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The Consumer Financial Protection Bureau is proposing additional measures to ensure, it says, that homeowners are treated fairly by mortgage servicers, HousingWire.com reported on Friday. The proposed measures include:

1. Extending borrower protections
Right now, a mortgage servicer must give the borrower certain foreclosure protections, including the right to be evaluated under the CFPB’s requirements for options to avoid foreclosure, only once during the life of the loan. Under the proposed rule, servicers would have to give those protections again for borrowers who have brought their loans current at any time since the last loss mitigation application.

2. Expanding death protections
If a borrower dies, CFPB rules currently require that servicers promptly identify and communicate with family members, heirs, or other parties, known as “successors in interest,” who have a legal interest in the home. The proposal would expand the circumstances in which consumers would be considered successors under the rules, including when a property is transferred after a divorce, legal separation, through a family trust, between spouses, from a parent to a child or when a borrower who is a joint tenant dies.

3. Providing proper notifications
Servicers will now have to notify borrowers promptly that the loss mitigation application is complete, so that borrowers know the status of the application and their foreclosure protections.

4. Holding servicers to timeframe
The proposal clarifies that generally a transferee servicer must comply with the loss mitigation requirements within the same timeframes that applied to the transferor servicer. Under the current system, when mortgages are transferred from one servicer to another, borrowers who had applied to the prior servicer for loss mitigation may not know where they stand with the new servicer.

5. Clarifying servicers' obligations
The bureau proposes clarifying what steps servicers and their foreclosure counsel must take to protect borrowers from a wrongful foreclosure sale. Servicers who do not take reasonable steps to prevent the sale must dismiss a pending foreclosure action. This aids servicers in complying with, and assist courts in applying, the dual-tracking prohibitions in foreclosure proceedings to prevent wrongful foreclosures.

6. Defining delinquent advance date change
It would clarify that delinquency, for purposes of the servicing rules, begins on the day a borrower fails to make a periodic payment. Under the proposal, when a borrower misses a payment but later makes it up, if the servicer applies that payment to the oldest outstanding periodic payment, the date of delinquency advances.

7. Providing borrowers with regular updates
The proposal would generally require servicers to provide periodic statements to those borrowers, with specific information tailored for bankruptcy, along with requiring servicers to provide written early intervention notices to let those borrowers know about loss mitigation options.

For more on the proposed changes, please click here: http://www.consumerfinance.gov/blog/proposed-changes-to-our-mortgage-se…

The U.S. Securities and Exchange Commission resolved an impasse over punishing Bank of America Corp. in a mortgage-bond case, clearing the way for the lender to complete a $16.7 billion global settlement, Bloomberg News reported yesterday. In a private meeting earlier this week, SEC commissioners voted to waive most of a set of additional sanctions that could have seriously curtailed the bank’s asset management business and ability to raise money for private companies. Some of the relief is conditioned on the bank’s good behavior and comes with an outside monitor. The bank also got hit with a penalty that takes away its ability to issue more shares or bonds without getting SEC approval for each deal. The SEC’s decision came as Bank of America and the agency neared a deadline for a federal judge in North Carolina to sign off on the settlement. The two sides had twice sought more time from the court as negotiations dragged on.

Lawyers for the U.S. and Wells Fargo & Co. told a judge they doubt they can reach a settlement in a government lawsuit accusing the bank of home-mortgage fraud, Bloomberg News reported today. The U.S. sued San Francisco-based Wells Fargo in 2012, claiming that it made reckless mortgage loans that defaulted and cost a federal insurance program hundreds of millions of dollars. The government said that the bank’s misconduct spanned more than a decade while it participated in the Federal Housing Administration’s program. The suit by Manhattan U.S. Attorney Preet Bharara is part of a larger effort to recoup losses from defaulted mortgages insured by the FHA. At a hearing yesterday, attorneys for both sides told U.S. District Judge Jesse Furman that they no longer thought a settlement was within reach. Both sides had halted the pre-trial exchange of evidence for four months to engage in settlement talks, according to a court filing.

The U.S. Supreme Court agreed to hear two Bank of America Corp. appeals that seek to give lenders more leverage over homeowners who file for bankruptcy protection, Bloomberg News reported yesterday. The question in the cases centers on whether homeowners can use bankruptcy liquidation proceedings as a means of wiping out, or “stripping off,” all liability on a second mortgage. Bank of America is seeking to overturn rulings by an Atlanta-based federal appeals court with jurisdiction over three Southeastern states. The lender says hundreds if not thousands of homeowners in those three states have sought to strip off the liens on their second mortgages. Other federal appeals courts around the country have refused to let homeowners wipe out second-mortgage debt in bankruptcy liquidation proceedings.
http://www.bloomberg.com/news/print/2014-11-17/bank-of-america-gets-u-s…

The cases are Bank of America v. Caulkett, 13-1421, and , 14-163. For more information and court filings, please click here: http://news.abi.org/court-decisions

Federal prosecutors are wrestling with whether to file a civil fraud lawsuit against Angelo R. Mozilo, the former chief executive of Countrywide Financial, which was at the center of the subprime mortgage boom and bust, the New York Times reported today. This summer, the U.S. attorney’s office in Los Angeles was said to be close to filing a lawsuit against Mozilo over his role in Countrywide’s sale of millions of mortgages to home buyers with questionable credit histories. Prosecutors there were planning to move forward with a civil fraud lawsuit nearly three years after it had abandoned a criminal investigation of Countrywide and Mozilo, the firm’s co-founder. But Stephanie Yonekura, the acting U.S. attorney for the Central District of California, which includes Los Angeles, has had lingering questions about the litigation because of arguments raised by lawyers for Mozilo and other potential defendants. One such argument is that a civil fraud lawsuit would duplicate the efforts of the Securities and Exchange Commission, which sued Mozilo and two other former Countrywide executives in 2009. On the eve of the trial in 2010, Mozilo and the other defendants reached a settlement with the agency that required the mortgage financier to pay $67.5 million in fines and restitution. In settling that securities fraud and insider trading case, Mozilo and the two other former Countrywide officials, David Sambol and Eric Sieracki, neither admitted nor denied liability.

A sizable percentage of mortgages — including most of the risky ones that were made in the run-up to the financial crisis — are not used to buy a home: They’re used to refinance an existing mortgage, according to a commentary in Friday’s New York Times. When home prices are rising and mortgage rates are falling, many homeowners choose to replace their mortgage with a bigger one, according to the commentary, taking the difference in cash to provide credit. Refinancing is a relatively modern phenomenon. According to Joshua Rosner, a managing director at the research consultancy Graham Fisher & Company, by 1977, only 8 percent of homeowners had ever refinanced. By 1999, 47 percent had refinanced at least once. By the peak of the bubble, homeowners were extensively using refinancings to extract cash. Rosner also points out that while homeownership peaked in 2004, home prices peaked in 2006, because refinancing drove up prices.

Timothy J. Mayopoulos, the chief executive of Fannie Mae, yesterday provided some crucial details on what the government’s program to expand the availability of mortgages with low down payments would look like, the New York Times reported today. Mayopoulos said that he expected Fannie’s low-down-payment mortgages to cost the borrower less than similar loans available under certain other government programs. But he also said that Fannie’s loans would require private mortgage insurance on top of the down payment, a stipulation that might, in theory, limit the size of the program. Even as the government is moving ahead with the changes, some housing analysts are expressing concerns, contending that the program could lead to higher defaults. Fannie Mae and Freddie Mac, another large government-backed entity that guarantees mortgages, are regulated by the Federal Housing Finance Agency. Under its director, Melvin L. Watt, the agency has recently taken steps that aim to ease the flow of housing credit. Since the financial crisis of 2008, some 80 percent of mortgages have had some form of taxpayer guarantee.

The Supreme Court is slated to hear arguments tomorrow in a case that could determine when and how borrowers are allowed to cancel their mortgages, American Banker reported on Friday. The case, Jesinoski v. Countrywide, centers on how consumers can exercise their statutory rights to request a rescission of their mortgage, which is allowed if the finance charge was understated by at least $36. Banks and other mortgage lenders are anxiously awaiting the outcome of the case, as some lawyers for troubled borrowers have attempted to invoke rescission in an effort to delay foreclosures. Under the Truth in Lending Act, a consumer has three business days after the closing of a refinancing or home equity line of credit to rescind the transaction. That right of rescission is extended for up to three years if the mortgage disclosures are found to be inaccurate or the lender fails to provide the borrower with the proper disclosures. The statute requires borrowers to notify the lender in writing that they are exercising their right to rescind the loan. The chief question is whether a borrower can simply send a notice or if they have to file a lawsuit to receive a rescission. Several U.S. appeals courts have ruled the borrower must file a lawsuit to exercise the extended right of rescission but other circuit courts have stuck to the literal language of the statute, resulting in a split among the courts.

A personal bankruptcy stands out as a conspicuous blemish on a consumer’s credit report for as long as 10 years, but the barrier it presents to obtaining a mortgage doesn’t have to last that long, according to a New York Times analysis yesterday. Many individuals who sought bankruptcy protection during the recent recession, which officially ended in 2009, may now be eligible to apply for a mortgage. The mandatory waiting periods to apply for a mortgage backed by Fannie Mae or the Federal Housing Administration last from two to four years. Personal bankruptcy filings climbed steadily beginning in 2007 before peaking in 2010 at about 1.5 million filings, according to the American Bankruptcy Institute. Households that went through a chapter 7 liquidation bankruptcy must wait four years from the date of discharge (when their debts are wiped out) before applying for a conventional loan. The waiting period, according to Fannie Mae guidelines, is two years from discharge for chapter 13 bankruptcies, in which debts are partially repaid under a court-approved plan. The wait for a Federal Housing Administration loan is two years for chapter 7, and one year for chapter 13, provided the individual has kept up with payments under the reorganization plan and has permission from the court.

McGraw Hill Financial said yesterday that its Standard & Poor’s unit was in “active discussions” with federal and state regulators on a possible settlement over ratings on six commercial mortgage-backed securities issued in 2011, the New York Times DealBook blog reported today. The company added that it took a $60 million charge in the third quarter for the legal costs. “There can be no assurance that this amount will be sufficient to resolve these matters or that definitive settlement agreements will be reached,” McGraw Hill said in a statement. In July, McGraw Hill disclosed that the Securities and Exchange Commission had sent a Wells notice concerning S&P’s ratings of the securities, alerting the company that the agency was considering a possible enforcement action. The attorneys general of New York and Massachusetts have also been investigating S&P over the commercial mortgage-backed securities.