A decision by the Department of Housing and Urban Development to suspend a Texas mortgage firm and its top executive was not “arbitrary and capricious” and did not violate due process, according to a recent Houston district court ruling. The court granted HUD’s motion for summary judgment and dismissed all of the plaintiffs’ claims with prejudice. In Allied Home Mortgage Corp. v. Donovan, (No. H-11-3864, 2014 WL 3843561, S.D. Tex. Aug. 5, 2014), a U.S. Attorney’s Office sued Allied Home Mortgage Corp. and its chief executive officer, James Hodge, in Manhattan federal district court for allegedly lying about its compliance with FHA requirements. Specifically, the former Houston-based mortgage net branch operator (currently doing business as Allquest Home Mortgage Corp.) allegedly violated the False Claims Act and the Financial Institutions Reform, recovery and Enforcement Act by ...

The New York Department of Financial Services said it has concerns that certain nonbank servicers are using complex arrangements with affiliates to side-step borrower protections in force-placed insurance. Superintendent of Financial Services Benjamin Lawsky detailed what he called a “troubling” scheme between Ocwen Financial and a “related party,” Altisource Portfolio Solutions. “This complex arrangement appears designed to funnel as much as $65 million in fees annually from already-distressed homeowners to Altisource for minimal work,” Lawsky said in a letter this week to Timothy Hayes, Ocwen’s general counsel. According to the NYDFS, Ocwen recently implemented...

A trade group representing non-agency MBS investors continues to raise concerns about settlements that give servicers credit for completing loan modifications on mortgages in non-agency MBS. Regulators and others counter that the settlements include protections for the investors, who ultimately benefit from loan mods completed under the settlements. The latest flare-up involves $4.0 billion in loss mitigation actions required of JPMorgan Chase under a recent settlement with federal and state regulators. Last week, the settlement’s monitor credited Chase with $6.31 million in consumer relief under the settlement, with 56 percent of the relief completed on Chase’s own holdings and the remainder completed on loans serviced for others, likely mortgages in non-agency MBS. The settlement prompted...

In recent weeks, speculators have been pressing their bets that certain publicly-traded mortgage companies could be in for a world of hurt because origination volumes are likely to remain subdued this year and there is little chance of growth through servicing acquisitions. According to figures compiled by Compass Point Research & Trading and public websites, the two most-shorted mortgage stocks are Nationstar Mortgage and PHH Corp. Measured by the percentage of shares publicly available (known as “float”), Nationstar has...

New FHA guidance regarding voluntary termination of FHA mortgage insurance does not affect separate guidance requiring borrowers to continue payment of their annual insurance premium regardless of the loan’s amortization terms. The FHA made the clarification in relation to Mortgagee Letter 2014-13, which requires written consents by the lender and the borrower in all voluntary terminations of FHA mortgage insurance. The requirement becomes effective on Oct. 1st this year. Specifically, the guidance requires FHA lenders to document that they have obtained the borrower’s informed consent to terminate FHA insurance on the mortgage. The change ensures that the lender would incur no liability and that the borrower understands the terms of the voluntary termination. Under current rules, the FHA may terminate mortgage insurance at the request of the borrower and the lender. The lender may cancel the insurance endorsement upon notification by the FHA commissioner that the insurance contract is terminated.

An industry that is used to reading about MERS’ court victories was stunned last week after a federal court judge in Pennsylvania found Merscorp Inc. and its electronic mortgage registry system in violation of state recording laws for real estate properties. While the ruling by U.S. District Court Judge J. Curtis Joyner may be appealed, MERS could be held liable for its role as an “agent” for member-lenders involved in property transfers and for alleged unjust enrichment, according to legal experts. The case was brought...

Officials with the Conference of State Bank Supervisors suggest that state regulators are likely to set capital requirements for nonbank servicers due to concerns about how a failure of a nonbank would impact borrowers. “People have to feel confident that their mortgage check is going where it’s supposed to go, when it’s supposed to get there,” Chuck Cross, a senior vice president for consumer protection at the CSBS, said last week during a webinar hosted by Inside Mortgage Finance Publications ...

Among the myriad of servicing concerns raised by the New York Department of Financial Services in recent months are the relationships between nonbank special servicers and their affiliates. Industry lawyers suggest that few laws specifically address the issue, though the area could see increased regulation and enforcement. In April, Ben Lawsky, superintendent of the NYDFS, expanded his probe of Ocwen Financial to include sales of real estate owned properties ...

U.S. Bank became the latest casualty in the government’s offensive against lax underwriting and improper origination of FHA mortgages after the bank to pay $200 million to settle all related charges. The Minneapolis-based bank became the seventh FHA lender since 2012 that has entered into settlement agreements with the Department of Justice and the Department of Housing and Urban Development to resolve alleged violation of the False Claims Act and the Financial Institution Reform, Recovery and Enforcement Act, according to Inside FHA Lending’s analysis of government data. The government lawsuits allege that the banks’ certification of loans as eligible for FHA insurance under the direct endorsement program violated the FCA. The banks’ misconduct allegedly contributed to the legacy losses that crippled the FHA Mutual Mortgage Insurance Fund and placed the ...

The FHA is seeking comment on two new sections of a proposed single-family handbook for mortgage lenders. The handbook is in development. Once completed, it will serve as the centralized source of current and future FHA policies. Agency staff is collating policies from several handbooks, rules, mortgagee letters, notices and other sources to incorporate into the handbook. The FHA is publishing two new sections, “Doing Business with FHA – FHA Lenders and Mortgagees” and “Quality Control, Oversight and Compliance,” for comment. The “Doing Business” section lays out the requirements for FHA lender approval, including eligibility requirements, application processes, operating requirements and post-approval changes. The section also contains the recertification process as well as processes for applying for ...