Compliance & Regulation

President Obama has named Carol Galante, a nonprofit multifamily builder, deputy assistant secretary in charge of the Department of Housing and Urban Development's multifamily program.Ms. Galante joins HUD from Bridge Housing Corp., which specializes in affordable homes in the California market. At HUD she will be in charge of the FHA's multifamily program, in particular financing and support for the government's $58 billion worth of privately owned rental properties. Ms. Galante joined Bridge in 1987 and was named president in 1996.

A day after press reports suggested that Jerry Howard might be dethroned as president and CEO of the National Association of Home Builders, the trade group issued a press release saying that he is still in charge. One builder, requesting anonymity, told National Mortgage News that Mr. Howard and certain homebuilding firms that were upset with the trade group's apparent stance on tax breaks that might only benefit small builders "have kissed and made up." In its statement NAHB noted that its High Production Home Builders Council met Monday for a "candid" discussion of issues facing builders, adding that "now more than ever, it is important for all homebuilders to be united." The Wall Street Journal reported in its Monday edition that Mr. Howard might be forced out of NAHB by a faction of large publicly traded building companies.

Fannie Mae's refinancing volume jumped to more than $41 billion in February, nearly three times the refis the company experienced during the month of January and the largest refinancing volume in nearly a year. Fannie also said more than 100,000 borrowers have accessed its online mailbox to inquire about their eligibility for refinancing under the Obama administration's refinancing plan, and about 50,000 callers have contacted Fannie's national hotline since the plan made its debut on March 4. The government-sponsored enterprise — currently held in government conservatorship — said it has launched a new addition to its website that will allow borrowers to quickly determine if they have a Fannie Mae-held mortgage. This is a determining factor in whether a borrower is eligible for the program, Fannie said.

The Financial Accounting Standards Board has proposed changes to its "other-than-temporary impairment" rules that should relieve many institutions from taking sharp losses on their holdings of mortgage-backed securities. For debt securities institutions are holding and do not expect to sell, only credit losses would be reported in earnings and the remainder of the impairment would be reported in "other comprehensive income," according to newly proposed OTTI guidance. "The new guidance makes it clear that effects on income are limited to actual credit losses. Notice that the new FASB guidance on OTTI accounting has little effect on capital," according to credit strategists at Bank of America/Merrill Lynch. Currently, FASB has a tougher ability-to-hold standard and the entire estimated impairment is reported as a loss. The comment period on the FASB guidance ends April 1. FASB also is seeking comment on changes to its fair value rules for determining distressed and inactive markets.

Mortgage-related fraud may have cost the industry between $15 billion and $25 billion last year, according to an estimate made by the Mortgage Asset Research Institute. Speaking at a fraud prevention conference in Las Vegas, MARI's Merle Sharick told the audience, "Mortgage fraud is a giant and growing cause of losses." Speakers at the conference said fraud might be a bigger drain on the mortgage business than most executives realize. The last official FBI count put the industry's annual loss due to mortgage fraud at $5 billion. But Scott Broshears, the special agent in charge of uncovering and prosecuting the crime, said his agency is "probably easily investigating" crimes valued at double that amount. Lending further credence to the belief that much of the fraud for profit taking place is doing so at the hands of organized crime, James Freis, director of the Financial Crimes Enforcement Network, a division of the U.S. Treasury, said his agency has noticed a direct link between mortgage fraud and money laundering. "Mortgage fraud is a highly moving target that requires the disposition of large sums of cash," he said. "These are often interconnected. These are not separate things. Profits need to be integrated into the financial system." Scott Brower, the U.S. attorney for Nevada, told the conference that even with the change in administrations in Washington, mortgage fraud "will be on our radar screens for the foreseeable future." He said, "We're trying to get ahead of the problem, but I'm not sure anybody in law enforcement can. We're just scratching the surface. We're likely to be very, very busy for months and years to come."

The FHA is experiencing "a large number of zero payment defaults" in which borrowers fail to make even one payment on their new government-insured mortgages, a Department of Housing and Urban Development official said at the Mortgage Bankers Association's annual National Fraud Issues Conference in Las Vegas. The trend, which Lisa Gore, the assistant special agent in charge of the criminal investigation division in HUD's inspector general's office, called "a huge red flag" that some type of fraud has been committed, is similar to the one experienced in the 1999-2001 housing market turndown. Ms. Gore's remarks confirm a front page Washington Post report earlier this month that many FHA borrower's are defaulting as quickly as they close. The newspaper's analysis of FHA data found that more than 9,200 loans insured by the agency in the past two years have gone delinquent with either one payment or no payments being made. The analysis found that the pace of what the Post called "instant defaults" has tripled in the last year, and more than two dozen loans are defaulting in this manner every week, the newspaper reported. Ms. Gore said the IG's office has stepped up the number of investigations into the "large number" of these and other cases of possible fraud. One investigation involves "more than 100 loans," she told MortgageWire.

A day after press reports suggested that Jerry Howard might be dethroned as president and CEO of the National Association of Home Builders, the trade group issued a press release saying that he is still in charge. One builder, requesting anonymity, told National Mortgage News that Mr. Howard and certain home building firms that were upset with the trade group's apparent stance on tax breaks that might only benefit small builders "have kissed and made up." In its statement NAHB noted that its "High Production Home Builders Council" met Monday for a "candid" discussion of issues facing builders, adding that "now more than ever, it is important for all homebuilders to be united." The Wall Street Journal reported in its Monday edition that Mr. Howard might be forced out of NAHB by a faction of large publicly traded building companies.

Farmer Mac lost $61.1 million ($6.03 per share) in the fourth quarter 2008 as a result of its losses on financial derivatives and provisions for losses related to credits granted in the ethanol sector.The GSE halved its dividend for the first quarter, cutting it to five cents a share. For the full year 2008, Farmer Mac lost $154.1 million or $15.40 per share. Newly installed president and chief executive Michael A. Gerber, said "We have adjusted our funding strategies to reduce the reliance on financial derivatives that have adversely affected our capital position, notwithstanding that all of our derivatives have been economically effective." He said the company was able to raise $124.2 million in new capital through preferred stock offerings in the third and fourth quarters of last year.

A federal bankruptcy court in Newark has approved the hiring of a criminal attorney by CU National Mortgage of New Jersey, as a federal investigation into allegations made against the failed mortgage lender spread.The bankruptcy court, where CU National and its parent US Mortgage Corp., landed last week, has approved the hiring of Gibbons PC as special criminal counsel for the company, and the payment of a $21,178 retainer to the Newark firm. The action comes as a federal grand jury is investigating allegations that the company defrauded dozens of credit unions by selling their mortgages to Fannie Mae without authorization and keeping the proceeds. As many as 30 credit unions in the mid-Atlantic region believe as much as $160 million of their loans may have been fraudulently sold to Fannie Mae.

Reported incidents of mortgage fraud in the U.S. increased by 26% in 2008 from 2007, an all-time high, according to a new report issued by the Mortgage Asset Research Institute. For the first time, Rhode Island ranked first in the nation in regard to mortgage fraud. Released in Las Vegas at the MBA's annual National Fraud Issues Conference, the report found that fraud activity based on the book of business originated in the Ocean State was three times the national average. "Future reports will tell if this is a statistical anomaly," said MARI spokesman Merle Sharick. "But for now, current data suggests that the state has emerged with a problematic and heretofore unnoticed mortgage fraud problem." Rhode Island's rise up the ladder from the fourth position last year knocked Florida down to the second spot. But Nevada and Utah have dropped out of the top10 altogether. California, too, has dropped, from fourth among the list of hot spots for fraud last year to eighth this year. The position changes suggests that there might not be any more money to made in those places hit hardest by the housing downturn, so scam artists are taking their talents elsewhere.