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Federal Reserve Releases Additional Servicer Action Plans
On March 8, the Federal Reserve Board released action plans for three additional supervised financial institutions. The plans are designed to correct alleged deficiencies in mortgage servicing and foreclosure procedures. The release also included an additional engagement letter between one financial institution and a third-party foreclosure review firm retained by the financial institution to review foreclosures that were in process in 2009 and 2010. The action plans and engagement letters are required by formal enforcement actions issued by the Federal Reserve last year. The Federal Reserve first released a group of action plans and engagement letters on February 27, 2012.
New York Extends Emergency Rules Regarding Mortgage Originator Licensing
On March 7, the New York Department of Financial Services extended through May 16, 2012 existing emergency rules regarding the licensing of mortgage loan originators. New York intends to adopt the rules as permanent at some future date.
FHFA IG Recommends Improved Freddie Mac Servicer Oversight
On March 7, the Inspector General (IG) of the FHFA published a report related to the FHFA’s supervision of Freddie Mac’s controls over mortgage servicing contractors. The report found areas in which the FHFA could enhance its supervision of Freddie Mac’s controls over those contractors. Specifically, the report found with regard to servicer oversight that the FHFA has not (i) clearly defined its role, (ii) sufficiently coordinated with other federal banking agencies, or (iii) addressed emerging risks in a timely manner. The IG recommends that the FHFA (i) promulgate comprehensive regulations or guidance regarding servicer oversight, (ii) direct Freddie Mac to implement servicer performance metrics more broadly, and (iii) improve existing procedures for coordinating with other federal agencies. The report includes a response letter from the FHFA, which highlights the FHFA servicing oversight initiatives to date and indicates whether and how the FHFA plans to implement the IG’s recommendations.
FHFA Provides Strategic Plan Implementation Scorecard, Announces Executive Compensation Reductions
On March 9, the Federal Housing Finance Agency (FHFA) released a “scorecard” that details the implementation of its recently released strategic plan for Freddie Mac and Fannie Mae. The scorecard provides specific measures Fannie and Freddie will take in executing the strategic plan. It also identifies timetables for implementation of each objective. Contemporaneously, the FHFA released details of its 2012 compensation program for Fannie Mae and Freddie Mac executives. The program reduces total direct compensation by ten percent and eliminates bonuses. The program also sets $500,000 as the target annual salary for new CEOs.
CFPB Releases SAFE Act Exam Procedures
On March 7, the CFPB updated its Supervision and Examination Manual with SAFE Act examination procedures. The procedures set forth the background and requirements of the SAFE Act, and its federal implementing regulations, for use in examining federally regulated depository institutions for compliance with the SAFE Act.
White House Announces More Housing Initiatives
On March 6, President Obama presented additional programs designed to provide relief to homeowners. In advance of the announcement, the White House released a fact sheet outlining the programs, which attempt to reach FHA borrowers and servicemembers and veterans. With regard to FHA borrowers, the Administration is reducing up-front and annual mortgage insurance premiums for borrowers that want to refinance loans originated prior to June 1, 2009 through FHA’s streamline refinance program. For servicemembers and veterans, the announcement did not include any new relief, but rather recited the relevant terms of the multi-party settlement with five major mortgage servicers announced last month. Those terms are further described in an executive summary of the settlement.
Fannie Mae Gives Notices of Lender-Placed Insurance Changes
On March 6, Fannie Mae notified servicers that it will soon change its Lender-Placed Insurance (LPI) requirements. As reported by several media outlets, Fannie Mae has asked insurance companies to compete for Fannie Mae LPI business. Through the proposal Fannie Mae wants to ensure that insurance costs are significantly reduced. It plans to issue new policy guidelines regarding (i) when and how to procure LPI, and (ii) allowed reimbursable costs associated with LPI.
Fannie Mae Provides Guidance Regarding Hardest-Hit Fund
On March 6, Fannie Mae issued Servicing Guide Lender Letter LL-2012-02 to all single-family servicers to provide guidance in connection with transition assistance programs under the Hardest-Hit Fund (HHF). Effective immediately, servicers must facilitate the borrowers’ receipt of HHF funds in connection with transition assistance programs on Fannie Mae loans, including those held in a Fannie Mae portfolio or those in an MBS pool with the special servicing option or a shared-risk MBS pool for which Fannie Mae markets the acquired property. The Lender Letter also clarifies policies related to implementation of the HHF unemployment, reinstatement, and loan modification assistance programs, including clarifications regarding (i) collection and solicitation activity, (ii) foreclosure actions, and (iii) servicer obligations when dealing with housing finance agencies.
Ninth Circuit Holds Nevada AG Suit Against Bank Not Removable Under CAFA
On March 2, the U.S. Court of Appeals for the Ninth Circuit held that a parens patriae suit brought by Nevada’s Attorney General (AG) related to mortgage modification and foreclosure practices could not be removed from state court under the Class Action Fairness Act (CAFA). Nevada v. Bank of America Corp., No 12-15005, 2012 WL 688552 (9th Cir. Mar. 2, 2012). The AG alleges that Bank of America Corp. (BAC) violated state law by misleading Nevada consumers about the terms and operation of its home mortgage modification and foreclosure processes, and that it violated a consent judgment entered between the state and several of its subsidiaries. BAC removed the case to federal court under CAFA. The district court denied the state’s motion to remand, finding that (i) it had jurisdiction over the suit as a CAFA “class action,” but not as a “mass action,” and (ii) it had federal question jurisdiction because the allegations require interpretation of the federal HAMP program and the Fair Debt Collections Practices Act. On appeal, the Ninth Circuit consistent with its opinion in Washington v. Chimei Innolux Corp., 659 F.3d 842 (9th Cir. 2011), which was issued after the district court ruled on Nevada’s motion, held that a parens patriae suit does not qualify as a class action removable under CAFA, and does not otherwise satisfy CAFA’s “mass action” requirements. The court reasoned that Nevada is the real party in interest and therefore held that the case could not qualify as a mass action removable under CAFA. The Ninth Circuit also held that, because only state law causes of action are alleged and there is no overriding federal interest, the district court does not have federal question jurisdiction.
Virginia Enacts Two Mortgage-Related Bills
On March 1, Virginia enacted two mortgage-related bills, both effective July 1, 2012. HB 570 exempts employees of bona fide nonprofit organizations from licensing and registration requirements applicable to mortgage loan originators. It also, among other things, (i) adds definitions for dwelling and residential mortgage loan, (ii) revises the definitions for loan processor or underwriter, mortgage loan originator, real estate brokerage activities, registered mortgage loan originator, and unique identifier, (iii) revises the licensing requirement for mortgage loan originators and adds exemptions for certain individuals, and (iv) prohibits licensees from using unique identifiers for any purpose other than the SAFE Act and the Virginia Mortgage Loan Originators law. HB 572 exempts from licensure under the NMLS persons who make loans or extend credit for any part of the purchase price of real property that the person owns.