The latest: Federal regulators may be poised to take action against mortgage giants in wake of mortgage fraud investigation
Federal regulators are likely to soon issue new guidance on mortgage brokers, warning them not to offer mortgages to people who have never even paid the mortgage, a move that could have a ripple effect for the industry and could make it harder for some companies to compete with each other.
A number of big banks and mortgage companies have already faced fines for misleading mortgage borrowers about their ability to repay.
The mortgage industry has been reeling since the beginning of the year with mounting losses and mounting uncertainty over whether the Trump administration will lift a moratorium on new foreclosures and mortgage payments.
The new guidance is likely to come after the Federal Reserve’s meeting this week in San Francisco, which will likely be followed by a meeting of the Federal Housing Finance Agency, which is also expected to be open to the public.
The FHFA is charged with overseeing banks and other financial institutions.
In the meantime, regulators will likely look at how to enforce the moratorium on foreclosing on foreclosed homes, said Timothy Gershman, the director of the Program for the Study of Foreclosure and Housing in the City University of New York’s Graduate School of Law.
The guidance could also be used to ease enforcement, he said.
“If you’re going to have an agency that’s going to be in charge of enforcement, you might as well have a big league league to enforce it,” he said, referring to the Federal Bureau of Investigation.
If banks and regulators were to make an effort to crack down on mortgage fraud, it would be a “major shift” that could make the industry more vulnerable to new risks, said Alan Steinberg, who served as head of the Office of Thrift Supervision at the FHSA under President Barack Obama.
A few weeks ago, Steinberg said that banks were beginning to take more steps to ensure that they were complying with the moratorium, but he acknowledged that it was not as easy as it might appear.
He said that the government could still push banks to tighten their enforcement policies.
“The only thing you can do is make sure you don’t put people in the position where they are being made to do things that aren’t right, and you can’t have it,” Steinberg told reporters last week.