Compliance & Regulation

Led by the ranking minority member on the House Financial Services Committee, 28 Republican members of Congress are asking the Justice Department to include Fannie Mae and Freddie Mac in their targeted probe into mortgage fraud. Led by Rep. Spencer Bachus, R., Ala., the group sent a letter to Attorney General Michael Mukasey, asking whether the Department of Justice is focusing on MBS fraud "and/or accounting fraud committed or aided and abetted by Fannie Mae and Freddie Mac." The 28 also want to know if the government is looking into the 'Friends of Angelo' program where certain elected officials, past and present GSE employees, and others, received breaks on mortgages that were funded by Countrywide Home Loans, Mr. Mozilo's former company. (Countrywide is now owned by Bank of America.) Both GSEs were investigated for fraud in regard to their past accounting scandals. No charges were ever brought. DOJ's wide ranging investigation into mortgage fraud is called "Operation Malicious Mortgage" and includes probes of more than 20 subprime lenders and some Wall Street firms.

The government sponsored enterprises indicated a willingness at the Mortgage Bankers Association convention to jettison their long-held allegiance to the bottom line in favor striking a balance between serving their shareholders and the housing markets. Instead of concentrating on maximizing profits, Fannie Mae will focus on the minimum returns necessary to insure the company's safety and soundness, the GSE's new president, Herbert Allison, told the San Francisco meeting. "Once we do that," Mr. Allison said, "we will review the pricing necessary to grow the company." David Moffett, Mr. Allison's counterpart at Freddie Mac, said his company is reviewing pricing "across-the-board" with the intent of readjusting "for the 30-year risk we are taking." Their remarks were seconded by director James Lockhart of the Federal Housing Finance Agency. While Fannie Mae and Freddie Mac serve two masters, Mr. Lockhart said, "they serve an extremely important mission, and that's what everybody should be focusing on. The key thing going forward is to get them through this market first."

SourceMedia, the publisher of Mortgage Technology magazine, gave out awards in seven categories honoring achievement in mortgage lending technology at the MBA's annual convention in San Francisco. The Steve Fraser Visionary Award is given to an outstanding mortgage technology innovator, visionary or evangelizer. The winner of the award is Kim Weaver of Fiserv for her dedication to furthering the e-mortgage and getting lenders live in an e-mortgage environment. The Release of the Year Award is given to the announcement of a technology product, platform, alliance or initiative that seems likely to have the broadest impact on mortgage lending. The winner of the award is DocVelocity for making lender-proven paperless technology available to all mortgage participants. The Synergy Award is given to technology initiatives and alliances that show exemplary inter-operability in a production setting to advance the cause of automation and e-commerce. The winners of the award are Optimal Blue and Secondary Interactive for bridging the gap between pricing and secondary marketing. The Lasting Impact Award is given to an individual, group or company that launched a technology initiative or development that has had a lasting impact. The winner of the award is Roger Gudobba for evangelizing on behalf of a data-driven process and working to help the mortgage industry embrace this vision. The 10X Award is given to a company, product or technology application having an exponential impact on mortgage lending. The winner of the award is The Turning Point for MACH 3, which helps lenders get repeat business through technology in a down market. The Help Desk Award is given for outstanding customer service and technical support. The winner of the award is Mortgage Builder for combining experienced support staff with cutting-edge technology to help clients. The Fix-It Award is given to a technology tool providing an effective solution for a particular industry problem, need or channel. The winner of the award is Zaio, for solving the problem of appraiser fraud through automation.

Financial institutions that want the Treasury Department to invest in their companies by buying preferred shares need to fill out an application and submit it to their primary regulator, under new government procedures outlined by secretary Henry Paulson on Monday. The government has created a single application form for use by all bank or thrift regulators. The application will be posted on all regulatory websites by close of day Monday. "Treasury has worked with the regulators to establish streamlined evaluations," said Mr. Paulson. "This means that all regulators will use a standardized process to review all applications to ensure consistency." Last week Treasury announced plans to buy $125 billion of non-voting preferred in nine of the nation's largest banks and investment banking firms, including the four largest players in mortgages: Bank of America, Citigroup, JPMorgan Chase and Wells Fargo. It will now spend another $125 billion to buy stakes in potentially hundreds of other smaller financial institutions, leaving less money for its mortgage purchase program. For details about the initiative, go to: http://www.treas.gov/press/releases/hp1222.htm

The chief executive of NeighborWorks America said some people are "misinformed" about the role that loans made under the Community Reinvestment Act have played in the current mortgage crisis. Kenneth D. Wade, in an interview with MortgageWire during the Mortgage Bankers Association annual convention in San Francisco, said there is "no basis" for saying these loans are responsible for the industry's problems. In conversations he has had with financial institutions, their CRA portfolios are performing fine, if not better than their regular portfolios, he said. Many of the now infamous subprime lenders were not subject to CRA, Mr. Wade added. CRA, he said, is an "easy, convenient target." NeighborWorks America has not seen an appreciable change in the demand for its services because of the ban on seller-funded down payment assistance. There is an impression that Congress has shut down all forms of down payment assistance programs, but programs that involve grants or loans, such as state housing finance agency programs, are still permissible and performing quite well, he said.

Federal Reserve chairman Ben Bernanke told Congress on Monday he is concerned about the condition of the commercial real estate market. Testifying before the House Budget Committee, the Fed chairman noted construction spending "decelerated" in the third quarter, after posting "robust gains" during the first half. He said declining sales are affecting the business community, which is hurting plans for building. He also cited "reduced credit availability from banks and other lenders." The economy is expected to shrink the rest of this year and into early next. "We are in a serious slowdown for the economy," Mr. Bernanke said, adding that, "whether it is called a recession or not is of no consequence." The nation's unemployment rate -- now at 6.1% -- could hit 7.5% or higher by next year, causing more consumers to go delinquent on their home mortgages, exacerbating falling home prices.

MRG Document Technologies has integrated with San Francisco-based ComplianceEase to provide automated compliance auditing for closing documents prepared by MRG. MRG is a provider of compliance and documentation services for the financial industry. ComplianceEase's automated compliance system, ComplianceAnalyzer, is accessible through MRG's document preparation system, MIRACLE ONLINE. The integration enables lenders using MRG to access all ComplianceEase tests and reports online. Audit results for possible compliance issues are available in both summary and detail formats. There is no additional charge for users to access ComplianceEase via MIRACLE ONLINE. Lenders simply sign up directly with ComplianceEase and the integration is handled by MRG.

Lender Processing Services, Jacksonville, will offer servicers using its systems access to servicing technology from Reverse Mortgage Solutions.Dan Scheuble, co-chief operating officer at LPS, said the partnership extends LPS's reach into the growing business for reverse mortgage loans. The primary market for reverse mortgage loans, or home equity conversion mortgages, is homeowners over the age of 65 who have paid off their mortgages. Currently, there are approximately 34 million seniors in the nation. LPS estimates that 12.5 million seniors currently own their homes mortgage-free, representing $4 trillion in equity.

A group of Idaho appraisers have filed a class-action lawsuit against the Bank of America-owned Countrywide Financial Corp., claiming the lender used strong arm tactics, intimidating appraisers to generate reports and "blacklisted" some for not cooperating with the company. The lawsuit, filed in U.S. District Court in Seattle, claims Countrywide forced appraisers to use improper appraisal techniques that benefited the lender. BoA/Countrywide is the nation's largest residential lender, according to figures compiled by the Quarterly Data Report. The lawsuit claims Countrywide's actions caused "substantial damage to thousands of appraisers on top of distorting real estate prices in the marketplace." At press time, a spokesman for BoA had not returned a telephone call about the matter.

The five board members picked by Congress to oversee the "Troubled Asset Relief Program" will earn at least $186,000 a year plus expenses, according to an analysis of the bill done by National Mortgage News. The five member panel will include overseers appointed by The Speaker and the minority leader of the House, the Senate majority and minority leaders, and one person picked by both the Speaker and majority leader of the Senate. The bill offers no guidance on what type of people might be appointed to the panel. Their salaries are capped based on what's called "Level 1 of the Executive Schedule" which works out to roughly $186,000 a year. Among its powers, the oversight panel can commission staff from other government agencies to work for them and hold hearings on the Treasury's TARP effort. Congress had not yet appointed any board members. In other TARP news, the Treasury has picked Simpson, Thacher and Bartlett to serve as a legal adviser. The law firm said it is already working on helping the agency with its bank equity program.