Fed rate cut, industry lawsuits: Top mortgage news September 2024

October 9, 2024 6:00 AM

Enjoy complimentary access to top ideas and insights — selected by our editors.

In September's news roundup in the mortgage industry, learn more about the impact of the Federal Reserve's rate cut on mortgage appetites, the continued wave of lenders launching and settling lawsuits and more.

Click here to read August's roundup of top mortgage news.

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Fed's large cut has complex effect on mortgages

Article by

Bonnie Sinnock

Anticipation of federal policymakers' first short-term rate cut in years has helped lower 30-year mortgages' financing costs considerably since May, but the decision's arrival is a different story.

Part of the market was correct in its speculation about the size of the cut, which turned out to be 50 basis points. A majority of the market was anticipating a cut of that size on Sept.18, according to First American Chief Economist Mark Fleming.

However, the move surprised another significant chunk of the market, which anticipated a 25 basis point cut.

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Why mortgage rates might rise after Fed cut

Article by

Brad Finkelstein

Mortgage rates continued to tumble closer to the 6% mark, even before taking into account the full impact of the 50 basis point cut in short-term rates by the Federal Open Market Committee.

But the Fed's actions shouldn't start an origination uptick for the mortgage industry, according to one long-time veteran.

"The last three months of much weaker new-job creation made the larger cut necessary in the Fed's eyes," said Melissa Cohn, regional vice president at William Raveis Mortgage. "The immediate impact of the cut is not mortgage-rate friendly, as bond yields have jumped higher."

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Why Mr. Cooper 'sidelined' its MSR activity

Mr. Cooper, an influential publicly traded nonbank that made a significant purchase in the mortgage servicing rights market this year, acknowledged a temporary pullback from it at a Barclays investor conference.

At the meeting last month, Chairman and CEO Jay Bray confirmed an assertion by Terry Ma, a senior equity research analyst at Barclays, who said, "You reviewed a record number of deals a few quarters ago, but I think that quantity has decreased somewhat today?"

"The first part of the year was, well, we looked at a lot of deals. It was very active. There was a lot of supply. I'd say the summer was even pretty active, but there were a couple of aggressive buyers out there. So we kind of sat on the sidelines and let them bid aggressively," Bray said.

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CFPB assistant director talks housing czar, junk fees and AI

The Consumer Financial Protection Bureau's Assistant Director of Mortgage Markets admits there's room to improve coordination between housing agencies, regulators and mortgage lenders and servicers.

But whether the answer is a housing czar is an open question, said Mark McArdle, speaking at the National Mortgage News Digital Mortgage conference in San Diego last month.

"[When we're making rules] we do go to the Federal Housing Administration, Department of Veteran Affairs and the Federal Housing Finance Agency to make sure that they understand how this might impact their rules … so there is coordination that occurs," McArdle said. "The question about a housing czar is can they make all the cats go in one direction? That's a tough job."

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A and N Mortgage sues CMG Mortgage for poaching, trade secrets theft

A Chicago-based lender is suing CMG Mortgage for stealing its trade secrets, including a proprietary loan program for asylum seekers.

A and N Mortgage Services also named two former employees and Select Lending Services, an Oregon-based brokerage owned by CMG, as defendants alongside its California competitor. The complaint filed in July in an Illinois federal court claims the information the loan originator and processor stole is worth over $1 million.

Bradley Boden, who's listed as a regional manager for SLS in Chicago, allegedly sent confidential A and N customer information to his personal email between May 2023 and his resignation in January. The suit also claims Boden misappropriated a confidential A and N financing product for C08 visa holders, or customers with asylum applications pending. The departing originator allegedly recruited an existing referral partner for the program, to work with CMG.

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Newrez and OneTrust settle explosive trade secrets suit

Newrez and OneTrust Home Loans, a d.b.a. of CalCon Mutual Mortgage LLC, after slinging accusations back and forth, have opted to settle litigation pegged against one another.

In February, Newrez filed a bombshell suit alleging James Hecht, former head of its retail operations, staged a ruse in which he transitioned to OneTrust and brought his colleagues with him. Meanwhile, OneTrust accused Newrez of attempting to smear its reputation via legal action in a countersuit.

Terms of the settlement were not disclosed, but both pieces of litigation have been dismissed with prejudice, documents filed Sept. 11 in Pennsylvania federal court show. That means the same claims can't be tried again in court.

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UWM is suspicious of media outlet's relationship with law firm

United Wholesale Mortgage wants to know how attorneys behind a racketeering lawsuit worked with a media outlet behind a scathing report about the company this spring.

Late last month, the lender doubled down on calls to dismiss the class action complaint accusing UWM of scheming with brokers to cheat borrowers out of billions of dollars in excess fees. The motion for relief filed Sept. 17 in a Michigan federal court is the latest salvo in UWM's defense against allegations raised in Hunterbrook Media's lengthy April investigation.

Boies Schiller Flexner LLP filed a 107-page lawsuit on behalf of borrowers against UWM the same day Hunterbrook's story was published. The article said the law firm had previously entered an agreement with the nonprofit newsroom. Hunterbrook's hedge fund parent at the time also said it took a short position in UWM's stock, and a long position in rival Rocket Cos.' stock.

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CFPB hits TD Bank with $28M in penalties for credit-reporting abuses

Article by

Catherine Leffert

originally featured on American Banker

The Consumer Financial Protection Bureau has ordered TD Bank to pay $28 million for illegally tarnishing customers' credit and subsequently failing to rectify practices the bank knew to be botched.

TD entered into a consent agreement with the CFPB on Sept. 11 that says the bank gave false information to consumer reporting companies, sometimes knowingly, and lagged in remedying the failures once it was aware of them. The action comes as the U.S. subsidiary of Toronto-based TD Bank Group likely faces massive sanctions and fines from other U.S. regulators for separate anti-money-laundering failures.

The Cherry Hill, New Jersey-based bank neither admitted nor denied any wrongdoing related to the CFPB's claims, per the consent order. TD spokesperson Miranda Garrison said in an email that the bank "cooperated fully to resolve this matter."

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Republican bill would put housing agencies on shorter leash

A wide-ranging housing bill Republican Sen. Tim Scott of South Carolina has introduced would position Congress to play more of a role in scrutinizing the government-dominated mortgage market, bring reform to existing systems and increase some forms of assistance.

The Road to Housing Act calls specifically for reforms in loan officer compensation for small loans and counseling. It also would require housing agencies active in the market to report more frequently to Congress than they currently do.

"Costs to buy a home and to rent continue to increase, and homelessness is at record levels. It's past time for Congress to take serious action," Scott, who is currently the ranking member of the Senate Banking Committee, said in a press release.

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13 largest homeowners insurers denied nearly half of claims last year

Likely looking to offset the rising costs of climate change, the nation's 13 largest homeowners insurers denied 47.5% of their claims last year, compared with 37.4% for all reporting underwriters, a study from Weiss Ratings alleged.

Several factors can lead to a claim being denied, including certain risks such as flood and windstorm not being covered under standard policies.

But for Martin Weiss, the founder of Weiss Ratings, there's more to the story.

Click here to read the full story.