The Department of Housing and Urban Development will not take on the new points-and-fees cure provision for qualified mortgages adopted by the Consumer Financial Protection Bureau. The agency is concerned that lenders might inadvertently violate the FHA’s statutory 3.5 percent downpayment requirement. HUD adopted other changes in the CFPB’s revised final rule on ability to repay and qualified mortgages (ATR/QM) to maintain consistency but saw no need for any further ability to cure points-and-fees errors. Reimbursement of any excess points and fees to the borrower could take away from the mandatory 3.5 percent downpayment and render the loan ineligible for FHA insurance, the agency explained in a notice published in the Nov. 3 Federal Register. HUD said it would provide lender guidance under its own QM rule on ...

As mortgage lenders continue to feel their way around the world of unfair, deceptive or abusive acts or practices (UDAAP) as defined by the Dodd-Frank Act and the Consumer Financial Protection Bureau, there is much they can learn from a close examination of recent enforcement actions. During a webinar this week sponsored by Inside Mortgage Finance, Mercedes Tunstall, a partner with Pillsbury Winthrop Shaw Pittman, said CFPB consent orders show that the bureau is watching telemarketing practices very closely. The CFPB is...

Participants in the residential mortgage market were largely pleased with the risk-retention requirements finalized last week for certain non-agency MBS. However, the requirements, which also cover commercial MBS and other ABS, drew a wide range of criticism from others. “The short version is that the rule doesn’t require meaningful credit risk retention where it counts, and imposes significant market-shaping safe-harbor requirements where skin in the game isn’t so important,” said Adam Levitin, a professor of law at the Georgetown University Law Center. He noted...

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...

If Republicans take control of the U.S. Senate in the upcoming elections, Congress next year may actually produce some mortgage-related legislation, according to political analysts participating on a panel at the Mortgage Bankers Association’s annual convention in Las Vegas this week. Any successful legislation will be narrowly targeted and not address complex problems like building a new mortgage finance system or resolving the status of Fannie Mae and Freddie Mac, analysts agreed. Over the last four years, the Democrats’ top priority has been preserving...

The Consumer Financial Protection Bureau last week proposed two narrow revisions to its complex mortgage origination disclosure rule, leaving the industry guessing what further changes could come as lenders gear up to implement a massive rule known as TRID: the Truth-in-Lending/Real Estate Settlement Procedures Act integrated disclosure. For most lenders, the most significant proposed change would relax the requirement that lenders provide a revised loan estimate on the same day that a consumer’s rate is locked. After considering industry feedback, CFPB staff concluded that such a short turnaround may be challenging for lenders that allow consumers to lock interest rates late in the day or after business hours. This could mean...

The CFPB issued a report earlier this month finding, more often than not, that owners of manufactured homes pay higher interest rates for their loans than borrowers whose homes were built onsite. “In 2012, about 68 percent of all manufactured-housing purchase loans were considered ‘higher-priced mortgage loans,’ compared with only 3 percent of site-built home loans,” the CFPB said. Two out of three manufactured-home owners eligible for mortgages finance with more expensive personal property (“chattel”) loans instead. That’s good and bad. On the one hand, chattel loans have lower origination costs and quick closing timelines, as the bureau noted. But on the other hand, they also have “significantly fewer consumer protections than mortgage loans,” the bureau said. For example, only ...

“Rating shopping is alive and well,” Calvin Wong, chief credit officer at Morningstar Credit Ratings, said last week at the ABS East conference in Miami Beach. The Securities and Exchange Commission recently released a rule setting new requirements for the rating services, but Wong warned that the SEC hasn’t done enough to address the issue. He said...

Investors are comfortable with broad swaths of the structured finance market and issuers are cautiously optimistic that regulators won’t hinder activity too much going forward, according to attendees at the ABS East conference produced by Information Management Network this week in Miami Beach. “We’re in a pretty good spot right now in the market from a supply-demand perspective,” said Bob Behal, a principal and co-head of ABS investments and commercial MBS investments at Vanguard Group. Almost 3,700 people had registered by the start of the conference, up slightly from around 3,500 people in 2013. Will Zak, a director at Barclays, said...

An estimated $336 million out of a $614 million settlement that JPMorgan Chase agreed to pay for not complying with FHA requirements will go towards stabilizing the agency’s ailing Mutual Mortgage Insurance Fund. On Feb. 4, 2014, the U.S. Attorney’s Office for the Southern District of New York took over a whistleblower lawsuit and started an investigation of Chase on behalf of the government for alleged violations of the False Claims Act. The whistleblower or “relator” alleged that Chase, an approved FHA direct endorsement lender, had not followed FHA requirements when underwriting loans, causing the MMIF to incur significant losses when the borrowers defaulted on their loans. The U.S. Attorney filed suit against Chase based on the results of an audit conducted by HUD’s Inspector General that looked into the bank’s underwriting and refinancing of FHA loans. The lawsuit alleged that ...