Regulatory scrutiny of the servicing sector appears unlikely to decrease anytime soon as officials with the Consumer Financial Protection Bureau along with state regulators note that regulation of servicing is a top priority. During a webinar this week hosted by Inside Mortgage Finance, Ann Thompson, a senior analyst in the CFPB’s Office of Supervision Policy, said the federal regulator conducts a risk-based analysis of issues affecting consumers. “Mortgage-related issues are presenting...

SunTrust Mortgage, based in Richmond, VA, agreed to pay a total of $968 million to settle allegations of origination and servicing wrongdoing under a consent order brought by the CFPB. The Department of Justice, the Department of Housing and Urban Development and state attorneys general from 49 states and the District of Columbia joined in the settlement, which stemmed from the National Mortgage Servicing Settlement. The company will provide $500 million in loss-mitigation relief to underwater borrowers. The order also will require SunTrust to pay $40 million to approximately 48,000 consumers who lost their homes to foreclosure, and $10 million to cover losses it caused to the FHA, the Department of Veterans Affairs, and the Rural Housing Service. The order...

SunTrust Mortgage’s recent settlement of a dispute with the federal government and 49 state attorneys general over defective FHA loans and Wells Fargo’s losing bid to quash a similar lawsuit are raising concerns about doing business with the FHA. Industry attorneys say the lesson for lenders in these recent industry debacles is that it is “extraordinarily dangerous” to do FHA loans these days given the outcome of the two cases. It is also getting harder to trust mortgage settlement agreements with the government, they added. “The scariest part in all these is the combination of government forces involved in these claims – state AGs, Department of Justice, Department of Housing and Urban Development and the Consumer Financial Protection Bureau,” said an attorney, who worked on both cases. “When they want to get you, they can get you.” Others believe these developments could have a ...

The market for large packages of “legacy” mortgage servicing rights is ice cold these days, throwing a monkey wrench into the aggressive growth plans of Ocwen Financial, Walter Investment Management and Nationstar Mortgage. The reason is simple: regulatory scrutiny from the New York Department of Financial Services of Ocwen’s planned purchase of $39 billion in highly delinquent MSRs from Wells Fargo has dampened both auctions and sales. “Legacy packages are still out there,” said one buyer of mortgage receivables, “but I don’t see many of them and they’re not very large.” He added...

Industry participants have raised a number of concerns about a proposed rule issued in April that would implement minimum requirements for appraisal management companies, which are intermediaries between appraisers and lenders. Federal regulators in April issued a proposed rule that would implement AMC provisions mandated by the Dodd-Frank Act, including a ban on AMCs providing appraisal management services for federally related transactions in states that haven’t established regulations for AMCs. The Consumer Mortgage Coalition said...

Disparate impact litigation apparently is one of those gifts that keeps on giving. Once again, the Supreme Court has been given an opportunity to receive one of those gifts, as the Texas Department of Housing and Community Affairs recently asked the justice to agree for what would be the third time to take on the issue of disparate impact claims brought under the Fair Housing Act. CFPB observers will be watching to see if the bureau feels compelled to weigh in on the case, Texas Department of Housing and Community Affairs, et al., Petitioners v. The Inclusive Communities Project, Inc., as it has previously elsewhere. The TDHCA distributes...

State regulators considering increasing capital requirements for nonbanks should hold off, according to an analysis by Kroll Bond Rating Agency. With encouragement from the Financial Stability Oversight Council, state regulators are considering prudential regulatory standards for nonbank mortgage companies. “We believe that large nonbank companies, and particularly seller/servicers in the mortgage sector, do not require formal capital requirements and other types of prudential regulation,” KBRA said in a report authored by Christopher Whalen, a senior managing director at the rating service. Nonbank servicers appear...

When it comes to the legal theory of disparate impact and the Supreme Court of the United States, perhaps the third time around will be the charm. Recently, the Texas Department of Housing and Community Affairs requested the nation’s highest court to agree once again to take on the issue of disparate impact under the Fair Housing Act. The questions presented to the high court in Texas Department of Housing and Community Affairs, et al., Petitioners v. The Inclusive Communities Project, Inc. are...

Servicing problems are being addressed “quickly and effectively” by the servicers subject to the $25 billion national servicing settlement, save for Walter Investment Management’s Green Tree Servicing, according to Joseph Smith, the settlement’s monitor. In a report released last week, Smith said Green Tree failed eight metrics tested in the second half of 2013, while Bank of America, Citi, JPMorgan Chase, Ocwen and Wells Fargo passed all of their settlement tests ...

The CFPB and the state attorneys general are well-positioned to work together and are continuing to do so, even though they have not completed efforts to strike a formal memorandum of understanding explicitly spelling out the terms of their cooperative relationship, one legal expert said recently. One of the areas in which such cooperation is continuing is in issues that affect U.S. military service members, according to attorney Clarine Nardi Riddle, who chairs the government affairs practice of the Kasowitz, Benson, Torres & Friedman law firm in Washington, DC. Riddle served from 1989 to 1991 as the first female state attorney general of Connecticut after a stint as the deputy AG in the preceding three years. “There’s a natural sweet ...