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Inside the CFPB

March 19, 2012

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Servicer Settlement Just the Beginning

The emerging consensus among industry analysts and attorneys who are reviewing the finalized documentation of the $25 billion servicing settlement is that state and federal government law enforcement officials are just getting started in their efforts to hold the industry’s feet to the fire over flawed foreclosure practices. Last week, the Department of Justice finally made public the official complaint and consent judgments for the $25 billion servicing settlement that had been announced the month before, the details of which seem to be largely in line with expectations... Read More

CFPB Proposes to Codify Privilege Protections

Mortgage lenders that provide sensitive, confidential or proprietary information to the Consumer Financial Protection Bureau will be able to breathe easier when doing so under a rule the bureau proposed last week that would codify protections for privileged information submitted to the agency by financial institutions. Early this year, the CFPB told institutions it supervises that submitting privileged information to the CFPB does not waive any applicable privilege with respect to third parties. The proposed rule, published in the March 15 Federal Register, is intended to provide ... Read More

Whistleblower Lawsuits Suddenly Have Become the Litigation Rage

A $95 million settlement with the nation’s four largest mortgage servicers – Bank of America, JP Morgan Chase, Wells Fargo and Citigroup – was announced last week by U.S. Attorney Bill Nettles of the District of South Carolina, the largest False Claims Act settlement in the history of the state, according to Justice Department officials. The settlement is part of the $25 billion global resolution announced in February between major banks and state attorneys general to settle claims of abusive mortgage practices, including robo-signing of foreclosures... Read More

Federal Appeals Court Opens Door to Borrower Suit for Loan Mod

In Wigod v. Wells Fargo Bank, the U.S. Court of Appeals for the Seventh Circuit earlier this month gave a mortgage borrower the green light to move ahead with class action litigation against the servicer of her mortgage for its failure to provide a permanent loan modification under the Home Affordable Mortgage Program. In this case, the borrower, Lori Wigod, and the servicer, Wells Fargo, entered into a HAMP trial period plan with the understanding that if Wigod complied with the terms of the plan for four months, Wells would offer her a permanent loan modification... Read More

Lawsuit Challenges Alleged Foreclosure Rescue Scam

Law firm K&L Gates and the National and Washington Lawyers’ Committees for Civil Rights launched a pro bono legal challenge to an allegedly discriminatory and otherwise unlawful foreclosure rescue scam targeting Hispanic homeowners in northern Virginia. Plaintiffs Jose and Margarita Viera allege they have been the victims of defendants Bella Homes LLC and a number of its management officials and agents in a scheme that zeroes in on Hispanic homeowners who were having difficulty making their mortgage payments. “The crux of the complaint is that ... Read More

You’ve Heard of Too Big to Fail. What About Too Small to Comply?

Regulatory streamlining is absolutely essential if smaller mortgage lenders are going to survive the threat they face from their enormous regulatory burdens, two industry trade groups told the Consumer Financial Protection Bureau recently. “Currently, the industry is dealing with several new rules, including those under the Secure and Fair Enforcement Act for Mortgage Licensing and the Truth in Lending Act, and faces an unprecedented wave of additional rules required under Dodd-Frank Wall Street Reform and Consumer Protection Act,” said the Consumer Mortgage Coalition ... Read More

Analyst Notes Risk of Moving Servicing from Banks to PE Firms

Earlier this month, private-equity firm Fortress took its mortgage servicer unit, Nationstar Mortgage Holdings Inc., public, the second such offering for a mortgage servicer in a month, even as some large bank servicers increasingly look for the exits. The move might look like healthy creative vs. destructive capitalism to some, but it’s a disturbing trend on at least one public policy level, according to housing policy expert Karen Shaw Petrou, managing partner at Federal Financial Analytics, a Washington, DC, think tank. “From a purely market perspective, there’s no problem if banks lose and PEs win ... Read More

New State, Local Requirements Add to Foreclosure Costs, Delays

The fact that real estate law remains fundamentally local in nature fuels a dynamic that prevents a timely and cost-effective resolution to the nation’s foreclosure crisis: a nearly overwhelming deluge of state and local laws, rules and regulations. That’s one of the take-aways in the testimony that Alfred Pollard, general counsel of the Federal Housing Finance Agency, provided early this week before the House Committee on Oversight and Government Reform. “State and local officials have been very active in adding to or amending laws related to foreclosures or servicing of mortgages,” Pollard said... Read More

State Roundup

Arizona. A former Countrywide loan officer, Paige Kinney, aka Jamie Lee Lawler, 43, of Phoenix, AZ, has been sentenced to 15 years in prison and ordered to pay $22 million in restitution by U.S. District Judge Neil Wake. According to court documents related to the first indictment she faced, Kinney played a leadership role in a $40 million mortgage fraud scheme that targeted Countrywide Home Loans and other lenders through the use of straw buyers and “cash back” accounts. According to her plea agreement on the second ... Read More

Federal Roundup

Federal Housing Finance Agency.FHFA Office of Inspector General. FHFA’s Supervision of Freddie Mac’s Controls over Mortgage Servicing Contractors Faulted. The Federal Housing Finance Agency’s Office of Inspector General found some areas in which the Finance Agency could improve its supervision of Fannie Mae’s and Freddie Mac’s controls over its mortgage servicing contractors. “FHFA has not clearly defined its role regarding oversight of servicers, sufficiently coordinated with other federal banking agencies about risks ... Read More

Worth Noting

Senate Banking, Housing and Urban Affairs Committee member Jerry Moran, R-KS, and Sen. Joe Manchin, D-WV, recently introduced the industry-supported S. 2160, the Financial Institutions Examination Fairness and Reform Act, which would provide critical balance and additional transparency to decisions the regulatory agencies make in the examination process. S. 2160, like its counterpart in the House, H.R. 3461, would, among other things, require more timely examination reports; more information about the facts the agency relied upon to make its exam decisions; and more precise ... Read More

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