Legal Issues

Browse articles from all of our Newsletters related to Legal Issues.

December 8, 2017 - Inside FHA/VA Lending

Congress Passes Short-Term Spending Bill, Avoids Shutdown

Congress on Thursday passed a stopgap-spending bill to prevent a potential government shutdown and to give lawmakers time to negotiate crucial issues. The House voted 235-193 to pass the measure. A short time later, the Senate quickly approved it 81-14. The temporary spending bill will keep the government running through Dec. 22. The continuing resolution or CR, that has kept the government open would have expired on Dec. 8. Both the House and Senate are scheduled to adjourn on Dec. 15. Congress will need to pass a final appropriations bill or another continuing resolution to keep the government operating after Dec. 22. Despite differences over tax reform, FY 2018 budget, immigration, health care and other issues, lawmakers do not want a shutdown, mortgage industry sources said. Republicans, in particular, hope to enact their $1.5 trillion tax package by Christmas. On the other hand, ...

December 8, 2017 - Inside FHA/VA Lending

Ginnie Mae Expands Seasoning Requirement for VA Refi Loans

Ginnie Mae has issued expanded guidelines to protect veterans and investors from harmful loan churning and rapid prepayments in mortgage-backed securities. The changes, along with additional measures under consideration by a joint Ginnie Mae/VA refinance task force, are aimed at ensuring continued strength and liquidity of the Ginnie Mae MBS program, said Michael Bright, the agency’s acting president. The latest guidelines expand on an initial measure Ginnie implemented requiring six-months of seasoning of VA loans before they can be refinanced and delivered into Ginnie MBS pools. However, some lenders have found ways around the measure and have continued their questionable lending practices, said Bright during recent testimony before a House Financial Services subcommittee. Churning is both illegal and unethical because it preys on unsuspecting borrowers, who are pressured by ...

December 7, 2017 - Inside Mortgage Finance

Guaranteed Rate Initiates Lawsuit Against Former Mortgage Lending SVP for Talent Raid

Guaranteed Rate is accusing a former top executive of raiding talent at the Chicago-based firm by planning a mass exodus of key employees for a newly launched competitor across town. But Joseph Caltabiano, the company’s former senior vice president of mortgage lending, denies the allegations.

December 7, 2017 - Inside Mortgage Finance

CFPB Seems to Shift in Mortgage Enforcement Case, Judge is Set to Further Consider English Challenge

Under new management, the Consumer Financial Protection Bureau this week took action that may be a harbinger of a more laissez-faire approach to regulatory enforcement.

December 4, 2017 - Inside the CFPB

Sen. Warren Questions Mulvaney About Double Duty at CFPB, OMB

Sen. Elizabeth Warren, D-MA, wrote to Don McGahn, White House counsel, and CFPB Acting Director Mick Mulvaney, in his capacity as director of the Office of Management and Budget, last week for answers to questions she has about Mulvaney and other OMB personnel simultaneously serving at the consumer bureau. First, she wanted to know what staff from OMB or elsewhere in the Executive Office of the President (EOP) have accompanied Mulvaney to the CFPB. She requested a complete list of all such staff, their title at OMB or in the EOP, and their title at the CFPB. Warren also sought the authority under which these individuals are working at CFPB. “Have these individuals been appointed to CFPB, or detailed to ...

December 4, 2017 - Inside the CFPB

CFPB, VA Warn Military Personnel About Deceptive Refi Offers

The CFPB and VA recently issued their first WARNO, or “warning order,” to members of the U.S. armed forces and veterans with VA home loans, urging them to stay on their toes and avoid deceptive mortgage refinance offers. “If you have a VA home loan, then there is a good chance that you have already come into contact with unsolicited offers to refinance your mortgage that appear official and may sound too good to be true,” the two agencies said. Many of these solicitations promise extremely low interest rates, thousands of dollars in cash back, the ability to skip mortgage payments, and no out-of-pocket costs or waiting period. “Don’t be fooled,” the CFPB and VA said. “Before responding to any ...

December 4, 2017 - Inside the CFPB

Industry Again Urges Pivot from Regulation by Enforcement

As the CFPB prepares to move forward with a new strategic plan – which may well be revised, now that Mick Mulvaney is in charge – the mortgage industry again called on the bureau to move beyond “regulation by enforcement.” Instead, it should provide more of the detailed guidance lenders and servicers and other participants need to fully comply with the agency’s rules and regulations and best serve consumers, top industry representatives said. In a recent comment letter to the bureau, the Mortgage Bankers Association noted that the CFPB is at an inflection point in 2017. Now it can “pivot and focus its resources on providing supervision and binding, authoritative guidance that helps responsible parties, including those in the mortgage industry, comply ...

December 4, 2017 - Inside the CFPB

With Mulvaney Confirmed Atop CFPB, What Happens to English?

Now that U.S. District Court Judge Timothy Kelly has affirmed Mick Mulvaney, President Trump’s choice to serve as acting director of the CFPB, one unresolved issue is the fate of his rival for the throne, Leandra English, whom Richard Cordray selected to be deputy director in his last official act before resigning. It’s possible that Mulvaney could flat out fire her, and he intimated last week that was a possibility – his argument being that she didn’t show up for work that day. However, multiple press accounts claimed she did in fact report for duty. One attorney closely following the case conceded, “I think she’s in a tough spot. While she could continue to press her claims in the hope of ...

December 4, 2017 - Inside the CFPB

The CFPB’s Own General Counsel Supports White House Position

One of the most surprising aspects of the sudden drama associated with the departure of Richard Corday as director of the CFPB – who started at the bureau with a cloud of controversy and left it the same way – is that the bureau’s own general counsel, Mary McLeod, supported the position of the Trump administration in the struggle for control of the agency. “Questions have been raised whether the president has the authority under the Federal Vacancies Reform Act to designate Mick Mulvaney, the director of the Office of Management and Budget, as the acting director of CFPB following the resignation of Richard Cordray ..., even if the deputy director otherwise could act under 12 U.S.C. §5491(b)(5),” she said in a memorandum ...

December 4, 2017 - Inside the CFPB

She Said, He Said: English’s Arguments vs Trump’s

The biggest CFPB story of the year – which appointee is authorized to head up the agency in the case of a resignation of the director – involves competing legal arguments interpretations of two federal laws. Deputy Director Leandra English is relying on the CFPB succession provision of the Dodd-Frank Act, while Acting Director Mick Mulvaney and the Trump White House are relying on the text of the Federal Vacancies Reform Act. The crux of their respective arguments to the U.S. District Court for the District of Columbia follows. English’s brief to the court declared: “The Dodd-Frank Act is clear on this point: It mandates that the deputy director ‘shall serve as the acting director in the absence or unavailability of the

December 4, 2017 - Inside the CFPB

Trump Wants to Fix ‘Awful,’ ‘Unaccountable’ Agency: Mulvaney

During his first press conference as acting director of the CFPB, Mick Mulvaney spelled out the charge he was given in taking control of the agency, and elaborated upon his view of the bureau as a regulatory entity that has overstepped its bounds. “[President Trump] wants me to fix it,” Mulvaney began. “He wants me to get it back to the point where it can protect people without trampling on capitalism, without choking off the access to financial services that are so critical to so many folks.” He then cited the “many folks who are in the lower and middle classes, folks who are trying to start their own businesses, people who are trying to break out, people who are ...

December 4, 2017 - Inside the CFPB

Cordray is Gone, Mulvaney Sets a New Tone for Consumer Bureau

Office of Management and Budget Director Mick Mulvaney, President Trump’s choice to serve as acting director of the CFPB, assumed control of the agency Monday, Nov. 27, 2017, and quickly established a dramatically different direction for the agency, one far less hostile to the financial services industry. In his first press conference as acting director, one week ago, Mulvaney shook things up while trying to strike a more balanced approach, one far less hostile towards the financial services community. “This is an ordinary course of business in Washington, DC. What you’re witnessing today at the CFPB happens at every single agency every couple of years, which is a transition,” he said. [Includes a timeline chart.]

December 1, 2017 - Inside The GSEs

GSE Roundup

Think Tank Makes a Case for GSEs to Become SIFIs. Alex Pollock, senior fellow at the R Street Institute, along with author Thomas Stanton, wrote Treasury Secretary Steve Mnuchin this week urging him to designate Fannie Mae and Freddie Mac as Systemically Important Financial Institutions (SIFIs). They said that it’s obvious the mortgage giants meet all the criteria specified by the Dodd-Frank Act and the Financial Stability Board for designation as SIFIs and they want the same protective capital and regulatory standards applied to the...

December 1, 2017 - Inside The GSEs

7th Circuit Rules Local Taxes Apply To Investors in GSE Properties

The Seventh Circuit Court recently reversed an earlier decision that held buyers purchasing property in Chicago from Fannie Mae were liable for state and local transfer taxes. The case involved real property transfer taxes imposed in 2013 and 2014 on purchasers who argued they were legally exempt from having to pay. The Illinois Department of Finance assessed the buyers for the tax. But since the property was purchased from a federal agency, the buyers believed they were exempt from having to pay. The buyers and Fannie then both sued the City of Chicago and asked the federal court to review the finance department’s decision.

December 1, 2017 - Inside The GSEs

Fannie Board Chair Defends Against ATL Mayor Land Claims

Fannie Mae’s board chairman and the mayor of Atlanta are in a heated dispute over roughly 100 acres of vacant land that the city said was supposed to serve the low-income population. In fact, Mayor Kasim Reed is suing Egbert Perry and has asked him to step down from his position as non-executive chairman of Fannie’s board. Perry, co-founder and CEO of the Integral Group, joined the GSE’s board in late 2008, and has been chair since 2014. He says he hasn’t done anything wrong. The argument stems from what the mayor calls a “secret deal” made with Integral in 2011 by Renee Glover, the former president and CEO of the Atlanta Housing Authority, who now serves on Fannie’s board.

November 22, 2017 - Inside FHA/VA Lending

Ginnie Spots Inconsistent Reports Regarding First Payment Date

Ginnie Mae called on issuers to ensure that the data they submit are accurate following the discovery of erroneous payment reports. The agency said it has noticed discrepancies in the reporting of the first payment date on loan modifications in violation of Ginnie guidelines. Specifically, the first payment date some issuers reported as part of the loan-delivery data did not match the date submitted for the same mortgage loan as part of issuers’ monthly report of pool and loan data. Ginnie blamed the errors either on loans set up incorrectly for servicing or faulty data issuers had reported to the Department of Housing and Urban Development. Guidance issued by Ginnie on Nov. 14 reminded issuers to report the first scheduled payment date of the re-amortized loan when reporting the first payment date for modified mortgages through either the GinnieNET or the Reporting and Feedback System. The date ...

November 22, 2017 - Inside FHA/VA Lending

Ex-FHA Chief Suggests Raising FHA Capital Ratio, Other Reforms

A former FHA commissioner has recommended raising the agency’s capital reserve ratio to 3 percent, to make FHA stronger and more resilient. Carol Galante, who served two years as FHA commissioner and assistant secretary for housing in the second term of the Obama administration, laid out her proposal along with other recommendations in a paper that she co-authored. Housing-finance reform without a retooled FHA could threaten families’ access to homeownership and increase risk to taxpayers, contrary to the goals of reform, said Galante, currently the faculty director of the Terner Center for Housing Innovation at University of California Berkeley. In her paper, Mission Critical: Retooling FHA to Meet America’s Housing Needs, Galante spelled out the changes necessary to help FHA perform its complementary and countercyclical role in the nation’s housing markets. Galante called for ...

November 22, 2017 - Inside FHA/VA Lending

Alert Out on Unwanted Refi Offers; CFPB, VA Warn of Misleading Ads

The Department of Veterans Affairs and the Consumer Financial Protection Bureau have issued a joint warning to servicemembers and veterans about VA refinancing offers that sound too good to be true. There is a good chance that borrowers with a VA loan have already received unsolicited offers to refinance their mortgages even just months after closing, the agencies said in their first “warning order” (WARNO). Many of these refi solicitations promise extremely low rates, thousands of dollars in cash back, skipped mortgage payments, no out-of-pocket costs and no waiting period, the agencies noted. The VA and the CFPB said lenders offering VA refinances may use aggressive and potentially misleading advertising and sales tactics. “Lenders may advertise a rate just to get you to respond or you may receive a VA mortgage refi offer that provides limited benefit to you while adding thousands of dollars to your loan balance,” the agencies warned. Even though the VA prohibits a lender from advertising skip payments on ...

November 20, 2017 - Inside the CFPB

Other News in Brief/More Industry Advice for a Post-Cordray CFPB

More Industry Advice for a Post-Cordray CFPB. Competitive Enterprise Institute financial policy expert John Berlau said last week, “Richard Cordray’s impending resignation as director of the CFPB is long overdue.... Growth of CFPB Leveling Off. The total number of employees at the CFPB came to 1,668 for fiscal year 2017, up 20 positions from the year before, according to the bureau’s latest financial statements for the last two years.... GAO Signs Off on CFPB Financial Statements. The Government Accountability Office audited the CFPB’s financial statements for fiscal years 2016 and 2017, and found they are “presented fairly, in all material respects, in accordance with U.S. generally accepted accounting principles.”...

November 20, 2017 - Inside the CFPB

CFPB, Ocwen Tit for Tat Continues, Thanks to DOJ’s Absence

The CFPB recently told a U.S. District Court it opposes Ocwen Financial’s motion to submit the Department of Justice’s brief filed in another case in lieu of the department’s inaction when it comes to weighing in on Ocwen’s dispute with the bureau. Ocwen recently asked the U.S. District Court, Southern District of Florida, West Palm Beach Division, for permission to file a supplemental memorandum (an earlier brief by the DOJ in PHH Corp. v. CFPB as to the unconstitutionality of the bureau) in defense of the company’s motion to dismiss the consumer regulator’s case against it. The common thread in both cases is that Ocwen and PHH similarly assert that the CFPB’s structure is unconstitutional. During the Obama administration, the ...

November 20, 2017 - Inside the CFPB

For Mortgage Lenders, Servicers, Enforcement is the New Focus

It’s unlikely the mortgage lending and servicing industry will see any big changes at the CFPB right away – at least in terms of new regulations and rule-makings – once Richard Cordray formally exits the stage as director of the bureau, most experts said. “Until the president installs a new director, it should be business as usual,” former CFPB official Benjamin Olson, now a partner with Buckley Sandler in Washington, DC, told Inside the CFPB. As excited as some mortgage industry representatives were upon hearing the news, all of the bureau’s rulemakings related to mortgage lending and servicing have already been issued and finalized, so that’s all water under the bridge. A new director will not be able to willy-nilly revoke or ...

November 17, 2017 - Inside MBS & ABS

Credit Suisse, MBIA Continue Fight Over MBS Fraud Claims; DOJ, Barclays Resume Settlement Talks

Credit Suisse and MBIA Insurance Corp. continued their wrangling in New York state appellate court in a $235 million MBS securities lawsuit brought by the bond guarantor in 2009.

November 10, 2017 - Inside FHA/VA Lending

MBA Calls for Changes to LRS, Remedies for Lender Complaints

FHA lenders think the new Loan Review System is a “modern and streamlined system” that is less user-friendly than Neighborhood Watch, according to the Mortgage Bankers Association. In a letter to the Department of Housing and Urban Development, the MBA called on the FHA to continue its ongoing discussion with lenders and other industry stakeholders on how the improve the LRS and its response timelines. Implemented last May, the LRS is an electronic platform for monitoring and reviewing the quality of single-family mortgages that FHA has insured. It replaced the post-endorsement technical review performed by the FHA Connection/Underwriting Review System (URS), review functions for post-closing test cases submitted by direct endorsement lenders, and lender self-reporting functions in Neighborhood Watch. The LRS also includes a defect taxonomy, which features a list of ...

November 10, 2017 - Inside FHA/VA Lending

Will Net Tangible Benefit Test Stop Churning? Yes, Analysts Say

A new net tangible benefit test for ensuring that a VA borrower benefits from a refinancing appears to be the obvious solution to the VA’s churning problem, according to analysts at Bank of America Merrill Lynch (BAML). Modeled after the FHA net tangible benefit test, the test seems to be a “foregone conclusion” for VA, analysts said. A Ginnie Mae/VA task force is currently working to resolve the problem, which is causing rapid prepayments in Ginnie mortgage-backed securities and raising serious doubts as to whether aggressive refinancing truly benefits veterans and servicemembers. “There is a critical need to ensure that veteran borrowers are not harmed by repeated refinancings through VA’s Interest Rate Reduction Refinance Loan program,” said Mortgage Bankers Association President/CEO David Stevens during a recent appearance before the House Financial Services Committee. IRRRLs, also referred to ...

November 10, 2017 - Inside FHA/VA Lending

Correspondent Platforms Feast on FHA, VA Securitization Market

Correspondent-based lending operations are accounting for a growing share of the FHA and VA home loans pooled in Ginnie Mae mortgage-backed securities, according to a new analysis and ranking by Inside FHA/VA Lending. In fact, correspondent originations are the only production channel to see year-over-year growth in FHA and VA business through the first nine months of 2017. Retail and wholesale-broker production is down for both FHA and VA loans. Correspondent programs are most dominant in the FHA market, perhaps reflecting a preference among large producers to have recourse to a primary-market lender if the government later finds defects in how the loan was originated. Correspondents accounted for 48.7 percent of FHA loans pooled in Ginnie MBS during the first nine months of the year, up from 43.1 percent in all of 2016. Volume was up 1.7 percent from the ... [Charts]

November 6, 2017 - Inside the CFPB

Other News in Brief/Provident, Ocwen, HMDA, Winter Park National

African-American and Hispanic Borrowers Allegedly Harmed by Provident Will Receive $9 Million in Compensation. Last week, Garden City Group, the settlement administrator for Provident Funding Associates, mailed out checks to African-American and Hispanic borrowers to compensate them for having been unlawfully charged higher interest or broker fees on their mortgages from Provident.... Ocwen Enters Into Agreement with Hawaii to Resolve Regulatory Action. Ocwen Financial settled some outstanding issues with regulatory authorities in Hawaii last week, continuing a streak the nonbank servicer has been on for the last two months or so....

November 6, 2017 - Inside the CFPB

New HMDA Data Privacy Concerns Emerge in Wake of Data Breaches

The CFPB recently issued some proposed policy guidance for its Home Mortgage Disclosure Act rule that could help borrowers on the data privacy front, but it might not be enough, according to one compliance attorney. “On the heels of the Equifax data breach and continued cybersecurity threats, the CFPB’s guidance is a clear attempt to alleviate concerns regarding identity theft and information security,” Alexander Koskey, an associate in the Atlanta office of the Baker Donelson law firm, said in a recent client note. “However, significant privacy concerns persist that the increase in the amount of data that is being disclosed for the first time will make it easier to discover the identity of applicants and borrowers.” Additionally, given that the ...

November 6, 2017 - Inside the CFPB

Compliance Pro IDs Major Issues, Concerns With New HMDA Rule

During the recent annual meeting of the Mortgage Bankers Association, a top compliance expert highlighted some of the biggest issues and concerns the industry faces under the new data collection and reporting regime ushered in by the CFPB’s updated Home Mortgage Disclosure Act rule. The short list of the most significant considerations, of course, includes the fair lending implications of the new requirements. Mitch Kider, chairman and managing partner of the Weiner Brodsky Kider PC law firm in Washington, DC, told attendees at one break-out session that HMDA data accuracy (or errors) sets the tone for an entire CFPB examination. “Most of the new data fields companies already have,” he said. “Do you know what story your data currently tells ...

November 6, 2017 - Inside the CFPB

Special Counsel Clears Cordray of Election Law Violations

In response to allegations from Republicans that CFPB Director Richard Cordray may have violated federal election law by dipping his toes in the electoral waters of Ohio gubernatorial politics while still at the helm of the bureau, the U.S. Office of Special Counsel has investigated the nation’s top consumer regulator and cleared him of any wrongdoing. The disclosure was made in a letter sent last month by the special counsel to Cordray. “The U.S. Office of Special Counsel (OSC) completed its investigation into allegations that you violated the Hatch Act by being a candidate in the 2018 Ohio gubernatorial election while employed as the director of the CFPB,” said OSC Deputy Chief Erica Hamrick. “OSC found no evidence that you ...

November 6, 2017 - Inside the CFPB

Industry Groups Celebrate Demise of CFPB Arbitration Rule

Industry representatives were pleased with the news that the Republican-controlled Congress and the Trump administration were able to cooperate and overturn the CFPB’s controversial rule banning mandatory arbitration clauses in most consumer financial services contracts. According to Consumer Bankers Association President and CEO Richard Hunt, “The CFPB’s rule was never about protecting consumers; rather, it was about protecting trial lawyers and their wallets,” he said. “The CFPB’s own study backs that up and proves trial lawyers would have been the real winners had this rule gone into effect.” Rob Nichols, president and CEO of the American Bankers Association, characterized the vote as a win for consumers. “As we and others made clear in our multiple comments to the CFPB, the ...

November 6, 2017 - Inside the CFPB

Trump, Congress Rebuke Cordray, Overturn CFPB Arbitration Rule

Republican efforts to repeal and replace the Patient Protection Affordable Care Act may have faltered, but a GOP-controlled White House, Senate and House were able to unite and achieve at least one major accomplishment: they deep-sixed the CFPB’s controversial rule banning mandatory arbitration clauses in most consumer financial services contracts. Last week, President Trump turned aside an unusual personal appeal from CFPB Director Richard Cordray and went ahead and signed into law the joint resolution under the Congressional Review Act that permanently overturns the bureau’s problematic rule. Under the act, not only is the bureau’s rule now rendered null and void, any successor to Cordray will be unable to push through another substantially similar measure. That means only Congress can ...

November 6, 2017 - Inside the CFPB

Ocwen Requests Oral Arguments in CFPB Case, Sans Trump DOJ

Ocwen Financial appears to be just as mystified as anyone else when it comes to understanding why the Department of Justice has not weighed in on the company’s dispute with the CFPB, as it had been invited to do. But that hasn’t kept the nonbank mortgage servicer from asking the court to proceed with oral arguments. Late last month, Ocwen filed a supplemental motion with the U.S. District Court, Southern District of Florida, West Palm Beach Division, in favor of its earlier motion to dismiss the bureau’s complaint against it. The purpose of the motion is “to clarify the position of the United States [government] on the issue of plaintiff CFPB’s structural unconstitutionality, in light of the inaction of the ...

November 3, 2017 - Inside The GSEs

Oral Arguments and Supreme Court Requests Are Latest in GSE Cases

There have been a number of moving parts in GSE shareholder cases recently, including oral arguments heard this week in one case and three separate lawsuits asking the Supreme Court of the United States to review the constitutionality of the structure of the Federal Housing Finance Agency. Attorney and managing partner David Thompson with Cooper & Kirk in Washington, D.C., who represents the shareholders in Christopher Roberts vs. FHFA, participated in this week’s oral arguments in the Seventh Circuit Court. He called the net-worth sweep unlawful because it imposed a “mandatory zero-capital regime and violated its own statutory commands to preserve and conserve assets and restore them to soundness.”

November 3, 2017 - Inside MBS & ABS

RBS Agrees to Pay to End RMBS Probe; Barclays Fights MBS Suit; Credit Suisse Bares Relief Plan

The Department of Justice has announced a non-prosecution deal with the Royal Bank of Scotland, which includes a $44 million settlement, to resolve a criminal probe of the bank’s activities in non-agency MBS and collateralized loan obligations. The probe accused the bank of defrauding more than 30 customers that purchased residential and commercial MBS as well as ABS over a five-year period beginning in 2008. The group that handled the sales of these securities for RBS was ...


With originations expected to drop in 2018, will your shop turn to non-QM/non-prime mortgage products as a way to bolster volumes?

Yes, definitely. We’re planning a launch.
No. It’s still difficult compliance/regulatory-wise.
Maybe. It’s under consideration.
Not now. But things could change as 2018 progresses.

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