CFPB asks servicers to exercise caution in MSR transfers
The Consumer Financial Protection Bureau is reminding mortgage servicers that they are required to protect consumers during loan transfers between companies.
During the transfer process — as a loan shifts from one servicing shop to another — mortgage servicers should never lose paperwork, lose track of the mitigation plans of a homeowner or hinder the consumer’s chance of saving their home from an unnecessary foreclosure, the CFPB said.
The bureau is voicing these concerns with a large number of sizable servicing transfers now taking place. The agency outlined a specific series of guidelines for servicers involved in massive transfers of MSRs.
Wells Fargo Co. ($35.30 0.415%) is reportedly close to selling mortgage servicing rights, according to Compass Point Research & Trading Group.
The research firm quoted Inside Mortgage Finance, which suggests Wells Fargo would still maintain customer contact through a sub-servicing arrangement.
Compass Point wrote the following:
Special servicers provide the operational expertise to physically service mortgages. Wells Fargo wants to maintain the sub-servicing of the mortgage in order to preserve the relationship with the borrower. However, the MSR asset would be sold to another party (similar to the relationship between (HLSS-Buy, $25, Stewart and OCN – Buy, $44, Barker) in order to provide capital relief to WFC under Basel III.
Private equity firms have been rumored to be looking at the space, but outside of Fortress few investments have been made. In this case, we believe private equity return hurdles are likely too high for WFC to part with the asset. Based on our conversation with industry brokers, we believe a clearing rate for high quality banks such as WFC to sell MSRs is in the 10-12% IRR range (or potentially even lower).
If transacted in this range, this sale has the potential to lower the cost to finance MSRs by setting a new benchmark return requirement. Recall, Cerberus Mortgage filed an IPO on Friday to discusses making this type of investment.
WEST PALM BEACH – Wachovia Bank allowed a woman to used forged checks to steal “millions of dollars” from an account to which she was not even a signatory, Breig Inc. claims in Palm Beach County Court.
Source: Courthouse News
R.B.S. Executives Testify in Rate-Rigging Case
LONDON – British politicians grilled current and former executives of the Royal Bank of Scotland on Monday about the management failures that led to the rate-manipulation scandal.
Over more than three hours of testimony, the British bank’s chief executive, Stephen Hester; the former head of the firm’s investment banking division, John Hourican; and other senior executives faced questions about why traders were able to report false rates.
Royal Bank of Scotland, which is 82 percent owned by British taxpayers after receiving a multibillion-dollar government bailout during the financial crisis, agreed on Feb. 6 to pay a $612 million fine to American and British regulators over rate-rigging. As part of the settlement, the Justice Department forced the firm’s Japanese unit to plead guilty to felony wire fraud.
New 120-Day Mortgage Foreclosure Rule Protects Borrowers
The new consumer protection guidelines say that “servicers must not make the first notice or filing required for the foreclosure process until a mortgage loan account is more than 120 days delinquent. This will give borrowers reasonable time to submit modification applications.”
It can be argued – and has been argued – that a loan is “late” or “delinquent” if a payment was not made by the due date even though the borrower has the right to pay the loan later because the financing terms include an allowable grace period. For instance, a loan payment may be due on the first of the month but the mortgage contract may allow the borrower to pay by the 15th without penalty.
Lenders who have tried to collect money before the end of the grace period – usually with harassing “courtesy” phone calls – are simply trying to get cash as quickly as possible so they can benefit from the “float” that such faster payments can produce. (See: A Foul Call From Lenders)
If a loan can be considered “delinquent” if a payment is received even a minute after the due date then by the same logic that mortgage is also subject to foreclosure. Under the new consumer guidelines lenders cannot make such a foreclosure claim because at least 120 days must pass before a loan can be considered delinquent.
Fannie Mae accused of forcing underwater borrowers into foreclosure
Fannie Mae policies have changed considerably over the last year, having a widespread impact on the short sale process, which some say have led them to force underwater borrowers into foreclosure.
California Court Holds That Borrowers May Enjoin A Foreclosure If A Lender Fails To Meet Servicing Guidelines
In Pfeiffer v. Countrywide Home Loans, — Cal.Rptr.3d —-, 2012 WL 6216039 (Dec. 13, 2012), mortgage borrowers filed a damages claim against a trustee for violating the federal Fair Debt Collection Practices Act (“FDCPA”) and an injunction claim against a lender to halt a foreclosure they claimed was wrongful. The trial court sustained the defendants’ demurrer to both claims without leave to amend. The California Court of Appeal affirmed as to the first claim, but reversed as to the second.
As to the first claim, the California Court joined others in holding that foreclosure activities are not “debt collection” within the meaning of the FCDPA. In particular, the issuance of foreclosure sales notices in compliance with California non-judicial closure law did not constitute debt collection. Thus, the borrowers could not state an FDCPA claim even if the foreclosure was otherwise allegedly wrongful.
As to the second claim, the Court held that the lender could be enjoined from foreclosing. The loan here was insured by the Federal Housing Administration. Thus, the foreclosure was subject to servicing regulations of the U.S. Department of Housing and Urban Development (“HUD”). These regulations required the lender to conduct a face-to-face interview prior to initiating foreclosure. The borrowers alleged this never happened. The Court held that even though the HUD regulations did not create a private right of action, failure to follow the regulations could nevertheless support an injunction based on a common law claim of wrongful foreclosure. Because the borrowers were seeking to halt the foreclosure before it concluded, rather than unwind or set aside a foreclosure that had already occurred, the Court held that the borrowers need not tender the loan proceeds to obtain the injunction.