The mortgage servicing rule proposed earlier this year by the Consumer Financial Protection Bureau could easily be exploited to bring any foreclosure proceeding to a grinding halt, according to a leading mortgage industry attorney. If the rule is promulgated as currently written, that could cause mortgage lenders, who are already skittish about future losses, buyback demands and a host of other pending regulations, to pull back even further when it comes to providing mortgage credit. “The consequence of these regulations is to create...

Some mortgage lenders will be able to develop and test, on a limited basis, their own consumer disclosures, under a proposed policy issued last week by the Consumer Financial Protection Bureau. The disclosures would have to be approved by the bureau before being used. “The bureau believes that there may be significant opportunities to enhance consumer protection by facilitating innovation in financial products and services and enabling companies to research informative, cost-effective disclosures,” the CFPB said. “The bureau also recognizes that in-market testing, involving companies and consumers in real world situations, may offer particularly valuable information with which to improve disclosure rules and model forms.” The Dodd-Frank Act gave...

Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act will carry two key “unintended consequences” for the structured finance industry should it be implemented in its current form, a trade group representative warned lawmakers this week. Testifying before the House Financial Services Subcommittee on Capital Markets and Government-Sponsored Enterprises, American Securitization Forum Executive Director Tom Deutsch said that Title VII’s treatment of commodity pools and margin requirements triggers two potential “compliance challenges” for some parties in securitization transactions that may hurt all of the beneficiaries of the deal. “We would not have expected...

Analysts expect the U.S. economic recovery to continue on a slow, weak path into 2013 with the potential for a new recession that could weaken the residential MBS market. At Standard & Poor’s, analysts predict a “slow and uneven” economic recovery with a 15 percent to 20 percent chance of another recession that would be less severe than the 2008-2009 financial crisis but potent enough to sap the MBS market. S&P assumes a reversal in home prices and unemployment rising to near 9 percent in 2013, which could hamper borrower capacity to make their mortgage payments. Overall, S&P’s outlook for the single-family MBS market is...

The mortgage industry is fearful of expanded liability after the Consumer Financial Protection Agency reportedly asked financial institutions with wholesale mortgage operations to monitor and ensure correspondents’ compliance with consumer protection laws and regulations. Lenders are said to be anxious about being held liable for purchased defective mortgages originated by unaffiliated third parties, and they are wary about new entrants that are trying to fill the void left by the traditional, larger players when they exited the wholesale broker/correspondent market. The CFPB has not issued...

The memorandum of understanding (MOU) announced recently between the Consumer Financial Protection Bureau and the Department of Justice does not represent a major policy shift but could lead to more referrals of fair lending cases to the DOJ, according to industry lawyers. Compliance attorneys said information-sharing between the two agencies will likely trigger new fair lending inquiries into origination and servicing practices. In addition, both agencies subscribe to the disparate impact theory and are expected to continue to push it, attorneys noted. The new MOU supplements...

The anti‐predatory lending rules of the Dodd‐Frank Wall Street Reform and Consumer Protection Act – especially those related to mortgages and credit cards – are based on the theory of ‘behavioral economics.’ That in turn has produced a stronger kind of federal regulator, in the form of the CFPB, and in stronger consumer protection laws, according to a new legal abstract. “These new legislative and regulatory developments mark a shift from the ‘rational consumer’ theory that underlay the great disclosure statutes of the late 1960’s and early 1970’s, such as the Truth in Lending Act, and toward the rising influence of ‘behavioral economics’ as a guiding force in consumer protection,” explained Dee Pridgen, professor of law and social responsibility at the University of Wyoming College of Law. ...

The American Securitization Forum has published an implementation guide to the due diligence requirements for securitization positions under the market risk rule issued by the federal bank regulators in August, as well as guidance the Office of the Comptroller of the Currency put out this past June. One of the primary purposes behind the rule and the guidance was to lessen industry dependence on credit ratings and to promote instead greater reliance upon proper due diligence. “With the adoption of the final rules, market participants have been working...

The CFPB and the Federal Trade Commission last week issued warning letters to approximately a dozen nonbank mortgage lenders and brokers about potentially misleading advertisements geared towards military veterans and older Americans that could be in violation of the 2011 Mortgage Acts and Practices Advertising Rule. The so-called MAP rule prohibits misleading claims concerning government affiliation, interest rates, fees, costs, payments associated with the loan, and the amount of cash or credit available to the...

In what may prove to be the first of many announcements dealing with the January 2013 mandate for changes under the Dodd-Frank Wall Street Reform and Consumer Protection Act, the CFPB has decided to give the mortgage lending industry extra time to implement certain new required consumer disclosures. Per the CFPB’s announcement in a new final rule, mortgage lenders will not be required to provide those disclosures until after the bureau’s other previously proposed mortgage disclosure rules are finalized...