Mortgage loan fraud was the most frequent type of suspicious activity reported by depository institutions involving real estate title and escrow related business throughout much of the past decade, according to a new study by the Financial Crimes Enforcement Network. FinCEN’s analysis of suspicious activity reports identified “thousands of instances” where financial institutions – particularly banks and money services businesses – filed SARs involving title and escrow companies “often in connection with mortgage fraud” from 2003 through 2011. “Over 82 percent of the SARs reporting real estate title and escrow related businesses included...

As Inside Regulatory Strategies was going to press this week, the Consumer Financial Protection Bureau was releasing a detailed proposed rule to integrate the mortgage disclosures consumers are entitled to under the Real Estate Settlement Procedures Act and the Truth in Lending Act. The proposal is accompanied by new “loan estimate” and “closing disclosure” forms to present the costs and risks of the loan in clearer terms. “The forms benefit consumers by using plain language and a format that will help them understand their loans,” the CFPB said...

House Oversight and Government Reform Committee Chairman Darrell Issa, R-CA, released a report last week that took another look at Countrywide Financial’s “Friends of Angelo” and “VIP Program,” concluding that Countrywide used the latter to lobby policymakers as well as to strengthen its relationship with Fannie Mae. According to the report, Countrywide reached an exclusive agreement with Fannie in 1999 to sell the government-sponsored enterprise billions of dollars in mortgages at a discounted rate. “The agreement led to a period of codependence and mutual growth,” the report noted...

Rep. Scott Garrett, R-NJ, chairman of the House Financial Services Subcommittee on Capital Markets and Government Sponsored Enterprises, successfully attached an amendment to H.R. 5972, the Department of Housing and Urban Development Appropriations Act, 2013. Garrett’s amendment would gut the disparate impact rule proposed by HUD last September by prohibiting the agency from using any of the agency’s funding to “promulgate, issue, establish, implement, administer, finalize, or enforce” the rule. The congressman’s amendment has strong support from the mortgage...

Lenders are potentially abusing reverse mortgage borrowers, according to the Consumer Financial Protection Bureau. Last week, the CFPB released a study on reverse mortgages and issued a request for information on the products along with threats of increased regulation. “In some situations the product can be misused in ways that harm borrowers,” said Richard Cordray, director of the CFPB. He noted the age of reverse mortgage applicants and lump sum payments to borrowers as particular concerns. The CFPB’s study ...

Thousands of ineligible tax cheats received FHA-insured mortgage loans under the American Recovery and Reinvestment Act of 2009 even though federal tax regulations prohibited tax debtors from obtaining government-backed mortgages, the Government Accountability Office reported in a new study. The report found that 6,327 borrowers, who owed a total of $77.6 million in federal taxes, were able to obtain more than $1.44 billion in FHA-insured mortgages under the ARRA. Of these borrowers, 3,815 individuals claimed and received $27.4 million under the statute’s temporary First-Time Homebuyer Credit program. The GAO’s analysis included ...

Some FHA borrowers are still having difficulty obtaining lower-cost streamline refinancing even though the FHA has said it will accept streamline loans with “no credit check, income verification or appraisal.” Borrowers said they are still encountering credit checks, income verification and other obstacles, which indicate that lenders are disregarding FHA instructions regarding the enhanced streamline refi program. Even though FHA guidelines are in place, lenders are adding their credit overlays to the detriment of FHA borrowers seeking to ...

The Consumer Financial Protection Bureau expects to undertake a project to refine and integrate disclosure requirements under the Truth in Lending Act and the Real Estate Settlement Procedures Act for reverse mortgages to improve consumers’ understanding of the product. The In a recent 231-page study submitted to Congress, the CFPB said consumers are still confused about how reverse mortgages work, despite the required disclosures and industry efforts to educate the public on this type of equity-based lending. The rising-balance and falling-equity nature of reverse mortgages is particularly ....

The Department of Housing and Urban Development said it has received $1.2 billion in recent settlements with large mortgage lenders and servicers but HUD’s internal watchdog, which did much of the legwork in the investigations, reveals a much smaller amount. According to recent audit reports published by HUD’s Office of the Inspector General, only Bank of America and Flagstar Bank have made payments under settlement agreements with HUD and the Department of Justice to resolve government claims. In separate memos to HUD’s Office of General Counsel last month, Kim Randall, director of the HUD OIG Civil Fraud Division, sought clearance to ...

Two lenders lost their approval to underwrite and originate FHA loans under Credit Watch while two others may be ordered to indemnify the Department of Housing and Urban Development for potential losses on several ineligible FHA-insured loans. HUD recently stripped Community Central Mortgage Co. of Mount Clemens, MI, and Strategic Mortgage Co. of Columbus, OH, of their direct endorsement approval because of the exceedingly high default and claim rates of FHA-insured loans they originated in their business areas. The Credit Watch Termination Initiative allows HUD to terminate a direct endorsement agreement with any FHA lender if ...