Mortgage Law Blog, LLC

The Department of Housing and Urban Development has posted a new settlement agreement entered into between HUD and an Arizona developer for alleged violations of the Interstate Land Sales Act.

This ILSA settlement is the third this year.  There was only one settlement per year posted during the period 2005-2007. 

Under the terms of the settlement, the developer agreed to pay the government $45,000, and also to send offers of rescission to all persons who purchased lots from the developer.  The offer must include a full refund of all monies paid in connection with the purchase in exchange for a return of the deed.

The last lot sold in this matter was in 2005.  Recent Arizona market conditions could make this remedy particularly unappealing for the developer.

For a copy of the settlement, please click here.

Tags: Consumer Protection, Fraud, HUD & FHA, Interstate Land Sales, Regulations, Unfair or Deceptive Acts by the Editor
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Mortgage Law Blog reminds readers that the Mortgage Bankers Association will hold its annual Regulatory Compliance Conference September 14 - 16, 2008. 

The conference will be held at the JW Marriott in Washington, DC.

The MBA’s website describes the conference as the “the premier forum for you to attain the most comprehensive, up-to-date information on significant regulatory and compliance issues facing the mortgage banking industry at the federal and state levels.”

The conference includes “an in-depth discussion of the Housing and Economic Recovery Act of 2008, the most sweeping real estate finance and housing legislation in a generation. Attendees of this conference learn about the contents of this law, how its provisions will be implemented and what changes your business needs to make to comply with the new regulations.”

Speakers will cover a variety of topics, including:

• Home Owners Equity Protection Act/Truth in lending Act
• Real Estate Settlement Procedures Act
• Anti-predatory lending requirements
• Home Mortgage Disclosure Act/Fair lending
• Fair Credit Reporting Act/Fair and Accurate Credit Transactions Act
• Federal Housing Administration loans
• Mortgage fraud against lenders
• Servicing
• Secondary market issues

There will also be legislative and litigation updates. 

The final day will include a visit to Capitol Hill to meet with legislators.

To learn more, visit the conference website here.

Tags: Association Activities, Conferences & Events, Consumer Protection, Economic Stimulus, FACT Act, FCRA, FHA Insurance, Fair Lending, Foreclosure, Fraud, HUD & FHA, High Cost Loans, Industry Involvement, Legislation, Loan Servicing, Lobbying, Mortgage Banking - General, RESPA, Regulations, State Regulation, Unfair or Deceptive Acts by the Editor
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Tags: Consumer Protection, Fraud, HUD & FHA, Interstate Land Sales, Mortgage Banking - General, Regulations, Unfair or Deceptive Acts by the Editor
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The Office of Thrift Supervision has announced a 90-minute teleconference entitled “Identity Theft Rules and Guidelines.”  The conference is part of the “Getting It Right” Compliance Series.

The announcement describes the teleconference as:

A live, ninety-minute, telephone briefing to provide savings associations with valuable information about federal Identity Theft rules and guidelines that go into effect on November 1, 2008.  Hear from compliance and information security experts at OTS and have an opportunity to ask questions and get answers.

The teleconference is scheduled for August 11, 2008 from 2:00 to 3:30 p.m.  (Advance registration required.)

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

Tags: Conferences & Events, Consumer Protection, Federal Bank Regulators, Fraud, Identity Theft, Mortgage Banking - General, OTS by the Editor
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The Department of Housing and Urban Development has announced suspension of its 90-day waiting period for FHA insurance in some cases.

HUD’s press release states:

In an effort to stabilize declining home values in certain neighborhoods, the Bush Administration today announced a temporary policy that will extend government-backed mortgage insurance and allow for the immediate sale of vacant foreclosed properties.

For one year, the Federal Housing Administration (FHA) will insure foreclosed properties marketed and sold by property disposition firms on behalf of lenders. The properties, which must purchased by owner-occupants, will no longer be subject to the customary 90-day waiting period.

“A glut of foreclosed and abandoned homes harms neighborhoods, frustrates homebuyers and delays a community’s recovery,” said Brian D. Montgomery, Assistant Secretary of Housing-Federal Housing Commissioner. “The action we take today will allow homebuyers to purchase these homes in much greater numbers and ease the excess supply of unsold homes in neighborhoods across the country.”

FHA’s new temporary policy will help stabilize neighborhoods experiencing high rates of foreclosure by reducing the inventory of unsold properties. Many foreclosed properties remain vacant for months, inviting vandalism and reducing values of surrounding homes. To address that sizeable inventory, lenders have hired companies that specialize in the marketing and disposition of foreclosed homes. It’s reasonable and appropriate that these firms have the ability to sell the properties to borrowers using FHA financing.

With certain exceptions, FHA currently prohibits insuring a mortgage on a home owned by the seller for less than 90 days. This prohibition is intended to prevent property “flipping,” a predatory practice that strips a home of its equity before being quickly resold at an inflated price to an unsuspecting buyer. FHA’s new policy will permit the immediate sale of foreclosed properties to legitimate borrowers wishing to use FHA-insured financing.

To read the full text of this new temporary policy, visit FHA’s website.

Mortgage Law Blog notes, however, HUD’s press release did not include a link to the new policy, and a search of HUD’s primary website at the time of writing did not reveal the information.  Nevertheless, a copy of the policy can be found here.

MLB also points out, the rule suspension is for a limited category of transactions, and only for one year.

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

Tags: Distressed Assets, Economic Stimulus, FHA Insurance, Foreclosure, Fraud, HUD & FHA, Loss Mitigation, Mortgage Banking - General, Regulations by the Editor
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In a letter to the Office of Federal Housing Enterprise Oversight, the Office of the Comptroller of the Currency has expressed ”substantial concerns” regarding certain appraisal related agreements and a code of conduct agreed to by OFHEO, the Attorney General of the State of New York, Fannie Mae and Freddie Mac.

The OCC’s concerns relate to unintended adverse consequences of the Agreements and Code for the safety, soundness and efficient operation of national banks’ residential mortgage lending activities and the cost of credit to consumers.

The OCC says that it “strongly endorses” the principle that appraisers must be free from coercion or influence.  This objective should be achieved, however, through direct regulation.  The goal should not be sought indirectly by dictating the corporate and internal organizational structures of lenders.

The OCC then goes on to say that the Agreements and Code conflict with the approach set forth by Congress and have “significant, unintended negative consequences for lenders and borrowers, and . . . major legal flaws.”

The OCC provides its rationale and objections at length in the 12-page letter.

For a full copy of the letter, click here.

Tags: Appraisals, Consumer Protection, Fannie Mae/Freddie Mac, Fraud, Mortgage Banking - General, OCC, Regulations by the Editor
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The Office of the Comptroller of the Currency has issued guidance on how consumers can avoid foreclosure rescue scams.

The OCC’s press release states:

Most foreclosure rescue scams fall within three categories.  In lease-back or repurchase scams, the con artist convinces a borrower to sign over their deed in return for a promise to lease back or eventually repurchase the property.  Refinance fraud involves a situation where the borrower believes the transaction is a refinance, but in fact the fraud involves transfer of property ownership to the con artist.  Bankruptcy schemes involve repeat bankruptcy filings to get a temporary stay order to delay foreclosure, but can result in damaging the consumers’ credit without saving their homes.

The OCC lists some ways to identify scams, ways to avoid them, and ways to seek actual assistance when facing difficulties in making payments.

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

For a copy of the Consumer Advisory, click here.

Tags: Consumer Protection, Foreclosure, Fraud, Mortgage Banking - General, OCC, Regulations by the Editor
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The Conference of State Bank Supervisors noted today that the Federal Bureau of Investigations issued its 2007 Mortgage Fraud Report.

The Report discusses both general categories of fraud most notable in the housing market today, fraud for profit and fraud for housing.

The Report contains four key findings:

1. Mortgage fraud continues to be an escalating problem in the United States. Although no central repository collects all mortgage fraud complaints, Suspicious Activity Reports (SARs) from financial institutions indicated an increase in mortgage fraud reporting. SARs increased 31-percent to 46,717 during Fiscal Year (FY) 2007. The total dollar loss attributed to mortgage fraud is unknown. However, 7 percent of SARs filed during FY 2007 indicated a specific dollar loss, which totaled more than $813 million.
2. Subprime mortgage issues remain a key factor in influencing mortgage fraud directly and indirectly. The subprime share of outstanding loans has more than a doubled since 2003 putting a greater share of loans at higher risk of failure. Additionally, during 2007 there were more than 2.2 million foreclosure filings reported on approximately 1.29 million properties nationally, up 75 percent from 2006. The declining housing market affects many in the mortgage industry who are paid by commission. During declining markets, mortgage fraud perpetrators may take advantage of industry personnel attempting to generate loans to maintain current standards of living.
3. Analysis of available information indicated that mortgage fraud was most concentrated in the north central region of the United States. Data from law enforcement and industry sources were compared and mapped to determine which states were most affected by mortgage fraud during 2007 and indicated that the top 10 mortgage fraud states for 2007 were Florida, Georgia, Michigan, California, Illinois, Ohio, Texas, New York, Colorado, and Minnesota. Other states significantly affected by mortgage fraud according to available sources included Arizona, Maryland, Utah, Nevada, Missouri, Indiana, Tennessee, Virginia, New Jersey, and Connecticut.
4. The downward trend in the housing market provides an ideal climate for mortgage fraud perpetrators to employ a myriad of schemes suitable to a down market. Several of these schemes have emerged with the potential to spread as the recent rise in foreclosures, depressed housing prices, and decreased demand place pressure on lenders, builders, and home sellers. Emerging and re-emerging schemes for 2007 included builder-bailouts, seller assistance, short sales, foreclosure rescue, and identity thefts exploiting home equity lines of credit.

The FBI’s Report is informative and valuable.  Mortgage Law Blog encourages lenders to carefully review the Report and share the information with employees and business associates.

For a full copy of the Report, click here.

Tags: Consumer Protection, Fraud by the Editor
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Mortgage Law Blog reminds readers that the Mortgage Bankers Association’s Legal Issues and Regulatory Compliance Conference is April 28 to May 1.

The conference, held this year in Carlsbad California, is one of the premier events for lawyers in the mortgage banking industry.

The MBA describes the conference as follows:

This year has brought an unparalleled array of new legislative, regulatory and litigation developments to the mortgage industry.  MBA’s Legal Issues and Regulatory Compliance Conference 2008 at La Costa Resort and Spa in Carlsbad, Calif., will provide you with an in-depth understanding of all that is new and all that is anticipated so that you can meet the legal and regulatory challenges of today and tomorrow.

No other conference offers the mortgage industry as comprehensive a legal and regulatory program. At this conference — designed for managers, industry lawyers and compliance officers — industry experts present conference participants with the entire complement of legal and regulatory developments facing the industry, including:  

New Federal Anti-Predatory Lending Legislation 

New Home Ownership and Equity Protection Act (HOEPA) Regulations

New RESPA and TILA Reform Proposals

New State Laws

New Servicing and Loss Mitigation Standards

New Litigation Cases and Class Actions

New Secondary Market - GSE and Investor Requirements

New Initiatives to Protect Lenders Against Mortgage Fraud

New HMDA and Fair Lending Developments

New Data Security, ID Theft and Privacy Initiatives

New FCRA and FACTA Developments

New FLSA/Employment Law Cases

New Risk Mitigation Strategies

Legal Ethics

New issues in the legal, regulatory and compliance spheres

The conference is packed with excellent speakers and attendees from industry and government, including from the Department of Housing and Urban Development, state Attorneys General offices, Fannie Mae, Freddie Mac, numerous mortgage banking companies and others. 

For more information about the conference, please click here.

Mortgage Law Blog will not post during this period due to the Editor’s attendance at the conference.

Tags: Association Activities, Conferences & Events, Federal Bank Regulators, Fraud, HUD & FHA, High Cost Loans, Industry Involvement, Legislation, Litigation, Loan Modifications/Workouts, Loan Servicing, Loss Mitigation, Mortgage Banking - General, RESPA, Regulations, State Enforcement, State Regulation, Truth in Lending Act, Unfair or Deceptive Acts by the Editor
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The Federal Bureau of Investigations last week issued a press report regarding fraud generally.  The FBI presented interesting statistics regarding a number of types of fraud.

In the mortgage industry, the FBI stated it is currently “investigating more than 1,300 individual mortgage fraud matters. Perhaps more importantly, we have identified 19 corporate fraud matters related to the subprime lending crisis—cases that may have a substantial impact on the marketplace.”

Mortgage Law Blog believes that mortgage companies that might have been involved in fraud were limited to a very small number of bad actors, all or most of which probably no longer exist.  At the individual level, it is quite possible that these 1300 cases are the tip of the fraud iceberg.

For the FBI’s press release, click here.

Tags: Consumer Protection, Fraud, Mortgage Banking - General by the Editor
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