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

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.

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.

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 ...

Officials with Bank of America maintain that a proposed $8.5 billion settlement related to non-agency buybacks and servicing is fair, even as opposition continues to mount. BofA also continues to take action to distance itself from “legacy” assets acquired from Countrywide Financial. “Obviously there aren’t many days when I get up and think positively about the Countrywide transaction in 2008,” BofA’s CEO Brian Moynihan said this month in a conference call with investors. “In each quarter, we continue to put risk behind us ...

The amount of subprime mortgages outstanding as of the second quarter of 2011 has declined by nearly 50 percent compared with the market’s peak of $1.0 trillion in the second quarter of 2007, according to an analysis by Inside Nonconforming Markets. However, subprime servicers have reasons to be optimistic, according to industry analysts.Subprime mortgage delinquencies increased in the first and second quarters of 2011 after declining throughout 2010 ... [includes one data chart]

Walter Investment Management is looking to capitalize on its recent acquisition of special servicer Green Tree and continue to grow. Officials with Walter said the company currently services a $40 billion portfolio and is on pace for a servicing portfolio of at least $60 billion by the end of this year. “We feel very good about our ability to get our fair share and more of what’s available in the market,” said Denmar Dixon, vice chairman of the board and executive vice president at Walter. ...

One of PennyMac Mortgage Investment Trust's primary goals is to increase jumbo correspondent lending activity, according to David Spector, president and COO of the real estate investment trust. Stanford Kurland, chairman and CEO of PennyMac, noted that banks have reduced correspondent activity due to impending risk-retention rules and other regulatory issues. “PennyMac has great potential to bridge the significant gap that exists in the origination market, which will likely grow with the expansion of the prime non-agency market as the agencies’ conforming loan limits are reduced,” Kurland said this month. ...

After negotiations related to losses deadlocked, American Home Mortgage Servicing this week filed a lawsuit against Lender Processing Services and its affiliate, DocX. The non-prime servicer is seeking to recover losses from LPS relating to faulty assignments of non-agency mortgages set for foreclosure. The lawsuit follows more than a year of negotiations between the companies as American Home attempted to recover millions of dollars in losses. LPS said it was surprised by the lawsuit and that American Home had refused to provide evidence of actual losses suffered. ...

The massive losses taken by the government-sponsored enterprises on their non-prime holdings are not over yet. Fannie Mae and Freddie Mac warned this month that they expect greater credit losses for 2011 than the hits they took last year, largely due to the continued poor performance of legacy non-prime acquisitions. The GSEs had a combined $430.51 billion in non-prime holdings as of the second quarter of 2011, according to a new ranking and analysis by Inside Nonconforming Markets. ... [includes one data chart]