The Consumer Financial Protection Bureau this weekend proposed limited revisions and clarifications to a number of its mortgage rules. The CFPB proposed allowing originations of certain high-cost balloon mortgages by small lenders to receive qualified mortgage status regardless of where the lenders operate. The CFPB also proposed slightly tweaking an exemption from escrow requirements on certain higher-priced mortgages originated by lenders in rural and underserved areas. To prevent ... [Includes two briefs]

An FHA proposal for new legislative authority to transfer servicing has raised concerns among industry participants, particularly in the Ginnie Mae market. Authorizing the FHA to shift mortgage-servicing rights from one servicer to another could have a ripple effect on Ginnie Mae servicing rights and also adversely impact state mortgage servicing and origination licenses, some say. The bottom line is that Congress should consider FHA’s request for new statutory authority with great care, said Larry Platt, a compliance attorney and a partner at the Washington law firm K&L Gates. “We would hope that ...

The FHA’s tiered system for assessing servicers’ use of loss mitigation tools should serve more as a red flag for increased supervision rather than as a basis for terminating servicing rights, said the Mortgage Bankers Association. Commenting on the FHA’s proposed enhancements to its servicer scorecard, the MBA acknowledged the agency’s responsibility to monitor and hold servicers accountable for poor performance. But while tiered ranking is a good enforcement tool, it can be misapplied, the group indicated. Any ranking system is a good first ...

The Department of Veterans Affairs will soon seek comments on certain proposed rules that would allow VA underwriting guidelines to remain independent of the Consumer Financial Protection Bureau and to also implement a lender scorecard. After a lengthy discussion with the CFPB regarding the “qualified mortgage” rule, the VA said it will propose a rule that would prohibit CFPB’s new underwriting guidelines from superseding existing VA guidelines. The VA feels there is no need for any significant change to its current underwriting rules due to ...

Reverse mortgage lenders, consumer groups and certain advocates for the elderly are urging Congress to enact legislation passed recently by the House of Representatives granting the FHA additional authority to govern its reverse mortgage program. Testifying before the Senate Banking Subcommittee on Housing, Transportation and Community Development, the groups said the most productive action Congress can take is to pass H.R. 2167 to allow HUD to make expeditious changes to the Home Equity Conversion Mortgage program through mortgagee letters. The bill, which the House approved on June 12, would ...

The Securities and Exchange Commission and defendants in civil lawsuits will have to face the harsher realities of an open-ended policy change requiring defendants in certain civil lawsuits to admit guilt as a condition for settlement, say legal experts. There is apparently a consensus among industry attorneys that it will be difficult for the SEC to determine when to apply the new policy and to which cases. In addition, there is also the question of whether the SEC will have the discipline to reject a huge settlement and avoid the expense and uncertainty of a drawn-out trial, just so it could get an admission of guilt by a corporate defendant. According to global law firm DLA Piper, SEC Chairman Mary Jo White recently notified...

The recent rapid rise in interest rates has some market participants talking about margin calls on MBS investors, but so far all the chatter appears to be speculative – although there still could be red ink out there, somewhere. At press time, the yield on the benchmark 10-year Treasury had stabilized at 2.54 percent. In mid-May the rate was 1.70 percent. That’s a run-up of 84 basis points. One secondary market official told...

Japan became the biggest overseas investor in U.S. MBS and ABS markets last year, moving past mainland China to head the ranking, according to final Treasury Department data. Japanese investors held $199.7 billion of U.S. MBS and ABS as of the midway point in 2012, the one time a year when Treasury releases detailed foreign holdings of U.S. long-term securities. That was up 21.3 percent from June 2011, when Japan held just $164.7 billion of MBS and ABS. The Japanese increased...[Includes one data chart]

Investors in vintage non-agency MBS could take $7.8 billion in losses due to previously undisclosed principal forbearance on top of the $1.0 billion in losses uncovered this month. However, a survey suggests that servicers don’t intend to pass the losses through to investors. The losses recognized in May were reported after Ocwen Financial took over servicing from Homeward Residential. Analysts warned that other servicing transfers could prompt similar losses. Bank of America Merrill Lynch said...

The SEC will push for admissions of guilt as part of settlements of lawsuits it files against private industry, including participants in the MBS market.