CFPB Director Richard Cordray told an assemblage of financial industry representatives last week that it would be a mistake for prudential regulators to examine institutions in such a way as to steer them toward providing only mortgages that can be defined as “qualified” under the bureau’s ability-to-repay rule, according to one industry source in attendance. Cordray said the CFPB wants other types of mortgages to flourish as well, the source continued. Bureau staff added that they would expect the percentage of QMs in the...

Providers of financial products to college students are going under the CFPB’s magnifying glass. The bureau has begun an inquiry into the effect of financial products marketed to students through colleges and universities in an attempt to determine if such arrangements are in the best interest of students. Products being scrutinized include bundled or co-branded student identification cards that double as debit cards, cards used to access scholarships and student loans, and school-affiliated bank accounts. In its notice and request for...

In light of the proposed guidance issued by the CFPB and the rest of the Federal Financial Institutions Examination Council on social media contacts by banks, savings associations, credit unions and nonbank entities, Lenders Compliance Group highlighted a number of important issues market participants should take into consideration, including key policies and procedures. “When you think of advertising, do you include social media? These days, most of you do,” LCG said in a recent analysis. “However, social media...

CFPB Warns Servicers to Protect Borrowers When Transferring Servicing. As Inside the CFPB went to press, the bureau issued a bulletin reminding mortgage servicers about their legal obligations to protect borrowers during transfers of mortgage servicing between firms. Through public feedback and its supervision activities, the CFPB said it has noted a significant number of servicing complications stemming from the large amount of servicing transfers that have taken place in the last year. In a number of instances...

CFPB Director to Testify Before Senate Panel. CFPB Director Richard Cordray is among a number of federal financial regulators scheduled to testify the morning of Thursday, Feb. 14, 2013, before the Senate Banking, Housing and Urban Affairs Committee on the subject, “Wall Street Reform: Oversight of Financial Stability and Consumer and Investor Protections.” This will be Cordray’s first appearance before Congress since the Canning v. National Labor Relations Board decision was issued by the D.C. Circuit Court of Appeals. FHA Chief to...

Federal regulators suggest that a number of changes are under consideration for risk-retention requirements initially proposed in 2011. Two changes under consideration include a revision of the qualified residential mortgage definition and a possible alternative to the controversial proposed premium capture cash reserve account. Katherine Hsu, chief of the office of structured finance in the division of corporation finance at the Securities and Exchange Commission, said federal regulators are considering changing the proposed definition for QRMs due to the recent ability-to-repay rule from the Consumer Financial Protection Bureau that set requirements for “qualified mortgages.” The QRM standards cannot be any more broad than the QM standards. Speaking at the American Securitization Forum’s ASF 2013 conference last week in Las Vegas, Hsu also stressed...

The Department of Justice filed a civil action in Los Angeles this week against Standard & Poor’s Rating Services and its parent the McGraw-Hill companies for $5 billion, accusing S&P of defrauding investors by falsely representing that its ratings on certain collateralized debt obligations were “objective, independent and unencumbered by any conflicts of interest.” The Justice Department’s complaint alleges that S&P “knowingly and with the intent to defraud, devised, participated in, and executed a scheme to defraud investors” in its ratings of “trillions of dollars” of residential MBS and CDOs between 2004 and 2007. DOJ contends...

Stonegate Mortgage Corp. this month launched a new jumbo conduit, hiring Eric Schlotz, a 15-year veteran from GMAC-RFC in Minneapolis, to manage the operation. As for when the conduit might actually securitize loans, that’s a different matter. Schlotz told Inside MBS & ABS that securitization is not on the immediate drawing board, but will be an option for the future. “We anticipate whole loan sales and private deals,” Schlotz said. Asked whether he feels...

The presence of the “to-be-announced” market provides greater liquidity to the agency MBS sector, according to a recent study by the Federal Reserve Bank of New York. The study, “TBA Trading and Liquidity in the Agency MBS Market,” presents evidence on the liquidity of the TBA market during the financial crisis period. Its analysis also yields preliminary evidence that the liquidity of the TBA market raises MBS prices and lowers mortgage interest rates. Authors James Vickery and Joshua Wright said...

The securitization industry has successfully shot down high-profile attempts in San Bernardino County, CA, and in Chicago to use eminent domain to seize underwater, performing mortgages, write them down to fair market value and repackage them for sale to other investors. However, they’re not letting their guard down, as similar efforts continue in a number of other local jurisdictions throughout the country – most notably Brockton, MA, and Salinas, CA. In Brockton, the City Council recently voted 9-2 in favor of setting up a working group to further explore the concept. It also voted to invite a handful of local community activists and city officials, as well as a representative from Mortgage Resolution Partners – the architect of the proposal – to appear before the finance committee. The issue on their agenda is...