Loss Mitigation

The Federal Reserve Board on Tuesday requested public comment on a proposed rule under Regulation Z that would require lenders to determine a borrower's ability to repay a mortgage before making the loan and would establish minimum mortgage underwriting standards. The revisions to the regulation, which implements the Truth in Lending Act (TILA), are in response to new consumer protection directives laid out by the Dodd-Frank Reform Act. The proposal provides four options for complying with the ability-to-repay requirement.

Industry data released this week shows that the dollar volume of mortgage loans associated with fraud has dropped to a three-year low, cut by more than half over the past 12 months to $900,000. Likewise, the number of fraud cases tracked has declined to push the index to its lowest level since early 2008. The drop coincides with the U.S. Department of Justice's late 2010 sting involving 120,000 fraud victims who lost more than $8 billion. However, recent activity suggests the lull might only be temporary.

Washington Governor Chris Gregoire signed the Foreclosure Fairness Act of 2011 into law Thursday. The new law goes into effect July 13. It gives homeowners facing foreclosure access to housing counselors, including meeting with the bank and an independent mediator to review options to keep their homes. Support for such mediation will be funded, at least in part, by lenders, who will pay a $250 fee for every new notice of default they file.

Aklero Risk Analytics, Inc., a Pennsylvania-based provider of automated data and document validity assurance for the mortgage industry, has appointed Richard J. Downing as EVP of sales. Downing is a veteran of the mortgage and consumer data industries, with more than 30 years' experience in working to deliver technology-based consumer lending solutions to residential and equity lenders.

Citigroup Inc. said Monday that it pulled in net income of $3.0 billion for the first quarter of 2011. The bank's profit declined $1.4 billion from the first quarter of 2010, but more than doubled compared to the final three months of last year. Even with the year-over-year drop, the lender's Q1 earnings beat analysts' expectations. Citi reported that the company's net credit losses declined 25 percent from a year earlier to $6.3 billion, as credit quality continued to improve for the seventh consecutive quarter.

CoreLogic Credco, a provider of merged credit reports, recently integrated its FinalCheck suite into the Ellie Mae Encompass360 mortgage management solution. FinalCheck is an automated Fannie Mae loan quality initiative (LQI) compliance suite that assists lenders in verifying credit, application, and fraud data. The company says the technology can help lenders uncover undisclosed debt prior to loan submission and mitigate repurchase risk to avoid loan buy-backs from the GSE.

Mortgage servicing practices have taken center stage on Capitol Hill, with a flurry of bills being penned to make servicing reforms the law of the land. Rep. Maxine Waters of California has revised a bill she's brought to the table several times before that would compel lenders to engage in what she says are ""reasonable loss mitigation activities"" for all delinquent homeowners. The legislation would place responsibility for modifying first and second liens with the servicer of the primary mortgage and would institute several reforms outlined in recent settlements with regulators.

Ginnie Mae, which provides a guaranty on mortgage securities backed by Federal Housing Administration loans, has announced a new policy regarding the pooling of past-due loans. For single-family securities with an issue date of June 1, 2011, and after, servicers can no longer package loans that are delinquent by more than the monthly installment of principal and interest that is due on the issue date. This fall, the federal agency will also begin requiring issuers to supply new data elements, such as loan-to-value ratios and pre-modification qualities.

Lawmakers in both the House and Senate are seeking to legislate changes to servicing practices. On the heels of the cease and desist orders issued by federal regulators to a handful of mortgage servicers to address process deficiencies uncovered by robo-signing investigations, four bills have been introduced aimed at reforming the way delinquent borrowers are handled industry-wide and aligning servicer incentives with those of investors and homeowners.

Bank of America said Friday that it turned a profit of $2.0 billion for the first quarter of 2011. That's down 39 percent from the lender's earnings a year earlier, largely due to continuing losses tied to its legacy mortgage business. Bank of America took a $4.9 billion hit related to foreclosure delays and other out-of-pocket expenses that the company does not expect to recover, as well as higher litigation costs and loss mitigation expenses. The bank has also confirmed plans to lay off 1,500 mortgage employees.