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Volume 27 - Number 15

July 25, 2016

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TRID Issues to Require Due Diligence Reviews in MBS

Non-agency mortgage-backed security issuers and investors were getting more comfortable in recent years with third-party due diligence reviews of less than 100 percent of the mortgages in an MBS due to the exceptionally strong performance of new originations. However, analysts at Morningstar Credit Ratings suggest that most non-agency MBS backed by new mortgages will be subject to full reviews due to uncertainty regarding the CFPB’s integrated-disclosure rule under the Truth in Lending Act and the Real Estate Settlement Procedures Act, otherwise known as TRID. The reviews help identify and cure compliance issues and protect MBS investors from TRID-related losses. “Most post-crisis transactions carry out due diligence on every loan, and we...

GOP Platform Aims to Abolish CFPB Or Change Its Structure, Funding

Last week, at their national convention in Cleveland, the Republicans issued their 2016 campaign platform, which featured some particularly sharp rhetoric towards the CFPB. The GOP called for either getting rid of the agency in the broader context of repealing and replacing the Dodd-Frank Act, or at least altering the bureau’s leadership structure and its funding mechanism. If they can’t abolish the CFPB outright, the Republicans want to replace the current single directorship with a bipartisan commission and subject the bureau to the congressional appropriations process in lieu of its funding from the Federal Reserve. “The worst of Dodd-Frank is the CFPB, deliberately designed to be a rogue agency,” the platform stated.

Look to the Courts to Rein in Five Year-Old CFPB, Attorney Advises

Last week marked the five-year anniversary of the birth of what is arguably the single most powerful, pro-consumer regulatory agency in the history of the United States: the CFPB. According to former CFPB enforcement attorney Jennifer Lee, now a partner at the international law firm Dorsey & Whitney, the CFPB has achieved a tremendous number of milestones in a short amount of time. “Between promulgating new regulations, bringing a multitude of enforcement actions, including ripening cases…

Pending Mortgage Servicing Amendments = More Changes

With finalized amendments to the CFPB’s mortgage servicing rules due to be released within the next several weeks, one of the big issues for servicers will be just how much time the bureau grants them to implement all the necessary changes to their loan administration systems. “We have a pretty good idea of what the bureau is going to do in substance,” Donald Lampe, a partner in the financial services group in the Washington, DC, office of the Morrison & Foerster law firm, told Inside the CFPB. “And so the question is going to be, what is the implementation time period going to be so that these changes can be fully implemented?”

CFPB Fines Santander Bank $10M Because of Overdraft Practices

In a warning to other lenders on the importance of proper vendor oversight, the CFPB recently brought a $10 million enforcement action against Santander Bank, based in Wilmington, DE, because of its allegedly illegal overdraft services practices. Among the practices at issue, the bureau said the bank signed up consumers for overdraft services without their consent. “In some instances, Santander’s telemarketer briefly described [the bank’s] Account Protector [service] to consumers, then asked for the last four digits of their Social Security numbers, and enrolled them without their consent,” said the CFPB. “In other instances, consumers said they did not want to enroll but requested information about the overdraft service, but the telemarketer enrolled them anyway,” the bureau added. Also, call ...

'Portfolio QM' Proposal Faulted by Advocate, Praised by Lenders

A proposal from House Republicans to treat mortgage loans held in a bank’s portfolio as qualified mortgages received divergent reviews at a recent hearing by the House Financial Services Committee. The proposal was included in the Financial CHOICE Act sponsored by Committee Chairman Jeb Hensarling, R-TX. Treating mortgages in bank portfolios as QMs would provide QM status to loans that would otherwise fail to meet those standards, including interest-only products and mortgages not eligible for sale to the government-sponsored enterprises Fannie Mae and Freddie Mac because the debt-to-income ratios are above 43.0 percent. Adam Levitin, a professor of law at Georgetown University Law Center, said the Financial CHOICE Act would “eviscerate” consumer protections in mortgage lending.

CFPB Reiterates its Argument in Remanded Spokeo Case

In May, the Supreme Court of the United States ruled in Robins v. Spokeo, Inc. that a plaintiff has to demonstrate that he or she suffered “concrete” and “real” harm in order to have standing under Article III of the U.S. Constitution to successfully sue for statutory damages under the Fair Credit Reporting Act. The CFPB has previously argued that is not necessarily so, and with the SCOTUS remanding the case back to the U.S. Court of Appeals for the Ninth Circuit, the bureau has recently reiterated its argument in an amicus brief with the lower court. The specific question in this case is whether the plaintiff (Robins) identified an injury-in-fact under Article III of...

Legal Challenges to Cordray's Recess Appointment Rejected

In State National Bank of Big Spring, Texas, et al. v. Lew, et al., the U.S. District Court for the District of Columbia has shot down the latest attempt to void the actions taken by CFPB Director Richard Cordray while he was still a recess appointee. At issue are several CFPB rulemakings, such as those having to do with electronic fund transfers, integrated mortgage disclosures, escrow requirements, ability to repay/qualified mortgages, and mortgage servicing. On July 18, 2011, President Obama first nominated Cordray to serve as director of the bureau. When the Senate took no action on that nomination, Obama appointed him to the position on Jan. 4, 2012, invoking his...

Briefly Around Capitol Hill

GOP Legislation Would Exempt Small Nonbank Lenders from CFPB Examination, Enforcement. Rep. Roger Williams, R-TX, recently introduced H.R. 5907, the Community Mortgage Lenders Regulatory Act of 2016, which would exempt qualifying smaller, “responsible” nonbank lenders from CFPB examinations and primary enforcement authority. To qualify, a nonbank mortgage lender must have net worth of less than $50 million; have originated fewer than 25,000 loans or $5 billion in loans the preceding year; and have originated at least 95 percent of their mortgage loans as qualified mortgages the last three years. As currently applies to most banks, a qualifying “responsible community lender” would not be subject...

Other News in Brief

CFPB Makes Some Senior Staff Changes. Last week, the CFPB announced some senior-level staffing changes. Among them, Chris D’Angelo, currently the bureau’s chief of staff, will serve as the associate director for supervision, enforcement and fair lending. He joined the CFPB in June 2011 and previously served as senior advisor to the director and as an attorney in the Office of Enforcement. D’Angelo came to the bureau from the U.S. Treasury Department, where he was senior advisor to the undersecretary for domestic finance and worked on financial regulation. Richard Lepley, currently the deputy general counsel for general law, ethics and oversight, will assume the position of principal deputy general counsel in the office of the general counsel in the legal division.

Calendar Update

CFPB Debt Collection Field Hearing This Week. The CFPB plans to convene a public field hearing July 28 on debt collection issues, at a location in Sacramento, CA, that has yet to be announced. The field event is to feature remarks by CFPB Director Richard Cordray, followed by a panel discussion with consumer advocates and industry representatives, and concluding with testimony from members of the public. The hearing, which is scheduled to begin at 11 a.m. PDT, is expected to be livestreamed at Congress is Now in Recess. The U.S. Senate and House of Representatives have recessed for the summer and are scheduled to return...


The yield on the benchmark 10-year Treasury fell to all-time low of 1.34% recently. How much better will originations be at your shop in the second half compared to 1H, if at all?

Better by 1% to 10%.
Better by 11% to 25%.
Off the charts better. Applications are great now.
Worse than 1H, but not by much.
A lot worse. But not sure on the damage.

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