Compliance & Regulation

The Office of Thrift Supervision wants to realign its Community Reinvestment Act regulations with those of the other banking regulators to show that thrifts are the "leaders" in CRA lending and investments, according to OTS Director John Reich."I find quite disturbing the fact that our institutions have to continually defend their programs and activities because of OTS's differing CRA rules," Mr. Reich told the National Bankers Association annual conference. With similar CRA standards, thrifts will be able to compare their CRA activities with those of banks, he said. The OTS director also suggested that the agency's different approach to CRA may have hurt thrifts in terms of getting additional investment powers from Congress. A recently passed regulatory relief bill increased the allowable percentage of investments that national banks can make in affordable housing and community development. Federally chartered thrifts did not get an increase.

Five real estate groups have entered into consent agreements with the Federal Trade Commission to stop certain anti-competitive practices that prevent homesellers from getting their properties listed on important public websites if they use discount brokers.The FTC alleged that real estate groups use multiple-listing services to discriminate against low-cost brokers and prevent competition. "Buying and selling a home is one of the biggest financial transactions most consumers ever make," FTC Director Jeffrey Schmidt said. "That makes it all the more important that consumers have a full range of options to pick the level of real estate services that meet their needs." MLS operators in Colorado, New Hampshire, New Jersey, Virginia, and Wisconsin entered into the consent agreements. The FTC also filed administrative complaints against two real estate groups in Michigan that refused to change their MLS rules.

A nationwide class-action lawsuit has been filed against LendingTree LLC and its wholly owned subsidiary, Home Loan Center Inc., alleging that they have engaged in unfair business practices and false advertising.The suit, filed by the law firm of Teuton, Loewy & Parker LLP in Orange County Superior Court, notes that LendingTree's slogan is: "When banks compete, you win." With this slogan, LendingTree styles itself as an online lending exchange that connects borrowers to a network of lenders that allegedly "compete" for the borrowers' business, the suit says. However, the suit alleges that in thousands of cases there is no such competition and that LendingTree uses its website and false advertising to generate leads for its wholly owned direct-lending division. The lawsuit further alleges that LendingTree secretly diverts many LendingTree.com leads to its subsidiary, where unsuspecting borrowers are sold loans at inflated prices based on the materially false representation that "competition" has occurred among lenders. Rebecca Anderson, a spokeswoman for Lending Tree, said the suit arose out of the termination of a "disgruntled LendingTree employee who was let go after working with the company for nine months."

Fair Isaac Corp., Minneapolis, has filed a lawsuit in the federal district court in Minneapolis against the three major credit repositories, as well as VantageScore Solutions LLC, alleging that they violated antitrust laws and engaged in unfair competitive practices.A statement from Fair Isaac contends that the three repositories could manipulate the credit score price, sales, and distribution process to promote the VantageScore product over the FICO score or any other credit scoring product. Tom Grudnowski, chief executive officer of Fair Isaac, said the three credit reporting agencies "have been our primary U.S. distribution partners for Fair Isaac's scores for more than 15 years. Now, the credit agencies are using their position to drive adoption of their own score to the detriment of our competing FICO score product and in conflict with their obligations to distribute our product." A statement from Equifax said the suit is without merit and that it plans to defend itself and VantageScore Solutions, which markets the VantageScore product founded by the three repositories. It said VantageScore increases competition and gives consumers more choice. Calls to Experian, TransUnion, and VantageScore had not been returned by MortgageWire's deadline.

The Department of Housing and Urban Development has verified that Fannie Mae and Freddie Mac exceeded their affordable housing goals in 2005, even though Fannie missed one of its subgoals by a whisker."Both government-sponsored enterprises met the housing goals for 2005," HUD said. While Freddie achieved all of three home purchase subgoals, HUD's analysis "confirmed that Fannie Mae did not meet the low- and moderate-income home purchase subgoal," HUD said. Earlier this year, Fannie disclosed that it missed that subgoal. HUD created the three subgoals in order to exclude purchases of refinanced loans and encourage more GSE support for home purchase loans. The subgoal for low- and moderate-income home purchase loans was 45% in 2005, and Fannie came in at 44.59%. For 2006, the low-mod subgoal is 46%.

The U.S. Rural Housing Service is in the last stages of perfecting an automated underwriting system that should be available to all lenders in January 2007.The guaranteed underwriting system can provide approvals on RHS-guaranteed single-family loans in 30 seconds, according to RHS Administrator Russell Davis. After a lender submits the application data, GUS pulls a credit report and runs it through the scorecard. GUS also has unique features to make sure borrowers meet RHS income limits and the property is located in a rural area. GUS uses geographic information system mapping software to pinpoint the location of the property. Since Aug. 1, eight lenders have originated 133 RHS loans using GUS, and more lenders are being added to the pilot program. "GUS is a premier, high-quality system," Mr. Davis said. "It will be much easier for borrowers to shop, and we believe we have a very attractive product."

The Treasury Department is about to swear in Robert K. Steel as the new under secretary responsible for policies and legislation involving Fannie Mae and Freddie Mac.The Senate confirmed the former Goldman Sachs vice chairman Sept. 29 just before Congress left Washington for the Nov. 7 elections. Treasury Secretary Henry Paulson handpicked his former colleague at Goldman Sachs to replace Under Secretary Randal Quarles, who announced this summer that he wanted to return to the private sector. The swearing-in ceremony comes at a time when Secretary Paulson wants to break a legislative stalemate over government-sponsored enterprise regulatory reform and pass a bill when Congress returns Nov. 9 for a lame-duck session. But the odds of that happening are slim. Mr. Paulson was the chairman and chief executive of Goldman Sachs.

Ginnie Mae wants to give Fannie Mae some competition for FHA-insured reverse mortgages, and agency officials are looking at different structures to securitize these mortgages, which are designed to help cash-poor seniors stay in their homes.Designing a reverse mortgage securitization program is "very complicated," Ginnie President Rob Couch told a Federal Housing Administration lending conference. "We are working hard at it," he added. The National Real Estate Development Center sponsored the conference. The former Mortgage Bankers Association chairman noted that Ginnie's involvement in securitizing what the FHA calls home equity conversion mortgages would increase competition in a market where Fannie Mae is the largest investor. Fannie holds HECM loans in its investment portfolio. A HECM securitization program also could help Ginnie increase its share in the mortgage-backed securities market, which currently stands at 4%. Originations of FHA-insured home equity conversion mortgages are up 80% this year, and the product has "tremendous growth potential" over the next 20 to 40 years, Mr. Couch said. Ginnie Mae can be found online at http://www.ginniemae.gov.

The 12 Federal Home Loan Banks posted $648 million in total earnings for the second quarter, up 136% from the level recorded a year ago, according to a report by the FHLBanks' Office of Finance.The preliminary unaudited results show that the FHLBanks have $1 trillion in combined assets, and advances to member banks and thrifts totaled $638 billion as of June 30. Since year-end 2005, advances have increased by 3%. In the first quarter, the FHLBanks reported $620 billion in earnings. The Office of Finance has not issued an audited combined financial report for the FHLBanks since the second quarter of 2004. However, the OF noted that all 12 FHLBanks have registered their stock with the Securities and Exchange Commission. "It is expected that the increased transparency of SEC registration will ultimately benefit members, investors, and the FHLBank System itself," the Office of Finance said. The agency can be found online at http://www.fhlb-of.com.

The trend among regulators in states such as New York, New Jersey, Ohio, and others is to make the mortgage broker, in essence, have a fiduciary duty to the borrower, according to E. Robert Levy, executive director of the New Jersey Association of Mortgage Brokers.Speaking at the group's annual convention in Atlantic City, Mr. Levy said the burden would therefore rest with the mortgage broker to select the loan product for the consumer. As a result, the mortgage broker could be held liable for making the wrong choice. He said consumer advocates are in favor of this position. Mr. Levy, who is also chairman of the advisory council of the American Association of Residential Mortgage Regulators, said it became clear in a meeting of that council that regulators were enamored with the "suitability test." However, Mr. Levy reminded the audience of New Jersey's experience with the original version of its predatory lending law, which contained a "net tangible benefits" test. That test closed the secondary market for loans in the state, and was eventually removed from the law.