Lenders that dabble in loans that don’t pass the qualified-mortgage test are going to be very selective about which borrowers they accept, and the loans are most likely to be held in portfolio, according to speakers at a recent industry conference in New York City. “We have used our balance sheet to retain non-QM loans in certain situations,” said Russell Brady, an assistant vice president at Elevations Credit Union. “This can make sense, but you have to do it in a controlled way with all the controls in place,” he said during a panel at the Secondary Market Conference sponsored by the Mortgage Bankers Association. The QM limit of 43 percent on debt-to-income ratio is...

Before the Consumer Financial Protection Bureau implemented standards for qualified mortgages, few lenders admitted that they were willing to offer non-QMs. However, in recent weeks, a number of lenders have touted their entrance into the sector, providing Ethos Lending with plenty of competition. Some of the non-QM lenders are sticking to relatively safe offerings of interest-only mortgages to well-qualified borrowers, while others see a strong market in non-QMs for borrowers that might not qualify for agency financing. This week, Caliber Home Loans announced...

One last thought on Mel Watt, FHFA and expanding the credit box: Members of the GOP who were big boosters of the recently departed Ed DeMarco will probably read the g-fee comment notice and have a fit…

A New York federal judge was out of line and beyond his discretionary authority when he rejected the Securities and Exchange Commission’s proposed $285 million settlement with Citigroup in 2011 stemming from the bank’s alleged mishandling of MBS, an appeals court ruled this week. A three-judge panel of the U.S. Second Circuit Court of Appeals vacated the district court’s order, holding that Judge Jed Rakoff of the Southern District of New York abused his discretion by applying an incorrect legal standard to his review of the settlement. Rakoff refused to accept the deal between the SEC and Citi because it did not contain an admission or denial of guilt. The appeals court held...

The odds seem to be increasing that student loan servicers are going to face tougher legislation or regulation – or both – as members of Congress and the Consumer Financial Protection Bureau pay more attention to the sector. During a hearing this week of the Senate Banking Financial Institutions and Consumer Protection Subcommittee, Chairman Sherrod Brown, D-OH, drew a comparison between the mortgage market’s collapse and the resulting financial crisis and today’s student loan market – with an emphasis on the role of servicers in both contexts. Last year, Brown wrote...

The Consumer Financial Protection Bureau’s effort to go after corporate executives in connection with its financial-crisis enforcement actions so far has led to 12 cases in which individuals were named as defendants or respondents. Individuals who have been included in CFPB complaints are primarily decision-makers or a party to the consumer transaction. Under the law, they include not only providers of consumer financial products or services, but also those with managerial responsibilities and a “material” participant in the transaction. Individual accountability is...

Among the 12 questions that the FHFA asks the public to consider is this: “If the enterprises [Fannie Mae and Freddie Mac] continue to raise g-fees, will overall loan originations decrease?”

Individual accountability is the regulatory catchphrase of the moment not only at the CFPB but at the Securities and Exchange Commission and state regulatory agencies as well.

The spring 2014 semi-annual regulatory agenda of the Consumer Financial Protection Bureau indicates the CFPB remains on schedule on a handful of mortgage-related rulemakings, including an eventual rule implementing Dodd-Frank Act changes to the Home Mortgage Disclosure Act. The good news for the mortgage industry is that the bulk of Dodd-Frank-required mortgage rules have already been issued. On the HMDA front, the CFPB recently convened...

Aurora Loan Services, once a huge player in the non-agency subprime and Alt A market, has agreed to resolve a class-action lawsuit alleging it duped distressed borrowers into paying monthly fees on nonperforming loans that were already destined for foreclosure. The $5.3 million settlement will be split among 15,000 California borrowers who signed bogus loan-workout agreements with the false hope of curing their deficiencies and keeping their homes. Borrowers claimed that Aurora had misled them into thinking that their foreclosures were on hold while they were being considered for loan modification. In reality, however, Aurora’s policy was...