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...

The Federal Reserve’s decision late last year to taper its agency MBS purchases appears to have contributed to higher mortgage rates, which in turn has helped lead to “significant reductions” in Fannie Mae and Freddie Mac guaranty fee revenue on MBS issued so far this year, according to the Federal Housing Finance Agency’s Inspector General. The evaluation report issued by the IG late this week concluded that continued tapering by the Fed and the eventual reduction of its massive MBS portfolio could have an “adverse impact” upon the financial performance of the two government-sponsored enterprises. “Although the Federal Reserve’s [quantitative easing] programs benefitted the enterprises’ financial condition in 2012 and 2013, its decision, among other factors, in late 2013 to taper its MBS purchases contributed...

A New York trial court judge has dismissed an investor lawsuit alleging fraud by Merrill Lynch in the sale of residential MBS because the plaintiffs failed to meet the state’s pleading standard for fraud claims. Justice Charles Ramos of the New York Supreme Court dismissed an amended complaint brought by Phoenix Light SF Ltd. and other investors against Merrill Lynch and several big banks. The complaint combined...

The Conference of State Bank Supervisors this week formed a task force on mortgage servicing rights to develop options for capital requirements for nonbank servicers. The task force includes representatives from nine state regulators, including the New York Department of Financial Services.

The Consumer Financial Protection Bureau this week finalized a rule change that allows lenders to fix inadvertent mistakes that send mortgages over the 3 percent cap on points and fees for qualified mortgages.Under the “right-to-cure” amendment, a lender can, under limited circumstances, re-fund the excess amount of interest to keep the loan a QM.