1. Mortgage Lending: Regulationand Enforcement Katherine WorthmanAttorney Federal Trade CommissionDivision of FinancialPractices June 3, 2008The views expressed are those of the speaker and not necessarily those of the FTC or any other person.

2. Players in the Mortgage Market - Primary MarketMortgage Lenders vs. Mortgage Brokers Mortgage OriginatorsDepository Institutions Banks Savings and Loans Credit Unions 3. Players in the Mortgage Market - Primary MarketMortgage OriginatorsNon-Depository Institutions Mortgage companies Mortgage brokers 4. Players in the Mortgage Market Secondary MarketSecondary Market Conduits Federal National Mortgage Association (FannieMae) Federal Home Loan Mortgage Corporation(Freddie Mac) Government National Mortgage Association(Ginnie Mae) Private Investment Banks 5. Mortgage Backed Securities Market Share 400350300250200150100 Ginnie50 Freddie 0 Fannie 2003 2003 2003 2003 2004 2004 2004 2004 2005 2005 2005 2005Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4Private Label Source: Mortgage Bankers Association 6. Players in the Mortgage Market Secondary MarketInvestorsPension FundsLife Insurance CompaniesCommercial BanksSavings and Loans 7. Who Has Enforcement Authority Over the Primary Market?The Federal Trade CommissionMortgage CompaniesMortgage BrokersFinance companiesUnits of bank holding companies 8. Who Has Enforcement Authority Over the Primary Market?The Federal Banking Agencies Banks Savings and Loan Institutions National Credit UnionsState Regulators 9. Whos Who of Federal Banking RegulatorsOffice of Comptroller of the Currency Board of Governors of the Federal Reserve Federal Deposit Insurance Corporation Office of Thrift Supervision National Credit Union Association 10. Who Regulates the Secondary Market?Office of Federal Housing Enterprise Oversight(OFHEO)Fannie MaeFreddie Mac 11. Who Regulates the Secondary Market?Securities and Exchange CommissionSecurities firms (JP Morgan Chase, Merrill Lynch, Morgan Stanley, etc.)Credit rating agencies State Regulators 12. FTC and the Federal Banking AgenciesThe Federal banking agencies have supervisory,regulatory and enforcement authority. In contrast, the Federal Trade Commission is a lawenforcement agency not a supervisory agency. 13. FTC - Scope of EnforcementOnly federal agency with both consumer protectionand competition jurisdiction in broad sectors of theeconomy Enforces the FTC Act prohibiting unfair or deceptiveacts and practices and 50 other statutes and morethan 30 rules governing specific industries andpractices 14. FTC - Scope of Enforcement Federal district courts and administrative litigation No criminal authority 15. Banking Agencies Scope of EnforcementBanking practices that threaten a financialinstitutions safety and soundness or violate afederal law or regulation. Supervisory, Regulatory and Enforcement Authority Administrative litigation, No criminal authority 16. Federal and State Regulatory CollaborationPilot Project with Federal and State regulators Purpose To conduct targeted consumer-protection compliance reviews of select non-depository lenders with significant subprimemortgage operations 17. Federal and State Regulatory CollaborationFederalBoard of Governors of the Federal ReserveSystemOffice of Thrift SupervisionFederal Trade CommissionStateState Members of the Conference of State BankSupervisorsAmerican Association of Residential MortgageRegulators 18. Federal and State Regulatory CollaborationFocus Underwriting standards Senior management oversight Deceptive or unfair practices 19. Federal and State Regulatory CollaborationGoal Share information about the reviews andinvestigations Take action as appropriate Collaborate on the lessons learned Seek ways to better cooperate in ensuringeffective and consistent reviews of theseinstitutions 20. What We Do at the FTCAll stages of mortgage lending Authority with respect to mortgage lending 21. Areas of Mortgage LendingAdvertising MarketingServicing 22. Authority with respect to mortgage lending Among other authority: The Truth in Lending Act (TILA) The Home Ownership and Equity Protection Act(HOEPA) The Equal Credit Opportunity Act (ECOA) 23. FTC Actions in the Mortgage Lending AreaPast decade: 22 actionsMore than $320 million 24. Key Enforcement AreasDeception re: loan terms Packing Lack of accurate and timely disclosures Servicing 25. PackingAdding extras, such as credit insurance as part ofthe loan, without adequately disclosing the cost ofexistence of the product Lenders often stand to make significant profits Single-premium credit insurance 26. Lack of Accurate and Timely DisclosuresCosts and terms of home equity loans Consumers right to cancel 27. Servicing Money not owed under the loan termsPractices that inhibit refinancing with other lenders 28. Investigating Mortgage CasesLocating Consumers Interviewing Consumers Consumer Documents Target Companies 29. Locating ConsumersConsumer Response Center and state complaintintake CID/Subpoena Mortgage Recordings - MERS 30. Consumer ComplaintsConsumer Response Center/Sentinel Legal aid attorneys/housing counselors/consumergroups 31. Consumer Response CenterVia phone, mail and website 31,000 complaints/inquiries per week 32. Consumer Sentinel FTCs fraud and identity theft complaint database Accessible to 1,650 law enforcement agencies 33. Consumer InterviewsBroker/Lender representations Consumers understanding of the mortgage loan 34. Target CompaniesFormer Employees Corporate Documents 35. Mortgage Lending: Regulation and Enforcement Katherine Worthman,Attorney Federal TradeCommissionDivision of FinancialPractices June 3, 2008