CFPB Joins Task Force on Market Integrity and Consumer Fraud. The CFPB recently joined a new Task Force on Market Integrity and Consumer Fraud, created by President Trump pursuant to an executive order. The task force is led by the Department of Justice, with the participation of the CFPB, the Securities and Exchange Commission, and the Federal Trade Commission. The task force will provide guidance for the investigation and prosecution of cases [Includes four briefs] ...

Prepayment speeds for VA and FHA loans are expected to converge due to changes in the refinance requirements for VA home loans, according to Wells Fargo Securities analysts.

Data-based technological innovations are creating more opportunities for lenders to assess the risks posed by consumers who have traditionally been denied access to credit. While the conversation on exploring alternative data has been ongoing for the past few years, the industry now appears to be taking steps toward making this a reality.

Nonbank online lenders, especially smaller ones, are concerned about the high cost of originating a loan. In a new study published by the Deloitte Center for Financial Services and Lendit Fintech, 77 percent of the nonbank respondents said the cost of funding is among their top three concerns. Thirty-eight percent listed it as their first concern. Deloitte noted the nonbank fintech market landscape is made up of a few large players and many small ones. In fact, the majority of survey participants ...

Although a number of large banks have recently shown more interest in the secondary market for mortgage servicing rights, there is no sign that the migration toward nonbanks is ending. A new Inside The GSEs analysis of mortgage-backed securities data shows that independent mortgage bankers increased their holdings of Fannie Mae and Freddie Mac MSR by 2.0 percent from the first to the second quarter of 2018. Depository institutions recorded an 0.5 percent decline in GSE servicing rights over the same period. Most of the bank shrinkage came from the four institutions with over $1 trillion in total assets. Although Wells Fargo, JPMorgan Chase, Bank of America and Citigroup still held a whopping...

A federal court held this week that the single-director structure of the Federal Housing Finance Agency, headed by Director Mel Watt, violates the constitution. The ruling in Collins v. FHFA was handed down in Texas by a three judge-panel for the U.S. Court of Appeals for the Fifth Circuit. It represents the most recent major ruling in a number of Fannie Mae and Freddie Mac shareholder cases filed against the federal government. “We found, after an in-depth examination, that the FHFA is excessively insulated from executive branch influence and is, therefore, structured in violation of the Constitution,” the judges state in their 83-page ruling. And although Congress can create an independent agency, the court determined that elected officials cannot insulate...

Fannie Mae’s new mortgage insurance pilot announced last week is troubling to mortgage insurers who continue to question the GSEs’ blurring of lines between primary and secondary markets. Fannie’s Enterprise-Paid Mortgage Insurance program is billed as just a way to give lenders another option for obtaining mortgage insurance for high loan-to-value loans. Under the pilot, Fannie will arrange primary MI coverage for existing private MIs or a panel of affiliated reinsurers. Fannie said the new option allows the GSE to streamline the operational requirements of participating lenders, increase the certainty of coverage and better manage Fannie’s counterparty risk. Fannie officials explained that they expect traditional mortgage insurance to be the primary cover for loans with LTVs over 80 percent.

The Milken Institute said the GSEs’ duty-to-serve policy is more complicated than other affordable housing reform issues because it forces the secondary market to boost lending in the primary market and assumes those private firms are underperforming. The conservative think tank published a paper this week authored by Michael Stegman and Phillip Swagel on the role of duty-to-serve in which it examined the policy and its potential impact on the mortgage market. While DTS currently encompasses manufactured housing, rural housing and affordable housing preservation, Milken said housing finance reform debates have centered on creating a DTS that includes areas beyond those three targets.

There was some discussion as to whether credit scores serve as a good mechanism to achieve cross subsidization as well as a need for better data to manage risks, during an Urban Institute panel discussion last week focused on subsidies and GSE pricing. Credit scores aren’t a good tool to achieve cross-subsidization, according to Andrew Rippert, CEO of Global Mortgage Group at Arch Capital. He said the goal should be to serve low- and moderate-income borrowers, not necessarily to subsidize people who make a lot of money but have bad credit scores and don’t manage their credit. “Our belief is that we can do a lot better if we were very explicit about the risk in the system with regards to FICO scores,” Rippert said.

Efforts in the Senate and House to reverse the Federal Housing Finance Agency’s rule that ended captive insurer membership in the Federal Home Loan Banks is getting pushback from a handful of FHLBanks. Six FHLBank presidents wrote lawmakers to express their strong opposition to reversing the final rule on FHLB membership issued in January 2016. They included the FHLBanks of Des Moines, New York, Pittsburgh, Topeka, Boston and Dallas. Among them, they serve financial institutions in 33 states. Despite receiving hundreds of comments against the proposed rule, the FHFA implemented the ban because it was concerned about the growing number of captive insurers gaining FHLBank membership access to take advantage of cheaper financing.