by Kyle Colona on April 11, 2012
1. Federal Housing Finance Agency
Mo Money to be thrown at housing giants
The head regulator for Fannie Mae and Freddie Mac believes it makes sense for the mortgage giants to reduce the loan balances of struggling homeowners.
The Washington Post reports that FHFA acting director Ed DeMarco thinks the GSE’s can save close to $2 billion by relying on so-called “enhanced incentives” from the Treasury Department to write down these loans. Translation: the Treasury will issue more debt to finance this play and we the taxpayer will foot the bill for another bailout of flailing lenders.
According to the Post’s story, the regulator has been looking into the effect of “more generous principal-reduction” that was also being pushed by President Obama. Of course, this creates the potential of a moral hazard where other homeowners stop paying their loans on time in a play to get into the game.
2. Federal Trade Commission
FTC still on the mortgage fraud case
The FTC convinced a federal court to impose a $3.89 million judgment against Samuel Paul Bain and three of his companies for a fraudulent mortgage modification and foreclosure relief scheme.
A press release on the FTC’s website noted that the order also blocks Mr. Bain’s enterprise from “claiming to provide debt relief and mortgage relief services to consumers.” The default judgment also closes the FTC’s case against US Homeowners Relief along with a number of other fraudsters who settle FTC charges.
Those defendants will cough up “millions of dollars in ill-gotten gains” and have been permanently banned from selling any mortgage assistance or debt relief products or services. This action is part of the agency’s ongoing crackdown on consumer fraud.
So why did the Dodd Frank act create another agency (the CFPB) if the FTC has long been on the case?
3. Consumer Finance Protection Bureau
Agency announces new mortgage servicer rules
Financial firms that service mortgage loans (that is, collect payments from borrowers, handle tax and insurance escrows, etc.) are under new scrutiny now that the CFPB is up and running.
The agency announced on April 9th that it is considering requiring mortgage servicing firms to “reach out” to delinquent borrowers and alert them about default interest-rate changes and other events that may be triggered by loan defaults.
The Wall Street Journal reported that the consumer bureau is the only federal regulator with direct authority over smaller players, including non-bank servicers. While that is true, technically, the FTC and the OCC previously had guiding regulatory authority that was transferred to the CFPB as part of the Dodd Frank mandate.
Moreover, banks were previously required to do these things by a number of pre-existing rules and regulations, as well as requirements of servicing and securitization agreements in the secondary market. In fact, quality control underwriting has long been part of the mortgage loan syndication sector.
Some observers believe the complicated regulatory campaign “could lead to state and federal agencies stepping on each others’ toes.”
4. Mortgage Bankers Association
MBA Responds to CFPB Rules for Servicers
David H. Stevens, President and CEO of the Mortgage Bankers Association (MBA), issued a statement about the aforementioned CFPB announcement. In short, the MBA will propose rules for residential mortgage servicers this summer.
In a press release dated April 10th the MBA noted that national standards that apply to all residential loan servicers can create more confidence and certainty in the real estate market for both borrowers and servicers. The statement also noted that borrowers would be better protected by a single standard if servicers have one set of rules to follow.
“The reforms that Director Cordray outlined appear to closely track the issues we have talked to him and the CFPB staff about and MBA looks forward to working with the CFPB,” said Mr. Stevens.
5. NY Department of Financial Services
Foreclosure prevention program to visit Hempstead, NY
New York’s banking and insurance regulatory watch dog has taken on a new role as a consumer loans defender.
In this regard, the DFS “Foreclosure Prevention Specialists” will be having a community outreach pow wow on Thursday April 12 in Hempstead.
Benjamin M. Lawsky, Superintendent of Financial Services, announced that the specialists will meet with “homeowners already in foreclosure and those at risk of foreclosure.”
Their objective is to help homeowners and make them aware of the Cuomo administration’s new policy to require lenders to work with borrowers in distress.
“Governor Cuomo believes that it’s essential that we provide as much help as possible to financially-troubled homeowners. The longer a homeowner waits, the harder it may be to save a home,” Superintendent Lawsky said.
6. Securities Exchange Commission
The securities watchdog has posted first quarter 2012 results of its enforcement actions. These actions are related to fraud and other foul plays by an array of financial firms.
The agency reported that 101 firms and individuals have been charged so far and that $1.2 billion in penalties have been assessed thus far. In addition they agency has retained additional monetary relief for harmed investors to the tune of $355 million.
Also additional penalties for “disgorgement” (sounds dreadful) and other monetary relief came in at $355 million, which means a total of almost $2 billion has been assessed. Finally, individuals and directors have been barred from the securities industry.
While the SEC has been repeatedly slammed for falling short in establishing new rules required by Dodd-Frank, they continue to do what their first job was long before Chris Dodd and Barney Frank came along.
Kyle Colona is a New York based freelance writer and a Feature Writer for the Compliance Exchange. He has an extensive background in legal and regulatory affairs in the financial services sector and his work has appeared in a variety of print and on-line publications.