The Community Mortgage Banking Project, the Housing Policy Council of The Financial Services Roundtable, and the Mortgage Bankers Association recently expressed concern to the Consumer Financial Protection Bureau about some aspects of the agency’s proposed rulemaking on high-cost mortgages that would implement changes to the Home Ownership and Equity Protection Act as per the Dodd-Frank Act. The changes would establish new definitions of points and fees and prepayment penalties as well as new restrictions and requirements...

As the Consumer Financial Protection Bureau’s forthcoming ability-to-repay/qualified mortgage rulemaking continues to keep the mortgage lending community up at night, talk of a compromise legal standard has moved beyond the zero-sum/either-or approach that would involve either a rebuttal presumption or a safe harbor. Speaking at the North Carolina Bankers Association’s American Mortgage Conference in Raleigh, NC, last week, some industry representatives suggested it could be both – or more precisely, first one and then the other...

The Securities and Exchange Commission has decided to set aside efforts to standardize credit ratings due to serious concerns raised by credit rating agencies and other market participants. Instead, the SEC said it will focus on rulemaking under the Dodd-Frank Act to achieve transparency in credit rating performance and in the methods used to determine credit ratings. In a mandated report to Congress on the standardization of credit ratings, the SEC said...

Uncertainty about risk in a rapidly changing regulatory environment and the still destabilized economics of the housing market continue to keep private capital from returning to the mortgage market, according to industry officials at this week’s American Mortgage Conference sponsored by the North Carolina Bankers Association. “Everybody’s very concerned about the role of the government, that the government is supporting too much of the marketplace today,” said Meg Burns, senior associate director for housing and regulatory policy for the Federal Housing Finance Agency. “But it’s really hard to envision how people can pull back from that government support when we don’t actually understand not only who holds the credit risk but what the requirements are for retaining that risk in terms of capital.” All of the Dodd-Frank Act regulations that are still in play are...

Two years after the enactment of the Dodd-Frank Act, banks with mortgage operations are faced with the question of whether to build up or scale back their mortgage lending operations, or simply divest and wait for a more favorable regulatory environment. Financial institutions are beginning to feel the impact of Dodd-Frank as the Consumer Financial Protection Bureau carries out its mandate to write rules based on the law’s goal of targeting systemic risk and protecting consumers. But while ...

One of the most worrisome elements to emerge so far in the Consumer Financial Protection Bureau’s proposed rule on mortgage loan originator compensation is the agency’s consideration of factors that may serve as proxies for prohibited transaction terms and how they may be used to restrict originator compensation. The CFPB proposal would implement statutory changes made by the Dodd-Frank Act to the Truth in Lending Act/Regulation Z loan originator compensation rule, including a new, additional restriction on the imposition of any upfront discount points, origination points or fees on consumers under certain circumstances. The proposal provides...

$7.5 Million FHA Mortgage Fraud Scheme. The Department of Justice has filed charges against top executives of a real estate brokerage for their participation in a mortgage fraud scheme that may cost the FHA $7.5 million in losses. Indictments were unsealed earlier this month in Manhattan federal court charging Mitchell Cohen and Erin Davis, the owner and sales manager, respectively, of Buy-A-Home, a real estate brokerage business in Queens, NY. The criminal charges follow a civil fraud lawsuit filed by the U.S. Attorney’s Office for the Southern District of New York last December against ...

The Consumer Financial Protection Bureau’s recent proposed rule regarding loan originator compensation would expand and clarify anti-steering rules established by the Federal Reserve, in effect since April 2011. “Compensation structures frequently gave loan originators incentives to steer consumers into loans with higher rates or other unfavorable terms,” according to the CFPB. The regulator’s proposed rule cited a consent order issued by the Fed in 2011 regarding subprime steering by Wells Fargo ...

Secondary mortgage market participants have expressed support for the Consumer Financial Protection Bureau’s efforts to establish clear standards for mortgage servicing that would balance investor and borrower interests. Issued last week, the proposed rules focus primarily on borrower protection and are described as measures that would benefit borrowers by eliminating surprises and run-arounds. However, they do not address servicers’ conflicts of interest that result in servicer breaches, which mortgage-backed securities investors have raised in the past, and other investor complaints. Specifically, the proposed rules implement...

Federal regulators this week proposed requiring a physical inspection of a property’s interior by a qualified appraiser for originations of “higher-risk mortgages,” the latest proxy for subprime loans. The requirement was included in the Dodd-Frank Act and could prompt more than 50,000 new appraisals per year. The Consumer Financial Protection Bureau estimated that full-interior appraisals are conducted as part of current practice in higher-risk mortgage originations on 95.0 percent of purchase-money transactions ...