Former Federal Trade Commission official Todd Zywicki had a blunt message for the U.S. Senate Banking, Housing and Urban Affairs Committee recently when it comes to the CFPB and its voluminous new mortgage rules: Many smaller banks have simply chosen to exit the residential finance sector rather than bear the increased regulatory costs and risks. The former director of policy planning at the FTC cited a survey conducted by George Mason University’s Mercatus Center which found “64 percent of small banks reported that they were making changes to their mortgage offerings because of [the] Dodd-Frank [Act], and 15 percent said that they had either exited or were considering exiting residential mortgage markets entirely.” Also, almost 60 percent of small banks ...

Many mortgage industry attorneys seem convinced that PHH Corp. will succeed – at least at the appellate court level – in defying the CFPB in its ongoing legal dispute with the bureau. The crux of the dispute is the bureau’s assertion that PHH violated the Real Estate Settlement Procedures Act and harmed consumers through a mortgage insurance kickback scheme tied to a captive MI. Last week, the U.S. Court of Appeals for the District of Columbia heard oral arguments in the case, PHH Corp. v CFPB, and the day did not go well for the bureau. Former CFPB enforcement attorney Jennifer Lee, now a partner with the Dorsey & Whitney law firm in Washington, DC, succinctly summarized the tough day the bureau ...

In another sign that the mortgage market continues to heal, consumer complaints to the CFPB about their residential mortgages continued to fall broadly during the first quarter and on an annual basis, according to a new ranking and analysis by Inside the CFPB. The latest data from the bureau’s consumer complaint database show that total gripes about mortgages are down 6.7 percent from the fourth quarter, and off 4.1 percent from year-ago levels. Borrower kvetching about loan modification issues was even better, down 9.8 percent and 13.9 percent, respectively, for the two periods...

Last week, the House Financial Services Committee approved H.R. 1486, the Taking Account of Bureaucrats’ Spending Act, or TABS Act, which would subject the CFPB to the congressional appropriations process, ostensibly to make the bureau more accountable to taxpayers, and more vulnerable to political opponents, according to supporters of the consumer regulator. “Every government agency should be accountable to the elected representatives of ‘We the People’ and the CFPB should not be an exception to that rule,” said Chairman Jeb Hensarling, R-TX. “We have the Pentagon which is on budget. We have the Justice Department which is on budget,” he added. “There is certainly no greater duty we have than to provide for the common defense, and we do not ...

This week, a judge removed the protective order on seven documents related to the U.S. Treasury’s sweep of GSE profits, revealing what shareholders and industry groups have been arguing for years: that Fannie Mae and Freddie Mac were in a position to post profits on a sustained basis. In a whirlwind of court activity over the past month involving GSE shareholders, Court of Federal Claims Judge Margaret Sweeney decided on April 12 to release certain documents that appellants in Fairholme Funds, Inc. et. al. v. United States and Perry Capital v. Lew, moved to be made public. This is ahead of the D.C. Circuit schedule oral argument for the Perry case on April 15 and it intensified talks of government corruption and false claims of protecting taxpayers via the sweep.

New production of non-agency MBS fell sharply in the first quarter of 2016 despite an anomalous rebound in the prime mortgage sector. A mere $8.38 billion of non-agency MBS was issued in the first three months of this year, down 40.8 percent from the fourth quarter and off 64.5 percent from a year ago, according to a new Inside MBS & ABS analysis and ranking. It was the slowest quarter for new issuance since the end of 2013, when just $6.11 billion of new non-agency MBS came to market. The non-agency MBS market remains...[Includes three data tables]

Two rating services published reports in recent days stressing that non-agency MBS with loans subject to TRID mortgage disclosures can be rated, even when the loans have TRID violations. The reports are part of an industry effort to deal with the rule that combines disclosure requirements of the Truth in Lending Act and the Real Estate Settlement Procedures Act that was promulgated by the Consumer Financial Protection Bureau and took effect in October. Kroll Bond Rating Agency and Morningstar Credit Ratings published separate reports in the past week stating expectations that TRID will have a “limited” impact on non-agency MBS investors. A number of other rating services have made similar statements since TRID took effect, though that has done little to spur issuance. Only one non-agency MBS with TRID loans has been issued...

The Department of Justice helped lead other federal and state entities in a $5.06 billion settlement with Goldman Sachs. The settlement announced this week involves non-agency MBS underwritten by Goldman between 2005 and 2007. The charges were centered on representations made by Goldman to investors in about 530 non-agency MBS. The offering documents for the MBS stated that mortgages in the deals were originated “generally in accordance with the loan originator’s underwriting guidelines,” other than possible situations where “when the originator identified ‘compensating factors’ at the time of origination.” Findings by third-party due diligence firms helped...

The nation’s largest MBS-investing real estate investment trust, Annaly Capital Management, this week agreed to buy the third largest player in the market, setting off speculation among analysts and investors that the “mREIT” sector could be in for a healthy dose of consolidation. The New York-based Annaly said it would buy Hatteras Financial Corp., Winston-Salem, NC, for roughly $1.5 billion in cash and stock. At year end, Annaly ranked...

The Federal Housing Finance Agency this week announced a limited principal reduction option for certain nonperforming, underwater borrowers with Fannie Mae or Freddie Mac home mortgages. The agency characterized the program as the “final crisis-era modification program [and] a last chance for seriously delinquent underwater borrowers to avoid foreclosure.” The program is limited...