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Texas businessman Charles Wyly’s widow, who last month told a bankruptcy judge she was left insolvent after the investor’s death in a car crash, said assets including two homes and $4 million worth of furs and jewelry can’t cover what she owes creditors, Bloomberg News reported yesterday. Caroline “Dee” Wyly listed assets of $67 million and debt of $81 million in a filing yesterday in U.S. Bankruptcy Court in Dallas, where she lives in a $6.7 million mansion. The $14 million shortfall doesn’t count an “unknown” liability in a fraud lawsuit the Securities and Exchange Commission won against her husband’s estate this year, she said. The filing was made the same day a federal judge in Manhattan granted the SEC’s request for a temporary asset freeze against Caroline Wyly and the estate, as well as her billionaire brother-in-law Samuel Wyly, who was a defendant in the same lawsuit and who also filed for bankruptcy.

The fate of a New York City law governing debt collections is headed to New York's highest court to answer questions resulting from Berman v. City of New York, a lawsuit brought five years ago by a collection law firm challenging the city's statute regulating collection attorney activities, CollectionsCreditRisk.com reported yesterday. The key matter at hand is whether Local Law 15, which regulates debt collection and was passed in 2007, is void when applying to law firms that happen to collect debts. The collection industry is closely watching the issue, concerned by the prevalence of nefarious so-called collection agencies and firms that practice abusive tactics. The challenge to Local Law 15 originated five years ago when Long Island, N.Y. attorney Eric Berman, who died in 2010, and 21-member Lacy Katzen LLP of Rochester, N.Y., raised the issue of whether the law should be void with regard to law firms who happen to pursue delinquencies. District Court Judge Eric Vitaliano held in 2013 that the law does not apply to plaintiff law firms attempting to collect debts. That ruling also stated the law violates a provision of the city's charter because it purports to grant the city the authority to grant or withhold licenses to practice law.

The three-year-old U.S. consumer protection agency said that it discovered that the largest mortgage servicers have been mishandling loan modifications and harming borrowers since new rules came into effect in January, Bloomberg News reported yesterday. Consumer Financial Protection Bureau supervisors have made spot checks to examine the books and practices of bank and nonbank servicers, the agency said in a report yesterday, without naming the firms. Supervisors found “substantial delays” in modifying loans that resulted in “negative consequences,” such as higher mortgage payments and unjustified blemishes on borrowers’ credit reports, the report said. The consumer bureau, created by the Dodd-Frank law and empowered to rid the mortgage industry of abusive practices, rolled out regulations that took effect this year. The bureau is examining the compliance of the rapidly expanding servicing industry as a New York regulator bears down on its biggest non-bank participant, Ocwen Financial Corp., whose shares have plunged this year.

A major banking regulator is sounding the alarm about lax car lending standards that are leading to a new round of losses for banks, the Wall Street Journal reported today. There’s been a spike in the average size of car loans that banks and other lenders are writing off as a loss following months of unpaid bills by borrowers, an official of the Office of the Comptroller of the Currency, a unit of the Treasury Department, said yesterday. At banks, the average charge-off for a car loan was $7,618 in the fourth quarter of 2013, up 12 percent from a year ago, said Darrin Benhart, deputy comptroller for supervision risk management at the OCC, citing loan performance data from credit-reporting firm Experian. For the entire car-loan industry, the average charge-off was $8,520, up 17 percent from a year prior, according to Experian. Benhart also expressed concern over a growing trend in the car-loan industry of loans that exceed the value of the car. The average loan that major lenders gave out at the end of 2013 on new and used cars exceeded the value of the car at the time of purchase, he said.

Over the last two years, lawmakers in at least eight states have voted to increase the fees or the interest rates that lenders can charge on certain personal loans used by millions of borrowers with subpar credit, the New York Times reported today. This overhaul of certain state lending laws comes after a lobbying push by the consumer loan industry and a wave of campaign donations to state lawmakers. In North Carolina, for example, lenders and their lobbyists overcame unusually dogged opposition from military commanders, who two years earlier had warned that raising rates on loans could harm their troops. The lenders argued that interest rate caps had not kept pace with the increased costs of doing business, including running branches and hiring employees. Unless they can make an acceptable profit, the industry says, lenders will not be able to offer loans allowing people with damaged credit to pay for car repairs or medical bills.

Mortgage lenders and housing investors are squaring off in Nevada over a court decision that has allowed thousands of foreclosed homes to be sold for pennies on the dollar, in a case that could have big implications on an already-tight home-loan market across the country, the Wall Street Journal reported today. At issue are homeowners associations and the liens they put on properties when a homeowner stops paying dues. Homeowners associations enforce rules in a community and collect dues to maintain common areas and pay for repairs. Like lenders, homeowners associations can foreclose on homes to recoup delinquent payments, an option that many have taken after waiting years for lenders themselves to foreclose, a scenario that has left homes without dues-paying owners and some HOAs strapped for cash. Nevada and about 20 other states have laws that allow HOA liens to get priority over first mortgages. The result, according to a recent state court decision, is that homes can be put up for auction by HOAs—without the blessing of the mortgage lender—and sold, extinguishing the first mortgage and allowing the investor to get title to the home. Such sales often are for an amount equal to or slightly above the HOA dues in arrears. In a court filing yesterday, the Mortgage Bankers Association wrote that because of the decision, “mortgage lenders stand to lose millions—perhaps even billions—of dollars in security interests.” Lenders nationwide have argued that HOAs should have to foreclose through the court system and shouldn’t have the power to wipe away entire mortgages. But in a closely watched case in September involving Bank of America Corp. , the Nevada Supreme Court said that they can do so, and sent the case back to a lower court. Last week, Bank of America requested that the state Supreme Court reconsider.

The federal government said yesterday that it reached a $5 million settlement with Wells Fargo to resolve allegations it discriminated against pregnant women, new mothers and women on maternity leave, the Associated Press reported yesterday. The U.S. Department of Housing and Urban Development said Wells Fargo's home mortgage unit refused to make loans available to some women based on their gender or family status, and forced some women to give up their maternity leave and go back to work before it would close a loan with them. HUD said that bank employees also made discriminatory statements to and about women who were pregnant or had recently given birth. The agency said Wells Fargo will change its underwriting guidelines as part of the settlement and will show its staff how to follow the new guidelines.

Payment processor New Beginnings NY Inc. and owner Kenneth Newton agreed to pay $71,640 to settle charges brought by the New York attorney general's office that the company withdrew money from consumers' bank accounts for identity theft protection that was never provided, CollectionsCreditRisk.com reported yesterday. Newton also has been ordered to shut down both New Beginnings and Ironwood Management Group, a consumer collection agency he operated. Cheektowaga, N.Y.-based New Beginnings worked as the payment processor for Phoenix Trust. New Beginnings allegedly electronically withdrew funds from bank accounts between June 26, 2013 to July 11, 2013 and deposited the money into another account to pay for the identity theft services.

Standards in the U.S. are so high for mortgage loans that former Federal Reserve Chairman Ben S. Bernanke, now a Brookings Institute fellow-in-residence with a net worth of at least $1.1 million, said at a conference last week that he couldn’t refinance his house in Washington, D.C., Bloomberg News reported today. Lenders are continuing to tighten the credit vise on homebuyers after five straight years of economic expansion, imposing the toughest standards since at least 1998, according to a new index by CoreLogic Inc. In May, credit availability for all home loans was half of what it was in the late 1990s, when the housing market was making steady gains much like today, according to the Housing Credit Index. While federal programs for struggling homeowners have helped to boost refinancing, credit availability for home purchases in May was about a third of what it was in 1998, according to the index.

The Pew Charitable Trusts released a report, which relied on a nationwide survey of borrowers, focus groups and data obtained from numerous sources, that concludes that fraud and abuse are widespread in the Internet market, American Banker reported today. Pew, which has released three previous reports about payday lending, is a sharp critic of both online and storefront lenders. But the most recent report focuses on ways in which online lenders are different from brick-and-mortar stores. Among Pew's findings: nine out of 10 Better Business Bureau complaints about payday lenders involve online operators, even though online loans only make up about one-third of the total market; 30 percent of online borrowers report being threatened by a lender or debt collector; and online payday loans typically have annual percentage rates of 650 percent.