A top Obama administration official told secondary market participants this week that the concept of a “benchmark transaction” could help the non-agency RMBS market overcome its feeble condition. Used in conjunction with the industry’s RMBS 3.0 project, such a mechanism could help clear away the rubble from the market’s collapse and attract big institutional investors that have largely refused to come back in from the sidelines. “The now widely recognized structural deficiencies in the legacy private-label securitizations that came to light during the financial crisis truly shattered the trust of market participants, with the result that almost seven years now after the collapse, this market is barely clinging to life,” said Michael Stegman, special counselor to the U.S Treasury for housing finance policy. “Concrete reforms are clearly needed to rebuild confidence and establish a resilient, sustainable architecture to bring back significant private capital to the U.S. housing market.” Stegman delivered...

Fannie Mae and Freddie Mac continued to trim their retained holdings of MBS and unsecuritized mortgages in keeping with their conservatorship mandate as the two government-sponsored enterprises each posted a profit during the third quarter of 2014. The two GSEs ended September with a combined $851.71 billion in mortgage-related holdings, down 2.4 percent from the previous quarter. Compared to a year ago, their combined mortgage portfolio was down 16.0 percent and down 46.5 percent from the $1.592 trillion the two firms held in the fourth quarter of 2008 shortly after being placed in government conservatorship. One of the conditions of the conservatorship the GSEs entered six years ago was...[Includes one data chart]

Although Fannie Mae and Freddie Mac reported combined comprehensive income of $6.8 billion in the third quarter of 2014 – thanks in no small part to strong guaranty fee revenue – the two government-sponsored enterprises both said they’re keeping a wary eye on the precarious financial condition of private mortgage insurers. Fannie noted in its 10-Q filing with the Securities and Exchange Commission that although the financial condition of its primary MI counterparties approved to write new business has improved, there is still risk that they may fail to honor the GSE’s insurance claims. “If we determine that it is probable that we will not collect all of our claims from one or more of these mortgage insurer counterparties, or if we have already made that determination but our estimate of the shortfall increases, it could result...

One key point that much of the mortgage lending industry is contesting in the Consumer Financial Protection Bureau’s proposed amendments to its integrated disclosure final rule is the timing requirement for re-disclosing the loan estimate. The proposal would amend a final rule to integrate disclosures required by the Truth in Lending Act and the Real Estate Settlement Procedures Act that itself won’t be implemented until August 2015. The CFPB tried to make the so-called TRID more workable by giving lenders more time to revise loan estimate disclosures. Revisions based only on changes in rates would have to be made by the next business day after the rate locks, instead of on the same day, which is the current requirement. A number of lender representatives told...

Now that the mortgage lending industry has had about three months to comb through the details of the CFPB’s proposed expansion of reporting requirements under the Home Mortgage Disclosure Act, it has found more cause to dislike it than upon first glance. “While we support the purpose of HMDA – to provide information on the availability of credit in the home mortgage market – we are concerned that the proposal to markedly increase HMDA data reporting and coverage goes beyond the law’s purposes in some areas and will unduly harm competition and increase costs in others,” a handful of leading industry groups told the bureau in a joint comment letter last week. “At the same time, we do not believe that the ...

Consumer advocacy groups say the CFPB isn’t going far enough to expand mortgage industry reporting requirements under the Home Mortgage Disclosure Act. The California Reinvestment Coalition and 41 other state organizations suggested a handful of changes to the proposal, each of which would likely add to the reporting burden for companies. Among the changes the California groups want is requiring loan modification data to be reported by banks and servicers, along with disaggregating the overly broad “Asian” race category to allow for more accurate reporting. They also would like to see the CFPB capture more information about languages spoken during a loan transaction, and have companies disclose if a borrower is going to own a property with somebody who is ...

CFPB examiners have identified a number of unfair or deceptive acts or practices on the part of an unspecified number of bank and nonbank servicers of federal and private student loans, according to the latest supervisory highlights report released recently by the bureau. One problematic practice involved “one or more supervised entities” allocating partial payments in a way that maximizes late fees. CFPB examiners have reviewed how servicers allocate payments when a borrower pays less than the total amount due on all of the loans in the borrower’s account, according to the report. “Examiners found that partial payments were being allocated proportionally ... among all the loans, resulting in all of the loans in a borrower’s account becoming delinquent,” said ...

There are a host of legal land mines that mortgage lenders must avoid if they want to keep from becoming the target of a CFPB enforcement action under its unfair, deceptive or abusive acts or practices (UDAAP) authority, according to top legal experts. Andrea Mitchell, a partner with the BuckleySandler law firm, told attendees at an Inside Mortgage Finance webinar last week that there are a number of representations lenders should stay away from in their marketing pitches. “Say what you mean and mean what you say,” Mitchell said. She then rattled off a list of potentially problematic terms to avoid, such as “free” or “no cost,” “best rates available,” “fastest” or “faster than…,” “improve/repair your credit” or “eliminate your ...

Castle & Cooke Mortgage late last month filed a motion to dismiss a putative class-action brought by one of the aggrieved parties who had already been compensated under the terms of the settlement the lender reached late last year with the CFPB. In Luis Cabrales v. Castle & Cooke Mortgage LLC, plaintiff Luis Cabrales contends that the lender improperly compensated its loan officers by giving them bonuses for putting customers in more expensive loans than what they qualified for. The plaintiff sued for violation of the Truth in Lending Act – a claim that Castle & Cooke is not challenging at this point. However, Cabrales also brought other causes of action: violation of Section 8 of the Real Estate Settlement Practices ...

Disparate Impact Theory of Legal Liability Struck Down. Last week, the U.S. District Court for the District of Columbia dealt a heavy blow to the position of the Department of Housing and Urban Development – as well as the CFPB – that disparate impact claims are cognizable under the Fair Housing Act. In American Insurance Association v. U.S. Department of Housing and Urban Development, the judge struck down HUD’s disparate impact rule, determining that the Fair Housing Act prohibits “disparate treatment only.” In promulgating its disparate impact rule, the court said HUD exceeded its authority under the Administrative Procedures Act. “The ruling is in line with what we have long believed the law to be and consistent with what we argued in ...