In an about face, the Basel Committee on Banking Supervision is preparing to allow for the use of credit ratings as a gauge for credit risk when setting bank capital requirements. If the move isn’t adopted by U.S. regulators, industry participants suggest that domestic banks could be at a disadvantage. In a speech late last week, Stefan Ingves, chairman of the BCBS, acknowledged that the Basel committee’s December 2014 proposal to revise the standardized approach for credit risk wasn’t well received. “The response was both vigorous and clear: not many of you liked the proposals,” he said. Ingves said...

Ginnie Mae is considering the implementation of stress testing for MBS issuers to see whether they can withstand the worst economic and financial market conditions. Over the next couple of years, Ginnie Mae will develop a framework for stress testing modeled after the Dodd-Frank Act’s supervisory stress testing currently required of bank holding companies, said Gregory Keith, senior vice president and chief risk officer, during a recent Ginnie Mae summit. The test will subject...

Mortgage Bankers Association President and CEO David Stevens again called for formal guidance from the CFPB on the legitimacy of marketing services agreements in the wake of some recent troubling developments after the bureau assumed enforcement of the Real Estate Settlement Procedures Act as a result of the Dodd-Frank Act. Speaking at the MBA’s recent 2015 regulatory compliance conference in Washington, DC, Stevens told a crowd of attendees, “We sent a letter to [CFPB] Director [Richard] Cordray weeks ago asking that the bureau simply clarify whether MSAs are considered acceptable and what constitutes an acceptable [agreement] if that’s the case. That was our question. We’re not saying we’re for them, against them; just please tells us if we’re going to ...

The Consumer Financial Protection Bureau has issued a final rule to allow more lenders to qualify as smaller creditors doing business in rural and underserved areas. The final rule, which takes effect Jan. 1, 2016, amends certain mortgage rules issued by the CFPB in 2013 under the Dodd-Frank Act. Specifically, the final rule lifts the current origination limit to qualify for “small creditor” status from 500 mortgage loans annually to 2,000 mortgage loans per year – a limit that also excludes loans retained in portfolio from the 2,000-loan cap. In addition, the rule now includes...

The Department of Veterans Affairs has adopted a final rule aligning the Home Loan Guaranty Program’s disclosure and interest-rate adjustment requirements with the servicing provisions in the Truth in Lending Act, as recently revised by the Consumer Financial Protection Bureau. The rulemaking will ensure VA remains consistent with other consumer finance and housing regulations governing adjustable-rate mortgages, the agency said. The rule is effective Sept. 11, 2015. The VA adopted without the change the rule as proposed on March 30, 2015. In this rule, VA adopted TILA’s minimum 45-day look-back period to clarify that lenders making VA ARMs must meet the statute’s minimum notification requirements. Specifically, disclosures and notifications must be provided to borrowers before an interest-rate adjustment. Lenders are required to adjust ARM rates based on the most recent ...

The FHA will not issue a new case number for any FHA-to-FHA refinance if the current mortgage has a repair or rehabilitation escrow account in FHA Connection. The change, which is one of several updates to FHA Single Family Policy Handbook 4000.1, applies only to FHA streamline refis. It aims to ensure that escrow funds of the mortgage being refinanced are properly applied as well as conform to system requirements. The updated sections become effective on Sept. 14, 2015. Another change clarifies that the payoff statement for the mortgage being refinanced is the only document required when calculating the maximum mortgage amount for simple refi transactions. In addition, guidance for loan-to-value limits for cash-out refis has been updated to clarify that the 85 percent LTV restriction applies only to cash-out refis. HUD also noted that appraisers have flexibility in regards to when inspections should ...

Appraisal independence requirements adopted by the government-sponsored enterprises helped reduce the probability of inflated appraisals and made it more difficult to obtain mortgages, according to new research by staff at the Federal Reserve Bank of Philadelphia. Lei Ding, a community development economic advisor at the Philadelphia Fed, and Leonard Nakamura, a vice president and economist, detailed their findings in a paper published at the end of July. The government-sponsored enterprises adopted...

The House Financial Services Committee this week marked up legislation to block pay raises for the top executives at Fannie Mae and Freddie Mac and to extend qualified-mortgage status to loans originated for an institution’s retained portfolio. H.R. 1210, the Portfolio Lending and Mortgage Access Act, introduced by Rep. Andy Barr, R-KY, would extend qualified-mortgage protection from litigation and enforcement actions for mortgages originated and retained in portfolio by depository institutions. “This would incentivize private-sector risk retention,” said Barr. Rep. John Carney, D-DE, said...

An appeals court in the D.C. Circuit has ruled that a Texas bank has standing to challenge the constitutionality of the Consumer Financial Protection Bureau, an independent federal agency that regulates consumer financial products and services. A three-person judicial panel unanimously overturned a 2013 district court ruling, which concluded that the plaintiff did not have standing and that its claims were not ripe. In State National Bank of Big Spring, TX, et al. v. Lew, et al., the U.S. Court of Appeals for the D.C. Circuit reversed and ruled that the bank has standing to challenge the constitutionality of the CFPB as well as the recess appointment of its director, Richard Cordray. The bank, joined by two nonprofit organizations, originally filed...

Selling Source, LLC, a lead-generation company in Las Vegas, and Tim Madsen, a company employee and recipient of a civil investigative demand from the CFPB, recently petitioned the bureau to modify or set aside entirely the CID. First, the company argues that the CID should be set aside since it is not a “covered person” under the bureau’s authority because it does not offer or provide a “financial product or service” as spelled out in the Dodd-Frank Act. In its petition to the bureau, the company notes that a “covered person” is defined by Dodd-Frank as “any person that engages in offering or providing a consumer financial product or service,” or acts as a “service provider” and is a corporate ...