Compliance & Regulation

Concerned that "bad actors" may be originating or brokering Federal Housing Administration-insured loans, Housing secretary Shaun Donovan said the government is sending out "SWAT teams" unannounced to check up on problem lenders. In Senate testimony on April 2, Mr. Donovan acknowledged that the number of FHA-approved brokers now stands at 36,000 compared to just 16,000 in mid-2007. The number of FHA approved lenders has grown by 525% since 2006 to 3,300. Senators serving on a HUD subcommittee fear that FHA delinquency rates are rising rapidly and that problem lenders that used to fund subprime mortgages are now facilitating FHA products. Mr. Donovan admitted that early payment defaults on FHA loans "have increased substantially" but said the growth in problem loans is slower than the overall growth in FHA fundings. He blamed rising EPDs on the economy and job losses.

John Wanek of Phoenix, Arizona, and Robert Swanigan of Mesa, Ariz., have been indicted by the Franklin County, Ohio Grand Jury for allegedly having perpetrated a mortgage fraud scheme in Franklin County, Ohio. The defendants were arrested March 30 in Arizona. According to the indictment, the case alleges that Mr. Wanek orchestrated commercial loan fraud through his Arizona companies. Mr. Swanigan was Mr. Wanek's operations manager. Investigators said that in the past six years Mr. Wanek allegedly obtained commercial loans in the Columbus, Ohio area through the use of false statements and forged documents. Mr. Wanek also obtained loans for the purchase of six Columbus apartment complexes and one Indianapolis apartment complex. Mr. Wanek then defaulted on the loans. Mr. Wanek had been indicted in March 2008 in a case alleging mortgage fraud on Franklin County properties worth more than $15 million. That case was due to go to trial this month. The new indictment incorporates the previous case and adds mortgage fraud allegations concerning properties worth an additional $23 million dollars. No trial date has yet been set. Neither defendant could be reached for comment.

Sen. Jon Kyl, R-Ariz., is urging bankers to stand firm and not compromise on cramdown legislation because Senate Democratic leaders don't have the votes to pass it. "There is no reason to concede on cramdowns when you have the votes to stop it," the high-ranking Senate Republican told the American Bankers Association government affairs conference. Sen. Kyl stressed that all 41 Senate Republicans, as well as a handful of Democrats, oppose cramdowns, which would allow bankruptcy judges to reduce the principal amount of a residential mortgage to the fair market value. "You are well aware that such a change to the bankruptcy code would result in higher interest rates for all home mortgages — actually what we don't need now," Sen. Kyl said. Sen. Richard Durbin, D-Ill., has tied a cramdown bill to legislation that increases the Federal Deposit Insurance Corp.'s borrowing authority. ABA members are hoping the Senate will pass the FDIC bill soon. Sen. Kyl assured the bankers the FDIC borrowing bill "enjoys wide bi-partisan support" and the Senate can pass it without the cramdown provisions. "We will stand by you. We have the votes to defeat cramdown," Sen. Kyl said.

Colonial BancGroup, the nation's largest warehouse provider, has received a $300 million capital commitment from mortgage banker Taylor, Bean & Whitaker and other investors, an infusion that will aid in the bank's near-term survival. Described as the lead investor in the deal, TBW is also a warehouse lending customer of Colonial's. The deal was announced late Tuesday afternoon and no other details were released concerning the other investors. Based in Ocala, Fla., TBW is a privately held S&L holding company. According to the Quarterly Data Report, TBW is the nation's eighth largest lender overall and second largest wholesaler. The Alabama-based bank needs to raise $300 million in private equity before it can become eligible for $550 million in Federal TARP funds. According to a statement released by the bank, TBW's investment is contingent upon the Treasury agreeing to infuse the $550 million into Colonial. Once the deal is completed the investor group led by TBW will control 75% of the Alabama bank. On Tuesday, National Mortgage News reported that Colonial had been approaching "mortgage banking companies" about being part of the investor group.

Colonial BancGroup, the nation's largest warehouse provider, has received a $300 million capital commitment from mortgage banker Taylor, Bean & Whitaker and other investors, an infusion that will aid in the bank's near-term survival.Described as the lead investor in the deal, TBW is also a warehouse lending customer of Colonial's. The deal was announced late Tuesday afternoon and no other details were released concerning the other investors. Based in Ocala, Fla., TBW is a privately held S&L holding company. According to the Quarterly Data Report, TBW is the nation's eighth largest lender overall and second largest wholesaler. The Alabama-based bank needs to raise $300 million in private equity before it can become eligible for $550 million in Federal TARP funds. According to a statement released by the bank, TBW's investment is contingent upon the Treasury agreeing to infuse the $550 million into Colonial. Once the deal is completed the investor group led by TBW will control 75% of the Alabama bank. Yesterday National Mortgage News reported that Colonial had been approaching "mortgage banking companies" about being part of the investor group.

Larry J. Lupton, a real estate broker from Brookfield, Wisconsin, has been found guilty of soliciting a kickback in connection with the state's attempted sale of a $30 million office building in downtown Madison.After hearing testimony and receiving evidence during a court trial earlier this month, U.S. District Judge Lynn Adelman found Lupton guilty on all four counts charged in the indictment: bribery, wire fraud and two counts of making false statements to an FBI agent. Lupton solicited a payment from a particular buyer's broker in exchange for steering the sale to that broker's client. Lupton asked the broker for a $75,000 kickback and suggested to the broker that the payment could be in the form of cash paid directly to Lupton or a consulting fee paid to a defunct company that he owned. Either form of payment would allow Lupton to conceal it from the state and from Equis Corporation, the real estate firm that had retained Lupton as an independent contractor. Sentencing has not yet been scheduled.

Accounting rules need to be more "realistic" so Federal Home Loan Banks and other institutions holding mortgage-backed securities until maturity do not have to take "excessive" writedowns, according to House Financial Services Committee chairman Barney Frank, D-Mass. "The Seattle and Boston Federal Loan Banks have been unduly hit by this and it has restricted lending," Rep. Frank told the American Bankers Association government affairs conference. The Boston bank recently reported a $339.1 million "other than temporary impairment" (OTTI) charge on $652.9 million in private-label MBS. The bank only expects a $22 million loss over the life of the securities. The Financial Accounting Standards Board is scheduled to approve changes to its OTTI accounting rules this Thursday (April 2). But ABA is concerned that FASB will limit the impact of those changes to newly impaired assets and the Boston FHLBank, for instance, would not be able to benefit and reverse the $339 million OTTI charge. "If people were forced unduly to mark down instruments that are going to be held to maturity and paying — then I think they ought to be able to go back up," Rep. Frank said

Prior to the recent sale of the government-owned IndyMac FSB to an investor group, Fannie Mae settled a $1 billion-plus buyback dispute with the thrift but all the parties involved are keeping the settlement secret.Representatives from IndyMac's new owners (Dune Capital), the Federal Deposit Insurance Corp., and Fannie all confirmed that the dispute was settled but have declined to say on what terms. A source familiar with the matter said the amount of loans Fannie wanted IndyMac to repurchase totaled about $1 billion. Loan buyback requests typically come about when a buyer of mortgages discovers that the portfolio acquired has early payment defaults or higher-than-anticipated delinquencies.

Colonial BancGroup, the nation's largest warehouse provider, is talking to an investor group that includes some of its mortgage customers about supplying much-needed capital to the bank, a source familiar with the matter told National Mortgage News. The Alabama-based bank needs to raise $300 million in private equity before it can become eligible for $550 million in Federal TARP funds. The source, requesting anonymity, said Colonial is approaching "mortgage banking companies" about being part of the investor group. The Wall Street Journal reported that non-bank lender Taylor Bean & Whitaker, Ocala, Fla., is part of that group and that TBW has a thrift affiliate that would be part of the deal. The newspaper says that the plan would be to convert Colonial from a commercial bank into a thrift. At press time officials from both Colonial and TBW declined to comment or had not returned telephone calls about the matter.

The Department of Housing and Urban Development is seeking expanded loss mitigation authority allowing the principal amount of an FHA-insured mortgage to be reduced by up to 30% to help homeowners avoid defaults. The Federal Housing Administration would pay a partial claim to the servicer/investor to cover the writedown and make the mortgage current. Eventually, though, the borrower would have to repay the forgiven principal — but without interest. "It would save FHA money," said William Apgar, a senior advisor to the HUD secretary. He noted that such an aggressive approach is "consistent" with President Obama's loan modification plan. "We do believe FHA should have state-of-the-art modification tools," Mr. Apgar told National Mortgage News. Meanwhile, FHA's "serious" delinquency rate is creeping up. FHA loans 90 days or more past due, in foreclosure and in bankruptcy hit 7.46% in February, compared to 6.16% a year ago.