Aspects of the CFPB’s ability-to-repay rule and ‘qualified mortgage’ standards may make credit access difficult for homebuyers with low credit scores, including many low-income and first-time homebuyers, Federal Reserve Board Governor Elizabeth Duke said recently. “First, the QM requirement that borrower payments on all debts and some recurring obligations must be 43 percent or less of borrower income may disproportionately affect less-advantaged borrowers,” Duke said. “Board staff tabulations based on the Survey of Consumer Finances...

Most of the CFPB’s requirements stemming from its blizzard of mortgage rulemakings in January take effect sometime next year. But there are a few notable exceptions, including the Truth in Lending Act ban on mandatory arbitration provisions in certain mortgage loans, which kicks in June 1, 2013. “Lenders now using mortgage loan documentation containing such provisions should take steps to ensure that they (and references to them) are removed from documentation to be used for loans that will be subject to the ban,” said Alan...

It’s not exactly Mutiny on the Bounty, but 378 employees of the CFPB voted last week in favor of joining the National Treasury Employees Union, with 86 against, putting the NTEU in the position of representing more than 800 of the CFPB’s approximately 1,200 employees, according to Politico. “Why would employees at CFPB – an agency with liberal bona fides, generous compensation and top-notch benefits – want to form a union,” Politico asked. “The push to organize was driven in large part by news that many employees in...

In its yearly letter to the CFPB, the Federal Trade Commission affirmed that it is “committed to continuing its vigorous enforcement” of regulations under the Equal Credit Opportunity Act, the Electronic Fund Transfer Acts, the Truth in Lending Act and the Consumer Leasing Act, and “in intends to do the same with other rules the CFPB issues.” The Dodd-Frank Wall Street Reform and Consumer Protection Act gave the FTC the authority to enforce any bureau rules that apply to entities within the FTC’s jurisdiction, which...

The broad and still uncertain powers granted to the CFPB by the Dodd-Frank Wall Street Reform and Consumer Protection Act are the biggest threat to community banks, according to an American Enterprise Institute white paper authored by Tanya Marsh and Joseph Norman.“The CFPB has been granted broad powers to ‘regulate the offering and provision of consumer financial products or services,’” the authors said. “The limit to those powers, and how those powers may be implemented in regards to community banks, remain uncertain...

The National Association of Federal Credit Unions is apprehensive about the unintended consequences of the Federal Housing Finance Agency’s decision to limit Fannie Mae and Freddie Mac future mortgage purchases to ‘qualified mortgages’ as defined by the final rule issued earlier this year by the CFPB. Earlier this month, the FHFA directed the two government-sponsored enterprises to limit their future mortgage acquisitions to loans that meet the requirements for a qualified mortgage, including those that meet the special or...

Legislation Would Revise QM Points-and-Fees Calculation Sens. Joe Manchin, D-WV, and Mike Johanns, R-NE, introduced legislation last week that would amend the way ‘points and fees’ are calculated to determine if a loan meets the ‘qualified mortgage’ definition under the CFPB’s ability-to-repay rule, issued earlier this year. Under the rule, a QM cannot have points and fees exceeding three percent of the loan amount. S. 949 is a companion to H.R. 1077, the Consumer Mortgage Choice Act, which has steadily picked up support since...

While non-agency MBS participants largely oppose a credit rating assignment system proposed by Sen. Al Franken, D-MN, some of the main players in the market endorse a model based on ratings rotation. At a roundtable hosted by the Securities and Exchange Commission this week, Martin Hughes, CEO of Redwood Trust, said issuer-paid rating conflicts could be reduced by requiring non-agency MBS issuers to alternate rating services so that one firm didn’t rate more than two consecutive deals from the issuer. He noted that Redwood has established a self-imposed rotation between Moody’s Investors Service and Standard & Poor’s on its non-agency MBS issuance. “The requirement to frequently alternate among the nationally recognized...

Freddie Mac is offering $1.0 billion of its non-agency MBS holdings for sale, according to a spokesman for the government-sponsored enterprise, part of efforts to meet requirements set by the Federal Housing Finance Agency. Fannie Mae also plans asset sales of some sort, but wouldn’t commit to selling its non-agency MBS holdings. Freddie held $70.28 billion in non-agency MBS at the end of the first quarter of 2013 and Fannie held $31.22 billion. The GSEs purchased the non-agency MBS before 2009 and have allowed the holdings to run off ever since. The FHFA recently required...

Rating services are putting considerable energy into assessing the companies that are originating loans for the new breed of jumbo non-agency MBS, in addition to thorough due diligence reviews of the collateral itself, industry experts say. The rating services don’t even begin the rating process until the major loan originators in a transaction clear the “gating” process, said Kathryn Kelbaugh, a senior analyst at Moody’s Investors Service, during a panel session at last week’s secondary market conference sponsored by the Mortgage Bankers Association. “We want to know what originators are doing, have third-party reviews and look at reps and warranties. You have to pass those gates before we can do a rating.” Margaret Sweeney, a director at Fitch Ratings, said...