Portfolio lenders as well as those looking to issue non-agency mortgage-backed securities cautioned the Consumer Financial Protection Bureau against setting specific thresholds for debt-to-income ratios on “qualified mortgages.” Some non-agency MBS investors countered that a bright line DTI ratio would be useful. In June, the CFPB reopened the comment period on the pending ability-to-repay rule, with an emphasis on data relating to DTI ratios. The deadline for comments was last week. The Clearing House Association ...

Servicing rules previewed by the Consumer Financial Protection Bureau in April are flawed, overreaching and need to be adjusted, according to four trade groups representing servicers and lenders. The CFPB said it plans to propose disclosures this month for servicers to send to borrowers as well as servicing procedures, some of which are required by the Dodd-Frank Act. The DFA requires a notice to be sent to hybrid ARM borrowers six months before the initial interest rate reset. The CFPB said it is considering expanding ...

The Consumer Financial Protection Bureau last week released its long-pending proposal for combined mortgage disclosures, with an emphasis on characteristics common in nonconforming mortgages. “In particular, explanations of how rates and payments can change over time are not always made clear [from current disclosures],” said Richard Cordray, director of the CFPB. Currently, the Real Estate Settlement Procedures Act and the Truth in Lending Act require different disclosures for borrowers. As directed by the Dodd-Frank Act ...

Principal reduction loan modifications completed by five major banks as part of the national servicing settlement have not been applied disproportionately to mortgages in non-agency mortgage-backed securities, according to Fitch Ratings. Non-agency MBS investors have raised concerns that servicers that agreed to the recent $25.0 billion settlement will complete their mandated principal reduction mods on non-agency MBS instead of on portfolio loans. “Although still early, there has been no evidence of ...

Wells Fargo agreed last week to pay more than $125.0 million and offer $50.0 million in downpayment assistance to settle subprime-related fair lending claims by the Department of Justice and others. The claims center on brokered originations for African-American and Hispanic borrowers. The DOJ alleged that between 2004 and 2009, Wells charged approximately 30,000 African-American and Hispanic wholesale borrowers higher fees and rates than non-Hispanic white borrowers because of their race or national origin ...

Mortgage-backed security investors continue to claim that a proposal in San Bernardino County to seize certain mortgages in non-agency MBS via eminent domain is unconstitutional. They also warn that if the “Homeownership Protection Program” is implemented there will be negative consequences. “It could severely negatively impact the value of your home, it could scare away jobs from the desert, it could scare away new construction, it might even result in the inability to get a mortgage or financing anywhere in the county ...

The number of loans potentially subject to strict rules for “high-cost” mortgages would dramatically increase, based on a proposal last week by the Consumer Financial Protection Bureau. However, because so few lenders actually originate loans subject to Home Ownership and Equity Protection Act requirements, the CFPB said it believes that such loans will continue to constitute a small percentage of mortgage originations. The CFPB proposed expanding the high-cost definition to include essentially all closed-end mortgages and ...

Manipulation of the London Interbank Offered Rate could have resulted in lower interest rates for subprime ARM borrowers, according to Laurie Goodman, a senior managing director at Amherst Securities Group. Interest rates on close to 80.0 percent of subprime ARMs outstanding in May were linked to LIBOR, according to data from Lender Processing Services, whose data covers about two-thirds of outstanding mortgages. As of the end of May, 70.3 percent of eligible second liens have received a modification via ... [Includes six briefs]

After just a week of sifting through the massive new mortgage disclosure proposed rule released by the Consumer Financial Protection Bureau, mortgage industry officials have already found a lot of problems and will probably find more issues in the months ahead. Rod Alba, senior counsel for mortgage policy at the American Bankers Association, said implementing the CFPB’s proposal as it is right now would be like trying to replace a human being’s skeleton while the person is still alive and functioning. “Just look at the sheer scope of it: 1,100 pages, where every single disclosure that mortgage loan originators and bankers must rely on when they engage in mortgage lending is going to change,” Alba said. “The system is going to...

Officials with the Department of Housing and Urban Development confirmed this week that they are working on ability-to-repay and “qualified mortgage” standards for FHA loans. However, they remained tight-lipped about whether they will craft a QM standard for FHA loans that differs from the Consumer Financial Protection Bureau’s standards, as requested by some lender trade groups. The Dodd-Frank Act requires HUD (for the FHA), the Department of Veterans Affairs, the Department of Agriculture and the Rural Housing Service to develop QM standards for the respective government mortgages that they oversee – in consultation with the CFPB. “Such rules may revise, add to, or subtract from the criteria used...