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The California state legislature is considering a bill to eliminate a tax deduction for owners of second homes and spending the newly collected revenue on affordable housing, the Palm Beach Desert Sun reported. The bill, A.B. 71, proposes the elimination of the state mortgage interest tax deduction — a policy that allows Californians to deduct any interest they pay on their mortgages from their taxes — for second homes. Assemblymember David Chiu (D-San Francisco), the bill’s sponsor, said that about 31,000 Californians claimed the tax deduction last year, and if collected, those taxes could have totaled $360 million for the state. A.B. 71 would require the state to collect those funds and deposit them into the Low-Income Housing Tax Credit program, a popular mechanism for funding the construction of affordable housing. The structure of the tax program allows developers to leverage federal and private funds, so the $300 million in state funds could allow total investment of more than $1 billion. Click here to view the bill text.

The Consumer Financial Protection Bureau said yesterday that it has ordered Nationstar Mortgage LLC to pay a $1.7 million civil penalty for violating the Home Mortgage Disclosure Act by failing to report accurate data on its loan transactions, Reuters reported. The CFPB said that the penalty for Nationstar, a unit of Nationstar Mortgage Holdings, was the largest to date over violations of the act. The CFPB said Nationstar consistently failed to report accurate data about its mortgage transactions between 2012 and 2014.

Wells Fargo & Co., Royal Bank of Scotland Group Plc and Deutsche Bank AG have reached a $165 million class-action settlement of investor claims over their underwriting for the now-bankrupt subprime lender NovaStar Mortgage Inc., Reuters reported today. The accord, requiring approval by U.S. District Judge Deborah Batts in Manhattan, resolves claims that offering materials prepared by the banks misled investors into believing that loans underlying roughly $7.55 billion of NovaStar mortgage-backed securities they bought were properly underwritten, and were safe. NovaStar had specialized in lower-quality residential mortgages, including many packaged into what proved to be risky securities issued in 2006 and 2007. The company filed for chapter 11 protection last July, and is not contributing to the payout.

The Trump administration’s deregulatory fervor has stirred expectations for a pullback in the enforcement of laws aimed at preventing discrimination in lending, a shift that has banks hopeful and consumer advocates on guard, the New York Times reported today. Bankers have been frustrated by what they perceive as overzealous enforcement of fair lending rules over the last few years, while at the same time consumer watchdogs and regulators have raised serious concerns about biased lending in some communities after banks pulled back from mortgage lending because of the financial crisis. During the housing bubble before the crisis, discriminatory lending was not a focus of regulatory efforts. The Justice Department pursued just a handful of cases each year, many of which were settled for tens or hundreds of thousands of dollars. But regulators stepped up their enforcement in more recent years, and the Justice Department even set up a separate fair lending unit in 2010. From 2010 to 2014, the Justice Department won $1.4 billion in fair lending settlements, according to a report to Congress that was submitted last August. In 2015, it opened 18 investigations, filed eight cases and settled nine, which led to another $82 million in relief, the report said. That tally includes several prominent cases, including a $33 million consent order involving accusations of redlining against Hudson City Savings Bank, which neither admitted nor denied wrongdoing. The Hudson City case, the federal government’s largest redlining settlement, was filed jointly by the Justice Department and the Consumer Financial Protection Bureau.