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Volume 25 - Number 22

October 27, 2014

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CFPB Finalizes 'Right to Cure' Loans That Exceed 3 Percent Cap

In a noteworthy concession to the mortgage lending industry, the CFPB last week finalized a “right to cure” loans in which a lender inadvertently breaches the 3 percent cap on points and fees for a loan that would otherwise be deemed a qualified mortgage under the agency’s ability-to-repay rule. Under amendments finalized this past Wednesday, if a lender discovers after the loan has closed that it has exceeded the 3 percent cap, there are limited circumstances in which it can pay a refund of the excess amount with interest to the consumer and the loan will still be considered a QM. First, the refund must occur within 210 days after the loan is made. The lender must also maintain and ...

CFPB Criticizes Private Student Loan Servicer Performance

The CFPB’s latest Student Loan Ombudsman’s Annual Report found fault with the performance of servicers in the relatively small number of instances in which borrowers – most of whom were struggling – have complained to the CFPB (less than 9,000), out of a universe of millions of loans outstanding. Since the bureau began accepting private student loan complaints in March 2012, the largest subset of complaints stem from borrowers seeking to avoid default during a period of financial hardship, the report noted. “Most frequently, borrowers submitting complaints are seeking to modify repayment terms to obtain a payment they can actually afford,” said the CFPB. “While student loan industry participants have stated that they intend to increase the number of programs to assist ...

Student Loan Complaints Mostly Down in Third Quarter, Up YOY

After rising for two consecutive quarters, borrower complaints to the CFPB about their private student loans have dropped for the last two reporting periods, according to a new analysis and ranking by Inside the CFPB. Following up on the second quarter drop of 16.3 percent, borrower gripes fell 14.5 percent in the third quarter, the latest data from the bureau’s consumer complaint database show. Among the top 10 companies ranked by borrower grumblings, a wide variety of results could be clearly seen. Six of the top 10 saw double-digit declines during the third quarter, but two others saw increases of that magnitude, most notably Nelnet, up 33.3 percent from the second quarter. The biggest drop among the top 10 was ...

Bureau Promulgates Final Rule On Annual Privacy Notices

The CFPB finalized its annual privacy notices rule last week, leaving it unchanged from its May proposed rule, other than some technical and clarifying revisions. The new rule creates an alternative delivery method for the privacy disclosure required every year under Regulation P (the implementation regulation of the Gramm-Leach-Bliley Act), which financial institutions will be able to use under certain circumstances. The new rule applies to both banks and those nonbanks that are within the CFPB’s jurisdiction under the GLBA. More specifically, the rule applies to “financial institutions,” as defined in Reg P. That includes banks, credit unions, mortgage companies, mortgage brokers and debt buyers. Under the CFPB’s new rule, financial institutions will be able to post privacy notices online ...

Castle & Cooke Now Facing Class Action From Prior Claimants

The $13 million settlement reached between the CFPB and Castle & Cooke Mortgage Co. back in November 2013 was not the end of the dispute for the mortgage lender. It now faces a possible class-action lawsuit brought by one of the aggrieved parties who had already been compensated under the terms of the settlement with the bureau. Homeowner Luis Cabrales, on behalf of himself and perhaps in excess of 9,500 similarly situated individuals, recently filed his complaint in the U.S. District Court for the Eastern District of California, Fresno Division. The class, so far, has not been certified. The legal argument is that the applicable statutes of limitation of the claims alleged in the new complaint were “tolled” (suspended or ...

Up to 490,000 Homeowners May be Hurt by Flawed Servicing Records

A recent study by Nationwide Title Clearing, Inc., a research and document-processing vendor for the residential mortgage industry, found that nearly half a million homeowners could be negatively affected by inaccurate servicing records. NTC found that out of 2,285,665 servicing database records that were verified against the collateral file, 24,490 loans (1.07 percent) had significant discrepancies. When viewed against roughly 49 million outstanding residential mortgages, that suggests as many as 490,000 homeowners could be affected by faulty servicer database records. “These database inaccuracies might have represented ‘acceptable risk’ in times past – but in today’s compliance-oriented landscape, such a high number of errors could bring increased scrutiny and penalties from CFPB regulators, not to mention ...

CSBS Creates Mortgage Servicing Group, Lawmakers Look at Sector

The Conference of State Bank Supervisors recently formed a mortgage servicing rights task force to develop options for prudential standards for non-bank mortgage servicers. The CSBS noted that there has been a significant growth of mortgage servicing assets in non-depository servicers in recent years. The state regulators group said it is important for the states to understand how this growth should inform changes to the regulatory framework. …

CFPB Needs to Address ‘Rolling Delinquencies,’ ABA Survey Says

The CFPB needs to provide additional clarity on how a “rolling delinquency” triggers the 120-day delinquency period required before a mortgage servicer can begin foreclosure under the bureau’s mortgage servicing rule, the American Bankers Association said. A rolling delinquency occurs when a delinquent borrower resumes making some payments but never becomes current on the loan. In a letter to the CFPB last week, the ABA noted that in responding to inquiries as to how banks should apply the 120-day rule in rolling delinquency situations, the CFPB has informally recommended that servicers look to common interpretations of “delinquency,” which may be found in best practices, industry standards, state law and contract law. “Because borrowers have a private right of action to ...

OIG Has High-Profile CFPB Audits Underway, Including HQ Rehab

The CFPB’s Office of Inspector General has a handful of high-profile audits or reviews of the CFPB underway, including audits of the bureau’s controversial headquarters renovation costs and its public consumer complaint database. In June 2014, the OIG completed a review and issued a letter report in response to a request from Rep. Patrick McHenry, R-NC, the chairman of the House Financial Services Subcommittee on Oversight and Investigations, regarding the CFPB’s headquarters renovation budget. “As a follow-on to this work, we are evaluating the reasonableness of the overall estimated and proposed costs for the CFPB’s headquarters renovation,” the OIG said in its latest work plan. “We will also assess the effectiveness of the CFPB’s processes and controls for approving, managing ...

Worth Noting/Comments Due This Week

It’s Official: QRM = QM. Last week, the Office of the Comptroller of the Currency, the Federal Reserve Board, the Federal Deposit Insurance Corp., the Securities and Exchange Commission, the Federal Housing Finance Agency, and the Department of Housing and Urban Development adopted a final version of their risk-retention rule for securitized mortgages. Under the new rule, the definition of a “qualified residential mortgage” (QRM) will be no broader than the definition of the “qualified mortgage” (QM) as promulgated by the CFPB in its ability-to-repay rule. Mortgage lending industry representatives were generally pleased with the move. Independent analysts said they expected the near-term impact of the QRM to be quite limited. However, others noted that the development does place a ...

Poll

What is it going to take to convince lenders to loosen the credit box (i.e., remove underwriting overlays)?

The recent rep and warranty changes announced by the Federal Housing Finance Agency should go a long way in protecting lenders from future buybacks and help expand mortgage credit.
There won’t be any significant elimination of underwriting overlays until the government stops seeking huge mortgage-related penalties and settlements from lenders.
There shouldn’t be any expansion of the mortgage credit box since looser underwriting is what caused the recent mortgage crisis.

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