The industry robo-signing foreclosure scandal took an historic turn this past week, with the first filing of criminal charges ever brought. Nevada Attorney General Catherine Cortez Masto brought 606 criminal charges against two Lender Processing Services employees who allegedly directed and supervised a robo-signing scheme which resulted in the filing of tens of thousands of fraudulent documents with the Clark County (NV) Recorder’s Office between 2005 and 2008. California resident Gary Trafford has been charged with 102 counts of offering false instruments for recording (a category C felony), false certification on certain...

The National Community Reinvestment Coalition improperly accepted approximately $2.4 million in donations from 10 of 38 lender organizations it tested under its Fair Housing Initiatives Program grant agreement with the Department of Housing and Urban Development, thereby creating conflict-of-interest situations in violation of the agreement, according to a new report from HUD’s Office of Inspector General. The NCRC immediately challenged the report and maintained it was politically motivated. The OIG said NCRC generally completed administrative and program activities and tasks in accordance with its agreement, the OIG said. The audit also found nonprofit improperly accepted donations from organizations it tested, thereby creating conflict-of-interest situations involving $59,800 of $230,000 in the grant funds (26 percent).

The Consumer Financial Protection Bureau, in a conciliatory gesture to a wary industry, recently announced the existence of a formal Early Warning Notice process that will provide advance notice of potential enforcement actions to individuals and firms under investigation. The process is modeled on similar procedures that have been successful at other federal agencies, according to the CFPB. It starts with the bureau’s Office of Enforcement explaining to individuals or firms that evidence gathered in a CFPB investigation indicates they have violated consumer financial protection laws. Recipients of an Early Warning Notice are then invited to submit a response in writing, within 14 days, including any relevant legal or policy arguments and facts. The Early Warning Notice process “strikes a balance between the goal of fairness to those being investigated and our mission to protect consumers,” said Raj Date, special advisor to the secretary of the Treasury for the CFPB. “This process will help us fulfill our commitment to transparency in enforcing the law.”

Maryland. A federal jury recently convicted Andrew Hamilton Williams, of Hollywood, FL, owner and founder of “Metro Dream Homes,” of fraud conspiracy, wire fraud and conspiracy to commit money laundering in connection with his alleged participation in a massive mortgage fraud scheme which promised to pay off homeowners’ mortgages on their “Dream Homes,” but left them to fend for themselves. ... Minnesota. In Taft v. Wells Fargo Bank, N.A., the U.S. District Court for the District of Minnesota has ruled that a national bank is not bound by state laws that would restrict the fees it can include in principal when making a reverse mortgage loan. In this case, the plaintiff accused the bank of violating Minnesota and South Dakota law by including origination fees, servicing fees, and mortgage insurance charges in the principal amount of her mother’s reverse mortgage loan.

The National Credit Union Administration this week announced settlement agreements with Deutsche Bank Securities and Citigroup stemming from their roles as underwriters that sold non-agency MBS to credit unions that eventually failed. Deutsche Bank is paying the bigger amount, $145.0 million, while Citi’s payment will be $20.5 million. Neither firm admitted fault as part of the settlement. The proceeds from the settlements will be used to offset assessments that the NCUA has levied against credit unions to pay the cost of cleaning up the failures of...

The National Credit Union Administration this week reached settlements with two underwriters of non-agency mortgage-backed securities. The settlements also have implications for non-agency MBS issuers and underwriters facing lawsuits from the Federal Housing Finance Agency. Deutsche Bank Securities agreed to pay the NCUA $145.0 million to reduce losses associated with five failed credit unions. Citigroup also agreed to pay the NCUA $20.5 million to settle similar charges. The settlements included terms stating that the issuers did not admit fault. NCUA Board Chairman Debbie Matz warned that the settlements are...

A federal judge in Houston ruled that Allied Home Mortgage Corp. can continue to originate and underwrite FHA-insured loans, putting into question the validity of the Department of Housing and Urban Development’s suspension of the lender’s FHA privileges. U.S. District Court Judge Melinda Harmon, in a 22-page decision issued filed on Nov. 15, said the “potential destruction” of Allied’s business outweighs any harm the government would suffer before the issues can be litigated.

The Obama administration this week proposed a new rule that would establish uniform procedures for the resolution of disparate impact allegations under the Fair Housing Act at a time when the whole legal underpinnings of disparate impact are slated for review by the U. S. Supreme Court. In a proposed rule that has been in preparation for months, the Department of Housing and Urban Development argued that it has the authority to apply the disparate impact theory of discrimination in the context of fair housing, including fair lending charges. The purpose of the proposed rule, HUD says, is to clear up uncertainty about...

The U.S. Supreme Court will determine whether disparate impact claims can be applied to the Fair Housing Act and lending discrimination cases by reviewing a Minnesota case involving rental housing. Although many fair lending cases based on disparate impact have been brought and settled over the years, the standard has not been universally interpreted by federal appeals courts. In Magner v. Gallagher, private landlords sued the city of St. Paul, MN, for enforcing its housing code, leading to claims by the landlords that shutting down their properties made it too difficult for minority renters to find...

Life isn’t getting any easier for mortgage lending giant Wells Fargo when it comes to litigation. The top-ranked mortgage lender through the first nine months of the year took a couple of high-profile shots in just the last two weeks or so. Last week, Illinois’s Cook County Judge Carolyn Quinn gave the green light to a suit filed by state Attorney General Lisa Madigan against Wells, which accuses the lender of offering financial incentives to employees to put minority borrowers who qualified for prime mortgages into subprime loans during the 2005-2007 time frame. Illinois has a similar axe to grind against Countrywide Financial Corp., which was acquired by Bank of America Corp. three years ago.