Mortgage Law Blog, LLC

The Federal Deposit Insurance Corporation has issued guidance that the agency says provides comprehensive information to give servicers and financial institutions “all of the tools necessary to implement a systematic and streamlined approach to modifying loans.”  The guidance is said to be based on the agency’s loan modification program initiated at IndyMac Federal Bank.

The press release states in part:

The Program is designed to achieve affordable and sustainable mortgage payments for borrowers and increase the value of distressed mortgages by rehabilitating them into performing loans. Under the terms of the Program, borrowers receive a loan modification with a maximum 38% down to 31% housing-to-income ratio through the use of interest rate reduction, amortization term extension, and in some cases, principal deferment. This loan modification process improves the value of the troubled mortgages for investors while helping many borrowers experiencing financial difficulties remain in their homes.

The FDIC implemented this approach to loan modifications on August 20th after IndyMac Bank, FSB failed on July 11, 2008. As of November 20th, 2008 IndyMac has sent out more than 23,000 modification letters to eligible borrowers and has completed more than 5,300 modifications after verifying the borrowers’ income. Thousands more are in the pipeline.

Although foreclosures are costly to lenders, borrowers and communities, the number of foreclosures continues to rise while the pace of modifications remains too slow. Currently, 1.6 million total loans are over 60 days delinquent. Through the end of 2009, the FDIC estimates that there will an additional 3.8 million new loans over 60 days past due. Today’s release of the FDIC’s “Mod in a Box” guide will provide the industry with the necessary tools to facilitate streamlined and systematic loan modifications to help stem foreclosures, halt the decline in home prices and provide needed stability to the broader economy.

The guidance includes a Summary of the Loan Modification program, a substantial appendix containing various additional information, and certain related materials.

For a full copy of the press release, click here.

Tags: Bailouts, Consumer Protection, Distressed Assets, FDIC, Federal Bank Regulators, Foreclosure, Loan Servicing, Loss Mitigation, Mortgage Banking - General, Regulations by the Editor
1 Comment »

The Federal Deposit Insurance Corporation has extended the deadline for participation in the Temporary Liquidity Guarantee Program. 

The program permits the FDIC to provide a 100 percent guarantee for newly-issued senior unsecured debt and non-interest bearing transaction deposit accounts at FDIC insured institutions subject to certain terms.

The FDIC issued an interim rule on the program October 29, 2008, providing a 15-day period for comment.  The FDIC indicated the extension of time would give institutions an opportunity to fully consider the interim rules prior to deciding whether to participate.

Any institution that opts out will avoid any assessment under the program.  Other institutions will pay program fees. 

For a copy of the full press release, please click here.

For a copy of the amendment extending the deadline, click here.

For a copy of the October 29 Interim Final Rule, click here.

For a Fact Sheet regarding the program, click here.

The new deadline is December 5, 2008.

Tags: Bailouts, Economic Stimulus, FDIC, Federal Bank Regulators, Regulations by the Editor
2 Comments »

The Department of Housing and Urban Development has issued Mortgagee Letter 08-30, “Hope for Homeowners Servicing Guidance.”

In the Mortgagee Letter, HUD states: 

The Housing and Economic Recovery Act of 2008 amends the National Housing Act to authorize a new, temporary Federal Housing Administration (FHA) mortgage insurance program called the HOPE for Homeowners Program (also referred to as the H4H Program).  Under the Program, a borrower facing difficulty paying his or her mortgage will be eligible to refinance into an affordable FHA-insured mortgage.  The H4H Program is effective for endorsements on or after October 1, 2008, through September 30, 2011.

This mortgagee letter provides HUD-approved servicing mortgagees with servicing and loss mitigation guidance on the new H4H Program.  The information, directions and guidance provided in the mortgagee letter reflect statutory requirements and the standards, policies and regulations adopted for the H4H Program by the Board of Directors of the H4H Program.

HUD then addresses the following topics:

• Background;
• Prohibition against subordinate financing;
• Refinancing;
• Capital Improvements;
• Defaults and loss mitigation;
• Impact of first payment defaults; and
• Sale and payoff.

For a full copy of the Mortgagee Letter, please click here.

Tags: Bailouts, Consumer Protection, Distressed Assets, Economic Stimulus, FHA Insurance, Foreclosure, HUD & FHA, Legislation, Loan Modifications/Workouts, Loss Mitigation, Mortgage Banking - General, Regulations by the Editor
No Comments »

The Department of Treasury has issued an interim final rule under the Emergency Economic Stabilization Act of 2008 governing executive compensation for companies participating in the Troubled Asset Relief Program, Capital Purchase Program. 

Among other features, the rule limits compensation that incentivizes senior executives of financial institutions to take unnecessary and excessive risks that threaten the value of the institution; requires recovery of bonus and incentive payments to executives based on materially inaccurate statements of earnings, gains or other criteria; prohibits golden parachute payments; and requires agreement to limit a claim to a federal income tax deduction for certain remuneration.

For a full copy of the interim rule, please click here.

Tags: Bailouts, Economic Stimulus, Legislation, Mortgage Banking - General, Regulations, U.S. Treasury by the Editor
No Comments »

The Department of the Treasury has requested public comment on seven general topics regarding an insurance program for distressed assets provided under the Emergency Economic Stabilization Act of 2008.  The program is designed to restore liquidity and stability to financial markets while minimizing long term adverse consequences for taxpayers.

Treasury’s press release states in part:

Under the EESA the Secretary is charged with establishing a program that will guarantee principal of, and interest on, troubled assets originated or issued prior to March 14, 2008. The program may take any form and may vary by asset class, but it must be voluntary and self-funding. The Secretary has the authority to set premiums to reflect the credit risk characteristics of the insured assets so as to ensure that taxpayers are fully protected.

Treasury invites comment on how the program should be structured to minimize adverse selection, including how premiums should be calculated, what events should trigger insurance payout, what form that payout should take, and which institutions and assets should be eligible.  The Department also asks for public comment on technical considerations, including what legal, accounting, or regulatory issues would arise and what administrative challenges the program will create.

For a full copy of the press release, please click here.

For a copy of the Federal Register notice requesting comments, please click here.

Comments are due October 28, 2008.

Tags: Bailouts, Distressed Assets, Economic Stimulus, Legislation, Mortgage Banking - General, Regulations, U.S. Treasury by the Editor
No Comments »

The Department of Housing and Urban Development has issued a press release indicating the agency allocated approximately $4 billion under its Neighborhood Stabilization Program.

HUD intends the program to provide emergency assistance to state and local governments to acquire and redevelop foreclosed properties. 

HUD will host a summit in Washington, DC on October 7-8, 2008, and a series of regional conferences, to explain details of the program to governors, mayors and other State and local leaders.

HUD’s press release states, in part:

State and local governments can use their neighborhood stabilization grants to acquire land and property; to demolish or rehabilitate abandoned properties; and/or to offer downpayment and closing cost assistance to low- to moderate-income homebuyers (household incomes not exceed 120 percent of area median income). In addition, these grantees can create “land banks” to assemble, temporarily manage, and dispose of vacant land for the purpose of stabilizing neighborhoods and encouraging re-use or redevelopment of urban property.

HUD is providing the funding through its Community Development Block Grant under the Housing and Economic Recovery Act of 2008. 

For a full copy of the press release, including the methodology HUD used for allocation, please click here.

Tags: Bailouts, Distressed Assets, Economic Stimulus, Foreclosure, HUD & FHA, Loss Mitigation, Mortgage Banking - General, Regulations by the Editor
No Comments »

Today, the Federal Housing Finance Agency published formal announcement of its establishment in the Federal Register.

The FHFA is an independent Federal agency established July 30, 2008, which will integrate certain functions of the Office of Federal Housing Enterprise Oversight and Federal Housing Finance Board.

Meanwhile, the firestorm of discussions surrounding the Department of Treasury’s conservatorship of Fannie Mae and Freddie Mac continue.  The popular press continues to issue in-depth articles on a variety of details of that conservatorship, and the events leading up to and after the conservatorship.

Mortgage Law Blog notes for readers that various agencies also have issued statements regarding the conservatorship.  Links to a number of these releases appears below.

For a copy of the FHFA announcement, click here.

For FHFA press releases on the conservatorship, click here.

For an FHFA Fact Sheet on the conservatorship, click here.

For a press release from the Department of Treasury, click here.

The following releases are also of interest, in some ways due to their reserved nature:

• Board of Governors of the Federal Reserve System.
• Department of Housing and Urban Development.
• House Committee on Financial Services; also here.
• Senate Committee on Banking, Housing and Urban Affairs; also, here.

Tags: Bailouts, Bankruptcy, FDIC, Fannie Mae/Freddie Mac, Federal Bank Regulators, Federal Reserve, HUD & FHA, Mortgage Banking - General, NCUA, OCC, OTS, U.S. Treasury by the Editor
No Comments »

Ben Bernanke, Chairman of the Board of Governors of the Federal Reserve, and Christopher Cox, Chairman of the Securities and Exchange Commission have announced that the two agencies have entered into a Memorandum of Understanding designed to “deepen their information sharing and cooperation.”

The Board’s press release indicates that the MOU will enable the agencies to cooperate in a number of important areas of common interest, including anti-money laundering, bank brokerage activities under GLBA, clearance and settlement in the banking and securities industries, and the regulation of transfer agents.  Under its terms, the MOU covers bank holding companies and “Consolidated Supervised Entities” that own securities firms.  The MOU is designed to formalize the long-standing cooperative arrangements between the two agencies, and recent cooperation on matters including banking and investment banking capital and liquidity following the Board’s emergency opening of credit facilities to primary dealers.

In response, Chairman of the Senate Committee on Banking, Housing and Urban Affairs released the following statement:

It is my hope that the MOU will result in improved supervision of investment banks and bank holding companies, and strengthen our financial markets for investors and our nation’s economy.  It is important to note that the MOU does not grant any new authority to either agency, nor does it affect the ability of the Congress and the Senate Banking Committee to oversee regulated institutions and markets.  I am pleased that the MOU seeks to achieve its important objectives while leaving consideration of any broader reforms to our financial regulatory landscape to Congress– issues that the Senate Banking Committee will begin to examine in greater detail over the coming weeks and months.

For a full copy of the Board’s press release, please click here.

For a copy of the SEC’s press release, click here.

For a copy of the MOU, click here.

For a copy of Chairman Dodd’s press release, click here.

Tags: Bailouts, Federal Bank Regulators, Federal Reserve, Mortgage Banking - General, Regulations by the Editor
No Comments »

The U.S. House Committee on Financial Services has released the following statement regarding the passage by the U.S. Senate Committee on Banking, Housing and Urban Affairs:

I congratulate Senator Dodd for the passage of legislation through the Banking Committee that will help stem the significant rise in foreclosures in America.  Senator Dodd deserves a great deal of praise for getting this bill through the committee by such a significant vote.  Because of his leadership on this issue, and the cooperation of Senator Shelby, it is highly likely we will be able to compromise on a significant housing package.   There are of course some differences between the two bills and we will need to work on these differences, but I look forward to continued cooperation between members of the House and the Senate to achieve a mutually agreed housing package sometime next month.

There seems to be a growing consensus that the Senate, and perhaps the Administration, may find a way to compromise on legislation soon.

Stay tuned . . .

Tags: Bailouts, Consumer Protection, Distressed Assets, Foreclosure, Legislation, Mortgage Banking - General by the Editor
No Comments »

The House Financial Services Committee yesterday introduced two legislative measures aimed at the economic downturn “caused by the housing and credit crisis.” 

The stated legislative goal is to ”combat the unprecedented rise in foreclosures, and the associated impact on cities and states.”

The legislation was first announced by Committee Chairman Barney Frank back in March. 

The legislation is divided into two bills.

The first bill is the Neighborhood Stabilization Act of 2008 (H.R. 5818).  This bill, introduced by Subcommittee on Housing and Community Opportunity Chairwoman Maxine Waters, would provide loans and grants to states and cities to deal with problems associated with large numbers of foreclosures in neighborhoods across the country. 

The second bill is the FHA Housing and Homeowner Retention Act (H.R. 5830).  This bill would expand the FHA program to help refinance at-risk borrowers into viable mortgages and require the Federal Reserve Board to conduct a study on the need for an auction or bulk refinancing mechanism. 

A summary of the the loan and grant bill can be found in the Committee’s press release here.

A summary of the FHA bill can be found here.  A copy of the FHA bill can be found here.

A markup of the measures is slated for April 23 and 24.

Tags: Bailouts, Consumer Protection, Economic Stimulus, Federal Reserve, HUD & FHA, Legislation, Mortgage Banking - General by the Editor
No Comments »