With residential mortgage foreclosure rates setting new records (again) in the third quarter and the pain from the ailing housing market continuing to spread, Congress and the Bush administration are under increasing pressure to help struggling borrowers hang on to their homes and to prevent the fallout from the housing/subprime crisis from tipping a weakening economy over the recession edge.

Federal examiners are casting a sharp eye at commercial real estate (CRE) portfolios, and they believe they have a strong reason for doing so. Deterioration in CRE loan portfolios has historically been a cause of significant bank losses, most notably during the early 1990s, when CRE delinquencies and charge-offs approached 7 percent and 2 percent, respectively. CRE charge-offs were negligible from the mid-1990s until the recession of 2001–2002.

The U.S. Court of Appeals for the First Circuit has sided with the Doral Mortgage Corporation in a lawsuit regarding the validity of the borrower’s right of rescission period. According to court documents, the plaintiffs sued Doral Financial Corporation and Doral Mortgage Corporation for violation of the federal Truth in Lending Act (TILA), 15 USC 1601-1667. The plaintiffs asked for rescission of their home loans, and damages, based on Doral’s failure to provide them sufficient notice of their rescission rights. The district court had previously granted Doral’s motion to dismiss the suit, and the Court of Appeals agreed.

Federal and state regulators plan to initiate in the fourth quarter a pilot project to conduct targeted consumer-protection compliance reviews of selected non-depository lenders with significant subprime mortgage operations. The Fed, Office of Thrift Supervision, Federal Trade Commission and state agencies represented by the Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators announced the pilot project on July 17.