The U.S. Senate last week passed legislation easing FHA rules on condominium financing even as condo reform rules are undergoing clearance at the Office of Management and Budget. H.R. 3700, the Housing Opportunity Through Modernization Act of 2016, was approved by unanimous consent. The bill passed in the House of Representatives by a vote of 427-0 back in February. Industry observers say the bill would essentially codify long-anticipated guidelines the Department of Housing and Urban Development has drafted. Among other things, the bill requires...

A New Mexico jury handed the Securities and Exchange Commission a split verdict in a 2008 financial crisis-related lawsuit against two senior executives of the now-defunct Thornburg Mortgage who were accused of fraud and misrepresenting the financial condition of the company. The jury found for defendants Larry Goldstone, former Thornburg CEO, and Clarence Simmons, former chief financial officer, on half of the counts but failed to reach a verdict on the most significant charges based on fraud and lying to the company’s outside auditors. In the lawsuit, the SEC alleged...

CA Legislature Poised to Pass Protections for Widowed Homeowners. The California legislature is a step away from enacting legislation that would extend existing foreclosure protections in the state Homeowners Bill of Rights (HBOR) to widows, widowers and other heirs of deceased homeowners. The legislature passed the HBOR in 2012 to provide due process protections to homeowners and establish rules and procedures for communication between servicers and borrowers regarding options to avoid foreclosure. However, the bill’s protections did not extend to surviving spouses and successors-in-interest who may wish to continue paying the mortgage loan but could not assume the loan or afford the payment with the loss of the deceased homeowner’s income. Surviving family members may then seek a loan assumption or modification, only to be refused by the servicer because their names are not on the ...

A bipartisan group of senators is urging Federal Housing Finance Agency Director Mel Watt not to take any steps that could possibly lead to Fannie Mae and Freddie Mac being released from conservatorship. Their letter sent last week is one of several in the past two months that Watt has received from various groups reiterating their positions on housing finance reform. Senate Republicans Bob Corker (TN), Mike Crapo (ID) and Dean Heller (NV), along with Democrats Mark Warner (VA), Heidi Heitkamp (ND) and Jon Tester (MT), emphasized the need for comprehensive reform legislation over “any unilateral action” by the administration. “That is why Congress included a provision in the 2016 omnibus legislation which restricted the release of Treasury’s shares in the government-sponsored enterprises,” they wrote. “The passage of this provision reasserted the desire of Congress to have a say in determining the fate of Fannie and Freddie.” But the lawmakers acknowledged...

The debate on what caused the financial crisis and how the federal government should respond continued this week in the House Financial Services Committee. At a hearing on the Financial CHOICE Act sponsored by Rep. Jeb Hensarling, R-TX, Republicans and banking-industry participants largely supported the bill while Democrats and a consumer advocate offered dire warnings. The Financial CHOICE Act would allow banking institutions to opt in to a regulatory system that puts an emphasis on capital. Under the bill, firms with an average leverage ratio of at least 10 percent would be functionally exempt from provisions in the Dodd-Frank Act, Basel III capital and liquidity standards and other regulations. “Freeing well-capitalized, well-managed financial firms from the chokehold of an overly intrusive, heavily politicized regulatory regime will help create...

The Obama administration’s top housing official took a beating from Republicans on the House Financial Services Committee during a hearing this week over recent changes to the Department of Housing and Urban Development’s Distressed Asset Sales Program, also known as DASP. For more than two hours, HUD Secretary Julian Castro faced a relentless attack by Republicans angered by what they perceived as preferential treatment given to nonprofits and local government over private investors in the DASP bidding process. The federal program sells pools of severely delinquent FHA mortgages to investors to help distressed borrowers stay in their homes and, at the same time, minimize losses to the FHA Mutual Mortgage Insurance Fund. Most of the nonperforming loans in the DASP pools are...

The Republicans in the U.S. House of Representatives are looking a little more serious about pushing legislation that would change the leadership structure of the CFPB from that of a single director to a five-member commission and subject the bureau to the congressional appropriations process. Last week, the full House passed appropriations legislation with provisions that would do just that. Other language would restrict the CFPB’s ability to limit payday lenders, halt the bureau’s efforts to end forced arbitration clauses in credit card contracts, and rescind the agency’s guidance on indirect automobile lending. One additional provision would defund the CFPB’s efforts to stop what it calls predatory lending to borrowers looking to purchase a manufactured home, and another would make ...

Former Federal Housing Finance Agency Director Ed DeMarco said the GSEs should operate as lender-owned entities that sell insurance against borrower defaults. DeMarco, along with Michael Bright, director of the Milken Institute’s Center for Financial Markets, published the housing reform plan last week. They said a long-term housing finance decision is needed. “Meaningful reform must be achieved, the vast majority of policymakers say, yet the decade anniversary of the conservatorships of Fannie Mae and Freddie Mac looms,” they said. “The FHFA was never envisioned as the permanent manager of the enterprises.” DeMarco and Blight suggest turning the GSEs into mutual insurance companies. In this scenario...

Mortgage lenders may get greater clarity on the legal question of just who may sue them for alleged racial discrimination, after the Supreme Court of the United States announced recently it would take on separate lawsuits filed by the city of Miami against Bank of America and Wells Fargo. The city accused the pair of perpetrating discriminatory mortgage lending within its jurisdiction over a long period of time. The city alleged that the banks’ conduct violated the Fair Housing Act in that they intentionally discriminated against minority borrowers and that their conduct had a disparate impact, resulting in an unbalanced number of foreclosures on minority-owned properties. The precise legal issue before the high court is...

Lenders will face higher penalties for violations of agency rules and regulations as the FHA and the Department of Veterans Affairs adjust their respective maximum civil monetary penalties for inflation. The adjustments are mandated by the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015, which also requires publication of an interim final rule showing the current and adjusted penalty amounts. Effective June 22, 2016, VA’s maximum civil monetary penalties for false loan guaranty certification increased from $10,000 to $21,563, and from $5,500 to $10,781 for fraudulent claims or statements in any VA program. Comments on the VA interim final rule must be received on or before Aug. 22, 2016. Meanwhile, the FHA also is making inflation adjustments for its maximum civil penalties through an interim final rule that will take effect Aug. 15, 2016, the day before the ...