As state regulators ratchet up their examinations of licensed mortgage companies, lenders are beginning to look for a way to raise concerns and ask questions during the evaluation. Such a mechanism might take the form of an ombudsman or neutral feedback loop that would allow for clarification. “The exam process is supposed to be about regulatory compliance and operation soundness. Right now, there’s no way for licensed mortgage companies to go back to the [Conference of State Bank Supervisors] to get questions answered or provide real-time feedback,” noted Donald Lampe, the leader of Dykema’s financial...

State regulators are gradually working through the pile of licensing applications submitted by mortgage companies and loan originators. The total number of unique entities holding state licenses increased 7.2 percent during the second quarter, reaching 140,421, according to an Inside Mortgage Trends analysis of data from the National Mortgage Licensing System. The vast majority of those licenses (76 percent) are held by individual loan officers. Regulators still had some 35,024 licensing applications pending at the end of June, but that was down 23 percent from the previous quarter. And the number of new applications submitted during...

Department of Housing and Urban Development Secretary Shaun Donovan said it was just “a matter of weeks” until there would be a settlement between federal and state agencies and much of the mortgage servicing industry over foreclosure practices in the aftermath of the “robo-signing” scandal. That was almost three months ago. Recent indications suggest the coalition of government agencies involved in the effort may be fraying. Last week, Iowa Attorney General Tom Miller, who is leading negotiations with the industry, suddenly dumped New York Attorney General Eric Schneiderman from the coalition’s executive committee, claiming the NY AG had “actively worked to undermine” the group’s efforts recently.

Illinois. The U.S. Attorney’s Office for the Northern District of Illinois announced that a former South Holland, IL, man, Kenneth Steward, was sentenced to 17 years and six months in federal prison for allegedly directing a $35 million mortgage fraud scheme involving more than 120 residences on Chicago’s south side. The scheme caused various lenders and financial institutions to lose approximately $16 million on mortgage loans that were not repaid by the borrowers or fully recovered through subsequent foreclosure sales, federal law enforcement officials said. The sentence that was imposed is one of the longest ever given to a mortgage fraud defendant in federal court in Chicago, according to officials.

A number of distressed mortgage insurance companies with special covenants with state regulators and the government-sponsored enterprises are in danger of losing their ability to write new insurance as continued losses prevent them from meeting financial eligibility requirements. With credit trends further weakening in the second quarter, certain mortgage insurers, including Mortgage Guaranty Insurance Corp. and PMI Mortgage Insurance Co., could slip below minimum re-serve and surplus requirements, observers say. Already on capital-requirement waivers, the MIs could be ordered to stop ...

The Senate Banking Committee plans a hearing on Thursday to consider President Barack Obama's nomination of Richard Cordray, the former Ohio attorney general and current chief of enforcement at the Consumer Financial Protection Bureau, to be the first official director of the CFPB. “With [this] hearing, I will begin the process of moving Mr. Cordray’s nomination forward to confirmation,” said Sen. Tim Johnson, D-SD, chairman of the committee. “The CFPB opened its doors as an independent agency on July 21st, and it is off to a strong start promoting an equitable and transparent consumer financial marketplace. However, until it has a director, the CFPB will not be able to use its full powers to protect consumers and level the playing field for community banks and credit unions.” ...

Massachusetts. State Attorney General Martha Coakley reportedly plans to obtain documentation filed by Mortgage Electronic Registration Systems as part of the broader investigation by a 50-state coalition of attorney generals into potentially unlawful foreclosure practices. New Jersey. Former mortgage broker Ara Mesropian, 39, of Paramus, NJ, pleaded guilty to charges that he participated in a mortgage fraud scheme which defrauded lenders and generated millions of dollars in fraudulent mortgage loans. ...

Most state-licensed mortgage companies in the Nationwide Mortgage Licensing System and Registry are mortgage brokers, of which a significant portion does FHA loan correspondent business, according to a recent report issued by the Conference of State Bank Supervisors. As of the end of the first quarter, 14,980 companies possessed 28,415 licenses – an average of two state licenses per company, according to the report, “A Nationwide View on State-Licensed Mortgage Entities, Quarter I, 2011.” The licensee/registrant reports ...

Some federally supervised depository institutions with FHA businesses are in danger of missing the July 29 deadline for registering with the Nationwide Mortgage Licensing System and Registry and could be sanctioned. The delay in registration is apparently due to confusion and uncertainty as to whether certain employees meet the definition of a “mortgage loan originator” (MLO) and should be registered as required by the Secure and Fair Enforcement for Mortgage Licensing Act, said compliance experts. The mortgage-related activities of such employees do not clearly meet the MLO definition and they include ...

Illinois Governor Pat Quinn (D) announced late last week the creation of a special fund that will use the state’s allocation of federal Hardest Hit Fund dollars to purchase distressed loans in the Chicago area and permanently modify them to affordable levels. The Mortgage Resolution Fund will extract $100 million of Illinois’ $445.7 million of HHF resources for the cause. The MRF will buy delinquent loans from lenders and capital markets trading desks at net present value, and each qualifying debt will be “brought into alignment with current values.” Chicago has suffered a ...