Compliance & Regulation

Vicki Bott has left Wells Fargo Home Loans to run the Federal Housing Administration's single-family program, according to industry sources. The new deputy assistant secretary began working at the Department of Housing and Urban Development on Monday after moving from Austin, Texas. Ms. Bott was a senior vice president for national sales at Wells Fargo Wholesale Lending. She will report to FHA commissioner David Stevens. Wells is one of the nation's largest FHA funders. In other personnel news, the Mortgage Bankers Association has hired Tom Koonce to manage the trade group's day-to-day lobbying efforts on Capitol Hill. A former lobbyist for the Independent Insurance Agents and Brokers of America, Mr. Koonce previously served as legislative director for Rep. Brad Miller, D-N.C., who has sponsored several anti-predatory lending bills.

Even though industry groups are clamoring for elected officials to extend the $8,000 first-time homebuyer tax credit past its November 30 sunset date, the White House said Tuesday it has yet to make up its mind on the issue. White House press secretary Robert Gibbs said the tax credit has "helped the economy" and an extension is under consideration as the President looks for ways to create more jobs. "Obviously, there has been quite a bit of success" in the program, Mr. Gibbs told reporters. Housing and mortgage industry groups are urging Congress to extend the credit for another year. Meanwhile, the National Association of Home Builders wants to expand the tax credit to all home buyers. "We stand ready to work with President Obama and Congress to extend and expand the tax credit," said NAHB president Joe Robson. The House Ways and Means Committee is expected to begin work on a tax credit extension bill in a few weeks. Due to the costs of the program and budget constraints, some insiders are betting Congress will go along with a six-month extension.

Lisa Torres, formerly of Johnston, R.I., pleaded guilty to a $1.7 million mortgage fraud scheme in which she purchased properties that had recently been foreclosed upon, and then used the names of straw purchasers in sham sales to finagle mortgage financing. According to Peter F. Neronha, U.S. attorney for the District of Rhode Island, between October 2007 and June 2008, Torres purchased nine residential properties in Providence. She then enlisted the aid of others, some willing participants, others unwitting dupes, to arrange sham sales of the properties at inflated prices in order to obtain mortgage financing. The loan proceeds went to Torres, the purported seller of the properties, so she profited the difference between what she had paid for the properties, about $1.1 million, and what she purportedly sold them for, about $1.7 million. Torres is currently serving a federal prison sentence for obstruction of justice, conspiracy and making false statements, a case that was prosecuted in U.S. District Court, Massachusetts. She is due to be released on Jan. 26, 2010. Sentencing for the fraud scheme has not yet been scheduled.

Three more investment funds — with combined commitments of at least $1.5 billion — have applied for and received approval from the Treasury Department to participate in the 'Public-Private Investment Program' in regard to buying troubled securities. The three are: AllianceBernstein LP and its sub-advisors Greenfield Partners LLC and Rialto Capital Management LLC; BlackRock, Inc.; and Wellington Management Company LLP. Treasury says each has completed initial closings and has at least $500 million of committed equity capital from private investors. To date, at least five funds have been established with total debt capital of $12.27 billion. So far, no PPIP sales have been disclosed publicly. Treasury says more PPIP funds will close and be announced by the end of October.

Freddie Mac is warning potential buyers of its foreclosed properties that they have to submit a bid by Oct. 30 to take advantage of its temporary offer to cover part of the closing costs. Freddie has 34,700 in real estate owned properties. To expedite REO sales the government-sponsored enterprise will put up to 3.5% of the house price toward closing costs. "Every home shopper should know there are only 30 days left to save potentially thousands of dollars in transaction costs when they buy a HomeSteps home," said Freddie vice president Chris Bowden. HomeSteps is Freddie's REO sales unit. Buyers also have to complete the closing by Dec. 31 to get the closing cost discount.

Housing trade groups are urging Senate appropriators to go along with a House-passed provision that extends the GSE $729,750 loan limit, which is due to expire Dec. 31, for another nine months. "We believe continuing the current higher temporary loan limit is necessary to complete the recovery of the nation's housing market," the nine trade groups say in a joint letter. The House has passed a Department of Housing and Urban Development appropriations bill that extends the $729,750 maximum loan limit for Fannie Mae, Freddie Mac and Federal Housing Administration loans for the rest of the 2010 fiscal year, which ends Sept. 30, 2010. The Senate did not include an extension because raising Fannie and Freddie's loan limit raises budget costs. The Senate is expected to accept the loan limit extension when House and Senate appropriators meet in conference to agree on a final HUD FY 2010 budget bill. Congress raised the loan limit to $729,750 in Feb. 2008 as part of the Bush administration's stimulus bill. It was extended again in Feb. 2009 with the passage of President Obama's stimulus bill. "Although the economy is showing signs of recovery, current conditions require those limits to stay at the higher level," the trade groups say.

The combined Treasury and Federal Reserve investment in the U.S. mortgage market was above the $1.2 trillion level when the government's fiscal year ended earlier this week, according to the latest figures from the Federal Housing Finance Agency. But even at that, some $768 billion in liquidity is still available if needed, FHFA Acting Director Edward DeMarco said at the New England Mortgage Bankers Conference in Providence. As of Sept. 30, Fannie Mae and Freddie Mac had drawn $96 billion under the Treasury Department's $400 billion senior preferred stock purchase agreement. Treasury also has purchased $181 billion of the enterprise's mortgage-backed securities. In addition to DoT's support, the Fed has purchased $885 billion worth of MBS securities, $813 billion of which was issued by Fannie and Freddie. The Fed also has bought $131 billion in Fannie, Freddie and Federal Home Loan Bank debt obligations out of the $200 billion for which it is committed. "This considerable backstop" has allowed enterprises to play a "critical role in bringing some measure of liquidity to the mortgage market," Mr. DeMarco told the conference. In particular, the government support has assured lenders that they will have an outlet for loan originations and kept mortgage rates at or around the 5% level.

The SAFE Act is putting nondepository mortgage lenders at a disadvantage to banks when it comes to hiring new loan officers, according to Scott Stern, chief executive of mortgage cooperative Lenders One. The Secure and Fair Enforcement for Mortgage Licensing Act passed by Congress in July 2008 requires LOs joining an independent mortgage company to go through prelicensing and continuing education requirements mandated by the states. "It is a huge barrier to hiring new loan officers," Mr. Stern said, because LOs hired by banks don't face prelicensing and continuing education requirements and don't pay licensing fees. Like stockbrokers, he said there should be one nationally recognized prelicensing course and one nationally recognized continuing education course for all loan officers. "We believe all lenders that meet with consumers should be licensed," the Lenders One CEO said. Mr. Stern is forming an advocacy group called the Community Mortgage Lenders of America that has membership commitments from 140 mortgage banking companies and community banks. He has lined up BuckleySandler LLP to serve as regulatory counsel for the new trade group and the Glaser Group to be its Washington lobbying arm.

Jerald Allen Teixeira, a former loan officer from Bakersfield, Calif., has pleaded guilty to wire fraud in connection with a scheme to defraud mortgage lenders. Teixeira was formerly a loan officer at Tower Lending, a mortgage brokerage company that was affiliated with Crisp & Cole Real Estate and was owned by Crisp & Cole's owners. As part of his plea agreement before U.S. District Judge Oliver W. Wanger, he agreed to cooperate in the government's ongoing investigation. According to Lawrence G. Brown, U.S. attorney for the Eastern District of California, Teixeira admitted that he and others executed a scheme to defraud lending institutions by submitting materially false and fraudulent statements in mortgage loan applications and related documents to obtain loans from the lenders for borrowers' purchases of real property. Teixeira also obtained loans to finance the purchase of approximately 11 real properties with a total purchase value at the time of $4.4 million. In order to qualify for these loans, he knowingly made misstatements or omitted relevant information. Teixeira is scheduled for sentencing on March 22, 2010.

An Indianapolis man was sentenced to 30 months in prison, followed by three years of supervised release, for participating in a large city-based mortgage fraud scheme. According to Timothy M. Morrison, U.S. attorney for the Southern District of Indiana, Jerry J. Jaquess admitted that, through his real estate company Homevestors LLC, he and others entered into contracts to purchase 186 duplexes in the Windsor Village neighborhood on the east side of Indianapolis. On each of the properties, Jaquess entered into a land contract immediately preceding the closing showing that Homevestors was purchasing the property for $50,000. Prior to finalizing the purchase agreements, Jaquess caused three of the Windsor Village properties to be listed on a Multiple Listing Service showing a list price of $120,000. Jaquess did not own the properties at the time they were listed. A few days after these properties closed, Jaquess and his associates were responsible for these three sales at $120,000 apiece to be placed on the MLS, showing these properties as comparables on appraisals to be prepared for all of the remaining Windsor Village properties, thus making it appear that each of those properties were worth $120,000. Jaquess attended the closings as the seller and took the downpayment checks to the closings. He signed the loan closing documents on behalf of Homevestors, including false HUD-1 Settlement Statements. After closing, Jaquess received checks to Homevestors for the amount of the fraudulent loan proceeds. In addition to the prison time, Chief Judge David F. Hamilton ordered Jaquess to pay more than $820,000 in restitution.