The $13 million settlement reached between the CFPB and Castle & Cooke Mortgage Co. back in November 2013 was not the end of the dispute for the mortgage lender. It now faces a possible class-action lawsuit brought by one of the aggrieved parties who had already been compensated under the terms of the settlement with the bureau. Homeowner Luis Cabrales, on behalf of himself and perhaps in excess of 9,500 similarly situated individuals, recently filed his complaint in the U.S. District Court for the Eastern District of California, Fresno Division. The class, so far, has not been certified. The legal argument is that the applicable statutes of limitation of the claims alleged in the new complaint were “tolled” (suspended or ...

A recent study by Nationwide Title Clearing, Inc., a research and document-processing vendor for the residential mortgage industry, found that nearly half a million homeowners could be negatively affected by inaccurate servicing records. NTC found that out of 2,285,665 servicing database records that were verified against the collateral file, 24,490 loans (1.07 percent) had significant discrepancies. When viewed against roughly 49 million outstanding residential mortgages, that suggests as many as 490,000 homeowners could be affected by faulty servicer database records. “These database inaccuracies might have represented ‘acceptable risk’ in times past – but in today’s compliance-oriented landscape, such a high number of errors could bring increased scrutiny and penalties from CFPB regulators, not to mention ...

In the Castle & Cook case more than 9,400 consumers received checks from the settlement with the CFPB. But one homeowner decided not to stop there...

The CFPB needs to provide additional clarity on how a “rolling delinquency” triggers the 120-day delinquency period required before a mortgage servicer can begin foreclosure under the bureau’s mortgage servicing rule, the American Bankers Association said. A rolling delinquency occurs when a delinquent borrower resumes making some payments but never becomes current on the loan. In a letter to the CFPB last week, the ABA noted that in responding to inquiries as to how banks should apply the 120-day rule in rolling delinquency situations, the CFPB has informally recommended that servicers look to common interpretations of “delinquency,” which may be found in best practices, industry standards, state law and contract law. “Because borrowers have a private right of action to ...

The CFPB’s Office of Inspector General has a handful of high-profile audits or reviews of the CFPB underway, including audits of the bureau’s controversial headquarters renovation costs and its public consumer complaint database. In June 2014, the OIG completed a review and issued a letter report in response to a request from Rep. Patrick McHenry, R-NC, the chairman of the House Financial Services Subcommittee on Oversight and Investigations, regarding the CFPB’s headquarters renovation budget. “As a follow-on to this work, we are evaluating the reasonableness of the overall estimated and proposed costs for the CFPB’s headquarters renovation,” the OIG said in its latest work plan. “We will also assess the effectiveness of the CFPB’s processes and controls for approving, managing ...

It’s Official: QRM = QM. Last week, the Office of the Comptroller of the Currency, the Federal Reserve Board, the Federal Deposit Insurance Corp., the Securities and Exchange Commission, the Federal Housing Finance Agency, and the Department of Housing and Urban Development adopted a final version of their risk-retention rule for securitized mortgages. Under the new rule, the definition of a “qualified residential mortgage” (QRM) will be no broader than the definition of the “qualified mortgage” (QM) as promulgated by the CFPB in its ability-to-repay rule. Mortgage lending industry representatives were generally pleased with the move. Independent analysts said they expected the near-term impact of the QRM to be quite limited. However, others noted that the development does place a ...

Six federal regulators approved a final rule this week setting risk-retention requirements for residential MBS transactions, exempting the entire agency MBS universe and non-agency securities backed by qualified mortgages. There is not that much left. The risk-retention requirements for residential mortgages will take effect one year after the final rule is published in the Federal Register, which is expected shortly. Regulators opted to align the definition for qualified-residential mortgages with the standards established by the Consumer Financial Protection Bureau for QMs. The sponsor of a non-agency MBS that includes non-QRMs will have to retain at least 5.0 percent of the balance of the security, as required by the Dodd-Frank Act. In 2011, federal regulators proposed...

The Securities and Exchange Commission has provided more details about a pilot project to test the revised requirements for shelf registrations that are part of Regulation AB II. ABS issuers must comply with the new rules and forms, other than asset-level disclosures, no later than Nov. 23, 2015. The SEC’s Division of Corporation Finance recently invited ABS issuers to request staff review of their registration statements in draft form, prior to filing. “We will select...

Issuers of securities backed by assets other than residential mortgages were able to win some concessions from federal regulators in the final risk-retention rule that was approved this week. However, the standards for “qualified” loans that are exempt from risk-retention requirements are much more stringent than those for qualified-residential mortgages, even including downpayment requirements in some instances. The risk-retention requirements for non-mortgage ABS and commercial MBS take effect two years after the final rule is published in the Federal Register. Securities that include loans that don’t qualify for exemptions will be required to have risk-retention of at least 5.0 percent, though there are instances when the required retention can be lower. The final standards qualifying commercial loans, commercial real-estate loans and auto loans were...