The Department of Veterans Affairs has issued guidance to help VA lenders understand better the agency’s interim final rule on a borrower’s ability to repay and qualified mortgages. The guidance was published in a frequently asked questions (FAQs) format to clarify and explain both the VA’s ATR and QM standards. The VA interim final rule became effective on May 9, 2014, the date it was published in the Federal Register. The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 requires residential mortgage lenders to make a reasonable and good faith determination that the consumer has a reasonable ability to repay the loan according to its terms. The statute directed the Consumer Financial Protection Bureau to develop and implement an ATR/QM rule. Under the CFPB’s final rule, a qualified mortgage is a category of loans that have certain, more stable features that ...

The FHA flood insurance requirements could make it difficult or more risky for lenders to originate FHA loans in states with significant flood risk or where flood maps may not accurately reflect the current flood risks, the Mortgage Bankers Association warned. Testifying during a recent hearing on private flood insurance, Steven Bradshaw, executive vice president of Standard Mortgage and MBA representative, warned that FHA’s current requirement for lenders to secure flood insurance on properties only if it is located within a high flood-risk zone has had some unexpected adverse impact, particularly in the wake of hurricane-related catastrophes. Bradshaw noted that many homes that were destroyed by Hurricane Katrina were not located in special flood-hazard areas (SFHA) and therefore were not required to have flood insurance. “Sadly, these borrowers were often uninsured and the ...

A battle on the legislative or even legal front may be brewing that challenges the Federal Housing Finance Agency’s recent decision to exclude certain types of insurance companies from membership in the Federal Home Loan Bank system. The biggest impact of the final rule would be to force a number of real estate investment trusts that have formed captives to gain access to the FHLBanks to give up low-cost FHLBank advances. “The impact on mortgage liquidity and credit access should be...

Democrats and Republicans in Congress want to know what it will take to expand real estate investment trust participation in GSE credit risk transfers. They wrote the Securities and Exchange Commission last week asking it to help alleviate the regulatory challenges REITs face when it comes to participating in credit risk transfers. “Specifically, we are requesting your expertise in unlocking a meaningful amount of capital in the form of mortgage real estate investment trusts to participate in these transactions,” said the letter from the 13 congressman.They cited the FHFA’s goal to grow the credit risk-sharing program with an expanded investor base and said that mortgage REITs would be a likely candidate if the obstacles were removed.

The Mortgage Bankers Association and flood insurance providers expressed support for legislation that would ensure the continued availability of federal flood insurance and, at the same time, facilitate the development of a private market for flood insurance. Industry representatives called for appropriate and timely long-term reforms to improve the National Flood Insurance Program, which provides mandatory flood insurance through private “write-your-own” flood insurance providers. Having gone through several extensions by Congress, the NFIP is scheduled to expire on Sept. 30, 2017, hence the call for private capital to provide flood coverage outside the NFIP. Testifying on behalf of the MBA during a recent House Financial Services Committee hearing, Steven Bradshaw, executive vice president of Standard Mortgage, said...

Officials at the Federal Housing Finance Agency provided some advice to real estate investment trusts along with the announcement this week that REITs will lose their access to funding from Federal Home Loan Banks: ask Congress to make some changes. “Congress has amended the Federal Home Loan Bank Act in the past to allow additional entities to become members of a Federal Home Loan Bank and it can certainly do so again if it wants some of these entities to ...

The CFPB’s ability-to-repay (ATR) rule with its qualified mortgage standard did not materially affect the mortgage market in 2014, according to a recent analysis by two economists at the Federal Reserve based on industry data provided under the Home Mortgage Disclosure Act. Following up on an article published simultaneously with the 2014 HMDA data release in which they found little indication that the new rules had a significant effect on lending in 2014, Fed economists Neil Bhutta and Daniel Ringo extended that analysis by conducting sharper tests around the date of enactment, and around lender-size and loan-pricing thresholds, where treatment of loans under the new rules varies. They found that “lenders responded to the ATR and QM rules, particularly by ...

A case in bankruptcy court regarding the priority of payment provisions for collateralized debt obligations could have broad ramifications for derivatives transactions at the heart of the structured finance industry, according to the Structured Finance Industry Group and other industry groups. In late December, SFIG filed an amicus brief in Lehman Brothers Special Financing v. Bank of America, which is being heard in U.S. Bankruptcy Court for the Southern District of New York. The Securities Industry and Financial Markets Association and the International Swaps and Derivatives Association filed a separate brief, making points similar to those raised by SFIG. LBSF is suing...

The Securities Industry and Financial Markets Association advised Capitol Hill that the successful government-sponsored enterprise credit risk-sharing programs could be improved to increase liquidity and investor interest. In a letter to Sen. Richard Shelby, R-AL, chairman of the Senate Banking, Housing and Urban Affairs Committee, the Wall Street group said, “Up-front risk-sharing could make housing finance more efficient and sustainable by allowing the GSEs to achieve day-one risk transfers without having to warehouse credit risk until it can be distributed in a back-end credit transfer transaction.” It added...

President Obama is expected to sign the $1.5 trillion omnibus spending bill this Friday, which includes several provisions in the Jumpstart GSE Reform Act and prohibits the GSEs from building capital anytime soon. The bill would prevent the Treasury from selling its stock in the GSEs, but would not prevent guaranty fee increases to fund other government spending. A recent twist introduced a sunset provision this week that would limit the prohibition on Treasury sales of GSE stock just for the next two years. Investors Unite, a shareholders trade group, noted that this provision is “effectively locking in the status quo of the flawed conservatorship well into 2017.” Section 702 of the 2,000-plus page omnibus spending bill limits the sale of...