Servicing

The House Financial Services Committee has postponed a markup of a mortgage reform bill that bans certain types of yield-spread premium payments and requires lenders to retain 5% of the credit risk on subprime loans that are sold to investors. The committee had scheduled a Tuesday (March 31) markup session, but canceled it without explanation. Lenders that sell subprime loans will not be allowed to "directly or indirectly transfer the credit risk it retains," according to the bill, sponsored by committee chairman Barney Frank, D-Mass., and fellow Democratic Reps. Brad Miller and Mel Watt of North Carolina. The sponsors want to crack down on compensation that might encourage mortgage lenders and brokers to steer borrowers into higher-cost loans. "Specifically, the new measure will strengthen restrictions on compensation paid to mortgage loan originators and brokers that is based on a loan's interest rate and terms, often called a yield-spread premium," according to Rep. Miller. Marc Savitt, president of the National Association of Mortgage Brokers, said that he is okay with the language in the bill, noting that "this doesn't ban yield-spread premiums outright" and instead "prevents people from making a couple of extra points" by putting consumers in higher-cost loans. Mr. Savitt added that his reading of the bill indicates that it would require mortgage banking firms to disclose their "servicing-released premiums" to the public as well. "The bill means you have to disclose everything," said Mr. Savitt. The legislation also mandates that all licensed and registered originators would be subject to a "federal duty of care" measure under the bill, obligating them to only make loans that a customer can afford. With refinancings, lenders would have to prove a "net tangible benefit.

Acknowledging that non-depository mortgage bankers are facing a warehouse funding crisis, the Federal Housing Finance Agency said it has met with industry leaders and is seeking proposals on how Fannie Mae and Freddie Mac can play a role in solving the problem.Glen Corso, who runs an advisory group called The Warehouse Lending Project, said he is working on a proposal where Fannie and Freddie would use their "guarantee authority" to help warehouse banks move the loans "off-balance" sheet which would alleviate capital charges on the credits. Mr. Corso said TWLP soon will submit its ideas to FHFA. The Mortgage Bankers Association is expected to submit a proposal too, but on Monday the trade group did not return a telephone call about the matter. In a statement FHFA said it has met "with a number of industry participants and others to try to develop solutions."

The House Financial Services Committee has postponed a markup of a mortgage reform bill that bans certain types of yield-spread premium payments and requires lenders to retain 5% of the credit risk on subprime loans that are sold to investors. The committee had scheduled a Tuesday (March 31) markup session, but canceled it without explanation. Lenders that sell subprime loans will not be allowed to "directly or indirectly transfer the credit risk it retains," according to the bill, sponsored by committee chairman Barney Frank, D-Mass., and fellow Democratic Reps. Brad Miller and Mel Watt of North Carolina. The sponsors want to crack down on compensation that might encourage mortgage lenders and brokers to steer borrowers into higher-cost loans. "Specifically, the new measure will strengthen restrictions on compensation paid to mortgage loan originators and brokers that is based on a loan's interest rate and terms, often called a yield-spread premiums," according to Rep. Miller. Marc Savitt, president of the National Association of Mortgage Brokers, said that he is OK with the language in the bill, noting that "this doesn't ban yield-spread premiums outright" and instead "prevents people from making a couple of extra points" by putting consumers in higher-cost loans. Mr. Savitt added that his reading of the bill indicates that it would require mortgage banking firms to disclose their "servicing-released premiums" to the public as well. "The bill means you have to disclose everything," said Mr. Savitt. The legislation also mandates that all licensed and registered originators would be subject to a "federal duty of care" measure under the bill, obligating them to only make loans that a customer can afford. With refinancings, lenders would have to prove a "net tangible benefit.

A federal bankruptcy court in Newark has ordered that CU National Mortgage/U.S. Mortgage of New Jersey turn over any and all funds belonging to Picatinny FCU that the $220 million credit union claims the failed mortgage servicer has been illegally withholding from it. The court also ordered that CU National transfer millions of dollars of Picatinny mortgages it has been servicing to a new servicer, CUMAnet. The ruling bodes well for more than two dozen credit unions that are also fighting for the return of funds they claim have been held by CU Mortgage without their authorization. However, an individual representing the credit unions said the Picatinny FCU order does not affect them and they are still fighting for their funds. The credit unions are all fighting for the return of as much as $160 million of their mortgages they claim CU National transferred to Fannie Mae without their authorization. Fannie Mae representatives declined to comment.

Tom Donatacci, who recently left Residential Capital Corp., has joined The Clayton Group, a loan advisory firm based in Shelton, Conn.Clayton named Mr. Donatacci executive vice president of marketing and sales. At ResCap Mr. Donatacci was in charge of new business development and oversaw its subservicing division. Meanwhile, Clayton named Tom Cronin managing director of government relations.

The House Financial Services Committee on Tuesday will mark up a mortgage reform bill that bans certain types of yield spread premium payments and requires lenders to retain 5% of the credit risk on subprime loans that are sold to investors."A creditor may not directly or indirectly transfer the credit risk it retains," according to the bill sponsored by committee chairman Barney Frank, D-Mass., and fellow Democratic Reps. Brad Miller and Mel Watt of North Carolina. The sponsors want to crack down on compensation that might encourage mortgage lenders and brokers to steer borrowers into higher cost loans. "Specifically, the new measure will strengthen restrictions on compensation paid to mortgage loan originators and brokers that is based on a loan's interest rate and terms, often called a yield-spread premiums," according to Rep. Miller. Marc Savitt, president of the National Association of Mortgage Brokers told National Mortgage News that he is okay with the language in the bill, noting that "this doesn't ban yield spread premiums outright" and instead "prevents people from making a couple of extra points" by putting consumers in higher cost loans. Mr. Savitt added that his reading of the bill indicates that it would require mortgage banking firms to disclose their "servicing released premiums" to the public as well. "The bill means you have to disclose everything," said Mr. Savitt. The legislation also mandates that all licensed and registered originators would be subject to a "federal duty of care" measure under the bill, obligating them to only make loans that a customer can afford. With refinancings, lenders would have to prove a "net tangible benefit."

The president of Metropolitan Money Store, Joy Jackson of Fort Washington, Md., pleaded guilty for her role in the company's massive mortgage fraud scheme that falsely promised to help homeowners facing foreclosure keep their homes and repair their damaged credit. According to her plea agreement, Jackson helped incorporate MMS, which offered foreclosure consultation and credit services to financially distressed homeowners. From September 2004 to June 2007, Jackson and others conspired to fraudulently promise to help homeowners avoid foreclosure and repair their damaged credit. The homeowners were directed to allow title to their homes to be put in the names of straw buyers for a year, during which time MMS promised to improve the homeowners' credit ratings, help them obtain more favorable mortgages, and eventually return title to their homes to them. The homeowners were told that the equity withdrawn from the properties would be used to pay the mortgage and expenses on their homes and to repair their credit. The straw buyers were paid up to $10,000 to participate in the scheme and allow the properties to be put in their names. Jackson also served as a straw buyer on several properties in Maryland. In addition, Jackson directed others to transfer the equity proceeds of homeowners into the general checking accounts of MMS as well as her personal accounts. She withdrew these funds and paid for goods and services for herself, including art, cars, clothing, credit card bills, homes, fur coats, furniture, airline trips, gambling expenses, jewelry, limousine services, student tuition and a luxury wedding for herself and an alleged conspirator. As a result of this scheme, the total loss attributable to Jackson, including the estimated losses to the mortgage lenders, is $16.88 million. Jackson is the seventh defendant to plead guilty in the MMS mortgage fraud scheme. Sentencing is scheduled for Nov. 16.

Loan sale advisory firm DebtX, Boston, plans to sell through two separate sales a total of 108 million euros ($147 million) in nonperforming real estate loans from financial institutions in Germany. The first sale involves 94 million euros ($128 million) in nonperforming commercial real estate loans from throughout Germany and is scheduled to take place on April 23. The second involves 14 million euros ($19 million) of nonperforming loans secured primarily by residential real estate in East Germany and it is scheduled to take place on May 14. The company expects to hold additional European loan sales in coming months as more financial institutions in the euro zone seek to sell the assets rather than managing them through prolonged workouts, said DebtX managing director Gifford West.

Attorney J. Thomas Cardwell of Akerman Senterfitt has been appointed to serve on the Florida Supreme Court's task force on residential mortgage foreclosures. The task force recommends policies, procedures, strategies, and methods for easing the backlog of foreclosure cases while protecting the rights of parties involved in them. An interim report from the task force is due by May 8. The task force has 15 members, including state judges, consumer advocates, mediators and lenders. Mr. Cardwell is chair of Akerman Senterfitt's financial institutions practice, a former chairman of the firm and general counsel to the Florida Bankers Association.

Integrated Asset Services LLC, a Denver-based default management and residential collateral valuation services provider, has rolled out a new product, called the "Conditioned Valuation Model." The company describes a CVM as a cost-effective tool that allows the integration of automated property analytics with human observation, adding that it falls out on the continuum between an automated valuation model and a broker price opinion. A CVM delivers a real-time, 360-degree view of the condition of the property, the neighborhood, the condition-adjusted value and market price trends. "Traditionally, the industry has had the choice of a more expensive human-based solution or faster and riskier automated solutions. But the current mortgage industry requires these two valuation approaches interact intelligently and at the right price point," said Dave McCarthy, chief executive of IAS. A CVM costs half the price of a standard BPO. The executive said CVM was designed to help avoid AVM failure to disclose supporting data and valuation methodologies that result in questionable property valuations. The CVM uses a valuation formula that integrates property data from IntelliReal, IAS' technology partner, to provide real estate intelligence, analysis, current neighborhood sales data and active listings. The data is then combined with a hands-on inspection performed by a third-party property inspection firm, including photos on the subject property and its neighborhood condition, occupancy status, and conditions that impact value.