Adverse impact violations are the hardest to defend against and the ones causing the biggest settlements, according to Tammy Butler, the director of fair lending and compliance for Optimal Blue, a leading pricing engine. “In a nutshell, this means that your institution has a policy or criterion that has a disproportionate impact on the protected class population of the areas you serve,” she said in a recent blog. This can occur in the way that a lender prices loans or underwriting overlays. “So far, every lender that has been...

Although the CFPB has yet to reach its full staffing levels and seems to have its hands full with mortgage, credit card and payday lending issues, rules and regulations, it also has a number of efforts underway to address a variety of issues related to the financial abuse of older Americans ¨C including coming up with guidance for financial institutions. Last month was the inaugural meeting of the Elder Justice Coordinating Council, an 11©\agency body convened to ¡°shine a light on the disastrous impact of...

Representatives of smaller financial institutions told officials at the CFPB recently they are apprehensive about regulatory overload and the fear that their ability to serve their local communities will be harmed by too much regulation coming too fast. The bureau got that message during separate meetings with its Community Bank Advisory Council and its Credit Union Advisory Council. In discussions about the challenges and opportunities in the post-financial crisis environment, advisory council members...

Two legal cases remain in play that are challenging some controversial recess appointments made by President Barack Obama earlier this year, one directly challenging the appointment of Richard Cordray as director of the CFPB, and another that has implications for the case. In the former, State National Bank of Big Spring, Texas, et al. v. Geithner, et al., currently before the U.S. District Court for the District of Columbia, federal bank regulatory agencies last week told a judge that the lawsuit should be...

Agencies Announce Increases in Dollar Thresholds for Exempt Consumer Credit and Lease Transactions. The CFPB and the Federal Reserve Board last week announced increases in the dollar thresholds in Regulation Z (Truth in Lending Act) and Regulation M (Consumer Leasing Act) for exempt consumer credit and lease transactions. The Dodd-Frank Wall Street Reform and Consumer Protection Act requires yearly adjustments to these thresholds by the annual percentage increase in the Consumer Price Index for Urban Wage...

Portfolio lending by community banks could be treated differently than other types of lending under pending Basel III capital requirements, according to recent indications from federal regulators. The potential exceptions for community banks follow strong lobbying from lenders as well as bipartisan support in Congress. “While we strongly believe that finalizing the regulations is critically important for certainty and planning, we also believe there are merits to considering alternative, simpler approaches to ...

While the nine rating services registered as Nationally Recognized Statistical Rating Organizations were largely compliant with Securities and Exchange Commission regulations and recommendations, the agency found some significant issues with the ABS rating process. In a review covering the government’s 2012 fiscal year ending in September, the SEC said one of the top three firms appeared to change its method for calculating a key financial ratio in rating certain asset-backed securitizations, but failed for several months to publicly disclose the change and its effects on the ratings. The agency includes non-mortgage ABS, commercial MBS and non-agency MBS in a single category of asset-backed securitizations. “Further, it appears the NRSRO did not consistently apply...

Wholesale mortgage production channels – and correspondent originations programs in particular – were key factors in the surge in loan originations during the third quarter of 2012, according to a new Inside Mortgage Finance ranking and analysis. Wholesale lending increased by 11.4 percent from the second quarter to the third, outgaining a 7.7 percent increase in retail production. And with most of the gain coming in correspondent production, it’s clear that the influx of new lenders in that segment, combined with Wells Fargo’s growing presence, has more than made up for the withdrawal of a handful of major lenders of the past. Correspondent originations rose...[Includes four data charts]

Lenders face increased regulation under policy changes designed to bring the FHA Mutual Mortgage Insurance Fund back to positive within the fiscal year and reduce the likelihood of a Treasury bailout to shore up the FHA’s claims-paying ability. The Department of Housing and Urban Development late last week announced a hike in FHA premiums and other changes designed to restore the FHA’s insurance fund, which had a negative 1.44 percent capital ratio at the end of September 2012, according to a new actuarial review. Department of Housing and Urban Development Secretary Shaun Donovan blamed...

The Federal Housing Finance Agency should go back and make additional tweaks to the revised representation and warranty framework for Fannie Mae and Freddie Mac to address significant industry concerns while also enabling greater industry input for future government-sponsored enterprise guidelines prior to issuance, according to the Mortgage Bankers Association. In a letter dispatched to the agency earlier this month, the MBA lauded the FHFA for its efforts through the framework to create clarity but said further changes need to be made to avoid adding to lenders’ confusion rather than alleviating it. “MBA is concerned...