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Mortgage Crisis Watch

Business and legal issues affecting: loan repurchases | mortgage-backed securities | mortgage insurance

Fighting Back Against CFPB Demands

An increasing number of banks, mortgage lenders, auto finance companies and other financial services industry participants are dealing with inquiries, investigations and actual or threatened legal claims from the Consumer Financial Protection Bureau (CFPB) and other enforcement agencies related to the fairness of their lending, servicing and collection practices. Noting that growing trend, a banking industry commentator recently published an article asking a fundamental question: Should banks push back?” The answer, I believe, is an emphatic “yes.”

Imagine you are a compliance officer at a bank or mortgage company. You take pride in the policies and protocols that your institution has in place regarding its lending practices. You know that your company personnel do a very good job adhering to the applicable procedures, and you know that instances in which rules are violated are dealt with and corrected, swiftly and appropriately, at your company. Continue Reading

A Digital Encyclopedia: Bilzin Sumberg’s Blogosphere

Bilzin Sumberg prides itself as being the go-to firm for domestic and international investors and corporations doing business in Florida and beyond. We aim to provide our clients with legal and business insight into the industries and areas they work in through our various blogs, which hone in on key issues or areas of interest for a wide variety of readers.

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Former JPMorgan Chase Insider Blows the Whistle

Matt Taibbi of Rolling Stone recently profiled the woman JPMorgan Chase paid one of the largest fines in American history to keep from talking in his article, The $9 Billion Witness: Meet JPMorgan Chase’s Worst Nightmare. Alayne Fleischmann, a former Chase manager, revealed the true reason why JPMorganChase settled the claims brought by the DOJ for such a seemingly staggering amount — cash in exchange for secrecy.

On the eve of a civil complaint being filed against Chase, Jamie Dimon called federal prosecutors and negotiated a quiet resolution, keeping many details regarding Chase’s misconduct hidden from the public. Expecting to be called as a key witness in a criminal prosecution against Chase executive officers, Fleischmann says that she was stood up by the government, despite her ability to present ample evidence with time remaining before the statute of limitations expired on a claim for wire fraud. By coming forward now, Fleischman seeks to prevent the “biggest financial cover-up in history.” Continue Reading

BofA Underwater Mortgage Cases Hit Supreme Court

The U.S. Supreme Court will hear two cases brought by Bank of America regarding whether a second mortgage on an underwater property can be voided during Chapter 7 bankruptcy. Both cases involve Florida homeowners who sued to void second mortgages when the debt owed to the holder of the first mortgage exceeded the value of the property.

Specifically, Bank of America is seeking to overturn rulings allowing homeowners to wipe out all liability on a second mortgage through bankruptcy liquidation proceedings, a practice known as “stripping off.” The U.S. Court of Appeals for the Eleventh Circuit, based in Atlanta and having jurisdiction over Florida, Georgia, and Alabama, issued the rulings that Bank of America is appealing. Bank of America says hundreds, if not thousands, of homeowners in those three states have sought to strip off the liens on their second mortgages.

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Freddie Mac’s Index Shows Housing Market Improvement

According to Freddie Mac, things are looking up for the South Florida housing market. The August Multi-Indicator Market Index (MIMI) ratings, released last Friday, awarded the Miami Metro Area a score of 69.2. While Miami is still 11 points shy of an “in range” score, this latest score is 11.43% higher than last August’s score, making Miami the fourth most improved metro area from August 2013 to August 2014, behind Las Vegas, Chicago and Riverside, California.

MIMI “measures the stability of local housing activity by combining current local market data with Freddie Mac data for all 50 states, plus the District of Columbia, the top 50 metros, and the nation. Specifically, MIMI assesses where each market is relative to its own long-term stable range by looking at home purchase applications, payment-to-income ratios (changes in home purchasing power based on house prices, mortgage rates and household income), proportion of current mortgage payments in each market, and the local employment picture.” These four indicators are combined to form a composite score, between 1 and 200. A score below 80 is considered “weak,” while a score above 120 is deemed “elevated.” Continue Reading

Connect at the 2014 MBA Annual Convention & Expo

The 2014 MBA Annual Convention & Expo will be held in Las Vegas, NV from October 19-22. My colleague Robert M. Siegel and I will be attending the conference. As many of you know, we lead the mortgage industry team here at Bilzin Sumberg. In addition to representing mortgage companies throughout the country, we often host educational and training seminars for industry professionals. During the conference, we are available to discuss legal issues that your company may be facing.

If you would like to schedule a meeting in advance, please email Phil (pstein@bilzin.com) or Robert (rsiegel@bilzin.com).

We look forward to meeting you there.

Regulators Increase Scrutiny of Wall Street Lending

Federal bank regulatory agencies are significantly increasing their scrutiny of Wall Street bank lending, moving from annual reviews to a system of monthly audits in a major effort to curtail aggressive underwriting practices.

Until recently, the Federal Reserve, the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency (OCC) have monitored banks’ behavior annually in Shared National Credit (SNC) reviews, meaning that banks had to wait up to a year to receive feedback from regulators. With a move toward monthly audits — focused on whether banks are adhering to guidelines released by the regulatory agencies in March of last year — there will be ongoing feedback from regulators, and regulators will be able to provide more specific guidance. The audits, for example, are understood to be broader than the SNC reviews, looking beyond just loans that the banks have made to deals that the banks turned down, how the banks rate and classify each loan, and the process the banks go through to approve credit. Continue Reading

Protecting Your Company Against CFPB Investigations & Investors’ Mortgage Buyback Claims

What are the boundaries of the Consumer Financial Protection Bureau’s authority? How might those boundaries continue to expand in the future? Are there ways that the CFPB can take action against a company even if it does not have true supervisory authority? These are just some of the questions that frustrated and concerned financial institutions and other consumer finance companies have been asking since the CFPB began operating in July 2011.

The CFPB’s jurisdiction is wide and its reach seems to grow longer as time passes. The CFPB has extended its supervisory jurisdiction to include credit bureau reporting agencies, debt collectors and student loan servicers. The bureau has even indicated that it will continue to expand its supervisory jurisdiction into other industries as well, including auto lending by non-banks.

Join me on Thursday, October 9, 2014 at 12:00pm EST for an in-depth webinar about the Consumer Financial Protection Bureau’s jurisdiction and authority over consumer finance companies and financial institutions. This webinar will focus on the CFPB’s reach for an even greater level of authority, and what financial services companies can do to prevent themselves from being the next target of a CFPB investigation or enforcement action. The webinar will also cover the latest developments pertaining to defending against mortgage buyback demands.

Click Here to Register.

Banks May Be Required to Increase Reserves

The Federal Reserve is expected to require the biggest U.S. banks to increase reserves in an effort to prevent the possibility of another financial crisis. Federal Reserve Governor Daniel K. Tarullo is scheduled to testify before the U.S. Senate Committee on Banking, Housing and Urban Affairs on Tuesday to introduce new rules, which would impose a so-called capital surcharge to reinforce the banking system by requiring too-big-to-fail banks to increase protections against potential losses.

Mr. Tarullo has advised that the Feds latest proposal would affect the biggest U.S. banks which are deemed “systematically important financial institutions.” By increasing capital reserve requirements, the Fed intends to “improve the resiliency of these firms.” Continue Reading

J.P. Morgan’s $4.6 Billion in Legal Reserves

In a regulatory filing filed with the U.S. Securities and Exchange Commission and released on Monday, August 4, J.P. Morgan Chase & Co. announced that it has $4.6 billion in legal reserves. Believe it or not, this massive number is actually an increase in reserves from last quarter, during which the banking giant had $4.5 billion marked for legal expenses.

J.P. Morgan is currently a defendant or putative defendant in a variety of legal proceedings that range from private civil litigation to regulatory/government investigations; from individual actions to class actions; and from suits in U.S. courts to those across Europe. It has received requests for information and documents related to its foreign exchange trading business and participation in setting the process for the London Interbank Offered Rate and other European and Tokyo interbank rates. It is also enmeshed in lawsuits with three municipalities that are seeking damages for lost tax revenue and increased costs associated with foreclosed properties, based on alleged violations of the Fair Housing Act and Equal Credit Opportunity Act. Continue Reading