Legal Analysts

Showing posts with label Mortgage Industry. Show all posts
Showing posts with label Mortgage Industry. Show all posts

Wednesday, June 19, 2019

Loan Officer Compliance Trainings Needed for HMDA Data

Loan Officers (LOs) frequently have issues collecting and entering applicant information on their electronic systems, which results in a denial of the loan. These issues occur when customers don't want to provide the information. At all costs, LOs seek to avoid a loan denial. As a result, LOs often develop strategies to fudge information, as a workaround, so that they can close their loans. These workarounds are often spearheaded by management at structured LO meetings. The LOs and managers know that without fudging the data, their system will hard stop the file and kill their loans. This is a non-starter for one with a broker's mindset.

Lenders - the Consumer Financial Protection Burea (CFPB) recently gave a $1.75 million reminder as to why lenders cannot fudge the data and need a compliance plan, in place, to avoid their LOs and managers from fudging the data. This $1.75 million civil penalty occurred by way of settlement In the Matter of Freedom Mortgage Corporation case.

The Freedom Mortgage Corporation case concerned LOs fudging information required by HMDA and Regulation C where such LOs selected non-Hispanic white when consumers refused to provide their race, ethnicity, and sex.

Interestingly, a compliance plan would have avoided this civil penalty because the applicable regulation permits lenders to report that the applicant did not provide the information and the loan can close. Had there been a compliance plan in place, Freedom Mortgage Corporation would have $1.75 million more today. In fact, CFPB ordered the lender to "develop, implement, and maintain policies, procedures, and internal controls to ensure compliance with data collection, recording, and reporting requirements set forth in HMDA and Regulation C." Additionally, trainings were required by CFPB.

Lenders - you need a compliance company to create policies and train your LOs before you get hit with a case by CFPB.

Tuesday, May 26, 2015

The Making Home Affordable Program (MHA) has been formally extended 1 year

The Making Home Affordable Program (MHA), has been formally extended 1 year, through December 31, 2016, by Supplemental Directive 15-04. The program has been widely successful in providing affordable alternatives to foreclosure for millions of homeowners nationwide, and the extension through 2016 will provide relief to the millions more who will be in danger of falling behind on their mortgages in the next year.

This extension applies only to mortgages that are not owned or guaranteed by Fannie Mae or Freddie Mac and for applications that are submitted to the Lender on or before December 31, 2016. Though it is not necessary to have a decision on the application for a loan modification, short sale, or deed-in-lieu by the end of 2016 to be eligible under the MHA program, the transaction must close on or before September 30, 2017 if the borrower would like to receive incentive compensation, such as relocation assistance, payments for successfully completing a short sale or deed-in-lieu, or payments for making timely loan modification payments. Since the amount of relocation assistance that Lenders must offer has increased from $3,000 to $10,000 for all HAFA (short sales & deeds-in-lieu) transactions closing on or after February 1, 2015, borrowers must be mindful of the deadlines so that they may be eligible to receive this increased amount to assist them in moving costs.

This Directive also amends the MHA guidebook to allow servicers to establish a cap on the amount that they will pay to release the second mortgage liens, as long as the cap is not less than $12,000. It establishes a floor amount that borrowers may receive from their primary mortgage lenders to assist them in closing on their short sales or deeds-in-lieu.

These amendments ensure that borrowers will continue to have access to adequate relief through the MHA program.

Wednesday, April 22, 2015

Consumer Step-by-Step Guide for the Mortgage Purchase Process

The Federal Government’s Consumer Financial Protection Bureau (CFPB) recently released a Home Loan Toolkit, a step-by-step guide through the mortgage purchase process, for consumer use. This is a must use tool for real estate professionals to create realistic expectations for their clients and customers. 

This toolkit helps consumers to:

  1. Calculate affordable monthly mortgage payments;
  2. Understand the importance of credit scores to obtaining better mortgages;
  3. Pick their mortgage type;
  4. Choose the best down payment amount;
  5. Shop with different lenders;
  6. Understand and know about issues that may arise;
  7. Choose a mortgage closing agent; and
  8. Understand the overall closing process.

This Home Loan Toolkit has fillable text fields, buttons, and list boxes, allowing consumers to update the toolkit as they work through the process. It is designed to be much easier and more accessible version of the existing Settlement Cost Booklet that is currently provided to consumers and should be used in connection with the new (and simpler) Loan Estimate and Closing Disclosure forms that will be effective on August 1, 2015.

Though creditors are required to provide the toolkit to all potential homebuyers, the CFPB encourages that real estate agents understand and provide this toolkit to their clients as well. The more informed the parties, the smoother the real estate transaction will go.

Tuesday, December 09, 2014

Help is Here to Prevent Mortgage Modification Scams

Do you feel that you are a victim of a mortgage modification scam?

According to the Attorney General: "Thousands of New Yorkers are scammed by companies who take advantage of homeowners in distress." 

To combat these scams, the Attorney General established, which offers "free, qualified mortgage assistance relief services from a network of trusted partners operating across the state under the New York Attorney General Homeowner Protection Program (HOPP)." 

The new site offers both English and Espanol.

The site also enables one to report a scam in a loan modification.

So, protect yourself if you need a modification. Remember, attorneys can provide valuable assistance in defending a foreclosure, but be careful of "attorneys who bring baseless lawsuits just to charge consumers a fee". Rarely, if ever, can attorney get your mortgage removed from your house. Instead, attorneys can assist in modifications, short sales and deeds-in-lieu of foreclosure incident to defending a lender's lawsuit.

Wednesday, October 22, 2014

Ocwen Mortgages May Get a Reprieve from Foreclosure

On October 21, 2014 the New York State Department of Financial Services sent correspondence to Ocwen's General Counsel raising issue "with Ocwen's systems and processes".

The issue presented by NYS DFS deals squarely with Ocwen engaging in bad faith negotiations to modify mortgages. 

Borrowers in New York should be arming their applications for violations of CPLR 3408's good faith negotiation requirement as they review this correspondence and asking the Courts to sanction Ocwen should they have experienced the issues highlighted in the correspondence.

Of note are the record keeping inaccuracies attributed to Ocwen by NYS DFS, which impact RPAPL 1303 and 1304 as well as issues with standing and, in particularly, the attorney verification requirements embodied CPLR 3012-b. How can a Court trust their applications to foreclose in light of this correspondence?

The correspondence claims that "these issues remain unresolved today". This is very concerning. 

Mortgage Modifications Update - New Base Net Present Value Model v5.0

This revised tool is used by "servicers participating in HAMP as a tool for deciding whether to modify a troubled mortgage that is eligible for subsidies under the program".

A main thrust of this new version of the NPV tool is for non-owner-occupied properties.

Additionally, investor incentives for successful modifications are enhanced by way of this new Model v5.0.

If you want to actually know how modification decisions are made, knowing this document is a must.

Monday, March 31, 2014

Mortgage Finance Reform Advances in the Senate

The Senate is currently formulating its bipartisan plan to overhaul Fannie Mae and Freddie Mac in the Committee on Banking, Housing, and Urban Affairs. Chairman Tim Johnson (D-SD) and Ranking Member Mike Crapo (R-ID) have been working together to craft legislation that shifts the mortgage market to the private sector and creates the Federal Mortgage Insurance Corporation (FMIC) that will protect taxpayers from having to bear the costs if another housing bubble bursts in the future. FMIC will be an independent agency that supervises servicers and guarantors and provides insurance on mortgaged-backed securities. It will also create a mortgage insurance fund that funds insurance claims but only after the private sector absorbs the initial risk. The government will remain a guarantor of mortgages as a last resort.

In a news release, Mike Crapo explained, “This agreement moves us closer to ending the five-year status quo and beginning the wind down of Fannie and Freddie while protecting taxpayers with strong private capital, building the components for a stable secondary market and avoiding repeating the mistakes of the past. Government control of Fannie and Freddie with no private capital to protect taxpayers against losses is unacceptable.”

This legislation is only in its early stages, focusing on the necessity of a smooth and efficient transition to private lending and the continuing availability of the affordable 30-year mortgage. Brokers, change is coming to the mortgage market, and it is essential that you are knowledgeable every step of the way to a final bill. This legislation directly affects your occupation and your clients, so keep your eyes open for more advances in legislation.

Click here to read more on the Housing Finance Reform legislation. You may also follow S. 1217’s progress here on  

Tuesday, March 04, 2014

Making Home Affordable - New Handbook Available - Version 4.4

To access the new Handbook for MHA, inclusive of HAMP and HAFA, click here.

This Handbook is the rules for banks / servicers to modify mortgages, so pay careful attention to detail and make sure that they comply.

Wednesday, February 26, 2014

Fannie Mae and Freddie Mac are Setting Records in Profits

Due to the housing bubble burst in 2008, the federal government took ownership of the mortgage giants, Fannie Mae and Freddie Mac, and bailed them out of financial ruin. Not only did this bailout cost $187.5 billion in taxpayer dollars, but it also took years for Fannie Mae and Freddie Mac to recover from their monumental losses and begin to profit again.

However, there is good news! Now that the mortgage giants are profitable again, they have more than repaid the government for their 2008 bailout by paying dividends to the U.S. Treasury of $192.5 billion. Fannie Mae alone broke records with its $84 billion profit in 2013, completely exceeding the government’s expectation of recovery.

Fannie Mae and Freddie Mac do not expect to make as huge a profit in 2014 as they did in 2013, but they are hopeful that they will remain profitable in the long run. The Obama Administration, however, still wants to overhaul the mortgage giants and take away their monopoly on the mortgage market. There is currently a bipartisan bill in the Senate called the Housing Finance Reform and Taxpayer Protection Act of 2013 that focuses on financial reform and will hopefully take center stage this year.

Brokers, keep in mind that the housing market may drastically change in the next 5 years as private lending replaces the government-sponsored enterprises. However, now that the mortgage giants are turning such huge profits, reform may experience some delays. It is difficult to enact reforms when times are good, even though another financial crisis always looms on the horizon. 

Friday, January 31, 2014

Obama Backs and Encourages Mortgage Finance Reform in his State of the Union Speech

In his state of the union speech on January 28, 2014, Obama asked Congress to focus on mortgage finance reform in the upcoming year. He stated, “Since the most important investment many families make is their home, send me legislation that protects taxpayers from footing the bill for a housing crisis ever again and keeps the dream of home ownership alive for future generations.”

There have been proposals in the Obama administration to overhaul Fannie Mae and Freddie Mac, the mortgage giants which own or guarantee about 60% of all mortgages in the United States. These government-sponsored enterprises (GSEs) have prospered for decades by buying and selling mortgages to provide capital to lenders and borrowers. However, when the housing bubble burst in 2008, the federal government took ownership of the mortgage giants, costing billions of dollars in taxpayer dollars to bail the companies out of financial ruin.  The housing market is now in recovery and Fannie Mae and Freddie Mac are profiting once again, but many government officials fear that another financial crisis is still possible. The goal is to take away Fannie Mae and Freddie Mac’s monopoly on the mortgage market, limit the federal government’s role and risk, and to focus on private lending instead. However, it will take years before the current system is completely overhauled and replaced with one dominated by private lenders.

It is imperative that brokers understand that the housing market is on its path to recovery, but may be facing drastic changes over the next two to five years. Middle class consumers may have difficulty obtaining a 30-year mortgage in a market that is run by private lenders unless the reforms allow for some substantial governmental intervention. We may only be in the early stages, but these proposals in Congress will lead to one of the biggest reforms this country has seen in the last decade.

Wednesday, January 22, 2014

Case Escalations: Power to the Homeowner

Have you applied for a loan modification and felt that your servicer did not properly review you for HAMP and other Making Home Affordable programs? Perhaps your servicer lost your documents or failed to provide you with the proper update on your file? Well, what are you waiting for? Escalate your case today and demand your servicer to be in accordance with the MHA guidelines!

Homeowners may contact the MHA Hotline at 888-995-HOPE to request assistance in the escalation of their cases. The MHA Support Center, acting as an intermediary between the homeowner and servicer, ensures that the servicer is complying with the MHA guidelines and is reviewing homeowners’ case escalations in a timely fashion. However, homeowners may also contact their servicers directly or authorize their attorneys to go through the HAMP Solution Center (HSC) to seek resolution. No matter what route is taken, it may take up to 30 or more days for an escalated case to be reviewed and resolved, so homeowners should act immediately if they believe to have been wrongly denied a MHA Program.

Case escalations give power to the homeowner and keep disorganized servicers in check. Please go here if you would like to know how to escalate your case today!

Wednesday, January 08, 2014

Supplemental Directive 13-09 to Take Effect in Two Days

The time has come! Supplemental Directive 13-09 to the Making Homes Affordable handbook will take effect in two days on January 10, 2014.

As discussed in a previous entry, this Supplemental Directive makes the loss mitigation process easier, clearer, and more efficient. It is an alignment with the final Consumer Finance Protection Bureau (CNPB) Mortgage Servicing Regulations, which prohibit high risk lending and will also take effect on January 10, 2014. 

Servicers must review documents and submit Incomplete Information Notices in tighter timeframes than ever before. This makes sense because most borrowers submit incomplete initial packets anyway and should be advised of missing documents immediately to move forward from the initial stage. By contacting the borrowers earlier and responding to them quicker, servicers are now able to maximize borrower protection in their review of loan modification applications.

The Department of the Treasury and the Department of Housing and Urban Development did not want to completely overhaul the Making Homes Affordable guidebook because they did not want to alter or destroy the integrity of the programs. All changes to the Making Homes Affordable handbook were kept to a minimum and in accordance with the final CFPB Mortgage Servicing Regulations. Remember, the CFPB regulations are the bare bones of requirements for servicers, so when servicers review borrowers for HAMP, they still must consider the Making Homes Affordable handbook and state laws as well.  

Also, HAMP still remains top priority even though CFPB regulations require borrowers to be considered for all loss mitigation options at the same time. If the servicer participates in the HAMP program and the borrower is eligible for HAMP, the borrower must be given HAMP over other in-house loan modifications. 

Tuesday, January 07, 2014

The Closing Disclosure Replaces the HUD-1 in Real Estate Transactions in 2015

According to the Consumer Financial Protection Bureau, the new form, "The Closing Disclosure form replaces the current form used to close a loan, the HUD-1, which was designed by HUD under RESPA. It also replaces the revised Truth in Lending disclosure designed by the Board under TILA."

Consumers must receive this form "at least three business days before the consumer closes on the loan." Strikingly, if many possible loan components are changed following the provision of The Closing Disclosure form, such as changing the product or adding a prepayment penalty, a "consumer must be provided a new form and an additional three-business-day waiting period after receipt".

Look forward to this final rule, which is effective on August 1, 2015.

Thursday, December 26, 2013

Ocwen is Finally Accountable for its Actions

The Consumer Financial Protection Bureau (CFPB) and 49 states have signed a proposed court order requiring Ocwen to spend $2.1 billion on loan modification programs and relief to victims of foreclosure. 

Ocwen is the largest non-bank mortgage servicer in the United States. It was alleged by CFPB that for years, Ocwen has illegally delayed loan modifications, charged improper fees, provided incorrect updates to consumers who were applying for loan modifications, erroneously reviewed foreclosure documents, and inaccurately applied and tracked monthly mortgage payments. 

Like GMAC, Bank of America, Citi, JPMorgan Chase, and Wells Fargo, Ocwen is alleged to have deceived and abused the system for too long and must be punished for its illegal practices.

Under the Order, Ocwen is required to comply with the provisions of the 2012 National Mortgage Settlement and must comply with the new mortgage servicing rules that are taking effect January 2014. A knowledgeable, responsive single point of contact must be established for borrowers applying for relief, so that the loan modification process will be clearer and quicker than ever before. Instead of being sacrificed, borrowers will now be protected and given a fair shot at saving their homes.

Borrowers should be overjoyed that there will be more communication between servicer and borrower, and that borrowers who were improperly foreclosed on between 2009 and 2012 may receive compensation. It is a great step forward in the mortgage servicing world. 

Thank you to Lieb at Law's Assistant Case Manager, Jessica Vogele, for sharing this valuable information. 

Thursday, December 12, 2013

Mortgage Changes less than a Month Away – What to expect on January 10, 2014

A whole new world of getting a mortgage is coming in the beginning of 2014. You should get familiar now!!!

To remind you, in the years before 2008, financial institutions were subject to little regulation in the United States. Many lenders did not even bother to verify income or debt before handing over adjustable-rate mortgages (ARMs) to consumers who could not afford them. High risk lending was the norm and mortgage fraud was rampant. These practices caused the subprime mortgage crisis and the worst recession that the country has experienced since the 1930s. Thousands of homes were foreclosed on and over one hundred mortgage lenders went bankrupt as more and more people could no longer afford their monthly mortgage payments.

As a result, The Consumer Financial Protection Bureau is issuing a final rule that prohibits high risk lending and implements the Truth in Lending Act and sections 1411, 1412, and 1414 of the Dodd-Frank Act. This rule will take effect on January 10, 2014, and will require mortgage lenders to verify consumers’ income and debt. Prepayment penalties that punish borrowers if they sell or refinance their home within a certain time frame are now generally prohibited. Qualified mortgages, which are less likely to end up in default, are defined in great detail and cannot have terms longer than 30 years or fees exceeding 3% of the total loan amount.  Lender are also encouraged to refinance adjustable-rate mortgages (ARMs) and must maintain documentation of compliance for three years after the loan is given to the consumer.

To remain in the real estate game, you must understand these rules and what a qualified mortgage is as that will drive the industry. Please read the rule for yourself!

Will We See an Extension of the Mortgage Forgiveness Debt Relief Act through 2014?

The Mortgage Forgiveness Debt Relief Act of 2007 has provided relief to thousands of borrowers who have completed short sales or obtained loan modifications with mortgage principal reductions. Before this law was enacted, any forgiven mortgage debt was taxable by the government. For example, if a lender reduced a borrower’s principal balance by $100,000.00, then the borrower would have to report that forgiven debt as ordinary income and pay taxes on it.  This was, of course, impractical and unreasonable for borrowers who were already experiencing financial hardship and were relying on modifications or short sales to save them from foreclosure. Most borrowers could not afford their tax bills and were stuck in the same situation as they were in before they had requested help from their lenders.

Under The Mortgage Forgiveness Debt Relief Act of 2007, borrowers do not have to pay taxes on cancelled mortgage debt as a result of a modification or foreclosure of their primary residence. This act was originally supposed to end at the end of 2012, but it was granted an extension through 2013 on the third day of the new year.

An extension may be granted through 2014, but it is unlikely. Both H.R. 2788 and H.R. 2994 are bills that will extend The Mortgage Forgiveness Debt Relief Act for at least another year, but they were each referred to committee over the summer and have received no attention since. There are 44 cosponsors for H.R. 2994, but it is already now the middle of December and time is running out. In order for this bill to be enacted, it still needs to pass the House and Senate and it must get signed by the President before December 31, 2013. It is improbable that an extension will be granted, but not impossible; especially with the economy rebounding and many forgetting the plight of those left behind. It’s important to not forget these individuals that still need relief and who have often spent years trying to get a modification or a short sale approved only to now be taxed when they finally get the relief that they have hoped for.

So for them, please tell your local representative how important it is that these Bills are passed and The Mortgage Forgiveness Debt Relief Act of 2007 is extended for another year.

Thank you to Lieb at Law's Assistant Case Manager, Jessica Vogele, for sharing this valuable information. 

Sunday, November 10, 2013

Find a housing counselor - Consumer Financial Protection Bureau approves list

Learn if a mortgage is good for you, your clients &/or customers.

Housing counselors provide advice on buying a home, renting, defaults, foreclosures, and credit issues.

In NY, 2 nationally approved housing counselors are:

  1. National Federation of Community Development Credit Unions
  2. National Urban League
However, there are many local housing counselors that can be found through this tool.

After, January 10, 2014 lenders will be required to provide a list of ten (10) housing counselors to all applicants for federally-related loans.

The list will also include this warning:
"The counseling agencies on this list are approved by the U.S. Department of Housing and Urban Development (HUD), and they can offer independent advice about whether a particular set of mortgage loan terms is a good fit based on your objectives and circumstances, often at little or no cost to you. This list shows you several approved agencies in your area. You can find other approved counseling agencies at the Consumer Financial Protection Bureau’s (CFPB) website: or by calling 1-855-411-CFPB (2372). You can also access a list of nationwide HUD-approved counseling intermediaries at”

No need to wait until January 10th - real estate professionals should start directing consumers to this list today.

Wednesday, October 16, 2013

Cracking Down on Strategic Defaulters

Do you know someone who purposely defaulted on his mortgage even though he had the ability to pay it? Perhaps this person did not want to waste his hard-earned income on mortgage payments but instead saved up for a cruise to the Bahamas. Or maybe this person owed more than he originally paid for the home and did not want to continue paying it any longer. Whatever the reason, this person is not alone. There are thousands of these “strategic defaulters” in the United States, many of whom get away with not paying deficiencies because Fannie Mae and Freddie Mac have been lax in pursuing them.

Fannie Mae and Freddie Mac are supposed to evaluate every defaulter’s ability to repay the past due amount on their mortgages. Even after foreclosure, these two government-sponsored enterprises and many other lenders can still go after borrowers with deficiency judgments.

However, according to the recent report from the Office of the Inspector General at the Federal Housing Finance Agency (FHFA), Freddie Mac did not evaluate nearly 58,000 foreclosures for deficiency collectability. That is $4.6 billion that went unchecked and could have at least partially been recovered by Freddie Mac. Thousands of strategic defaulters were set free of the past due amounts that they owed on their mortgages.

The Office of the Inspector General is rightfully horrified by these numbers and is fiercely recommending the FHFA to oversee Freddie Mac’s deficiency recovery strategies to ensure that these strategies become efficient and effective in the near future. The fact that so many have gotten away with this practice in the past few years only encourages more to do so.

No longer should strategic defaulters get away with robbery.

In a separate recent report, the Office of the Inspector General recommends the FHFA to closely oversee Fannie Mae’s deficiency recovery strategies as well. From January 2010 to June 2012, Fannie Mae did not pursue deficiencies in 29,692 foreclosures because the states’ statutes of limitation for pursuing these deficiencies had expired or were about to expire. Fannie Mae is in a better position than Freddie Mac in terms of collecting on deficient judgments, but it can still drastically improve its methods so that it can obtain deficiencies even in states with short deadlines for filing claims.

If you have a loan insured by Fannie Mae or Freddie Mac and you strategically defaulted on your mortgage, watch out. The two enterprises will not be lax any longer.

Thank you to Lieb at Law's Assistant Case Manager, Jessica Vogele, for sharing this valuable information. 

Tuesday, September 17, 2013

Consumer Financial Protection Bureau getting into the Mortgage Modification Game

Incident to the Consumer Financial Protection Bureau's (CFPB) new mortgage rules, the Ability-to-Repay Rules, the CFPB also has created rules for delinquency notices, follow-up information for loss-mitigation, and forbearance plans. Its imperative that foreclosure defense counsel familiarize themselves with these rules prior to their effective in 2014.

The full final rule is available here.

Most interestingly is the "general ban on proceeding to foreclosure before a borrower is 120 days delinquent".

Also, important for mitigation specialists is the clear requirement that servicers provide notice of deficient document submissions incident to a modification application and an opportunity to cure. This should hopefully put an end to the days of we closed your file because we didn't get all of your documents - the fax shredder will be broken.

Mortgage Foreclosure Alert: New Making Home Affordable Program Handbook Released - Version 4.3

To access the new Handbook for MHA, inclusive of HAMP and HAFA, click here
This Handbook is the rules for banks / servicers to modify mortgages, so pay careful attention to detail and make sure that they comply.