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Inside the CFPB

April 16, 2012

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Industry Frets Over Mortgage Servicing Rules

The mortgage lending industry is apprehensive about the multitude of mortgage servicing rules coming its way, and that anxiety is probably well justified, leading industry representatives suggests. Beyond last year’s consent orders and last month’s $25 billion mortgage servicing settlement and all the ramifications they have for industry servicing practices going forward, the most immediate concern has to do with a proposed rule on mortgage servicing due out this summer from the Consumer Financial Protection Bureau. Last week, the CFPB made a public “pre-announcement” of the... Read More

CFPB Takes Low-Hanging Fruit on L.O. Comp

With all the concern thatfs been raised about loan originator compensation since the mortgage marketfs collapse in 2008, and given a certain amount of gget-toughh rhetoric from leadership at the Consumer Financial Protection Bureau, the agency seemed to take a quick-and-dirty approach when issuing its first pronouncement in topic earlier this month. Back in September 2010, the Federal Reserve put out loan originator compensation rules under the Truth in Lending Act and Regulation Z, effective as of April 6, 2011. Then with enactment of the Dodd-Frank Act of 2010... Read More

Justice Dept. Reveals What Prompts ECOA Referral Litigation

The U.S. Attorney General’s recently released 2011 annual report to Congress on the Equal Credit Opportunity Act Amendments of 1976 provides some useful insight as to what prompts it to litigate referrals from other agencies, as opposed to bumping them back for administrative resolution. Referrals that are most likely to be returned generally share a few characteristics, such as whether the practice at issue had ceased and there is little chance that it will be repeated. Another characteristic is whether the violation may have been accidental or stemmed from ignorance of the... Read More

Fed Forces Settlement Over Saxon Foreclosure, Servicing Practices

The Federal Reserve Board recently brought a consent order against Morgan Stanley to deal with what it characterized as a pattern of misconduct and negligence in residential mortgage servicing and foreclosure processing at the Wall Street firm’s Saxon Mortgage Services subsidiary, once the 34th largest mortgage servicer in the United States. “As noted in the announcements relating to the 2011 enforcement actions, the Federal Reserve believes monetary sanctions are appropriate and plans to announce monetary penalties in these cases,” the Fed said. The monetary penalties... Read More

SEC Accuses Bank Executives of Abusing Loan Mods to Hide Woes

The Securities and Exchange Commission has charged two officials of Houston-based bank holding company Franklin Bank Corp., with setting up increasingly aggressive loan modification programs during the last six months of 2007 to hide from investors the true amount of the bank’s nonperforming assets and to artificially inflate Franklin’s net income and earnings. According to the SEC, CEO Anthony Nocella and CFO Russell McCann instituted three loan modification schemes that caused Franklin to account for its significantly increasing portfolio of delinquent... Read More

Fair Housing Advocates Allege Wells Discriminated in REO

The National Fair Housing Alliance filed a federal housing discrimination complaint with the U.S. Department of Housing and Urban Development against Wells Fargo & Co. and Wells Fargo Bank, N.A. over its marketing and maintenance of foreclosed properties. A similar complaint against another major national mortgage lender is expected from the organization this week. In the Wells case, the NFHA said its complaint resulted from an undercover probe of the lender's real-estate-owned property management practices related to 218 properties. According to the housing advocacy group... Read More

Industry, Consumer Groups Call For Broad “Qualified Mortgage”

An unusual coalition of dozens of lender, realtor, consumer and civil rights groups late last week urged the Consumer Financial Protection Bureau to write a broadly defined “qualified mortgage” as part of the ability-to-repay final rule it’s putting together as per the Dodd-Frank Wall Street Reform and Consumer Protection Act. The CFPB is expected to issue a proposed rule defining a QM shortly. As per the ability-to-repay standards of Dodd-Frank Section 1412, a qualified mortgage cannot have points and fees in excess of 3 percent of the loan amount. The groups are worried... Read More

Industry Disappointed the CFPB Isn’t Adopting More Suggestions

Four mortgage- and financial services-related trade groups told the Consumer Financial Protection Bureau they’re unhappy the CFPB hasn’t adopted more of the suggestions they’ve made over the numerous iterations the bureau has put out of its Know Before You Owe consolidated consumer disclosure project. The CFPB is currently on the ninth version of its evolving disclosures model. “During the Know Before You Owe iterations, we have submitted a large number of comment letters that walk the CFPB through a large number of very technical, but important details,” the groups said... Read More

State Roundup

Ohio. The state Attorney General’s office recently finalized amendments to the state’s ability-to-repay rules that provide a safe harbor for certain types of mortgages. Under the new rules, a borrower is deemed to have an ability to repay and a reasonable probability of payment if the lender provides a fully-amortizing fixed-rate refinance mortgage that has the same or a lesser interest rate or principal amount than the current loan, and does not lengthen the payoff date. Pennsylvania. The state Department... Read More

Federal Roundup

U.S. District Court for the District of Columbia. Mortgage Servicing Settlement Approved. Earlier this month, the U.S. District Court for the District of Columbia gave its approval to the consent orders that make up the $25 billion mortgage servicing settlement by federal regulators and 49 state attorneys general into alleged mortgage-related violations by the nationfs five largest mortgage servicers. The federal agencies that signed on to the settlement are the Department of Justice, the Department of Housing and Urban Development, the Department of Treasury... Read More

Worth Noting

At the request of the Federal Trade Commission, the U.S. District Court for the Central District of California has imposed a $3.89 million judgment against defendant Samuel Paul Bain and three of his companies, including U.S. Homeowners Relief, for their role in an allegedly fraudulent mortgage modification and foreclosure relief scheme. According to the FTC’s complaint, the defendants charged consumers up to $4,250 for a promise to reduce their mortgage payments, interest rates, and sometimes even their loan balances.The court order also bans Bain and his firms from telemarketing... Read More

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