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The Consumer Financial Protection Bureau today ordered Prospect Mortgage, a major mortgage lender, to pay a $3.5 million fine for improper mortgage referrals, in what the regulator calls an alleged "kickback" scheme, HousingWire.com reported yesterday. The lender paid illegal kickbacks for mortgage business referrals. But Prospect Mortgage isn’t the only one being fined. The CFPB also dealt out penalties to two real estate brokers and a mortgage servicer who took kickbacks from Prospect. These three will pay a combined total of $495,000 in consumer relief, repayment of ill-gotten gains and penalties. “Today’s action sends a clear message that it is illegal to make or accept payments for mortgage referrals,” CFPB Director Richard Cordray said.

A new federal appeals court decision could clear the way for the U.S. government to turn over many documents sought by investors suing over its 2012 decision to seize the profits of mortgage giants Fannie Mae and Freddie Mac, Reuters reported. The Federal Circuit Court of Appeals yesterday said that a lower court judge mostly acted within her discretion in ordering the disclosure to Fairholme Funds and other investors of 56 documents, which had been sampled from roughly 12,000 that the government withheld on privilege grounds. Writing for a three-judge panel, Circuit Judge Kathleen O'Malley said eight of the documents could be withheld on the basis of either presidential privilege, or privilege of the deliberative process. The government seized Fannie Mae and Freddie Mac in September 2008 as mortgage losses mounted, and put them into a conservatorship under the Federal Housing Finance Agency. Both companies have since become profitable, and according to court papers have returned roughly $68 billion more to the government than they drew down during the financial crisis.

President Trump yesterday reiterated his intention to roll back Dodd-Frank financial regulations enacted to prevent another financial crisis, telling reporters that he soon planned to do “a big number” on the 2010 law, the New York Times reported today. During the 2016 campaign, Trump had pledged to “dismantle” Dodd-Frank, passed when Democrats controlled the White House and Congress, without specifying the actions he planned to take. Trump’s pick for secretary of the Treasury, Stephen T. Mnuchin, a hedge fund manager, also has promised to “kill” parts of the law, including the so-called Volcker rule restricting banks from making certain kinds of speculative investments of the kind that led to the 2008-9 global economic crisis. “Dodd-Frank is a disaster,” the president said during a 10-minute session with reporters as he signed an executive order slashing government regulations. Read more. 

In related news, a new executive order that requires executive agencies to find at least two existing regulations to rescind for every new rule does not extend to independent agencies, according to the White House, MorningConsult.com reported. “All independent agencies are not covered by the EO,” Lindsay Walters, a White House spokeswoman, said in response to the question of whether the order applies to independent agencies like the Consumer Financial Protection Bureau, the Securities and Exchange Commission and the Commodity Futures Trading Commission. President Donald Trump signed the order yesterday requiring all executive departments or agencies to “identify” what existing regulations can be repealed. Agencies covered by the action also must ensure that regulations issued for the rest of this fiscal year, offset by rescinded regulations, have a net cost of zero dollars. Read more. 

After an eight-year run, a troubled government effort to prevent foreclosures and keep struggling borrowers in their homes came to an end last month, the New York Times DealBook blog reported yesterday. What happens next will be a Trump-era laboratory experiment in how financial services companies conduct themselves when the regulatory fetters are loosened. The expired Obama-era program — known as HAMP, the Home Affordable Modification Program — was widely criticized for its poor execution. Participation was voluntary for banks, and many that opted in did so unenthusiastically. Consumer advocates were also not thrilled; many felt that the program did not go far enough to help troubled homeowners or hold accountable the banks that contributed to their predicaments. But Republican-led Washington has no intention of replacing it. So now it will be entirely up to the private sector to address a lingering social ill that was brought on by the financial crisis. Banks and mortgage lenders say they are ready to step in with their own foreclosure-prevention programs, modeled on what they learned from the Obama administration’s effort. Armed with years of new data, financial companies say that they now know how to make loan-modification programs successful, for both borrowers — who want to protect their homes — and lenders, who want to limit their losses on delinquent loans headed for default.

Royal Bank of Scotland Group PLC today put aside an extra $3.8 billion to cover future settlements with U.S. authorities over the sale of toxic mortgage-backed securities before the financial crisis, offering investors hope that the British bank is getting closer to resolving one of its last major crisis-era litigation headaches, the Wall Street Journal reported. The provision will likely push the 72 percent U.K. government-owned bank to one of its largest annual losses since its taxpayer bailout in 2008, further denting the bank’s prospects for paying dividends in the medium term. RBS said that the timing of any settlement with U.S. authorities remained “uncertain.” The extra provision, which will be taken as part of the bank’s full-year earnings next month, will take the total the bank has put aside to cover the potential penalties to $8.3 billion and will reduce its Tier 1 capital ratio to 13.6 percent. The Justice Department is probing criminal and civil issues related to RBS’s sale of mortgage bonds at the height of the U.S. housing boom. The additional provision is mostly to cover that investigation, RBS added. The bank had already earmarked $5.6 billion to pay for a settlement with the Federal Housing Finance Agency.