The number of loans potentially subject to strict rules for “high-cost” mortgages would dramatically increase, based on a proposal last week by the Consumer Financial Protection Bureau. However, because so few lenders actually originate loans subject to Home Ownership and Equity Protection Act requirements, the CFPB said it believes that such loans will continue to constitute a small percentage of mortgage originations. The CFPB proposed expanding the high-cost definition to include essentially all closed-end mortgages and ...

After just a week of sifting through the massive new mortgage disclosure proposed rule released by the Consumer Financial Protection Bureau, mortgage industry officials have already found a lot of problems and will probably find more issues in the months ahead. Rod Alba, senior counsel for mortgage policy at the American Bankers Association, said implementing the CFPB’s proposal as it is right now would be like trying to replace a human being’s skeleton while the person is still alive and functioning. “Just look at the sheer scope of it: 1,100 pages, where every single disclosure that mortgage loan originators and bankers must rely on when they engage in mortgage lending is going to change,” Alba said. “The system is going to...

The mortgage industry is facing mounting legal challenges to force-placed insurance practices as evidenced by two class-action lawsuits filed or advanced last week while state and federal policymakers look for ways to reduce homeowner costs on lender-placed insurance. A Florida homeowner filed a class-action lawsuit in federal court in Fort Lauderdale against Wells Fargo Bank, accusing the lender of engaging in a pattern of “unlawful and unconscionable profiteering and self-dealing” by charging inflated force-placed insurance premiums to homeowners who had allowed their coverage to lapse. Ira Fladell, a lawyer representing himself, claims the bank breached its contract with him and acted in bad faith and that the lender bought...

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...

The Supreme Court of the United States surprised many industry and legal observers late last month by deciding it would not take on a key dispute under the Real Estate Settlement Procedures Act. “The writ of certiorari is dismissed as improvidently granted,” the high court said in a terse announcement. At issue in First American Financial v. Edwards is whether someone who has not suffered any actual damages from alleged RESPA violations has the legal standing to sue in federal court. The SCOTUS decision to not rule on the case, after deciding a year ago to take it on, means the...

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 Supreme Court of the United States had a chance to resolve the issue of whether an individ-ual who has not suffered any actual damages from violations of the Real Estate Settlement Procedures Act has legal standing to sue in federal court. But instead, SCOTUS decided not to explore it. “The writ of certiorari is dismissed as improvidently granted,” the high court said in a terse an-nouncement late last week regarding First American Financial v. Edwards, a case it agreed to hear al-most to the day one year ago. The ruling means the plaintiff will in fact be able to move ahead and sue, as the...

Fannie Mae’s and Freddie Mac’s home retention activity declined for the most part during the first quarter of 2012, according to a new analysis of Federal Housing Finance Agency data by Inside The GSEs. Total loss mitigation activity – total home retention efforts and foreclosure alternatives combined – declined 5.0 percent during the first quarter of the year to 214,812 and was down 14.3 percent from year-ago levels. Our analysis was based on the FHFA’s First Quarter 2012 Foreclosure Prevention Report. Total home retention efforts came to 111,739 at the end of the first quarter, a decrease of 7.4 percent from the fourth quarter 2011 and down 22.4 percent from the same period a year before.

The Consumer Financial Protection Bureau has been able to identify a number of improvements it can make in a rulemaking that will merge the consumer mortgage disclosures required under the Truth in Lending Act and the Real Estate Settlement Procedures Act, thanks to input from a small business review panel it convened earlier this year. “During the small business review panel [process] and our other outreach, industry identified several areas in which the current rules create uncertainty about how to comply,” CFPB Deputy Director Raj Date said during a hearing of the House Financial Services Subcommittee on...

The mortgage lending industry won a comprehensive and authoritative victory and a great deal of legal certainty from the Supreme Court on the issues of fee-splitting and markups under the Real Estate Settlement Procedures Act. Last week, in Freeman et al. v. Quicken Loans Inc., the nation’s highest court unanimously sided with the lender and ruled that a plaintiff has to show that a fee charged for a real estate settlement service was shared between two or more persons to prove a violation of Section 8(b) of RESPA has occurred. In this case, the plaintiffs were three couples, the Freemans, Bennetts...