The ability-to-repay “qualified mortgage” final rule released last week by the Consumer Financial Protection Bureau will likely impair access to and the cost of jumbo and nonprime mortgage loans, in spite of the market clarity and certainty it provides, according to many market observers. Wall Street MBS analyst Laurie Goodman and the rest of her MBS strategy group at Amherst Securities said the implications for jumbo mortgage is that loans with debt-to-income ratios greater than 43 percent will not be made by most lenders, as these mortgages will not qualify for QM status. “The penalties for making non-QM mortgages can be...

Recent changes announced by the Basel Committee for pending capital standards will increase demand from private capital for non-agency MBS, according to industry participants, but some say the benefit may be muted. Last week, the Basel Committee adjusted the liquidity coverage ratio for Basel III capital requirements by expanding the definition for “high quality liquid assets” to include Level 2B assets. Among the assets newly eligible are certain residential MBS rated AA or higher, subject to a 25.0 percent haircut. “The Basel Committee made...

Inside Mortgage Finance Publications, Inc. announced this week that it has just settled a major copyright infringement dispute with a large national financial institution for more than one quarter of a million dollars. Without admitting any infringement, liability or wrongdoing, the financial institution agreed to pay IMFP to settle charges that it had violated federal copyright laws by making unauthorized copies of Inside Mortgage Finance. IMFP alleged that the financial institution had engaged in ongoing in-fringement, distributing infringing copies of dozens of registered issues to a group of non-subscribing employees. “We never like...

The Consumer Financial Protection Bureau estimates that about 70 percent of the mortgages originated from 1997 to 2003 would likely meet the agency’s new “qualified mortgage” designation. Under the agency’s recently minted ability-to-repay final rule, lenders that originated qualified mortgages will be legally protected against lawsuits brought by borrowers. The ATR rule itself broadly requires lenders to consider a number of factors in underwriting most home mortgages – a few loan types ...

A few weeks ago, ES Appraisal Services, Jacksonville, FL, closed its doors, the second national appraisal management company to go bust in the past year. The other was Appraisal Loft. ES Appraisal’s demise was a hardly a surprise. For months, industry message boards were full of comments from independent appraisers who worked as contractors for the firm, complaining about unpaid invoices. In December, the company sent an email to appraisers confirming the news. At one point the firm employed, on a contractual basis ...

The federal judge in charge of overseeing the multiple lawsuits filed by the Federal Housing Finance Agency against non-agency mortgage-backed securities issuers for allegedly misrepresenting deals that were sold to Fannie Mae and Freddie Mac rebuffed yet another motion by one of the banks to shut down the legal action. Last week, Judge Denise Cote of the U.S. District Court for the Southern District of Manhattan rejected a motion to reconsider her December decision allowing the FHFA to proceed on behalf of the GSEs with most of its fraud claims against Ally Financial. On Dec. 19, the judge denied most of Ally’s motion to dismiss, including the defendant’s request that the court strike the demand for punitive damages, finding there were sufficient factual allegations in the FHFA’s complaint to move forward with its fraud complaint.

The Consumer Financial Protection Bureau issued its final rule on mortgage servicing this week, with perhaps the most significant change from the proposed rule being tougher treatment on the servicing industry’s dual tracking practices. However, the bureau threw the industry a few bones along the way. The CFPB decided not to require a single point of contact for distressed borrowers, but will require servicers to have “dedicated staff” to handle borrower concerns with their mortgages, something the bureau refers to as “continuity of contact.” The final rulemaking also essentially pre-empts...

The Consumer Financial Protection Bureau’s new rule implementing ability-to-repay underwriting requirements uses origination compensation as one of the factors in whether a loan meets the coveted “qualified mortgage” designation – but the agency acknowledged that there is some ambiguity in the Dodd-Frank Act and asked for more input before the rule takes effect. To be eligible for QM status, total points and fees cannot exceed 3.0 percent of the loan amount, although prime-rate mortgages can have up to an additional 2.0 percent in discount points. The question the CFPB wrestled with was how to calculate the total, particularly in cases where the loan originator may be getting payments from multiple sources. Dodd-Frank specifically says...

The residential mortgage servicing market continued its incredible shrinking act during the third quarter of 2012, falling below the $10 trillion mark for the first time since early 2006. The Federal Reserve reported that total single-family mortgage debt outstanding declined by 0.9 percent during the third quarter, drifting down to $9.926 trillion. The supply of mortgage servicing has been in a steady decline since peaking at $11.179 trillion in March 2008. The agency servicing market was...[Includes two data charts]

Inside Mortgage Finance Publications, Inc. announced this week that it has just settled a major copyright infringement dispute with a large national financial institution for more than one quarter of a million dollars. Without admitting any infringement, liability or wrongdoing, the financial institution agreed to pay IMFP to settle charges that it had violated federal copyright laws by making unauthorized copies of Inside Mortgage Finance. IMFP alleged that the financial institution had engaged in ongoing infringement, distributing infringing copies of dozens of registered issues to a group of non-subscribing employees. “We never like to pursue...