The Federal Housing Finance Agency announced April 17 that servicers will be required to make a decision within 30 days of receiving an offer on a property through a traditional Fannie or Freddie short sale program or a completed Borrower Response Package requesting short sale consideration.

The FHFA says the timeline will be in place in June.

If servicers need more than 30 days to make a decision, the FHFA will require them to provide the borrower with weekly status updates and arrive at a decision no later than 60 days from the date the BRP or offer was received.

The additional 30 days will provide some leeway for servicers who may need additional time to obtain an appraisal, broker price opinion or a private mortgage insurer’s approval for a short sale.

In the event a servicer makes a counteroffer, the borrower is expected to respond within five business days. The servicer must then respond within 10 business days of receiving the borrower’s counter.

The new guidelines fall under the Servicing Alignment Initiative implemented last fall. The Fannie and Freddie plan to use the timelines to evaluate servicer compliance with the initiative.

FHFA said it expects additional changes to be in place by the end of the year that address borrower eligibility and evaluation; documentation simplification; property valuation; fraud mitigation; payments to subordinate lien holders; and mortgage insurance.

The Consumer Financial Protection Bureau promised to crack down on banks with discriminatory lending practices, even if the discrimination is unintentional, the bureau announced April 18.

The agency's news release said that banks with lending policies that have a “disparate impact,” which means they put certain groups of borrowers at a disadvantage even if that is not the clear intention, could face lawsuits in the coming months.

The CFPB noted that while some lending practices have a discriminatory impact that can’t be helped because they “meet a legitimate business need that cannot reasonably be achieved as well by means that are less disparate,” many situations do not fit that criterion.

“We cannot afford to tolerate practices, intentional or not, that unlawfully price out or cut off segments of the population from the credit markets,” CFPB Director Richard Cordray said in the news release, which was issued simultaneously with a bulletin reaffirming the bureau’s commitment to enforcing the Equal Credit Opportunity Act.

Disparate impact lending is giving loan officers wide discretion to determine how much to charge borrowers, which can result in an aggregate pattern of discriminatory lending, Cordray noted.

One such case resulted in a fair lending settlement with Countrywide Financial in December 2011. That $335 million settlement was one of eight that the U.S. Department of Justice reached last year with banks over fair lending practices. The CFPB, however, can bring its own cases against lenders in federal court and does not have to file through Justice.

Read the CFPB’s notice on fair lending.

Speaking at the Los Angeles Federal Reserve April 20, Comptroller of the Currency Thomas Curry said too few borrowers have participated in the Office of the Comptroller of the Currency’s foreclosure review process, so the deadline to submit review requests was extended to July 13, National Mortgage News reported.

Curry noted that borrowers who participate in the foreclosure review process would not forfeit their right to sue servicers if they did not like the results offered by the OCC.

The OCC and the Federal Reserve Board have disagreed on the issue of borrowers waiving their legal rights as a condition of compensation under the independent foreclosure reviews being conducted by the 14 largest servicers.

The OCC has favored allowing servicers to require borrowers waive their rights to other legal remedies while the Fed, which regulates four of the 14 largest servicers, has opposed the waivers.

Waiver or not, Curry said that borrowers have nothing to lose by taking their cases to the OCC for review. “I want people to know that this process is free to borrowers who ask for a file review and that they give up none of their rights in asking for the independent review of their case,” Curry said, as reported by National Mortgage News. “If they don’t like the results, they don’t have to take it and they can choose to pursue whatever other legal remedies may be available.”

Currently, the OCC’s review process has generated little interest — only 3 percent of the 4.3 million eligible borrowers have asked for foreclosure reviews, National Mortgage News reported.

As a result, the OCC announced the deadline extension and said it would ramp up public outreach efforts.

The U.S. Department of the Treasury is expected to release a preliminary plan in the coming weeks that will outline how the agency plans to wind down the role of government-sponsored enterprises Fannie Mae and Freddie Mac, Bloomberg reported April 17.

Unnamed sources at Treasury told Bloomberg that the agency is leaning toward a plan that would continue to offer government-backed mortgage assistance to low- and moderate-income borrowers, as well “catastrophic reinsurance behind significant private capital,” meaning that private companies would insure mortgage bonds with the government paying out only in severe cases — where shareholders had been entirely wiped out, for example.

Reportedly, Treasury also is closely examining bills previously introduced in Congress that called on winding down Fannie and Freddie.

Karen Dynan, vice president at the Brookings Institution and former economist with the Federal Reserve Board of Governors, told Bloomberg that with both the upcoming presidential election and ongoing division between Democrats and Republicans in Congress, major housing finance reform isn’t anticipated this year. However, Dynan notes that the uncertainty surrounding the future of the mortgage finance system has impeded the housing market rebound and the private housing-finance market.

Treasury Secretary Timothy Geithner has previously stated his desire to wind down the GSEs and bring private capital back into the market.

The GSEs have required nearly $190 million in taxpayer aid since being taken into government conservatorship in 2008, and their role has become more entwined in the nation’s housing market as private investors have pulled back in the wake of the recession. The two GSEs now own or guarantee 60 percent of American mortgages, Bloomberg reported.

Geither wants to better target the government’s role in the housing market by focusing on first-time homebuyers and low-and moderate-income borrowers.

The GSE’s regulator, the Federal Housing Finance Agency, already is working on reducing their presence in the mortgage market. FHFA Acting Director Edward J. DeMarco has previously noted that the two GSEs will begin entering into arrangements that would allow them to share risk on some of their portfolios with private investors.  They also will rely more heavily on mortgage insurance and higher fees for guaranteeing mortgage-backed securities, Bloomberg reported.

The Housing Financial Services Committee announced that it launched the Dodd-Frank Burden Tracker April 17. The web-based resource is designed to aid in tracking changes mandated under the Dodd-Frank Act.

“This online resource will help the public better understand how the cumulative weight of these new rules — layered upon existing outdated, unnecessary and duplicative red tape — (affect) small businesses and financial institutions,” Financial Services Committee Chairman Spencer Bachus, R-Ala., said in the news release. “They have to spend increasing amounts of time and money dealing with all this red tape instead of engaging in the activities that grow our economy and create jobs.”

According to the committee, Dodd-Frank already has had a profound effect on the financial sector. Regulators have written only 185 of the expected 400 rules, but the 185 rules alone are expected to require the private sector spend more than 24 million man-hours each year to meet compliance, according to the news release. The tracker also found that those 185 rules take up more than 5,300 pages.

According to Randy Neugebauer, R-Texas, chair of the Oversight and Investigations Subcommittee, the time required by businesses to comply with Dodd-Frank rules will be significant.

“It took only 20 million [man-hours] to build the Panama Canal,” Neugebauer added. “Banks and credit unions, retirement funds and other financial institutions will be forced to spend a large portion of their budgets trying to comply with Dodd-Frank rules rather than lending to small businesses and American consumers investing in our economy. While the promised benefits of Dodd-Frank are still (undetermined), the costs are beginning to become crystal clear.”

The tracker will continually be updated as more rules are written.

View the Dodd-Frank Burden Tracker.

The Federal Deposit Insurance Corporation forecast fewer bank failures for 2012, signaling its belief that the economy will continue its recovery, National Mortgage News reported April 18.

Speaking April 17 at a small business lending summit in Washington, D.C., Acting FDIC Chairman Martin J. Gruenberg said that only 16 banks have collapsed so far in 2012, and that he expects the total number of failures this year to fall between 50 and 60, National Mortgage News reported. Last year, 92 banks failed while 157 banks failed in 2010.

The number of problem banks also continues to shrink, Gruenberg said. As of Dec. 31, 2011, 813 banks and thrifts were on the FDIC's watch list, compared to 844 three months earlier, National Mortgage News reported.

Gruenberg said that 2011 was the banking industry’s most profitable year since 2006.

Bank of America made minimal progress on outstanding mortgage repurchase claims in the first quarter, HousingWire reported April 19.

According to HousingWire, more than $16 billion in claims remain outstanding, with more than 50 percent coming from Fannie Mae and Freddie Mac. Outstanding claims grew from $11.8 billion to $12.6 billion from first quarter 2011 to first quarter 2012.

Investors allege that Bank of America violated origination standards prior to selling them on the secondary market, and are trying to make the bank repurchase them.

According to HousingWire, the bank created its legacy asset division last year to settle those requests, but Fannie Mae and Bank of America severed ties in February resulting from disagreements over outstanding claims. Bank of America Chief Financial Officer Bruce Thompson told investors in an April 19 conference call that “we continue to have disagreements.”

According to Bank of America’s earnings statement, the bank approved $480 million in buyback requests in the first quarter, down from $1.1 billion during the previous quarter, and a high of $2.2 billion in the third quarter of 2011, HousingWire reported.

Private-label claims awaiting Bank of America action tripled during the past year. Outstanding claims from private mortgage-backed securities totaled $4.8 billion at the end of the first quarter, an increase of $1.5 billion over the same period last year, HousingWire reported. Bank of America noted that the private investor increase was separate from the $8.5 billion settlement with Bank of New York Mellon as a trustee, which is still awaiting court approval and would resolve pending litigation.

Bank of America expects to lose approximately $5 billion in private-label repurchase claims , and is unable to predict losses on Fannie and Freddie claims, HousingWire reported.

Ally Financial disclosed that its mortgage unit, ResCap, missed a debt payment, and analysts at Barclays Capital warned of additional fallout from a possible bankruptcy, HousingWire reported April 18.

HousingWire reported that ResCap missed a semi-annual payment on $1.75 billion in notes that will ultimately mature in April 2013. Those notes bear a 6.5 percent coupon. The bank reported that $473 million is outstanding, but that it won’t be considered in default for 30 days.

“ResCap now has a 30-day grace period before creditors can accelerate the debt and declare an event of default,” stated Barclays Capital in an April 18 note, reported by HousingWire. “We think the missed payment suggests that ResCap may be heading toward a bankruptcy proceeding or is using the threat of a bankruptcy filing to corral investors into reducing the company’s debt burden. We expect some resolution to the uncertainty surrounding a ResCap filing within the next one to two months.”

HousingWire reported that the pooling and servicing agreements on residential mortgage-backed securities serviced by ResCap demonstrate some concerns. Specifically, if ResCap is put into bankruptcy, the trustee would become the master servicer on the underlying mortgages if a majority of the stakeholders direct it to, or a revised contract could be negotiated with the new servicer.

Analysts at Barclays Capital indicated that if ResCap is unable to sell the mortgage servicing rights prior to a bankruptcy filing, the government-sponsored enterprises or the trustees of private-label RMBS can transfer the rights away without paying ResCap.

According to HousingWire, speculation has Nationstar, the Texas-based servicer owned by Fortress Investment Group, as a possible purchaser of the mortgage servicing rights.

HousingWire reported that there is a chance that the trustees of the ResCap RMBS would divide the servicing rights among several servicers based on performing or nonperforming status, though obtaining servicers for less valuable subprime rights could be challenging.

Whether or not any new servicers would be required to abide by the $26 billion foreclosure settlement Ally agreed to with the state attorneys general and federal prosecutors is unclear, although settlement documents indicate that new servicers would be required to honor the obligations, HousingWire reported.

“Prior to any filing, we would expect a sale of the servicing rights to a successor servicer, as that would maximize value for the estate,” Barclays Capital noted, according to HousingWire. “However, we cannot rule out the possibility of a messy bankruptcy filing if ResCap is unable to complete a sale with another servicer. If this occurs, we expect some short-term servicing/cash flow disruptions on non-agency loans serviced by ResCap and a transfer of servicing to either the trustee or a servicer chosen by the trustee.”

The Federal Reserve announced April 19 that big banks won’t have to fully conform to the Volcker rule until July 2014. Regulators provided the guidance in response to bank concerns about having to adopt the rules by the statutory deadline of July 21, 2012. 

The Fed’s news release stated that “entities covered by section 619 of the Dodd-Frank Act have a period of two years after the statutory effective date, which would be until July 21, 2014, to fully conform their activities and investments to the requirements of section 619 of the Dodd-Frank Act.”

The guidance came after Sen. Mark Warner, D-Va., announced in March that he was in discussions with other senators about sponsoring legislation to provide clarity on the compliance date.

The Volcker rule aims to reduce risk to the U.S. economy by restricting banks from making speculative trades with their own money and from investing in hedge funds and private-equity funds.

Jaret Seiberg, an analyst at Guggenheim Securities LLC in Washington, D.C., told The Wall Street Journal’s MarketWatch April 19 that the Fed’s announcement bodes well for big banks like JPMorgan Chase, Goldman Sachs, Citigroup and Bank of America. “Our view is that the rule will become more moderate the longer it takes to finalize, especially if regulators delay until after the election,” Seiberg told MarketWatch.

While the Fed and other bank regulators, including the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, the U.S. Securities and Exchange Commission and the Commodity Futures Trading Commission, said they expect to write new rules by July, Fed Chairman Ben Bernanke said he thought it was unlikely the Volcker rule will be approved by then.

Read the Fed’s announcement.

The Federal Reserve Bank of New York initiated a competitive bid process April 18 for roughly $7.5 billion of collateralized debt obligations linked to commercial mortgages it acquired during the 2008 bailout of American International Group Inc., The Wall Street Journal reported.

The CDOs, called MAX, now have a face value of roughly $7.5 billion, and represent about one-sixth of the bonds in a portfolio known as Maiden Lane III, which have a total unpaid principal balance of $47 billion, the Journal reported. The Maiden Lane III portfolio was acquired from AIG Financial Products with $24.3 billion in financing from the New York Fed and a $5 billion equity contribution from AIG.

Eight Wall Street dealers were invited to bid, including Barclays PLC, Deutsche Bank AG, Goldman Sachs and Bank of America’s Merrill Lynch division, the Journal reported. Bids are due April 26, at which point the New York Fed will decide whether to sell depending on the strength of the best bid.

Chicago announced that it would likely ease requirements of a controversial ordinance that required owners of vacant properties to register them with the city within 30 days of vacancy and pay a $500 fee, HousingWire reported April 19.

The ordinance, which also includes properties that have not yet completed the foreclosure process, took effect Nov. 19, 2011, and met with immediate resistance. The Federal Housing Finance Agency filed suit against the city in December claiming the ordinance, which affects properties owned by Fannie Mae and Freddie Mac, established a legal liability and noted that the ordinance could set a precedent for other communities to impose similar requirements, which would be cost prohibitive to FHFA.

The FHFA had advised Fannie and Freddie to pay the fee under protest.

To lessen the burden on mortgage lenders and servicers, the city said it was considering changes related to standards for maintenance and upkeep of properties not yet foreclosed upon, HousingWire reported.

Proponents of the ordinance, including Chicago Buildings Commissioner Michael Merchant, said the city has seen property registrations nearly double since the ordinance took effect in November, and his field employees report a higher level of compliance, HousingWire reported. The Chicago Department of Buildings reported that between Nov. 19 and April 5, 3,544 vacant properties were registered with the city.

The Financial Crimes Enforcement Network released its full year 2011 report on mortgage loan fraud April 24, and reported that financial institutions submitted 92,028 suspicious activity reports for the year — a 31 percent increase from the 70,472 submitted in 2010.

The FinCEN report noted that 84 percent of reported suspicious activities occurred more than two years prior to filing, compared to 77 percent in 2010.

A significant improvement in due diligence among mortgage lenders was noted, with 40 percent of suspicious activity reports related to institutions turning down loan applications, short sale requests or debt elimination attempts because of suspected fraud.

“The FinCEN report shows we’re seeing financial institutions spotting activity that appears to be fraud before it happens and in the process, helping to prevent it,” FinCEN Director James H. Freis, Jr. said in an accompanying news release. “Even though we’re seeing the market work through its backlog of the book of business now in default, FinCEN data is revealing possible fraud that institutions are using to help defeat scammers.”

The report noted that in a majority of income fraud-related suspicious activity reports, filers detected a misrepresentation before funding a loan request and declined the application. Additionally, in all of the debt elimination-related suspicious activity reports, filers recognized that documents submitted to cancel mortgage obligations or pay off loan balances were invalid, and communicated to customers that their mortgages were still due.

FinCEN also released per capita rankings of suspicious activity reports by state, with California, Hawaii, Florida, Nevada, and the District of Columbia topping the list. (D.C. is counted as a state for purposes of the report.)

See the full 2011 report.

Read the Appraisal Institute’s response to mortgage fraud increase.

CBRE Capital Markets was Freddie Mac’s highest producing multifamily mortgage seller in 2011, with the firm completing $4.13 billion in transaction volume, the government-sponsored enterprise reported April 19.

The GSE’s other top producers were NorthMarq Capital ($2.14 billion), Berkadia Commercial Mortgage ($1.68 billion), Wells Fargo Multifamily Capital ($1.49 billion) and Holliday Fenoglio Fowler ($1.43 billion).

In total, Freddie Mac reported that it purchased more than $20 billion in loans from lenders in 2011, consisting of 321,000 multifamily units and requiring approximately $14 billion in mortgage securitizations.

By region, Boston-based KeyCorp Real Estate Capital led the Northeast ($575 million); Atlanta-based CWCapital dominated the Southeast ($949 million); Dallas-based Holliday Fenoglio Fowler was tops in the Central region ($476 million); and PNC Bank in Calabasas Hills, Calif., was the key player in the Western region ($451 million).

Citibank logged in as the top targeted affordable housing seller for 2011 ($461 million), followed by Wells Fargo Multifamily Capital at $315 million, the GSE reported. KeyCorp Real Estate Capital was the top conventional structured transactions seller ($334 million) and Wells Fargo Multifamily Capital was the top seniors housing seller ($162 million).

Meanwhile, Beech Street Capital received Freddie Mac’s partnership award for its 800 percent increase in volume over the previous year.

David Brickman, senior vice president of Freddie Mac Multifamily, called it an outstanding year, noting that these lenders are making a difference in their communities by providing loans for the growing multifamily rental market.

"They achieved this status through hard work, persistence and a commitment to the industry,” Brickman said in the news release. “These lenders have hung in there during this challenging economic environment, and helped to keep much-needed credit flowing to the rental housing marketplace.”

Average fixed mortgage rates held relatively steady, increasingly only slightly from the previous week, Freddie Mac reported April 19 in its weekly Primary Mortgage Market Survey.

The 30-year fixed-rate mortgage inched up 0.02 percentage points from the previous week to 3.9 percent (down from 4.8 percent a year ago). The 15-year rate also rose 0.02 percentage points to 3.13 percent (down from 4.02 percent a year ago).

Five-year Treasury-indexed adjustable-rate mortgages fell 0.07 percentage points to a record low of 2.78 percent (down from 3.61 percent a year ago). However, the one-year rate inched up 0.01 percentage point to 2.81 percent (down from 3.16 percent a year ago).

“Fixed mortgage rates held relatively stable this week amid signs that inflation remains in check,” Freddie Mac Chief Economist Frank Nothaft said in a news release. “Industrial production was flat in March, a reading below the market consensus forecast. Meanwhile, both headline inflation gauges (the consumer and producer price indexes) for March were in line with market expectations.”

View Freddie Mac’s weekly Primary Mortgage Market Survey.

The Appraisal Institute announced April 25 that Floyd Robinson, assistant general counsel, Federal Deposit Insurance Corporation Professional Liability and Financial Crimes Section, will be a general session speaker at its 2012 Annual Meeting. The event will take place Aug. 1-3 at the Loews Coronado Bay Hotel in San Diego.

Robinson is responsible for investigating and litigating professional liability claims on behalf of the FDIC against directors, officers and other professionals who allegedly caused losses to a bank or a thrift that later failed. PLU also investigates and pursues fidelity bond claims. The Financial Crimes Unit is responsible for coordinating with and providing support for the U.S. Department of Justice in criminal cases seeking convictions for banking crimes, and for collecting criminal restitution and forfeiture orders issued against defendants.

The 2012 Annual Meeting will include more than 20 panel discussions and workshops, as well as numerous opportunities for networking and information sharing, continuing education (with the chance to earn up to 18 hours of Appraisal Institute CE credit, and state credit), an awards luncheon, exhibits and abundant recreational activities in sunny San Diego.

Registration is open. Sign up today and find schedule information, an exhibitor list, hotel packages and discounted airfare.

Matthew George, SRA, of the Colorado Chapter of the Appraisal Institute, is prominently featured in a consumer-focused article in the April issue of Money magazine, which covers personal finance for individuals, business executives and personal investors, and has more than 1.9 million subscribers and nearly 6 million unique monthly online visitors.

In the article, real estate reporter Lisa Gibbs suggests that sellers need to set realistic for-sale prices from the get-go. George tells Gibbs that it’s important for sellers to scout active listings. “You have to know what you're competing against,” he said. Gibbs advocates that consumers use a professional appraiser and recommends looking for one on the Appraisal Institute’s website.

Also featured in national media coverage this past week were Appraisal Institute President Sara W. Stephens, MAI, Debbie Shaw, Associate member, Peter Christensen, Affiliate member, John Forsythe, SRA, and Bill Pastuszek, MAI, SRA, in Valuation Review; and William Waltenbaugh, SRA, in American Banker.

These stories are among the recent media coverage included in the “AI in the News” feature on the members-only section of the Appraisal Institute website.

Appraisal Institute members appearing recently in local media coverage include Michael Clapp, MAI, Winston-Salem (N.C.) Journal; Bob Maddox, MAI, SRA, Steamboat (Colo.) Today; Michael MaRous, MAI, SRA, Arlington Heights (Ill.) Daily Herald; Frank Zabbo, SRA, Lowell (Mass.) Sun and Boston Business Journal; Ted Yamamura, SRA, Hawaii Reporter (Honolulu), Maui (Hawaii) News and MauiNow.com (Hawaii).

See the latest media coverage about the real estate valuation profession, the Appraisal Institute and its members. Media coverage at “AI in the News,” found on the member log-in page of the Appraisal Institute’s website, is updated daily and also includes the latest news releases from the Appraisal Institute.