Compliance & Regulation

Former Housing and Urban Development Secretary Henry Cisneros, who recently resigned from the board of Countrywide Financial Corp., plans on selling his holdings in the troubled lender -- all 25,337 shares worth.According to a Form-4 filed with the Securities and Exchange Commission, Mr. Cisneros signaled his intention to sell his stake in the company beginning Nov. 6. (In trading Nov. 19, Countrywide's shares reached a new 52-week low of $10.25.) Meanwhile, according to an investment newsletter called tickerspy.com, investor George Soros now owns 1.8 million shares in Countrywide. On Monday it was also revealed that Countrywide is paying more to insure the debt of its home loan unit. That cost jumped 30%, or 787 basis points ($787,000 per year for five years to insure $10 million in debt), according to Markit Intraday.

The Mortgage Bankers Association, the American Land and Title Association, and the American Escrow Association have announced the development of uniform mortgage closing instructions.The instructions, which are being proposed to members for comment, are designed to improve efficiencies and lower costs by replacing numerous instructions with two standard sets, and to help stem mortgage fraud and facilitate automated mortgage originations, the associations said. When finalized, they will not be required to be used by lenders but are likely to be widely accepted, the groups said. "The instructions promise to save money and increase efficiency across the lending and settlement industries, which will ultimately help borrowers reduce their closing costs," said Ken Markison, the MBA's senior director and regulatory counsel. "It's critical that companies across the industry understand the instructions and provide useful comments so that MBA, ALTA, and AEA can move forward to finalize the instructions for industry use."

The Office of Thrift Supervision is refining a policy position on loan modifications that would compensate servicers and allow adjustable-rate subprime borrowers to stay at the initial interest rate for 36 months if they can't afford their payments once the mortgage resets.OTS director John Reich has discussed the proposal with Treasury Department officials and he believes a three-year modification period is consistent with current servicing contracts and could be used by all servicers - not just thrift institutions. Mr. Reich told reporters he is "not comfortable" with proposals that call for converting 2/28 ARMs to 30-year fixed rate mortgages. Under his proposal, borrowers that are current and borrowers that became delinquent because of a reset could be eligible for a loan modification. However, each eligible borrower would have to make their monthly payment for six months before the modification becomes permanent. Servicers would be paid $500 for each loan modification Mr. Reich plans to discuss the loan modification proposal at OTS' housing conference on Dec. 3 at the National Press Club in Washington.

The Office of Federal Housing Enterprise Oversight has spent over $16 million, or 25% of its budget, on litigation expenses as it pursues administrative charges against former Fannie Mae and Freddie Mac executives.OFHEO receives $66.1 million in funding in fiscal year 2007, including a $6.1 million supplemental appropriation to cover litigation expenses. Former Freddie chairman and chief executive Leland Brendsel recently agreed to a $16.4 million settlement, and four other former Freddie executives agreed to pay civil fines totaling $515,000 and to forfeit $258,000 in ill-gotten gains. OFHEO Director James Lockhart says he expects Congress to provide his agency with only $60 million for the current fiscal year even though the agency's litigation expenses will remain high. An administrative court judge is set to hear OFHEO's charges against former Fannie chairman and CEO Franklin Raines in 2008. Mr. Lockhart noted that litigation expenses and the appropriations process make it difficult to plan for and fill 40 positions. OFHEO currently has 235 full-time employees. OFHEO can be found on the Web at http://www.ofheo.gov.

First American Title Insurance Co. has agreed to pay a $5 million fine and shut down 84 affiliated partnerships with real estate agents, mortgage brokers, and builders in Florida as part of a settlement with state regulators and the U.S. Department of Housing and Urban Development."Our joint investigation found these partnerships were created to generate referrals in violation of the Real Estate Settlement Procedures Act and HUD's policies against sham affiliated business arrangements," HUD Assistant Secretary Brian Montgomery said. The Santa Ana, Calif.-based company agreed to abide by HUD rules in operating future affiliated title companies in Florida that are separately capitalized and have full-time employees. First American said it is adjusting its practices to changing regulatory standards. "Homeowners who purchased title insurance through these joint venture companies were charged premiums consistent with the valid, filed rates for title insurance in Florida," the company said. "Rates were not adversely impacted by these business arrangements." First American can be found on the Web at http://www.firstam.com.

The Senate has passed by unanimous consent a bill that provides for a seven-year extension of the Terrorism Risk Insurance Act, which is due to expire on Jan. 1.The Bush administration has signaled that it supports the Senate bill, but "strongly opposes" a House-passed bill that provides for a 15-year extension and expands coverage to include nuclear, biological, chemical, and radiological acts of terrorism. The Senate bill includes a study of such expanded coverage. The House and Senate banking committee leaders will have to reconcile their differences when Congress returns from its Thanksgiving break on Dec. 3. Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee, has already suggested that a temporary 120-day extension may be needed. Meanwhile, real estate and financial services firms are hoping that a deal can be worked out quickly. "Extension of the Terrorism Risk Insurance program is crucial to maintaining the smooth operation of the commercial real estate finance market," said Mortgage Bankers Association chairman Kieran Quinn.

A few Republican senators are blocking efforts by Democratic leaders to pass a Federal Housing Administration reform bill just before the Senate leaves for a two-week Thanksgiving break.Senate Majority Leader Harry Reid, D-Nev., urged Republicans to expedite passage by allowing an up-or-down vote on the bill (S. 2338), which would increase the FHA's capacity to refinance struggling subprime borrowers. "These borrowers need better mortgage options, and FHA loans will be a better option with this legislation," Sen. Reid said. But Sen. Tom Coburn, R-Okla., said he would object to such a vote, which caused Sen. Reid to withdraw his request for a vote late Thursday afternoon. The Oklahoma Republican said the Senate needs to take the time to debate and consider changes to the FHA reform bill. And he raised concerns about increasing the FHA loan limit to $417,000 (the conforming loan limit) and lowering the FHA downpayment requirement from 3.0% to 1.5%.

The Office of Federal Housing Enterprise Oversight has given Fannie Mae the green light to restart its construction lending program, but the government-sponsored enterprise is still waiting for the Department of Housing and Urban Development to complete a review.OFHEO Director James Lockhart told MortgageWire that he "signed off" on the program, but included some "growth" parameters on Fannie's purchases of acquisition, development, and construction loans from lenders. A HUD spokesman confirmed that the department has started a review of the ADC program, but could not say when it would be completed. HUD is the GSE's mission regulator. Fannie Mae could not be reached for comment. In July 2006, OFHEO ordered Fannie to suspend its ADC program until it had fixed certain operational and control problems. Fannie Mae can be found online at http://www.fanniemae.com.

The House has passed a predatory-lending bill by a bipartisan vote of 291-127 that clamps down on abusive lending practices, makes securitizers responsible for loans they package, and lowers the points-and-fees trigger on the Home Ownership and Equity Protection Act to cover more high-cost subprime loans.Mortgage lenders, along with the Bush administration, oppose key provisions of the bill, contending that the lending standards are too subjective and that the assignee liability provisions (along with the HOEPA provisions) will reduce access to mortgage credit. However, Rep. Spencer Bachus, R-Ala., said the bill will "protect consumers from predatory lending practices" and preserve access to credit. "We are dealing with legislation that seeks to prevent a repetition of the events that caused one of the most serious financial crises in recent times," said House Financial Services Committee Chairman Barney Frank, D-Mass. The National Association of Mortgage Brokers succeeded in getting language in the bill (H.R. 3915) clarifying that a broker's fee can be financed into the loan. However, mortgage bankers are concerned that this language might require the disclosure of servicing-released premiums for the first time. Senate Banking Committee Chairman Christopher J. Dodd, D-Conn., said he will introduce a predatory-lending bill soon.

The Rev. Al Sharpton is calling on Senate Democrats to stop the Department of Housing and Urban Development from killing downpayment assistance programs that help Federal Housing Administration homebuyers just as the Democrats are trying to pass an FHA reform bill that also prohibits DPA programs.The civil rights activist said House Democrats have moved to block a HUD rule that would prohibit seller-funded downpayment assistance that Nehemiah Corporation of America and other nonprofits arrange for FHA borrowers. But Senate Banking Committee Chairman Christopher J. Dodd, D-Conn., has been "missing in action," the Rev. Sharpton told reporters, when it comes to saving this homeownership program for minorities and low-income families. However, the Senate Banking Committee has approved an FHA reform bill that lowers the FHA downpayment requirement from 3.0% to 1.5% and prohibits seller-funded downpayment assistance on FHA loans. Senate Majority Leader Harry Reid, D-Nev., was trying to get the Senate to vote on an FHA reform bill Thursday. But Senate Republicans are stonewalling the Democrats on several major bills. The FHA reform bill's chances of getting through appear to be slim.