November 14, 2012
Primary Architect of Mortgage Initiatives at CFPB To Leave
Raj Date, the number two official at the CFPB, is leaving as the Bureau completes its mortgage regulations. Story here.
November 14, 2012 | Permalink | No Comments
Judge Cote (SDNY) Allows FHFA To Proceed in Suit Against JPMorgan
The court said that the FHFA, Fannie and Freddie’s regulator, can proceed with its securities fraud claim relating to billions of MBS bought by the two mortgage companies. The allegations turn on allegedly false representations made by the bank relating to the mortgages underlying the securities.
The quoted representations are pretty strong. One reads:
depositor will not include any loan in the trust fund for any series of
securities if anything has come to the depositor’s attention that would
cause it to believe that the representations and warranties of a seller or
originator will not be accurate and complete in all material respects in
respect of the loan as of the date of initial issuance of the related series of
securities.
The Opinion and Order can be found here:
https://bit.ly/PX00xX
November 14, 2012 | Permalink | No Comments
November 10, 2012
FHFA and CFPB To Create a National Mortgage Database
This is a very big deal. Data on mortgages is very fractured and imcomplete and it is hard for researchers to access in many cases. Private companies that collected such data often are unwilling to share it and some types of information that would be useful to know has not been collected at all. The press release indicates that the “database will primarily be used to support the agencies’ policymaking and research efforts and to help regulators better understand emerging mortgage and housing market trends.” It continues, “the database will include loan-level data about the mortgage including: the borrower’s financial and credit profile; the mortgage product and terms; the property purchased or refinanced; and the ongoing payment history of the loan. Data will be updated on a monthly basis and track as far back as 1998. Additionally, this database fulfills an FHFA requirement under the Housing and Economic Recovery Act of 2008 (HERA) to conduct a monthly mortgage market survey.“
Complete Press Release here: https://www.consumerfinance.gov/pressreleases/federal-housing-finance-agency-and-consumer-financial-protection-bureau-to-partner-on-development-of-national-mortgage-database/
November 10, 2012 | Permalink | No Comments
Federal Court in Texas Rules in Favor of Counties in Recording-Fee Case Against MERS
Margaret Cronin Fisk & Tom Korosec report a decision by the U.S. District court in Dallas to not dismiss a case brought by several Texas counties against MERS and Bank of America for lost recording fees. Margaret Cronin Fisk & Tom Korosec, Bank of America, MERS Lose Bid to Dismiss Texas Fee Suit, Bloomberg Businessweek (May 24, 2012).
November 10, 2012 | Permalink | No Comments
CFPB Issues Supervisory Highlights
The Fall 2012 Highlights state that the Bureau will have three guiding principles
1. Focused on consumers;
2. Driven by data; and
3. Examinations conducted consistently across sectors.
The Bureau found that effective systems to ensure compliance with Federal consumer financial law were lacking in one or more financial institutions. (p. 3)
The Bureau also discovered “numerous violations of Federal consumer financial law.” (p. 7)
In particular, the Bureau noted significant examples of non-compliance with RESPA, TILA and HMDA. (p. 13)
The complete document is here: [link]
November 10, 2012 | Permalink | No Comments
Hurricanes Hitting Underwater Mortgages
By David Reiss
A former colleague, Barry Goldberg, raises an important financial issue relating to the devastation that Hurricane Sandy left in its wake.
Massive flood, storm and fire casualties on homes with underwater mortgages may make for an odd set of incentives for borrower and RMBS investor.
A Fannie/Freddie form of mortgage contains language like this:
“In the event of loss, Borrower shall give prompt notice to the insurance carrier and Lender. . . . Unless Lender and Borrower otherwise agree in writing, any insurance proceeds, whether or not the underlying insurance was required by Lender, shall be applied to restoration or repair of the Property, if the restoration or repair is economically feasible and Lender’s security is not lessened.”
Homeowner has no financial incentive to rebuild — in all likelihood she would still be underwater. If the owner of the mortgage believes in good faith that restoration is not economically feasible, then it will accelerate the balance of the loan and direct the insurance proceeds to be applied to sums owed pursuant to the mortgage.
Take this example:
Homeowner purchases home for $250,000.
The house is now worth $150,000.
The mortgage is for $200,000.
The insurance policy is for $200,000.
The homeowner (mortgagor) would be incentivized to abandon the property in a non-recourse jurisdiction and the owner of the mortgage (mortgagee) would be incentivized to take the proceeds from the insurance policy, foreclose and sell the property as a tear down. It looks, from this simple example, like the mortgageee would be better off financially as a result of the massive casualty.
I would be interested to hear from others who have seen how this plays out in reality, given real players and real documents.
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November 14, 2012 | Permalink | No Comments