Compliance & Regulation

While some in the industry are calling seller- and nonprofit-supported downpayment assistance "a lost battle," a new lawsuit has been filed against the Department of Housing and Urban Development by AmeriDream Inc., Gaithersburg, Md., to resist HUD's effort to eliminate private DPA.It is the second lawsuit filed this month by AmeriDream, an affordable housing nonprofit organization, as part of a wider effort to fight HUD's decision to eliminate privately sponsored DPA options for low-income borrowers. The new action seeks a temporary restraining order and preliminary injunction to stop HUD from enforcing its final rule on Oct. 31 that would eliminate DPA programs sponsored by nonprofit organizations, AmeriDream said. "HUD's actions reveal its rulemaking for what it really is: a desired result in search of a justification," AmeriDream president Ann Ashburn said in a company release. "We will continue to fight HUD's arbitrary and capricious decision to eliminate valuable assistance to individuals and families who deserve to become homeowners." On Oct. 1, both AmeriDream and DPA industry pioneer Nehemiah Corporation of America, Sacramento, Calif., filed lawsuits against HUD. AmeriDream can be found on the Web at http://www.ameridream.org.

An internal investigation by Beazer Homes USA has found that its mortgage unit violated Federal Housing Administration rules, "particularly in relation to downpayment assistance programs," and a possible settlement with regulators could range from $8 million to $15 million, according to the Atlanta homebuilder.The violations of Department of Housing and Urban Development rules by Beazer Mortgage Corp. date back to "at least 2000," the company said, but it did not disclose the number of FHA loans involved or the default rates on those loans. A spokesman for the HUD inspector general's office declined to comment on the Beazer investigation. The homebuilder previously disclosed that the U.S. attorney's office in Charlotte, N.C., had subpoenaed its mortgage banking unit for loan production documents. Beazer also faces civil litigation from homebuyers who lost their homes. Fitch Ratings -- citing the Beazer internal probe, accounting irregularities, and "challenging" market conditions -- downgraded Beazer's issuer default rating and its senior notes from BB to BB-minus. The ratings remain on Rating Watch Negative. Beazer can be found online at http://www.beazer.com.

House Financial Services Committee Chairman Barney Frank, D-Mass., has drafted a bill that temporarily increases the caps on Fannie Mae's and Freddie Mac's portfolios for six months so the two mortgage giants can purchase modified or refinanced subprime loans.The bill would increase the caps on the companies' $700 billion portfolios by 10%, but 85% of any mortgages purchased must benefit struggling subprime borrowers. Sen. Charles E. Schumer, D-N.Y., is expected to introduce a similar bill in the Senate. "The six month/85% bill that I am filing seems to me responsive to the immediate needs to help people avoid foreclosure," Rep. Frank said. The House committee chairman is also preparing to introduce a bill aimed at stopping abusive lending practices. And he is planning to hold hearings on and mark up the predatory lending bill this year. The committee can be found online at http://financialservices.house.gov.

The Department of Housing and Urban Development is investigating payments of "excessive" fees to nonapproved mortgage brokers by Federal Housing Administration lenders.In the past few weeks, HUD officials have noticed that some FHA lenders are charging borrowers points and paying $4,000 to $5,000 to brokers for simply bringing a customer to their office. Brokers that are not approved by the FHA cannot take a loan application or close an FHA loan. HUD rules do allow nonapproved brokers to refer borrowers to FHA lenders. However, FHA Commissioner Brian Montgomery told MortgageWire that a $4,000 fee is a "little excessive" and that his agency has "ramped up an investigation." HUD officials are also reviewing FHA guidelines for nonapproved brokers and talking with department officials that deal with Real Estate Settlement Procedures Act matters. These fees seem to be "beyond what is reasonable and customary," Mr. Montgomery said in an interview.

The Federal Housing Finance Board has finalized a cease-and-desist order that will prevent all stock redemptions at the Federal Home Loan Bank of Chicago without the FHFB's approval.The C&D order also requires the Chicago FHLBank to start phasing out the use of $1 billion in subordinated debt as capital after three years. "The action was necessary to improve the condition and practices of the bank, stabilize its capital" and address certain "supervisory concerns," the Finance Board said. In a letter to members, Chicago FHLBank president Mike Thomas acknowledged that the bank may have to make some changes in its operations. "As the issues in the order are addressed, the board and staff of the bank will continue their work to advance the mission of the bank and to explore appropriate strategic alternatives, including the possibility of a merger with the Federal Home Loan Bank of Dallas," Mr. Thomas said. The Finance Board can be found online at http://www.fhfb.gov, and the Chicago FHLBank can be found at http://www.fhlbc.com.

The House has passed a bill by a 264-148 vote that would create a trust fund for the construction, rehabilitation, and preservation of 1.5 million affordable rental units over the next 10 years.The national housing trust fund would tap the government-sponsored enterprises -- Fannie Mae and Freddie Mac -- for the bulk of the trust funds. Surplus revenues from the Federal Housing Administration would also flow to the trust fund. House Financial Services Committee Chairman Barney Frank, D-Mass., estimates that the trust fund could distribute $800 million to $1 billion in affordable housing grants to states, local communities, and Indian reservations. "It has been 17 years since the federal government last enacted a major affordable housing production program, and I am pleased that this legislation will tackle the full range of housing crises, providing relief to overburdened renters and homeowners while targeting funds where the need is greatest," said Rep. Maxine Waters, D-Calif.

The North Carolina state treasurer has asked the Securities and Exchange Commission to investigate stock sales by Countrywide Financial Corp. founder, chairman, and chief executive Angelo Mozilo.The letter to SEC Chairman Christopher Cox from North Carolina Treasurer Richard H. Moore says, "I was shocked to learn that CEO Angelo Mozilo apparently manipulated his trading plans to cash in, just as the subprime crisis was heating up and Countrywide's fortunes were cooling off." According to the letter, Mr. Mozilo accelerated his stock selling as the publicly traded lender's fortunes continued to wane. (Over the past few years, Mr. Mozilo has exercised options and sold more than $300 million worth of stock.) North Carolina pension funds own at least 500,000 shares of Countrywide stock. The request to investigate comes as Mr. Mozilo continues to exercise options and sell shares in the ailing lender. (On Oct. 10, Mr. Mozilo exercised options at $9.94 and sold $2.6 million worth of stock.) In about two weeks, Countrywide will release its third-quarter earnings. Morgan Stanley recently said Countrywide could lose at least $2.4 billion in the quarter. At deadline time, Countrywide's spokesman Rick Simon had not returned a telephone call about the North Carolina request.

The Department of Housing and Urban Development is very close to sending a RESPA proposal to the Office of Management and Budget that revamps the good-faith estimate and HUD-1 settlement sheet, according to a high-ranking HUD official.The Real Estate Settlement Procedures Act proposal will be shipped over to the OMB "very soon," HUD Assistant Secretary Brian Montgomery told MortgageWire. The proposal includes a standard GFE form to create more consistency in the initial disclosure that mortgage applicants receive from lenders on the costs of a mortgage transaction. The GFE will be comparable to the HUD-1 settlement sheet, and fees that might change before closing are grouped together. Increases should not exceed certain tolerances, which are also disclosed to consumers. HUD also plans to ask Congress to amend RESPA to require that borrowers receive closing documents sooner and to increase civil monetary penalties.

R&G Financial Corp., San Juan, Puerto Rico, has announced that its status as an approved lender for the Department of Housing and Urban Development has been reinstated.R&G also reported the execution of an agreement with the investors from the company's 2006 financing transaction that will permit it to repurchase certain outstanding warrants for a nominal consideration upon the sale of R-G Crown Bank, R&G's wholly owned Florida thrift subsidiary. Regarding R&G's approved-lender status, the company said HUD's chief administrative law judge had recently ordered the department to reinstate R&G pending the outcome of an appeal, citing HUD's failure to follow its regulations in withdrawing R&G Mortgage Corp.'s approved-lender status. R&G can be found on the Web at http://www.rgonline.com.

First Line Data Inc., a Boulder, Colo.-based provider of business intelligence for mortgage lenders, has announced enhancements to its Counter-Fraud Review reports, including address verification.Called CMRA Checkpoint, the new address feature will indicate whether a submitted address is actually a Certified Mail Receiving Agency. "With mortgage companies downsizing, the potential exists for mortgage brokers to be working out of virtual offices instead of an actual physical location," said Nancy Cowley, First Line Data's vice president of national sales. "CMRA Checkpoint will help lenders determine if their applicant is housed in an actual office." Another enhancement allows HUD NeighborhoodWatch to be included in reports on broker, correspondent, and warehouse line-of-credit applicants. This indicates whether the subject company is listed with the Department of Housing and Urban Development as a lender, and if so, the number of originations, default and claims totals, and Credit Watch status. The company can be found online at http://www.firstlinedata.com.