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Inside the CFPB

August 29, 2011

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AG Settlement Hinges on Multiple Issues

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. Read More

MERS Poised for Supreme Court Review

The exact nature of the role of Mortgage Electronic Registration Systems in foreclosure proceedings may well be decided once and for all, as the U.S. Supreme Court has been petitioned for an expanded review of a decision that upheld the rights of MERS to the deed of trust, giving MERS the right to foreclose. Jose Gomes, petitioner, v. Countrywide Home Loans, Inc., et al. is the first major MERS case to reach the Supreme Court. “This will be the first case in the country to petition the nation’s highest court regarding the foreclosure fraud that has taken place, though its emphasis will be specifically on California law,” said San Diego-based foreclosure attorney Ehud Gersten, who petitioned the high court on behalf of his client, borrower Jose Gomes, in his dispute with his servicer, Countrywide. Read More

Gov. Refi Plan, Expansion of HARP, Other Proposals May Emerge

Inside the beltway types have resurrected discussions about a possible broad government refinance initiative to more definitively bring financial relief to large swaths of struggling homeowners. But given the possible costs involved and the bitter partisan wrangling and brinkmanship seen over the latest round of debt ceiling negotiations, political observers see the introduction of yet another government mortgage program as improbable. A year ago, a team of analysts at Keefe Bruyette & Woods led by Bose George thought talk of a broad-based government refi program would ultimately go nowhere. They still do. Read More

CFPB Proposes “Transparency” Policy it Can Modify at Will

To promote openness and transparency, the Consumer Financial Protection Bureau has adopted a new policy governing ex parte (one party only) presentations, generally requiring public disclosure of such presentations made to CFPB staff concerning a pending rulemaking. The rule essentially requires anyone who communicates with the CFPB about a pending rulemaking to submit a written copy of the presentation (or a summary of an oral presentation) on the public rulemaking record within three days after the communication to the CFPB. The stated purpose of the rule is to “promote openness and transparency” and to give the public “access to the input that CFPB is receiving.” However, the CFPB’s policy has two significant exceptions that call into question how transparent the CFPB’s rulemaking process will really be, according to Ballard Spahr attorney Christopher Willis. Read More

CSBS, AARMR Offer Guidance to CFPB on ‘Larger Participants’

The Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators jointly provided input to the Consumer Financial Protection Bureau on defining “larger participants” of a market for other consumer financial products or services. Their first main point was that the CFPB ought to pay close attention to state legal definitions of the market, state jurisdictional coverage, and the overall consumer protection priority of the market. Second, the two agencies suggested that, when deciding how to define what entities are “larger,” the criteria and thresholds ought to be flexible, determined on an industry-by-industry basis, and based on aggregated institutional ownership. Read More

LPS Rejects American Home Mortgage Robo-Signing Complaint

Lender Processing Services is disputing robo-signing allegations recently made against it and its DOCX LLC subsidiary in a lawsuit filed by American Home Mortgage Servicing Inc. related to the surrogate signing practice at DOCX. “As LPS has previously disclosed, when it discovered the practice at DOCX, LPS immediately notified AHMSI of its discovery of the practice; immediately discontinued the practice; and voluntarily reviewed and remediated assignments of mortgage executed by DOCX using this practice,” LPS said. Once it completed the remediation in January 2010, LPS returned the remediated documents to the attorneys who had originally requested them on AHMSI’s behalf, the company said. Read More

FDIC Must Face $10 Billion WaMu Suit, Judge Rules

Judge Rosemary Collyer of the U.S. District Court in Washington, DC, has rebuffed the Federal Deposit Insurance Corp.’s effort to dismiss a $10 billion lawsuit filed by a unit of Deutsche Bank AG over pools of mortgage loans made by Washington Mutual that later went bad. Deutsche Bank, as trustee for the securitized pools at issue, filed suit against the FDIC as well as JPMorgan Chase, arguing that one or the other should be liable for losses suffered by the pool from WaMu’s allegedly fraudulent or poorly underwritten residential mortgages. The trusts involved had been investigated by a Senate subcommittee, which revealed that internal reviews performed by WaMu had determined that “loans marked as containing fraudulent information had nevertheless been securitized and sold to investors.” Read More

Foreclosure Attorneys Advised to Be Careful Around Loan Mods

Lex Consulting’s mortgage fraud examiners’ project is warning foreclosure attorneys to be extra careful to identify contract breaches and/or tortious conduct or face malpractice or at least disgorgement of fees from their own client. “Only exposure of contract breaches and/or tortious conduct underlying a mortgage transaction provides a sound strategic basis for liberating homeowners from the bondage of mortgage foreclosure,” said Storm Bradford, founder of the project. “Homeowners and attorneys need to understand a promissory note/mortgage/deed of trust is nothing more, nothing less than a contract. Moreover, attorneys need to be extra careful,” he added. “According to several ethics Read More

State Roundup

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. Read More

Federal Roundup

Senate Banking Committee. Richard Cordray nomination. The Senate Banking, Housing and Urban Affairs Committee has planned a Sept. 6, 2011, hearing to consider the nomination of Richard Cordray to be director of the Consumer Financial Protection Bureau. Political observers will look for signs from Republican members of the committee, particularly Alabama Sen. Richard Shelby, of any potential easing of opposition to the appointment. Thus far, GOP members of the Senate have uniformly remained adamant to the naming of any director to the CFPB until some significant changes are made to its structure, the most notable of which would be the replacement of a single director with a board leadership structure. Read More

Worth Noting

The Arizona Department of Insurance has put PMI Mortgage Insurance Co. and PMI Insurance Co. under the department’s supervision, and required them to cease issuing new mortgage insurance commitments effective as of the close of business Aug. 19, 2011, unless otherwise approved by the director or the supervisor that has been appointed over the firms. Under the order, MIC and PIC may issue mortgage insurance policies under pending commitments through the close of business on Sept. 16, 2011. In addition, PMI Mortgage Insurance Co. must cease making interest payments on the $285 million in aggregate principal amount of surplus notes that it has issued. During the period of supervision, the two companies are prohibited from taking a variety of actions without approval, including lending funds, merging with another company, entering into reinsurance contracts ... Read More

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