulted on his mortgage. Schack was concerned that there might be a conflict of interest for Steven J. Baum and ordered the law firm to submit an...
President Obamas contentious recess appointment of Richard Cordray, his nominee to head the Consumer Financial Protection Bureau, sets the stage for legal challenges by mortgage lenders affected by actions of the CFPB. One interesting angle that has emerged in discussions with industry attorneys so far is the possibility that, sometime in the future, an aggrieved mortgage lender or servicer that becomes the focus of a CFPB enforcement action could block it by challenging the legality of the action. A company might be able to do so on the basis that the bureau may have acted unlawfully by utilizing an authority it really didnt have because the CFPB director might not have been legally confirmed by the Senate. There are issues with this appointment, said Anne Canfield, executive director of Canfield & Associates, the first of which is the question of whether the Senate is in session or in recess.
The Countrywide Financial legacy continues to sour for Bank of America, which recently was compelled to agree to pay $335 million to settle charges that Countrywide allowed pricing discrimination against African American and Hispanic borrowers, along with unchecked steering to subprime loans, when similarly qualified Caucasian borrowers were given prime loans at lower cost. Its the largest fair lending settlement to date. This is the first time that the Justice Department has alleged and obtained relief for borrowers who were steered into mortgages because of their race or national origin, government officials said. The settlement which requires court approval mandates that Countrywide implement policies and practices to prevent discrimination if it returns to the lending business during the next four years. Countrywide currently operates as a subsidiary of Bank of America but does not originate new loans.
When it comes to contemplating the wide range of mortgage lending compliance challenges in 2012, it might be useful to borrow from former Defense Secretary Donald Rumsfeld: there are knowns, things we know and things we know we dont know, and there are unknowns, things we dont know that we dont know.In terms of some of the knowns, the mortgage servicing exam procedures released back in October by the Consumer Financial Protection Bureau provide a roadmap for some of the emphasis areas mortgage lenders can expect from their new regulator, according to Christopher Willis, partner in the Atlanta office of Ballard Spahr. I think fair lending is going to be a very big emphasis area for them, he said. The recent settlement between the Department of Justice and Bank of America sets the stage for that to continue to be a very public, very big issue. And that was an origination case; that wasnt even a servicing case.And if you read the mortgage servicing exam procedures, the CFPB is saying they want to apply fair lending analysis to things like foreclosures and loan modifications, he added. I think thats going to be a major source of activity.