As the country grapples with the impacts of the COVID-19 pandemic, financial service providers should hold fast to the adage that those who forget the past are destined to repeat it. The last financial crisis centered in large part on the mortgage industry, both in its inception and its slow climb to stabilization. Like the last crisis, a growing percentage of homeowners are not able to make their mortgage payments, requiring loan servicers to employ various loss mitigation tools to reduce individual’s financial hardships. While the COVID-19 pandemic is impacting nearly all sectors of the economy, the mortgage industry can look back to past experiences to help mitigate present and future risks. If past is prologue, one risk likely to increase in the coming months is class action litigation.Read More
Mortgage loan servicers are toiling away at executing all the new servicing requirements in the CFPB’s Regulation Z and Regulation X amendments by the January 10, 2014 deadline. Given this overwhelming task, it is understandable that some servicers may not be as familiar with the CFPB’s ECOA Valuation Rule amending Regulation B. The Rule, which imposes an obligation to furnish a copy of valuations to borrowers of first-lien loans and to provide notice to borrowers of this right, may apply to a servicer’s loss mitigation efforts.
The U.S. Department of Housing and Urban Development’s recently announced that an independent actuarial review of the FHA Mutual Mortgage Insurance (MMI) Fund found that the Fund’s capital reserve ratio has fallen to -1.44%, which represents a negative economic value of $16.3 billion. In the wake of this announcement, HUD unveiled a series of aggressive steps it intends to take over the next several months. According to the Annual Report provided to Congress earlier this month, FHA lenders will have to contend with several policy changes to FHA origination and servicing requirements in the coming year, as well as to the Home Equity Conversion Mortgage (HECM) program. Read More
On Friday, November 16, 2012, the U.S. Department of Housing and Urban Development released its 2012 Annual Report to Congress and announced that the FHA Mutual Mortgage Insurance (MMI) Fund suffered a $16.3 billion deficit. In addition, for the fourth year in a row, the MMI Fund has failed to meet its 2% statutory reserve amount, an amount required under the National Housing Act to be held back to cover excess loss.
For those who wondered how the Consumer Financial Protection Bureau (the “Bureau”) would seek to convert portions of the global foreclosure settlement into federal law, last Friday’s proposed servicing rules provide an answer. The Dodd-Frank Act (“DFA”) amended the Real Estate Settlement Procedures Act (“RESPA”) in several ways to address discrete loan servicing issues, such as escrow accounts, flood insurance, and qualified written requests. What it did not do, however, is address loss mitigation or foreclosure. Many thought that the Bureau would use its general authority to issue regulations prohibiting unfair, deceptive or abusive acts and practices to craft loss mitigation requirements, but that authority would not afford consumers with a federal private right of action. Read More
The National Servicing Standards, outlined in the March 2012 Global Foreclosure Settlement, are difficult to reconcile with the already stringent servicing requirements in place for the Federal Housing Administration’s (“FHA”) single family loan insurance program. The National Servicing Standards are expressly subject to and must be interpreted in accordance with applicable federal, state and local laws, rules and regulations, and the terms and provisions of the requirements, binding directives and investor guidelines of the mortgage insurer, including FHA. In the event of a conflict between such requirements and the National Servicing Standards such that a servicer cannot comply with the National Servicing Standards without violating these requirements or being subject to adverse action, then the servicer must document such conflicts and notify the monitoring committee that the servicer intends to comply with the FHA requirements to the extent necessary to eliminate the conflict. Read More