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The Consumer Financial Protection Bureau (CFPB) added its voice yesterday to a chorus of other regulators in calling for sustainable foreclosure relief when the Home Affordable Modification Program expires at year-end, National Mortgage News reported today. The CFPB released "guiding principles" for mortgage servicers and investors that were almost identical to those described in a white paper last week from the Treasury Department, the Department of Housing and Urban Development and the Federal Housing Finance Agency. Still, the bureau was careful in pointing out that its principles do not constitute a binding legal requirement for mortgage servicers or investors. Instead, the principles are intended to be part of the ongoing discussion about creating a universal loss mitigation program framework for the future. The CFPB is calling for mortgage lenders, housing finance agencies and investors to create affordable and sustainable loss mitigation programs that are accessible and transparent for borrowers.

The Consumer Financial Protection Bureau (CFPB) released a set of proposed updates to its “Know Before You Owe” mortgage disclosure rule after industry calls asked for greater clarity and certainty on the rule, HousingWire.com reported on Friday. However, despite the welcomed changes, the bureau failed to address one major concern the industry asked for clarity on: the secondary market. After the “Know Before You Owe” mortgage disclosure rule, also called the TILA-RESPA Integrated Disclosures (TRID) rule, went into effect on Oct. 3, 2015, there were initial hiccups and headaches centered on how long loans would take to close, potentially causing a lot of problems for consumers who are strapped for time. But a lot of these have passed, and once those problems subsided, the secondary market mainly was left to experience the biggest pain points from TRID at this point. Among the changes, the industry will be required to heed the original guidance the bureau put out that “examiners will be squarely focused on whether companies have made good faith efforts to come into compliance with the rule.”

A federal appeals court yesterday revived Ohio's lawsuit accusing Freddie Mac of defrauding the state's $87.3 billion public pension fund by hiding its exposure to subprime and other risky mortgages prior to the 2007-09 financial crisis, Reuters reported. The U.S. Court of Appeals for the Sixth Circuit said that a lower court judge erred in finding that the Ohio Public Employees Retirement System (OPERS) did not plausibly allege that disclosure shortfalls by Freddie Mac and officials, including former Chief Executive Richard Syron, caused it to lose money on the company's stock. Freddie Mac and the larger Fannie Mae were seized by the U.S. government in September 2008 after racking up huge losses from mortgage securities. They have since regained profitability, but remain in a federal conservatorship and send profits to the U.S. Treasury Department. In its lawsuit, which began in January 2008, OPERS accused Freddie Mac of concealing nearly $227 billion in exposure it had taken on to subprime and other low-quality loans, as well as its ability to manage risk and fight fraud. The fund said Freddie Mac's stock price plunged 29 percent in one day after the truth became known in November 2007. OPERS sought class action status on behalf of purchases of Freddie Mac stock from Aug. 1, 2006, to Nov. 20, 2007.

Carlyle Group co-founder Bill Conway was in court on this small island last week recounting one of the most bruising episodes in his private-equity firm’s history: the 2008 collapse of mortgage-bond fund Carlyle Capital Corp., the Wall Street Journal reported today. Carlyle Capital Corp. (CCC) borrowed vast sums from banks to buy $23 billion in bonds. When a deteriorating U.S. housing market spooked CCC’s lenders, investors in the fund lost their entire $945 million in capital. Conway was summoned to Guernsey, where the fund was registered a decade ago, to testify in a $1 billion civil lawsuit by CCC’s liquidators. They allege that Conway and six other Carlyle and CCC officials acted recklessly and should have started selling the fund’s assets months before it failed. For six days this month, Conway answered questions from a lawyer of the liquidators about the fund’s business model, governance and funding problems. Among the specific allegations against him: that he refused to have CCC sell assets or restructure as loans dried up in the summer of 2007 because he didn’t want bad publicity from CCC to jeopardize an investment by an Abu Dhabi government fund in Carlyle Group. Conway denies that.

The Consumer Financial Protection Bureau (CFPB) and the Department of Justice (DOJ) announced a joint action yesterday against BancorpSouth Bank for discriminatory mortgage lending practices that harmed African Americans and other minorities, according to a press release. The complaint filed by the CFPB and DOJ alleges that BancorpSouth engaged in numerous discriminatory practices, including illegally redlining in Memphis; denying certain African Americans mortgage loans more often than similarly situated non-Hispanic white applicants; charging African-American customers for certain mortgage loans more than non-Hispanic white borrowers with similar loan qualifications; and implementing an explicitly discriminatory loan denial policy. If the proposed consent order is approved by the court, BancorpSouth will pay $4 million in direct loan subsidies in minority neighborhoods in Memphis, at least $800,000 for community programs, advertising, outreach, and credit repair, $2.78 million to African-American consumers who were unlawfully denied or overcharged for loans, and a $3 million penalty.

The U.S. Supreme Court yesterday agreed to decide whether Miami can pursue lawsuits accusing major banks of predatory mortgage lending to black and Hispanic home buyers resulting in loan defaults that drove down city tax revenues and property values, Reuters reported. The justices will hear appeals filed by Bank of America Corp. and Wells Fargo & Co. of a lower court's decision to permit the lawsuits by the Florida city against the banks. They were filed under the Fair Housing Act, a federal law outlawing discrimination in housing. Last September, the U.S. Court of Appeals for the 11th Circuit overturned a lower court's decision to dismiss such lawsuits by the city against Bank of America, Wells Fargo and Citigroup Inc. Citigroup decided not to appeal to the Supreme Court. Miami accused the banks of a decade of lending discrimination in its residential housing market. The city accused Wells Fargo, Bank of America and Citigroup of steering non-white borrowers into higher-cost loans they often could not afford, even if they had good credit.

When the housing crisis sent the American economy to the brink of disaster in 2008, millions of people lost their homes. New investors soon swept in — mainly private equity firms — promising to do better, but some of these new investors are repeating the mistakes that banks committed throughout the housing crisis, an investigation by the New York Times reported today. They are quickly foreclosing on homeowners, they are losing families’ mortgage paperwork, much as the banks did. And many of these practices were enabled by the federal government, which sold tens of thousands of discounted mortgages to private equity investors, while making few demands on how they treated struggling homeowners. The rising importance of private equity in the housing market is one of the most consequential transformations of the post-crisis American financial landscape. Private equity firms, and the mortgage companies they own, face less oversight than the banks. And yet they are the cleanup crew for the worst housing crisis since the Great Depression. Out of the more than a dozen private equity firms operating in the housing industry, the Times examined three of the largest to assess their impact on homeowners and renters. Lone Star Funds’ mortgage operation has aggressively pushed thousands of homeowners toward foreclosure, according to housing data, interviews with borrowers and records obtained through a Freedom of Information request. Lone Star ranks among the country’s biggest buyers of delinquent mortgages from the government and banks.