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U.S. antitrust officials are investigating potentially anti-competitive practices in the residential real estate brokerage business, with a focus on compensation to brokers and restrictions on their access to listings, Bloomberg News reported. The probe was detailed in a civil investigative demand, which is akin to a subpoena, issued by the Justice Department to CoreLogic Inc., which provides real estate data to government agencies, lenders and other housing-market participants. The U.S. residential real estate industry has long faced criticism that it stifles competition among brokerages, protecting agent commissions that are higher than those paid by sellers in many other countries. In 2008, the Justice Department reached a settlement with the National Association of Realtors, a trade group, that was designed to lower commissions paid by consumers by opening the industry to internet-based brokers. The investigative demand to CoreLogic, dated last month, follows a lawsuit filed against the Realtors association and real estate broker franchisors, including Realogy Holdings Corp., claiming they conspired to prevent home sellers from negotiating commissions they pay to buyers’ agents. The Realtors association filed a motion to dismiss the lawsuit, arguing that it misunderstands the role of brokers. 

Recently released data from the Federal Reserve Bank of New York’s Center for Microeconomic Data revealed that the first quarter of this year was the mortgage business’ worst quarter in more than four years, but a deeper dive into the data shows that on the refinance side of things, it may have been the worst quarter since the financial crisis, HousingWire.com reported. The Fed report, which looks at mortgage originations as appearances of new mortgage balances on consumer credit reports and includes refinances, showed that the first quarter had the lowest dollar amount of mortgage originations in any quarter since the third quarter of 2014. In fact, according to a new report from the Federal Housing Finance Agency, Fannie and Freddie refinanced fewer mortgages in the first quarter than they have in any quarter since at least 2008. According to the FHFA report, Fannie and Freddie refinanced a total of 234,716 mortgages in the first quarter of this year. And a review of 10 years worth of data from the FHFA shows that that is the fewest number of refinances completed by the government-sponsored enterprises in any quarter since the financial crisis.

Not long after the U.S. Trustee granted its petition to create a committee to protect consumer interests in its bankruptcy proceedings, Ditech filed a motion objecting to such a committee, asking that it be disbanded or, alternatively, that the scope of its involvement be limited, HousingWire.com reported. The consumer committee drama began last month when several advocacy groups filed petitions with the U.S. Trustee asking for the creation of a committee to represent the interests of the mortgage borrowers who have loans with Ditech or its subsidiaries. Among those seeking representation were Chicago-area victims of a reverse mortgage scam whose loans were being serviced by Ditech subsidiary Reverse Mortgage Solutions. The representative of some of those victims, J. Samuel Tenenbaum of Northwestern’s Complex Civil Litigation and Investor Protection Center, said such a committee was necessary to protect the rights of these borrowers, who are mostly elderly, disabled or financially unstable, and therefore vulnerable. In response, the Trustee approved of the creation of a five-member consumer committee on May 2, but the ink was barely dry before Ditech filed its objection, claiming that the Trustee’s move was “arbitrary and capricious” and would have a chilling effect on Ditech’s attempts to sell off portions of its business. If the court will not disband the committee, Ditech asked that the committee’s scope be limited and its fees and expenses capped at $250,000.

A career con man in California pleaded guilty yesterday in a federal fraud case stemming from a real estate scam that targeted distressed homeowners, many of whom were elderly individuals who were scammed out of their homes, losing significant equity in the properties accumulated over the course of their lifetimes and sometimes over the course of generations of home ownership, according to a press release from the U.S. Attorney's Office for the Central District of California. Michael “Mickey” Henschel of Van Nuys, Calif., pleaded guilty to mail fraud in relation to the scheme that generated more than $17 million in profits and caused homeowners to suffer approximately $10 million in losses when they lost title to their homes and when they were defrauded into giving Henschel and his co-conspirators money as part of the scam. Henschel’s fraudulent conduct also caused losses to mortgage lenders and purchasers of foreclosed properties. With another defendant pleading guilty today, a total of seven conspirators linked to Henschel’s Van Nuys-based businesses have now pleaded guilty in the scheme that used fraudulent deeds to steal properties from homeowners, and also charged homeowners illegal fees to delay foreclosure and eviction actions.

The gatekeepers of the American mortgage market are increasingly backing loans to borrowers who have heavy debt loads, highlighting questions about mortgage risk as policy makers debate ways to change the system, the Wall Street Journal reported. Almost 30 percent of loans that mortgage giants Fannie Mae and Freddie Mac packaged into bonds last year went to home buyers whose total debt payments amounted to more than 43 percent of their incomes, according to an analysis by industry research group Inside Mortgage Finance. The share has nearly doubled since 2015. Data on other government mortgage programs also show an increase. The backing of these loans opens up a debate about the government’s role in the housing market. Some say cheap, federally backed financing has made credit available for millions of borrowers who otherwise might not have had a shot at homeownership. Others say that more-indebted borrowers are riskier, and that their purchases may be accentuating a rise in home prices that in many areas has outstripped median incomes. An obscure half-decade-old rule made these mortgages to buyers with high debt possible. The temporary provision expires at the beginning of 2021, or, should it happen first, when Fannie and Freddie revert to private control, following government sponsorship after the housing crisis.

The FHA, which sells insurance that repays lenders if a borrower defaults, proposed a number of changes to its compliance requirements yesterday to give financial firms more confidence that they can issue loans backed by the agency without running afoul of its rules, Bloomberg News Reported. “It has become clear that our lending partners are seeking clarity and greater certainty when documenting compliance with FHA requirements,” Montgomery, said FHA Commissioner, Brian D. Montgomery. “We anticipate that this will encourage more lender participation in FHA business.” The move follows complaints from JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon and other bankers that it didn’t make sense to participate in FHA loan programs because of alleged violations. After the 2008 financial crisis, the Justice Department aggressively pursued banks for underwriting mistakes, levying billions of dollars in sanctions, prompting major lenders to pull out. Most of the biggest issuers of FHA mortgages are now non-bank lenders. One consultant who helped banks navigate the post-crisis legal challenges: Montgomery. After an earlier stint as FHA commissioner during the Bush administration, he helped found the Collingwood Group, a Washington, D.C.-based firm that specializes in FHA-related penalties and lawsuits. Collingwood Group’s clients included Wells Fargo & Co. and US Bancorp.

A handful of homeowners who may be affected by mortgage servicer Ditech Holding Corp.’s bankruptcy have been named to a Justice Department-appointed committee, giving them a platform to amplify their concerns, WSJ Pro Bankruptcy reported. The Justice Department division that monitors corporate bankruptcy cases told Judge James L. Garrity Jr. in court papers filed on Thursday that it has created a committee for Ditech customers who have raised questions about how the company’s chapter 11 case will affect them. The Fort Washington, Pa., company, which collects mortgage-loan payments on about 1.4 million residential loans through Ditech Financial LLC, Green Tree Servicing Corp. and other associated companies, filed for bankruptcy on Feb. 11. It blamed its financial troubles on rising interest rates and its own heavy debt payments. The company faces thousands of litigation claims from homeowners who have notified the company of mistakes related to their mortgage accounts, according to documents filed in U.S. Bankruptcy Court in New York.

Thousands of residents in sprawling subdivisions west of Houston don’t just blame the historic rainfall for the losses they incurred during Harvey: They also fault the federal government, the Wall Street Journal reported. A trial starting today will test the legal claims of these residents and business owners who allege the U.S. Army Corps of Engineers knew homes were at risk of flooding and now, under eminent domain law, owes them compensation. The U.S. Justice Department, which is representing the government, has argued in court filings that the flooding was a one-time, temporary occurrence that doesn’t reach the necessary legal threshold for payment and that residents should have known they were living in an area vulnerable to flooding. The Army Corps built the Addicks and Barker dams west of Houston in the 1940s as part of a broader flood-management plan. Unlike some reservoirs, the areas only fill with water during heavy rainfall. Most days, the more than 25,000 acres is a serene expanse of grassy parkland, golf courses and sports fields. Residents of the neatly-pruned neighborhoods on the edge of the area say it was never clear to them their subdivisions were also part of a reservoir intended to hold water during severe storms.