Miami Lawsuit Against Mortgage Lenders Survives High- Court Review

WASHINGTON — The Supreme Court handed a partial victory to the city of Miami Monday, ruling it was authorized to bring lawsuits alleging Bank of America Corp. and Wells Fargo & Co. engaged in financial-crisis-era discriminatory lending that led to urban blight and falling property values.

The court said in its 5-3 ruling, however, that Miami in future proceedings will have to establish that the banks caused direct harm to the city — not attenuated, downstream effects — a high standard that could prove challenging to meet.

The court’s opinion, written by Justice Stephen Breyer, concluded that Miami had legal standing to bring the lawsuits under the Fair Housing Act, which bars discrimination in housing sales and rentals, as well as in related real-estate transactions.

The court rejected the banks’ argument that the city wasn’t an appropriate party to bring a claim under the law. Miami’s alleged economic injuries “fall within the zone of interests that the FHA protects,” Justice Breyer wrote.

Read on.

CFPB fines three reverse mortgage lenders over deceptive advertising

American Advisors Group, Reverse Mortgage Solutions and Aegean Financialare the latest names to face the wrath of the Consumer Financial Protection Bureau due to deceptive advertisements in reverse mortgage lending.

Collectively, the bureau ordered the three reverse mortgage lenders to pay a civil penalty of $790,000.

Read on.

Can a mortgage lender claim it’s part of Indian tribe, offer home loans at 355 percent? Money Matters

Cleveland,com:

Q: I heard a commercial for a bank offering mortgages but I was a little thrown off when the ad said their interest rates are too low to disclose on the radio. The phone number for the company is 877-860-CASH. What’s up with this company?
D.S., Euclid

A: The name of the company is CashCall Inc./CashCall Mortgage. If that doesn’t set off alarms for you right out of the gate, then I don’t know what would.

First, if you look up the company through the Better Business Bureau, you’ll see it has a C-minus rating, primarily because it’s been sued or faced legal action from various state agencies in California, Florida, New York, Pennsylvania, Maryland, Colorado, Minnesota and a bunch of others.

Among the cases you’ll find:

In August 2013, New York’s attorney general filed suit against CashCall Inc. for violating the state’s usury and licensed lender laws. “The companies charged annual rates of interest from 89 percent to more than 355 percent to thousands of New York consumers,” the BBB says on its web site. “These interest rates far exceed the maximum rate allowed under New York law, which is limited to 16 percent for most lenders not licensed by the state.”

And in December 2013, the Consumer Financial Protection Bureau filed suit against CashCall Inc., saying the company issued loans to consumers but claimed it didn’t have to obey consumer protection laws. The CFPB said CashCall said the funding for the loans was provided by Western Sky, which claimed to be part of an Indian tribe, and that that status would “void any licensing requirements and other consumer protections.”

“The CFPB alleges however, that Western Sky was not in fact part of an Indian Tribe and was actually just a front to allow CashCall to violate state and federal laws,” according to the list of government actions against CashCall. “The CFPB suit seeks to order CashCall to forfeit these loans and award civil money penalties.”

In both of these cases, the actions are pending.

And last year, the company settled with the Michigan Department of Insurance and Financial Services. The company was accused of servicing and collecting loans with interest rates that ranged from 89 percent to 169 percent. CashCall agreed to cease and desist and establish a $2.2 million settlement fund to be distributed to all Michigan consumers with Western Sky loans.

Other consumer complaints against CashCall say the company charged late fees on payments that weren’t late and took money out of customers’ checking accounts without authorization. (It apparently requires direct debit. Shocker.)

In one complaint, a customer said he borrowed $10,000 from CashCall 7-1/2 years ago and had been paying $333 a month. He checked his remaining balance and found it was $9,827.33. He had paid out $29,637 on a $10,000 loan and was told he still owed $9,827. So he had paid only $123 in principal in seven years?

As far as the company saying it couldn’t disclose its interest rate, that should be alarming. It’s also strange because the company states today’s interest rate pretty prominently at the top of its home page. Today, it’s 3.38 percent, with no closing costs. (Another red flag.)

In any case, that’s less than the national average, according to Freddie Mac. (Another red flag.) And it’s in line with local banks that aren’t shrouded in so much mystery and don’t have such long records of complaints alleging egregious behavior. And the local banks are overseen by many layers of regulators, and they don’t claim to be insulated from government regulation because of alliance with any Indian tribes.

Finally, I’ll be honest; I’m not completely sure whether the company is offering mortgage loans, or unsecured loans without the home as collateral. In my research, I found references to both. Maybe they actually offer both. It doesn’t really matter.

I wouldn’t take out a loan from a business with this many question marks.

Flint water crisis now impacts mortgage lending

From the article:

As a condition for making a mortgage against a property, lenders often require that a home meet certain minimum standards of livability, including potable water. Government agencies, which back most U.S. home loans, also have such requirements.

“As we learn more and as this situation evolves, we will work with lenders to determine what policy changes, if any, may be warranted,” Fannie Mae said in a statement. “We feel for the community impacted by the unfolding issues related to Flint, Michigan-area water quality.”

“This isn’t a question of the lenders arbitrarily choosing not to do loans in Flint,” said David Stevens, president of the Mortgage Bankers Association, a trade group. “It’s a question of whether lenders are allowed to originate those loans based on government requirements.”

CFPB gives mortgage lenders a Christmas present

The Consumer Financial Protection Bureau gave lenders a post-holiday present — telling anxious bankers that they wouldn’t be held liable for most minor errors in loan processing and paperwork under the new “Know Before You Owe” rule.

The federal rule, which went into effect in the fall, stipulated that consumers must be given the new combined Closing Disclosure with all the charges, fees and line items three days before the closing, rather than at the closing. The rules were designed to give consumers more time to read the documents before signing, as a way to avoid what happened during the height of the housing boom, when unscrupulous lenders, title agents and realtors used the blizzard of paperwork to slip in higher interest rates and hidden fees. But they’ve ended upcausing some disruptions in home lending and closings.

In a Dec. 29 letter to the Mortgage Bankers Association, the CFPB’s director, Richard Cordray, told the Washington, D.C.-based trade group that small paperwork errors and typos in key sections of the new disclosure rules, known as TRID, would not likely create a scenario where a private investor who buys a loan from a banker could sue the lender, or where the lender would face the regulatory wrath of the CFPB or the federal agencies that buy loans.

Read on.

Judge to mortgage lenders: no double-dipping on Sandy foreclosures

TOMS RIVER — A mortgage lender has to disclose before a property is sold through foreclosure whether it has insurance money to repair any damages, otherwise there’s the potential for double-dipping, a Superior Court judge has said.

The ruling by Judge Francis Hodgson Jr. in Ocean County attempts to make the foreclosure process – particularly of properties damaged by Hurricane Sandy – a more open and fair one to bidders and the property owner, attorneys for the property owner said.

“By permitting the lender to hold the insurance proceeds secretly through the sale suppresses the fair market value, discourages bidders and allows the lender to potentially retain excess collateral, thereby prejudicing the borrower,” Hodgson said in his decision.

Read on.

Lenders want Congress to stop FHFA rule change

Housingwire:

Lenders and housing advocates are not happy that proposed new rule from the Federal Housing Finance Agency alters membership requirements in the Federal Home Loan Bank system.

The Mortgage Bankers Association and a coalition sent a letter to House Financial Services Committee Chairman Jeb Hensarling, R-Texas, and Ranking Member Maxine Waters, D-Calif., expressing concern with FHFA’s proposed rule changes.

The letter was signed by MBA, Habitat for Humanity International, Independent Community Bankers of America and
National Association of Real Estate Investment Trusts signed the letter, which states:

The undersigned associations, representing thousands of institutions that are dedicated to housing finance in America, are writing to express our concerns with a proposed rulemaking (the Proposed Rule) currently under consideration by the Federal Housing Finance Agency (FHFA). The Proposed Rule, which was published for notice and comment in September 2014, would make harmful changes to the Federal Home Loan Bank System’s (the System) membership requirements. It also raises significant concerns regarding legislative intent and the fulfillment of the System’s overall mission. Notably, members of both the House of Representatives and the Senate submitted letters during the notice and comment period, voicing their strong opposition to the changes proposed by FHFA.

We respectfully urge Congress to prohibit this Proposed Rule from taking effect. Congress should also direct FHFA to consult with stakeholders to evaluate an appropriate membership structure to allow the System to best serve its mission in the 21st Century.

Online Mortgage Lenders Are Beating Traditional Bank Loans

NEW YORK (MainStreet) — Traditional bank mortgages are losing ground to nonbank lenders, especially in cities with a hot housing market.

Seth James Ellis, 33, and his husband, Jared Ellis, 32, along with a third investor turned to Social Finance, Inc., a San Francisco-based online lender, for a jumbo mortgage to purchase a $1.1 million, three-bedroom duplex in Berkeley, Calif.

”We didn’t expect to get this house, ” said Seth James Ellis, who works as a fundraiser in the Bay Area. “The emotional feeling in this market is that you’re never going to get the house that you want, because someone is going to come in with a higher cash offer.”

Non-traditional, non-bank lenders, such as SoFi as the online lender is commonly called, offer less conventional underwriting for residential mortgages and typically a shorter period to close because of the design of the loans, mortgage experts say.

Read on.

Fannie Mae: Mortgage lenders unnecessarily restrict credit

(Image courtesy of Fannie Mae)

It appears the post-recession mantra of mortgage lenders is “better safe than sorry.”

Despite pushes from the Federal Housing Finance Agencyand the Federal Housing Administration, many mortgage lenders are still applying additional credit overlays to loans delivered to Fannie Mae and Freddie Mac, a new survey of lenders showed.

The survey, conducted by Fannie Mae’s Economic & Strategic Research Group and based on responses from senior mortgage executives in May 2015, found that approximately 40% of lenders who deliver loans to the GSEs or Ginnie Mae reported applying credit overlays that are more stringent than what the GSEs or Ginnie Mae require.

Fannie Mae’s quarterly Mortgage Lender Sentiment Survey also found that 64% of lenders who deliver loans to the GSEs or Ginnie Mae said that credit overlays are applied on a “limited basis,” which is 20% or less of their loan originations.

Read on.

Mortgage lenders “routing” homebuyers to FHA?

Even as the housing and mortgage markets are stabilizing, many borrowers with good credit remain shut out of the home-loan market or saddled with a new array of fees and extra costs.

Lending standards may have loosened since the end of the Great Recession six years ago, but mostly for buyers with excellent credit scores of more than 700, analysts say.

Borrowers with minor credit dings, or down payments of less than 20 percent, still can’t get access to federally backed loans once considered mainstream. Lenders are instead routing them into higher-cost Federal Housing Administration (FHA) mortgages, designed for low-income or bad-credit borrowers.

The cost of such FHA loans has also jumped, with hiked upfront fees for private mortgage insurance and monthly insurance payments that now are locked in for the entire loan period — regardless of the borrower’s payment record or escalating home equity.

Read on.