Government

The House Committee on Oversight and Government Reform has launched an official investigation into the federal government's foreclosure prevention program. According to a statement from the head of the committee, the probe was triggered by complaints that servicers have been slow and inconsistent in modifying loans under the Making Home Affordable (MHA) program, and are not communicating clearly with eligible homeowners.

Multiple bank closures have become commonplace on Friday evenings, but last week, regulators shut the doors on just one institution-1st American State Bank of Minnesota. The bank operated two local branches in Hancock, with $16.3 million in deposits and $18.2 million in total assets. It was acquired by Community Development Bank, also in Minnesota.

The Federal Trade Commission has proposed a new rule that would prohibit third parties, including loan modification specialists and loss mitigation attorneys, from collecting payment for foreclosure prevention services until after they obtain a documented offer from a lender or servicer for a modification or other form of mortgage relief.

U.S. Rep. Judy Biggert of Illinois has introduced new legislation designed to ramp up congressional oversight of the government-controlled mortgage giants Fannie Mae and Freddie Mac. The bill would require the two companies to submit regular reports to Congress and the public disclosing the intricacies of their businesses, including executive bonuses, foreclosure mitigation, and investments.

A key Treasury official is publicly speaking out against new rules that would require lenders to retain some of the risk on mortgages and other assets sold to investors. At the American Securitization Forum's annual convention this week, Comptroller of the Currency John Dugan urged policymakers to focus reform efforts on improving loan underwriting standards, rather than risk retention proposals that could hamper an already-tenuous securities industry and further diminish credit availability.

PNC Financial Services Group said Tuesday that the company has reached an agreement with banking regulators and the U.S. Treasury to pay back the $7.6 billion it received under the Troubled Asset Relief Program (TARP). To fund the repayment, the Pittsburgh-based company has priced a $3 billion offering of common stock and sold off its investment servicing business.

The federal supervisor charged with overseeing Fannie Mae and Freddie Mac says the two mortgage financiers will not be allowed to introduce new loan products into the market or take on additional responsibilities to lower interest rates once the Federal Reserve's mortgage purchase program expires next month. The Federal Housing Finance Agency (FHFA) has also told lawmakers that it plans to reduce Fannie Mae and Freddie Mac's mortgage portfolios, and the companies will not be ""substantial buyers or sellers of mortgages.""

Problems in the commercial real estate sector have put Congress on the offensive. House members are particularly concerned with guidance issued be federal banking regulators, advising lenders to extend or restructure loans backed by income-producing or development properties. Lawmakers say there are indications these loans are not being serviced properly, and evidence that regulators themselves are triggering defaults by encouraging lenders to write down the value of performing loans when payments are current.

Connecticut Attorney General Richard Blumenthal sent cease-and-desist letters to 30 law firms and real estate companies this week ordering them to stop abrupt and illegal evictions of tenants of foreclosed properties. Blumenthal says his office has received complaints from tenants who were illegally forced out of rental homes after their landlords' properties were foreclosed - a violation of the federal Protecting Tenants at Foreclosure Act (PTFA) signed into law last year.

Overdue loans in pools of commercial mortgage-backed securities (CMBS) climbed to 6.49 percent in January, according to a report issued this week by Trepp LLC, a New York-based company that tracks the commercial real estate market. That figure is up 42 basis points from the 6.07 percent delinquency rate in December, and Trepp says it's the highest delinquency level in the history of the CMBS industry.