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Inside Mortgage Finance

August 2, 2012

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FHFA Rejects GSE Principal Reduction, New Analysis Also Finds Fannie, Freddie Writedowns Costly to Taxpayers

Despite intense lobbying and political pressure from the Obama administration and Congressional Democrats, the Federal Housing Finance Agency announced this week it will hold fast to its original conclusion and not agree to Treasury Department requests to allow Fannie Mae and Freddie Mac to offer principal forgiveness modifications. Despite the incentives offered by Treasury to pay the government-sponsored enterprises to write down principal under the Home Affordable Modification Program using Troubled Asset Relief Program funds, FHFA Acting Director Edward DeMarco concluded the benefits of implementing HAMP’s Principal Reduction Alternative did not outweigh the risks to the taxpayer-backed GSEs. “Given our multiple responsibilities to conserve the assets of Fannie Mae and Freddie Mac, maximize assistance to homeowners to avoid foreclosures, and minimize the expense of such assistance to taxpayers, FHFA concluded... Read More

Help on Buybacks?

In a letter to Congressional leaders, the FHFA shed a little more light on its efforts to address GSE buybacks. Fannie and Freddie are developing... Read More

Mixed Results in the Servicing Market: Wells Keeps Growing While Others Keep Shrinking

Wells Fargo continued to climb toward the $2 trillion servicing mark – a place only one other firm has been – while its nearest competitors in the mortgage servicing business did not originate enough new business to replenish their runoff during the second quarter. Wells reported $1.863 trillion in mortgage servicing at the end of June, up 1.2 percent from the previous quarter. While the company has fine-tuned its origination strategy, including a recent decision to quit the wholesale broker market, it has consistently generated more than enough new business to grow its servicing portfolio at a time when new house prices have tumbled, the cash-out refinance market has evaporated and originations have been under pressure. According to a new Inside Mortgage Finance ranking and analysis, Wells has increased...[Includes one data chart] Read More

Sen. Merkley’s Refi Proposal Would Require Fee From Lenders, Consideration of All Borrowers

A large-scale refinance program proposed by Sen. Jeff Merkley, D-OR, would rely on a “risk transfer fee” for lenders and require participating lenders to consider all potential borrowers for the program. The “Rebuilding American Homeownership” program has support from the Obama administration, though analysts suggest approval from Congress is unlikely. Merkley recently proposed the RAH program to help “virtually all” non-delinquent borrowers with negative equity to refinance into a mortgage with a lower interest rate. The program could be based on a one-time federally-backed structure, similar to the Home Owners’ Loan Corp. established by the federal government during the Great Depression. The RAH trust would sell... Read More

Lenders to Learn about UDAAP From CFPB Exams, Combined Disclosure Rule Raises Many Questions

One of the many concerns mortgage lenders have with the powerful and still largely untested Consumer Financial Protection Bureau is the expanded standard of “unfair, deceptive and abusive acts and practices” created by the Dodd-Frank Act – and how the CFPB is going to enforce it. Unfortunately, they’re more likely to learn about it on the fly during the examination process than they are in advance through careful, formal rulemaking or supervisory guidance, according to one of the presenters during an Inside Mortgage Finance webinar last week on the CFPB’s regulatory and supervisory landscape. “What I think you’re seeing develop here is examination beyond regulation, and the CFPB’s examination authority and supervision authority goes beyond... Read More

CA Homeowners File Class-Action RICO Lawsuit Against JPMorgan for Charging Excessive Default Servicer Fees

A group of San Francisco-area homeowners has filed a federal RICO class-action lawsuit against JPMorgan Chase, alleging the company charges inflated fees to homeowners who go into default. In a suit filed last week in the U.S. District Court, Northern District of California, the three named plaintiffs, Diana Ellis, James Schillinger and Ronald Lazar, accuse JPMorgan of violating California business standards law. The suit also says JPMorgan’s use of mail and wire communications to perpetuate its fraud against homeowners violates the federal Racketeer Influenced and Corrupt Organizations Act. The homeowners contend that JPMorgan is using... Read More

Lawmakers Concerned About CFPB’s Impact On Small Business in the Mortgage Industry

Consumer Financial Protection Bureau Director Richard Cordray this week sought to allay the concerns of some members of Congress that small businesses in the mortgage industry and other sectors are about to be overwhelmed by regulatory overload. One of the main issues in this regard being considered by the House Small Business Committee is the CFPB’s recent proposal to integrate and simplify the consumer disclosures mandated by the Truth in Lending Act and the Real Estate Settlement Procedures Act. “Our committee is interested in how the regulations will affect... Read More

Fitch Reports Mixed Mortgage Banking Results in 2Q12, Anticipates Rising Repurchase Claims in Coming Quarters

Overall, banks continued to report strong earnings from their mortgage banking operations during the second quarter, but there were nearly as many institutions reporting declining profits or net losses as there were reporting gains. According to an analysis by Inside Mortgage Trends, an affiliated newsletter, a group of 21 top lenders posted a combined $8.2 billion in mortgage banking profits during the second quarter. That was down 6.8 percent from the $8.8 billion those same companies earning during the first three months of the year, but mortgage banking income was up dramatically from the first half of 2011. Major banks reported... Read More

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