The Consumer Financial Protection Bureau initiated its first enforcement action last month, filing a sealed complaint in federal court in California against an attorney and affiliated partners and companies that offered loan modification and foreclosure relief services to struggling homeowners. The bureau’s complaint alleges that defendant Chance Edward Gordon, some of his colleagues and related companies in the Los Angeles area, deceived consumers with false promises of obtaining loan modifications in exchange for...

A handful of mortgage lending industry trade groups have written the Consumer Financial Protection Bureau with several recommendations to help the bureau avoid unintended consequences in its upcoming rulemaking on mortgage‐loan originator compensation, as per the Dodd-Frank Wall Street Reform and Consumer Protection Act. To begin with, the American Bankers Association, the American Financial Services Association, the Consumer Mortgage Coalition and the Independent Community Bankers of America encouraged the CFPB to...

U.S. Sens. Roy Blunt, R-MO, Jerry Moran, R-KS and Mark Begich, D-AK, wrote Consumer Financial Protection Bureau Director Richard Cordray late last week, urging the regulator to include a broad definition of “qualified mortgage” – and a true legal safe harbor for conforming loans – in the bureau’s forthcoming ability-to-repay rules. “These rules will have a dramatic impact on the mortgage market, and if drafted too narrowly could severely restrict access to mortgage credit,” the trio wrote. “To prevent these unintended consequences...

American International Group, MGIC Investment, Genworth Financial and Radian Group have been served with subpoenas by the Consumer Financial Protection Bureau, the firms said in public filings last week, as the bureau is apparently probing to determine if the mortgage insurance companies transferred billions in M.I. premiums to the banks that made the mortgages. PHH Corp. made a similar disclosure back in January. The CFPB’s subpoenas, known as Civil Investigative Demands, indicate that the bureau’s enforcement...

Last week, the Office of the Comptroller of the Currency and the Department of Justice announced a $12 million settlement that resolves legal and regulatory actions brought against Capital One for alleged violations of the Servicemembers Civil Relief Act, including foreclosing without a court order. The agreement requires Capital One to pay approximately $7 million in damages to service members for SCRA violations, including at least $125,000 in compensation plus compensation for any lost equity (with interest) to each service...

Officials at Ocwen Financial revealed this week that the servicer hired more employees than operationally necessary in an effort to win bids for servicing and subservicing. They said they are now in the process of right-sizing staffing levels through a number of different techniques. “We over-hired to make sure we could hit the cover off the ball on the deals that we knew we had in-hand,” Ron Faris, president and CEO of Ocwen, said during the servicer’s earnings presentation for the second quarter of 2012. Ocwen completed ...

The top priority in any effort to revamp, reform or otherwise reduce risk in the $1.8 trillion tri-party repurchase or repo market should be to clearly determine “who’s in charge from a federal perspective,” according to a top Senate Democrat. In holding this week’s hearing of the Senate Banking Subcommittee on Securities, Insurance and Investment, Chairman Jack Reed, D-RI, said the government needs to defuse potential risk to the tri-party repo credit market for funding as an act of emergency preparedness rather than allow another financial crisis, such as what crippled the market in 2008. “One of the lessons we learned...

In response to criticism that the Home Affordable Modification Program is susceptible to fraud, the Treasury Department recently established a fraud detection program with unprecedented penalties for the non-agency portion of HAMP. In certain circumstances, the Treasury will recapture any servicer, borrower or investor incentive payments, even for loan modifications completed before the new fraud detection program was announced. The process was detailed in HAMP Supplemental Directive 12-04. The Treasury said it hired ...

A proposal by Sen. Jeff Merkley, D-OR, to help refinance non-agency borrowers with negative equity has support from the Obama administration and could begin tests without action from Congress. The proposed “Rebuilding American Homeownership” has been characterized as a Home Affordable Refinance Program for non-agency mortgages. “I think the policy is very good; it’s very well designed,” Treasury Department Secretary Timothy Geithner said in testimony last week before the Senate Committee on Banking, Housing and Urban Affairs ...

Performance data from mortgages serviced for the government-sponsored enterprises would be included in non-agency servicer ratings under a proposal by Moody’s Investors Service. In July, the rating service proposed a major overhaul of its servicer rating process. Loan-level data submitted to Moody’s as part of the “Servicer Quality Assessment” rating process would be supplemented with data from securitization trusts, as well as GSE performance data “as needed.” The data from securitization trusts – which Moody’s noted ...