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The Consumer Financial Protection Bureau took action against a former Wells Fargo employee for an illegal mortgage fee-shifting scheme that allowed him to ultimately increase his commissions, HousingWire.com reported yesterday. According to the CFPB, David Eghbali referred a substantial number of loan closings to a single escrow company, which shifted its fees from some customers to others at Eghbali’s request. From there, the CFPB said that Eghbali could then manipulate loan costs and ultimately increase the number of loans he closed, increasing his commissions. The CFPB, as a result, said it filed an administrative consent order requiring Eghbali to pay an $85,000 penalty. The bureau also banned him from working in the mortgage industry for one year.

The Office of the Comptroller of the Currency yesterday finally lifted its mortgage servicing restrictions on Wells Fargo now that the bank is in compliance with the requirements of the Independent Foreclosure Review, HousingWire.com reported yesterday. But Wells Fargo didn’t come out of this unscathed and must pay a $70 million civil money penalty for previous violations of the order, according to the OCC. “We are pleased that the OCC has validated the effectiveness of the significant changes we have made to our mortgage servicing operations and confirmed our release from the Consent Order. Our team worked very hard to complete the requirements of the original Consent Order and the amendments, and continues to provide the best possible service to our customers,” Tom Goyda, a spokesperson for Wells Fargo said. While the OCC said it originally issued orders in April 2011 and amended the orders in February 2013, it amended the orders again in June 2015. The OCC revised Wells Fargo’s restrictions, along with JPMorgan Chase’s and four other banks that also had restrictions placed on them due to their failure to comply with requirements of the Independent Foreclosure Review.

An appeals court dealt the Obama administration a major setback in its efforts to levy tough fines on corporations and executives, overturning a civil mortgage-fraud case against Bank of America Corp. tied to the financial crisis, the Wall Street Journal reported today. The court yesterday also tossed out a $1 million civil penalty against Rebecca Mairone, a former executive at Countrywide Financial Corp., who was one of the few individuals fined for alleged misdeeds during the crisis.The ruling by the U.S. Court of Appeals for the Second Circuit raises the bar for the government to prove fraud against companies and individuals, weakening a weapon the Justice Department has used to push Wall Street to agree to big mortgage settlements. If it stands, the three-judge panel’s unanimous decision could affect the remaining investigations into crisis-era mortgage securities, some observers said, including those into European lenders Royal Bank of Scotland Group PLC and UBS Group AG. The decision also could encourage other firms to push back against prosecutions. The original verdict in the Bank of America case helped pave the way for the government to reach multibillion-dollar settlements with large banks for alleged financial-crisis misdeeds. The ruling won’t alter the nearly $45 billion in mortgage-securities settlements the Justice Department already has reached with the biggest U.S. banks, including J.P. Morgan Chase & Co. and Citigroup Inc.

The Department of Housing and Urban Development issued a proposal yesterday to codify recent changes to its reverse mortgage program and to provide additional protections for seniors, including a cap on annual interest rate increases, NationalMortgageNews.com reported yesterday. The Federal Housing Administration has revamped its Home Equity Conversion Mortgage program over the past two years to tighten up the reverse mortgage program and require financial assessments for the first time to ensure borrowers have the financial wherewithal to remain in their home and pay for property taxes and homeowners insurance. Now, FHA wants to add additional consumer protections, according to Golding. "As we grow older as a nation, we have a responsibility to ensure reverse mortgages remain a safe, secure and sustainable financial option for future generations of senior homeowners,” said Edward Golding, principal deputy assistant secretary for housing at HUD.

Financial regulators in New York are scrutinizing a revival in seller-financed deals for marketing inexpensive homes to lower-income people who cannot get a mortgage, the New York Times reported on Saturday. The New York State Department of Financial Services on Friday subpoenaed four investment firms that either are involved with seller-financed deals or provide financing for such deals. The firms receiving subpoenas from New York regulators are Battery Point Financial, New York Mortgage Trust, Apollo Residential Mortgage and an affiliated entity of Apollo Global Management. The nation’s top consumer regulator, the Consumer Financial Protection Bureau, recently began an informal inquiry into seller-financing arrangements, which are commonly referred to as contracts for deeds. The bureau has assigned two enforcement lawyers to research the seller-financing market and determine whether the terms of some deals violate federal truth-in-lending laws. Contracts for deeds and other forms of seller financing have been in resurgence after the financial crisis, which created a large supply of cheap foreclosed homes for investors to buy and left many potential homeowners unable to qualify for a mortgage. Proponents contend that a contract for deed can provide an alternative route for lower-income borrowers to buy a home.

A small but growing slice of the mortgage market has shifted from mainstream banks to an informal, loosely regulated corner of property finance, the Wall Street Journal reported today. These lenders can earn 8 percent and more on their money — the catch is they must stomach the risk of lending their savings to borrowers rejected by banks. “It’s the Wild West out here,” said Corey Kohnke, who spends his days driving around Orange County, Calif., matching borrowers with investors looking to make loans, a job that pays commissions of 2 to 8 percent. Private lenders charge annual interest rates as high as triple those of a conventional 30-year fixed-rate mortgage. Some issue loans from personal fortunes and collect monthly interest payments. Others make loans and sell the note to investors. There also are private mortgage funds that pool investor money. “We can’t make loans fast enough to sell them to our investors,” said Michelle Rodriguez, general counsel for R.C. Temme Corp., and its affiliate, private lender Woodland Hills Mortgage Corp. in Los Angeles. When the firm’s salespeople call investors to market the loans, she said, “they’re snapped up within minutes. Literally, 15 minutes and they’re gone.” Read more. (Subscription required.) 

Don’t miss the “Real Estate Values Are Climbing (Again): Debtor, Watch Your Back!” session at the Southeast Bankruptcy Workshop on July 21-24 at the Ritz-Carlton in Amelia Island, Fla. Click here to register. 

The Federal Housing Finance Agency said yesterday that Fannie Mae and Freddie Mac will each be able to issue multifamily loans totaling $35 billion this year, MorningConsult.com reported. That figure represents an increase from the previous lending limit of $31 billion for the government-sponsored enterprises. FHFA said it decided to raise the cap following projections for a market increase. “FHFA engaged in a thorough analysis of the multifamily market and determined that, to adjust to the realities of the market and ensure that Fannie Mae and Freddie Mac have the flexibility to continue supporting this important sector, an increase in the lending caps is warranted,” FHFA Director Mel Watt said in a statement. “Supporting liquidity in the multifamily housing finance market remains a priority for FHFA and we will also continue to ensure that Fannie Mae and Freddie Mac maintain their strong support for financing of affordable and workforce housing.”