Compliance & Regulation

Wells Fargo Home Mortgage says it is ready to implement the new RESPA disclosure rule and urged the Department of Housing and Urban Development to stay with the Jan. 1 effective date. "We have already programmed the mandated RESPA changes into over 40 computer systems and have no choice but to proceed with implementation of the new forms on the Jan. 1 effective date," WFHM co-president Michael Heid says in a letter to HUD. As previously reported, HUD has decided to stay with original effective date despite pressure from Congress and major trade groups to postpone the change. "We fully appreciate that there are challenges involved in transitioning to the new RESPA rule, but I want to personally assure all mortgage professionals that we will continue to make every effort to assist them throughout this process," said HUD assistant secretary David Stevens. "Even after Jan. 1, HUD will continue to help lenders, brokers and other settlement service providers in complying with the rule," he added.

Department of Housing and Urban Department officials are moving ahead with the Jan. 1 effective date for the new RESPA rule, despite warnings from industry groups that it could lead to a compliance train wreck. Six industry groups urged HUD to postpone the effective date of the Real Estate Settlement Procedures Act rule that requires lenders to use a new standardized good-faith estimate disclosure and a revised HUD-1 settlement sheet. "HUD, particularly the Office of Housing, is acutely aware of the procedural concerns, timing constraints and ancillary costs attributable to the implementation of these new requirements and the issues they raise for your members," HUD assistant secretary David Stevens says in a letter to industry executives. Mr. Stevens pledged that HUD would continue to work with lenders, title underwriters, escrow agents and others to make implementation as smooth as possible.

The House Financial Services Committee has approved an amendment to the Consumer Financial Protection Agency bill that eases some of the regulatory burden on community banks and makes the measure easier for midsize and small banks to accept. For banks with $10 billion in assets or less, consumer compliance examinations and enforcement authority would be delegated to the banks' primary regulator. CFPA examiners would still examine larger banks. The amendment, sponsored by Reps. Brad Miller, D-N.C., and Dennis Moore, D-Kan., also applies to credit unions with less than $1.5 billion in assets. The Independent Community Bankers of America welcomed the Miller/Moore amendment. It "recognizes that community banks are responsible lenders that didn't cause the financial crisis," ICBA president Camden Fine said. However, ICBA has concerns about the new regulatory agency's broad rulemaking authority to ban abusive lending products and practices. The bill only gives the federal banking regulators an advisory role in the process. ICBA wants the banking regulators to have more authority in approving consumer protection regulations, possibly joint rulemaking authority, according to ICBA's top lobbyist Steve Verdier. "The rulemaking authority ought to be cut back to where the agency [CFPA] is implementing statutes written by Congress or the rulemaking should be assisted by the prudential regulators. They would understand the safety and soundness implications," Mr. Verdier said. The committee's markup of the CFPA bill resumes on Tuesday (Oct. 20) afternoon.

The California Senate has cleared a measure that would reinstate the popular $10,000 tax credit for new homebuyers. The measure, which would re-authorize the use of $30 million in credits not awarded during the first program, is expected to be taken up by the General Assembly next week. The state set aside $100 million for the original program, and more than 10,600 buyers were approved for the original credit before the Franchise Tax Board stopped taking applications July 2. But the FTB has since determined that the average credit would be $7,000, not the full $10,000, freeing up $30 million to cover the tax credit extension. Under the bill, only buyers who close after the extension is approved will be eligible. Those who closed after July 2 but before the bill's effective date would not be eligible. On the federal level, lobbyists from the Mortgage Bankers Association and other trade groups are trying to persuade the White House and Congress to extend the $8,000 first-time homebuyer tax credit at least for a few more months.

MGIC Investment Corp., the nation's largest mortgage insurer outside the federal government, posted a massive $518 million loss in the third quarter, sending its share price plunging. Its net loss for the first nine months was $1.04 billion, compared to $249.8 million for the same period last year. Company chairman and CEO Curt Culver blamed the results on a weak economy, higher unemployment and lower home prices. In tandem with the poor results, MGIC said Fannie Mae has approved its insurance unit MGIC Indemnity Corp. (MIC) as an eligible mortgage insurer through the end of 2011. (Mr. Culver said MGIC is seeking similar approval from Freddie Mac.) Loan delinquencies (not including bulk loans) in its book of business were just under 14% for the quarter; one year prior, the delinquency rate was 7.54%. Under the agreement with Fannie, MGIC cannot contribute more than $200 million to MIC, which limits the amount of business it can write going forward. For MIC to start writing new policies, Wisconsin's Office of the Commissioner of Insurance must sanction the unit. In addition, MIC would need a waiver from OCI regarding Wisconsin's capital requirements. There are 16 states, including Wisconsin, that have specific mortgage insurer capital requirements. Under the plan MIC could do business in those states because MGIC would no longer meet minimum capital requirements.

The Los Angeles and Miami areas saw the most reported fraud for the first half of 2009, according to the Financial Crimes Enforcement Network's updated Suspicious Activity Report Activity Review. According to FinCen's updated SAR report, Los Angeles and Miami each saw 6,300 SAR subjects. Following these, the urban areas with the largest number of mortgage fraud SAR subjects were New York with 4,500, Chicago with 3,200 and the District of Columbia with 2,200. Ranked by total reported subjects, the top 10 states included California, Florida, New York, Illinois, Georgia, Texas, Arizona, Michigan, Virginia and New Jersey. From Jan. 1 to June 30, filers submitted 32,926 mortgage loan fraud SARs, less than a 1% increase over the 32,660 SARs filed in the same period in 2008.

A federal grand jury in West Palm Beach, Fla., returned a 15-count indictment against eight individuals who have been allegedly involved in making false statements to banks to obtain mortgage money to purchase five properties in Wellington, Fla. . The defendants include licensed mortgage brokers, title agents and straw buyers. According to Jeffrey H. Sloman, acting U.S. attorney for the Southern District of Florida, the indictment alleges that the defendants and straw buyers engaged in a scheme which resulted in property being sold twice in one day and nearly doubling the value of that property during that one day. A total of more than $8.5 million in mortgage money was obtained through this alleged scheme. The defendants charged in this alleged scheme are Rony Alberto Aguilar-Hecker, Reinaldo Perez-Sanchez, Pablo Atouro Aponte-Torres, Fabio Salazar, Roger Omar Nunez-Murillo, Idalmis C. Arias, Ericson Perez and Juan Carlos Lopez. At press time, they could not be reached for comment.

An amendment that would delay mortgage disclosure changes under the Real Estate Settlement and Procedures Act is slated to be introduced Thursday afternoon. According to the National Association of Mortgage Brokers, Rep. Judy Biggert, R., Ill., will introduce an amendment to pending consumer protection legislation allowing for a more gradual implementation of RESPA changes. In particular, brokers are concerned that come January 1 the "good faith estimate" form is going to four pages from one, causing headaches throughout the industry. The Biggert amendment would allow "both new and old forms" to be allowed during the transition period, according to a memo issued by NAMB.

After a five-day trial, the owner of USA Properties, William E. McKanry of Warrenton, Mo., was convicted of multiple conspiracy and fraud charges involving the multimillion-dollar sale of 12 local properties. Sentencing has been set for Dec. 22. According to Michael W. Reap, acting U.S. attorney for the Eastern District of Missouri, William E. McKanry, along with his son, William C. McKanry, who owned and operated USA Title, sold 12 real estate properties in Missouri through Paula Enders, a licensed mortgage broker operating through the brokerage company Foundation Mortgage. On the applications, Enders falsified that the source of the downpayments, settlement charges and subordinate finances were to be made by the buyer of these properties, when they were actually made by William E. and William C. McKanry, the sellers of the properties. All closings were made at USA Title and documents falsely showed the buyer as making cash payments that were actually made by the McKanrys. Since the closing on the 12 properties, 11 ended up in foreclosure and were resold for a loss. William C. McKanry pleaded guilty in June to related charges and is scheduled for sentencing Oct. 15. Enders pleaded guilty in December 2008 and is scheduled for sentencing Oct. 22.

New Financial Accounting Standard Board rules that go into effect Jan. 1 could force bank issuers and servicers to consolidate "hundreds of billions of dollars" of private-label residential and commercial mortgage securities on their balance sheets, according to industry trade groups. The Mortgage Bankers Association and Commercial Mortgage Securities Association warn that such a consolidation of securitized assets would "artificially increase" bank risk-based capital and loan loss reserve requirements at the worst time - forcing some to raise additional capital. Anything regulators can do to delay implementation "will serve to postpone the pro-cyclical, anti-consumer, anti-affordable housing impacts" of the FAS rules 166 and 167, MBA and CMSA say in a joint comment letter to the federal banking agencies. The groups say FASB is reacting to credit card issuers that provided credit support for their securities to shield investors from losses and prevent rating agency downgrades. They argue, "There is no business case for sponsors to provide credit support" for static pools of securitized mortgages. "MBA and CMSA recommend that the agencies take the time to study the risks inherent in each of the major securitization structures so that the regulatory capital treatment is more precisely aligned with the risk of the reporting bank." Capital One Financial Corp., McLean, Va., is urging the regulators to delay the capital impact of consolidation for six months. The American Bankers Association wants a one-year delay. The banking agencies have suggested a phase-in over four quarters would reduce the costs and burdens.