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A jump in U.S. job numbers above the levels seen the previous month cooled interest rate cut expectations Friday, and nonbank mortgage broker and bank job estimates released that day softened.U.S. jobs rose by 254,000 in September, above expectations for 150,000 more in line with August's addition. Unemployment was 4.1% as compared to the 4.2% anticipated. New industry payroll estimates for August activity totaled 272,300 compared to an upwardly revised 272,600. "Employment continued to trend up in food services and drinking places, health care, government, social assistance and construction," the Bureau of Labor Statistics report said.The numbers suggest that while federal monetary policymakers may continue to cut short-term rates they control, it won't be as aggressive as the 50 basis point cut last month."A return to a more normal cadence of 25 basis point cuts is likely at the November meeting, and at each meeting beyond that, until the fed funds rate returns to a neutral level next summer," said Michael Brown, senior research strategist at Pepperstone, in a report. This makes it less likely mortgage borrowers, brokers and lenders will get much more interest rate relief."Interest rates jumped on the release of this report," Michael Fratantoni, chief economist at the Mortgage Bankers Association, said in an emailed statement."MBA's forecast is for longer-term rates, including mortgage rates, to remain within a relatively narrow range over the next year. This news will push mortgage rates to the top of that range, but we do expect that mortgage rates will stay close to 6% over the next 12 months," he added.While the market was somewhat surprised by Friday's employment report, there had been other indications that hiring has been a little stronger recently earlier in the week.The August Job Openings and Labor Turnover survey numbers had signaled that in some respects U.S. employment conditions are surprisingly robust, according to a report from Rania Gule, senior market analyst at global multi-asset broker XS.com.U.S. job openings rose during the month to 8.4 million, following two consecutive declines earlier, Gule noted."This reflects ongoing strength in the labor market, prompting traders to lower their expectations for any significant monetary easing," said Gule.Private payroll numbers released two days earlier showed 143,000 jobs added in September, according to a report ADP produced in collaboration with Stanford Digital Economy Lab. The number was larger than anticipated after five months of slower activity but still below the 200,000 benchmark.Compensation for private workers softened compared to a year earlier in the payroll provider's September report, particularly for workers who changed jobs. The latter category saw their average increase fall from 7.3% to 6.6%, while the former dipped slightly to 4.7%."Stronger hiring didn't require stronger pay growth last month. Typically, workers who change jobs see faster pay growth. But that premium over job-stayers shrank to 1.9 percent, matching a low we last saw in January," ADP chief economist Nela Richardson said. At 225,000, initial jobless claims outpaced estimates for 220,000 this week, according to Cody Echols at Mortgage Capital Trading. Continuing claims largely plateaued."Continued geopolitical tensions also continue to remain high, which is driving uncertainty with global markets," said Echols, who is a senior capital markets technology advisor at MCT.

Home equity investment contracts are having a moment, with the introduction of new products and investors and a venture capital raise in recent weeks, despite increased criticism about a lack of consumer protections for the product.Traditional lenders and fintechs alike are responding to what they think will be elevated consumer demand for nontraditional lending options by bringing various products that could address both high refinance rates and available equity. Referred to commonly as either shared appreciation or home equity investment platforms, the model offers consumers the opportunity to draw from their property value in exchange for an interest stake in it until repayment, which could be after an agreed-upon date or at time of sale or homeowners' death. Among the segment's recent wins, Unison announced a partnership with the global investment firm Carlyle, which is making a strategic investment into the home equity appreciation platform and will provide resources for Unison to also unveil a new interest-only loan. The loan combines the benefits of a mortgage with an equity draw, the company said. The cost of the loan is offset by sharing a portion of the home's future appreciation, as well as partially deferred interest. Through the new investment, Carlyle is set to buy up to $300 million of Unison's new home equity loans on the secondary market. "Unison is a leader in equity-sharing agreements and we're confident our expertise in asset-backed finance can help increase origination and awareness for this new capital solution for homeowners," said Akhil Bansal, head of credit strategic solutions at Carlyle, in a press release. Unison's product rollout follows news of a $280 billion raise in capital by Unlock Technologies, which promises consumers the ability to get loans on the future value of their homes. In an agreement with D2 Asset Management, the fintech is set to receive $30 billion through the Series B equity investment, with another $250 million capital commitment to support its growth.Unlock said it plans to use the cash to expand both product offerings and upgrade technology. The funding will also help it embark on efforts to expand its national footprint. In the secondary market, investors are seeing an influx of home equity product issuances and securitizations coming to market. While more likely to consist of closed-end loans, securitizations of HEIs are also growing, industry experts said. Compared with closed-end home equity loans that come with a fixed coupon, HEI securitizations have more nuances that ultimately make the final return on investment a guessing game.Most usually combine a coupon rate with some shared appreciation. "It depends on how the product is structured. Some of these — and there's a wide variety of these out there — have minimum yields that are higher than zero. In that case, the investor will get the minimum regardless of what happens to the home price," said John Beacham, CEO of Toorak Capital Partners. "You're taking the risk of home appreciation being higher or lower than expected," he added. The risk of delinquencies or nonpayment could also be higher than expected.As a relatively new offering, though, HEIs still come with a number of questions and potential for unwelcome surprises when the bill comes due for customers, depending on the amount of appreciation that has occurred.  Where the segment is seeing challenges and legal pushback emerge is among state consumer regulators. At the root of the problem is the lack of clear regulatory guidelines for the products, said Andrew Pizor, senior attorney at the National Consumer Law Center."Some courts have said they're not loans, because at the time they're written, there's no certain obligation, you have to pay something back," Pizor said. "There's a whole laundry list of consumer protection laws that don't apply to these, so they're essentially unregulated," he said. Among the rules that are not enforceable is the Truth in Lending Act.One company attracting both favorable and negative publicity this year is Easyknock, which acquired shared appreciation platform Homepace in a deal that allowed them to expand its range of offerings. EasyKnock also found itself the subject of a National Public Radio investigation in June. The NPR report specifically detailed problems certain consumers had with its sale-leaseback product. Some state regulators are claiming the company employs "dishonest" marketing tactics that hide the fact sale-leasebacks involve ceding homeownership to Easyknock, effectively making the company their landlord. Easyknock is also facing lawsuits in several states. In one of those cases, the company celebrated a victory in early October, when a Texas court ruled in favor of Easyknock in arbitration, affirming the sale-leaseback contract it had with plaintiffs as a "valid and enforceable contract." The couple suing the platform had claimed fraud and misrepresentation over what they considered a "disguised loan."Unison, one of the first companies to introduce shared appreciation transactions, is also being sued in Colorado by a customer who claims they went bankrupt from their agreement. The National Consumer Law Center is providing legal assistance to the plaintiff in the case."NCLC believes they should be regulated as loans, because they really work that way from a consumer's perspective," Pizor said. Developments on the state level could signal possible future regulatory challenges to how HEIs operate. Two states, Maryland and Connecticut, moved to classify home equity investment products as loans, placing them under the same stricter rules that apply to mortgages. Similar legislation in Washington State was considered this year but failed to pass following industry pushback, Pizor said. Mortgage banking leaders in Massachusetts are currently pushing for HEIs to be classified as loans and their providers as lenders, who should undergo the same scrutiny their industry does.

William Chang, who oversees Pennymac's capital markets and investment activity, is stepping down from his post, and an interim successor to his responsibilities upon departure is in place.Chang, who holds the title of chief capital markets officer at the financial services unit, is reportedly leaving "to explore new opportunities in the mortgage banking sector." He also is the chief investment officer at Pennymac's real estate investment trust and holds the title of senior managing director at both entities."Will has been at Pennymac for more than a decade, playing a role to help share the success of our organization in various capacities, including his most recent role in our capital markets group," Chairman and CEO David Spector said in a press release. "We are appreciative of his many years of dedication and hard work, and we wish him continued success in future endeavors." Mark Elbaum, who joined the company in April 2023 and is the managing director of strategic initiatives, will take on Chang's responsibilities. "At Pennymac, we have a deep bench consisting of talented leaders who I believe are among the best in the industry," Spector said. "To ensure a smooth transition, I have asked Mark to step into the roles on an interim basis, with the utmost confidence in his ability to lead our capital markets group."Elbaum, like Pennymac's founders, has ties to Countrywide. He oversaw capital markets, pricing, products and hedging at one point during his tenure there. He also worked at Bank of America, which acquired Countrywide, and previously served in leadership at Home Point Financial. He was the chief financial officer there."With his extensive mortgage banking background and active collaboration with Pennymac's production pricing and capital markets teams, Mr. Elbaum is well-equipped to assume the responsibilities of chief capital markets officer," the company said in its press release.

The Massachusetts attorney general's office announced it has reached a settlement with a mortgage servicer over its practice of resurrecting and collecting on sometimes long-forgotten defaulted second, or zombie, liens.Per conditions of the settlement, Franklin Credit Management Corp. will cease debt collection on its entire portfolio of Massachusetts loans, which primarily consisted of second liens. The servicer also said it would not transfer or sell its loans to another company, thereby effectively erasing over $10 million worth of mortgage debt held by hundreds of Massachusetts homeowners.Franklin Credit also agreed to pay a monetary penalty of $300,000 and change its policies if it seeks to conduct future business in Massachusetts. "Zombie second mortgages are ancient debts that servicers quietly sit on for years before attempting to collect on them. This unfair and harmful practice blindsides consumers, often putting them at new risk of losing their homes," said Attorney General Andrea Joy Campbell, in a press release.More common prior to the Great Financial Crisis, second liens were sometimes taken out by borrowers to piggyback on top of a primary loan at the time of origination, using home equity as collateral. The separation of the two liens assisted many borrowers in making a down payment, achieving an 80% loan-to-value ratio on the primary mortgage or staying below conforming limits. In certain cases, though, homeowners were not fully aware they held two loans or thought the piggyback mortgage had been satisfied upon foreclosure or loan modification during the financial crisis, the attorney general's office said. Franklin Credit violated state regulations in resurrecting the liens to begin collection proceedings without adequate communication to borrowers or advice of loss-prevention measures, the AG said. Massachusetts law mandates servicers make good faith efforts to help homeowners avoid foreclosure.The state claimed the servicer delayed sending notices to borrowers until their unpaid balances had risen to a level too high to implement a loan modification, in violation of foreclosure-prevention regulations, and sometimes charged fees to begin the process."This settlement should encourage other states to take action to protect homeowners who have been unfairly burdened by zombie second mortgages,"  said Andrea Bopp Stark, senior attorney at the National Consumer Law Center. Earlier this year, the Consumer Financial Protection Bureau released its own warning to servicers seeking to collect on zombie loans, noting that the practice violated federal laws. The bureau said that it had received an increasing number of complaints from consumers who had received notices about payments immediately due, even though no communication about the loans had been sent for over a decade in some cases.The recent reappearance of zombie seconds occurs during a three-year-long stretch of surging home equity, with debt collectors potentially seeing opportunities in today's property values on many of the collateralized properties. While the volume of piggyback liens pulled back in the decade after the Great Recession, Corelogic recently reported a noticeably increasing share among newer government-backed originations. The share of Federal Housing Administration-guaranteed mortgages featuring piggybacked seconds grew to 18% this summer from 10.8% two years earlier, coinciding with higher prices and decreased affordability in the housing market.

The lock-in effect of homeowners clinging to their ultra-low rates is letting up.The housing market last month had the highest number of active listings since April 2020, according to Realtor.com. The number of newly listed residential properties in September was also up 11.6% from the same time last year. More inventory and easing affordability however hasn't translated into more sales, research by both Realtor.com and Redfin said this week.According to Redfin, sales are rising in larger metropolitan areas. However, pending home sales in September were flat year-over-year; the highlight being the first time since January that the metric hadn't declined. After a late summer surge, buyer interest has stalled. Both purchase and refinance application volumes cooled toward the end of September. The average 30-year fixed rate mortgage remains stuck just above 6%, after the Federal Reserve's highly-anticipated rate cut last month was priced in weeks earlier. There were 1,010,788 active listings in September, according to Redfin. Those houses had a median asking price of $401,700. While the 4.2 months of supply was considered "balanced" by Redfin, properties are remaining up for sale even longer. Homes for sale in September spent 65 days on average on the market, according to Realtor.com. Originators have cited a typical end-of-summer slog, but Realtor.com Economist  Ralph McLaughin said last month was the slowest September in five years. Encouragement over the lock-in effect's apparent end is also dampened by historical context. McLaughlin said inventory remains down 23.2% compared to typical levels seen from 2017 to 2019.Realtor.com reported a median home price of $429,500 last month, down $5,000 from August. The median price per square foot however climbed 2.3%, and remains 50.8% greater than five years ago. "While market speed moved at the slowest rate for a September since 2019, buyers have been engaged just enough to keep prices from falling, with the median price per square foot rising on a year-over-year basis," McLaughlin said in a press release. Hot spots and sluggish marketsThe number of listings in September were up in every region, according to Realtor.com, with the South recording a 42% annual increase in residential properties for sale. The nation's priciest metros saw significant inventory growth; Seattle saw listings rise 41.8% compared to 12 months ago. "We suspect this is at least partly due to the fact that homebuyers—who often are also home sellers—in more expensive markets benefit from higher nominal savings than buyers in less expensive markets," said McLaughlin. Almost one in every five sellers has offered a price cut, with the rate of discounts remaining about flat year-over-year. The median price last month fell the most in Miami, down 12.4% annually, according to Realtor.com. Pending home sales in the Sunshine State have slowed notably. West Palm Beach saw pending sales in September drop 18% compared to the same time last year, the highest rate in the country according to Redfin. The brokerage blames the slowdown on Florida's climate disasters and rising insurance and homeowners association costs.A silver lining among the lukewarm sales data was a rise in Redfin's Homebuyer Demand Index, which measures home tours and other buying services from Redfin agents. The company's measure was up 9% monthly, the best figure since April. Data from Optimal Blue this week also showed mortgage locks doubling from the end of August to the end of September.

Mortgage interest rates did not continue to dip as expected following the Federal Reserve's recent decision to cut short-term rates, according to Freddie Mac.The conforming 30-year fixed-rate mortgage interest rate rose to 6.12% on Oct. 3, up from 6.08% the previous week, as reported in Freddie Mac's Primary Mortgage Market Survey. A year ago, the 30-year FRM averaged 7.49%.This increase of 4 basis points can be attributed to geopolitical tensions and a rebound in short-term rates, said Sam Khater, Freddie Mac's chief economist, in a press release. This indicates that "the market's enthusiasm on rate cuts was premature," he added.The 15-year fixed-rate mortgage also saw a rise, climbing 9 basis points to 5.25%, up from 5.16% last week. This time last year, the 15-year loan averaged 6.78%.Some industry experts had anticipated that the Fed's rate cut might lead to a rebound in mortgage rates. Melissa Cohn, regional vice president at William Raveis Mortgage, previously highlighted that the cut was necessary due to weak job creation figures. "The immediate impact of the cut is not mortgage-rate friendly, as bond yields have jumped higher," she said.However, Khater remains optimistic about the future for homebuyers."Zooming out to the bigger picture, mortgage rates have declined one and a half percentage points over the last 12 months, home price growth is slowing, inventory is increasing, and incomes continue to rise," he noted. "As a result, the backdrop for homebuyers this fall is improving and should continue through the rest of the year."Despite recent uptick in rates, purchase activity has seen an increase, the Mortgage Bankers Association's weekly applications survey ending Sept. 27, shows.The trade group's unadjusted purchase index increased 1% compared to a week prior. It was 9% higher than the same week one year ago.Though rates increased, they remain much lower than earlier this year, said Bob Broeksmit, MBA's CEO, in a statement Thursday."These lower mortgage rates – along with rising inventory levels – are giving potential buyers more confidence to enter the market," Broeksmit added. 

In an era of rapid economic changes and evolving lifestyle preferences, younger generations — including millennials and Gen Z — are reshaping the housing market landscape. Yet, as they navigate this terrain, many grapple with significant uncertainties about homeownership and the lending process.Millennials make up the next largest homebuying group after baby boomers. Gen Z, while only making up 3% of today's homebuyers, will significantly impact the market in the coming years. Understanding the unique challenges and needs of younger generations in the housing market is crucial for lenders and housing professionals.Homeownership trends among younger generationsHomeownership in the U.S. made significant strides in the years leading up to and into the pandemic. The U.S. homeownership rate in 2022 (65.8%) was higher than in 2019 (64.6%) as the country was still recovering from the foreclosure crisis in 2004 and the Great Recession in 2008.Generation Z (born 1997 to 2012) and millennials (born 1981 to 1996) drove the increase, partly due to low interest rates and flexibility around remote work. The homeownership rate among adults under 35 and 35 to 44 rose by two percentage points between 2019 and 2022 in both age groups. Comparatively, the rate remained flat for adults 45 to 54 and 55 to 64 and only increased by 0.5 percentage points among adults 65 and older.However, a perfect storm of rising interest rates, high home prices and tight inventory has now culminated in a challenging situation for potential homebuyers, especially younger individuals who lacked the savings or equity from a previous property sale to support a home purchase. Despite the slower growth, 63% of millennials and Gen Zers indicated that they are ready and eager to become homeowners. Current challenges and barriers to homeownership for younger buyersThe current homebuying landscape poses challenges for prospective buyers of all ages. A high cost of living combined with job instability or low incomes of adults at the beginning of their careers make today's affordability challenges especially difficult for young prospective buyers. Almost 40% of Gen Z said uncertainty about being able to afford a home is one of their top financial concerns, according to research from Ernst & Young Global Limited.Additionally, today's first-time buyers, especially younger millennials, often face significant debt burdens, including student loans. High rent costs leave some prospective buyers with little room to save for a home. According to the National Association of Realtors Profile of Home Buyers and Sellers, about 38% of recent first-time homebuyers said saving for a downpayment was the most difficult step in the process. To overcome this hurdle, younger buyers are turning to alternative sources, such as gifted funds, to help with down payments.These challenges are contributing to a shift in the traditional perspective of homeownership as a critical factor of wealth-building among young adults. In a recent study, 1 in 3 Gen Zers said they weren't sure that owning a home was the best way for them to build generational wealth.Understanding Millennial and Gen Z homebuyersThe needs, preferences and tendencies of millennial and Gen Z homebuyers differ not only from previous generations but also from each other.Technology use: Younger buyers turn to modern sources for financial advice, relying heavily on Instagram, YouTube and TikTok to educate themselves on homeownership and financial planning. According to a Google/Ipsos poll, 80% of Gen Z teens say YouTube has helped them become more knowledgeable about a topic. This highlights the importance of lenders using digital channels to reach and inform these prospective buyers.Loyalty: Around 40% of Gen Z and millennial borrowers with thin credit profiles return to the same type of bank or credit union they used for previous transactions — such as car loans — when seeking new financial products. This indicates a strong sense of brand loyalty that shapes their financial decisions.Preferences and needs. Young prospective homeowners have varying homebuying priorities. For example, according to the NAR, millennials tend to desire walkable city living, valuing proximity to urban amenities over spacious homes. On the other hand, Gen Z is increasingly purchasing homes in more affordable, growing areas outside of cities. Also, there's a strong trend among younger buyers toward homes accommodating remote work and social activities, with open floor plans becoming more desirable.Smart homes and sustainability are key. For generations raised on the internet, smart-home technology is a must. According to a recent survey by RE/MAX, 78% of Gen Z buyers are more interested in smart features than older cohorts. Tech tools can also help create an efficient and healthy environment, which can be attractive to younger buyers concerned with the long-term impact of climate change. According to the Building Performance Association, 73% of Gen Z buyers and 68% of millennials will opt to splurge on sustainable building materials. How lenders can engage young homebuyersLenders must not only understand the unique challenges, needs and desires of today's younger homebuyers but also adapt to them and align services with the priorities and tendencies of this generation of borrowers.Digital platforms: Again, younger adults rely heavily on technology for information and daily activities, making digital channels essential in homebuying. Lenders should stay updated on technology trends and use digital platforms to reach and inform potential buyers.Education and resources: Although millennials and Gen Zers are considered financially knowledgeable, many still hold misconceptions about mortgages. For example, in a recent study, 47% of Gen Z respondents — and an even greater share of millennials — believe that a 20% down payment is required to buy a home. Lenders can address these gaps by offering clear, accessible guidance on loan options, down payment assistance and homebuying resources.Company transparency: Studies show younger generations are less likely to seek advice from traditional financial institutions, and a significant portion of Gen Zers and millennials distrust housing market professionals. Gen Z, in particular, expects companies they work with to be honest, authentic and relatable and to practice what they preach. Lenders can build trust by providing transparent, user-friendly tools and information.Innovative offerings: Unique products, incentives and processes — for example, shared equity programs, down payment assistance and student loan relief — can be particularly appealing to younger buyers. Offerings that address their specific challenges and preferences can help turn today's sidelined homebuyers into tomorrow's homeowners.

Andrew Harrer/Bloomberg The Federal Reserve issued two enforcement actions this week: one against a Helena, Montana, bank for flood insurance violations, the other against a former banking employee in Jackson, Wyoming.The actions were unrelated but were announced concurrently on Thursday.First, the Fed cited Opportunity Bank of Montana for repeatedly violating the National Flood Insurance Act, which requires properties in designated flood zones to carry the insurance in order to be used as collateral for loans. The enforcement action came with a $31,000 civil penalty as a result of the bank's "pattern or practice of violations," the Fed said. Fed Hits Two with Enforcement Actions By law, the Fed can fine banks up to $2,000 per violation of Regulation H, the rule that implements the National Flood Insurance Act. Once the Fed collects the civil penalty from the bank, it will pass it along to the National Flood Insurance Program.The enforcement action, which was executed on Monday, did not specify how or when Opportunity Bank flouted its requirements, as is typical of such public disclosures.The bank consented to the action, meaning it neither admitted nor denied wrongdoing, but rather agreed to meet the terms of the order. The Fed's second action was a cease and desist order against Lindsay Graves, a former employee and institution-affiliated party of the Bank of Jackson Hole, for mishandling confidential supervisory information, or CSI.Graves worked for the bank between 2015 and 2019 as an information technology manager, overseeing the bank's IT department. During her tenure, Graves made copies of more than 50,000 electronic documents at the request of another former bank employee, according to the enforcement disclosure. Some of those documents contained CSI, which is, by law, the property of the bank's supervising agency — in this case the Federal Reserve Board of Governors.According to the Fed, Graves provided a copy of the material to both the other employee and his lawyer without authorization to do so from the bank or its regulator.The document did not disclose what type of information was shared. As a result of her agreement with the Fed, if Graves wishes to take another job in the banking sector, she will have to inform her future employer about the enforcement action and provide written notice to the Fed. She will also have to provide written documentation that she knows and will adhere to her compliance obligations in that new role.Because of concerns over reputational damage and even financial stability — should its disclosure result in a bank run — CSI is imbued with strict protections. Individuals who share such information can be subject to civil penalties and even criminal prosecution.Earlier this year, the Fed issued a consent order forbidding another former employee of the Bank of Jackson Hole, John Freeze, from working in the banking industry. Freeze was accused of receiving more than 280,000 electronic documents including those containing CSI shortly after being fired by the bank in 2019.Freeze, the former chief financial officer of the Bank of Jackson Hole, is suing the bank, claiming he released confidential documents to blow the whistle on misconduct by executives, according to a report from the Jackson Hole News & Guide.

A Chicago-area loan originator was found guilty of five fraud counts for a scheme that cheated businesses out of millions.A federal jury convicted Kevin Smith in September for running a scam that deceived lending companies into improperly originating Federal Housing Administration-backed mortgages to real estate investors. Property value losses resulting from the crimes totaled almost $2.6 million and involved 14 residences, according to the U.S. Attorney's Office in the Northern District of Illinois.A grand jury filed charges in late 2019, and the case was prosecuted by federal lawyers representing the Justice Department, as well as the Department of Housing and Urban Development and the Department of Veterans Affairs."Smith abused his position of trust as a gatekeeper of FHA-insured mortgage loans and used his real estate knowledge to circumvent the rules to secure his own self-interest," said Machelle L. Jindra, special agent-in-charge of HUD's Office of Inspector General in Chicago. During the scheme, which lasted from mid 2011 to 2013, Smith targeted aspiring real estate investment entrepreneurs at seminars held in Chicago-area churches and hotels, convincing them to falsely claim their sources of down payment and intent to reside in the properties they  purchased. He also instructed them to not seek legal advice for the transactions. In reality, Smith helped provide the down payments to originate the FHA purchase mortgages. After loans closed, Smith would make what he described as "grants" of as much as $20,000 to the buyers, while keeping seller payments for himself without notifying HUD or lenders involved. During the period in which the crimes occurred, Smith was a loan originator working with Grand Bank and Mortgage Services III, both among the defrauded, according to the grand jury indictment. He also sought to involve other mortgage companies in the scheme to help finance investor purchases, including 360 Mortgage Group, which was identified in one of the counts as a victim. Policies governing single-family mortgages FHA guarantees mandates borrowers use them to fund a primary residence. Instances of fraud typically require the originator to repurchase the loan. "Loan originators and other mortgage professionals are entrusted with protecting the integrity of the government-backed mortgage program," added Acting U.S. Attorney Morris Pasqual. "Our office will continue to hold accountable any individual who violates that trust to line their own pockets."Smith faces up to 30 years in prison for each guilty count. Sentencing is scheduled for Dec. 17. He previously moved, but failed, to get charges dismissed for various reasons, citing the court's lack of jurisdiction, noncompliance with criminal procedures and violations of the Privacy Act. He also called his indictment "multiplicitous" for charging a single offense as separate counts, thereby violating the Fifth Amendment's Double Jeopardy clause. Earlier this year, four conspirators pleaded guilty in a different federal fraud case involving FHA originations in California. In that filing, the defendants were charged for their roles that contributed to more than 100 loans being issued to unqualified borrowers. Total value of the mortgages was more than $55 million, and foreclosures on some of the properties guaranteed by the FHA led to almost $500,000 in losses for the agency. 

A federal judge had earlier thrown out some parts of a lawsuit about a loan modification against Cenlar but now has decided in favor of the plaintiffs on some claims related to how the servicer communicated with the borrowers.Judge Edmund Sargus Jr. in the Southern District of Ohio's Eastern division ruled in favor of the plaintiffs regarding the company's liability for claims related to the Real Estate Settlement Procedures Act and breach of contract in the case, O'Keeffe v. Cenlar.The RESPA claim centers on a requirement that a mortgage must be 120 days delinquent before a servicer makes an initial filing or notice. Cenlar, which was subservicing the loan, said it does not comment on pending litigation and will defend itself in the case."The loan modification is valid and enforceable, so the loan was not in default," the judge said in an order and opinion on the matter.Sargus also partially denied a motion for summary judgment on a notice of error claim and damages on the breach of contract claim."The O'Keeffes move for summary judgment only as to liability for their RESPA claims, but as to liability and damages for their breach of contract claims," the judge noted."Defendants do not respond to the O'Keeffes' damages arguments in their opposing brief and plaintiffs do not revisit in their reply," he continued. "Although the court has decided liability for the breach of contract claim, it will not decide the damages issue on such scant briefing."The case centers on a dispute plaintiffs say arose after one of them asked for a correction on a name spelling in a modification agreement, which was reportedly recorded without an adjustment to billing. Plaintiffs allege they then received a new, corrected mod that the servicer said it revised because the earlier one was not as intended. They refused to sign the new modification because they found a $90,000 difference in it unacceptable.During the dispute, plaintiffs said they sent out both a request for information and an NOE, with the latter advising the company of their concerns.The RFI requested "call logs, recordings, service notes and records of communications between Cenlar and plaintiffs" in addition to "all documents from January 2021 to the present" related to the issues at hand.Sargus previously dismissed allegations related to Cenlar's "allegedly inadequate RFI response," noting that "plaintiffs' sole damages" costs related to "preparing and transmitting" a qualified written request but allowed claims related to the NOE to move forward.Sargus had said that NOE responses are supposed to include either a correction or "a reasonable investigation" that ends with the "written notification that includes a statement that the servicer has determined that no error occurred," reasons for that determination and how borrowers can obtain supporting documentation.So "the mere fact that Cenlar would have concluded that no enforceable loan modification existed after conducting a reasonable investigation does not absolve them of the responsibility of conducting a reasonable investigation and explaining their belief," he said.The case is part of the broader body of law and regulatory actions that servicers and attorneys have been reviewing to update compliance parameters for handling formal borrower communications under RESPA and other rules around when foreclosure actions can commence.