The Federal Reserve’s Open Market Committee brought the latest installment in its quantitative easing programs to a conclusion this week, but the central bank will continue to reinvest principal payments back into agency MBS. The FOMC also reaffirmed the current 0 to 0.25 percent target range for the federal funds rate. “The committee anticipates … that it likely will be appropriate to maintain the 0 to 0.25 percent target range for the federal funds rate for a considerable time following the end of its asset purchase program this month, especially if projected inflation continues to run below the committee’s 2 percent longer-run goal, and provided that longer-term inflation expectations remain well anchored.” And as usual, the Fed left...

Issuers of non-agency MBS should be able to price loans that don’t meet the standards for qualified mortgages at nearly the same levels as QMs, according to Andrew Davidson & Co., a firm that provides risk analytics on non-agency MBS. Non-QMs actually perform better than similar QMs in certain scenarios, as long as underwriting on the products is strong. Beginning in late 2015, non-QMs included in new non-agency MBS will trigger risk-retention requirements. Only mortgages that meet QM standards will be deemed to be qualified residential mortgages and exempt from risk retention. Interest-only mortgages appear...

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...

While originations of loans that don’t meet standards for qualified mortgages can subject lenders to increased liability, underwriting and compensating factors can help limit risks from non-QMs, according to Moody’s Investors Service. “Non-QM loans typically carry higher default risks than QM loans, but lenders can mitigate those risks by originating loans with attributes that compensate for the weaknesses that put the loans outside of the QM guidelines,” analysts at Moody’s said in a report published late last week. The rating service said...

Mortgage lending industry representatives urged the Consumer Financial Protection Bureau to establish workable data integrity standards as it substantially expands reporting requirements under the Home Mortgage Disclosure Act. “Our members are committed to reporting accurate data and strive to do so, but the current supervisory expectation of a near-zero error rate is virtually impossible to achieve,” said six industry trade groups said in a joint comment letter. “As community banks and other small lenders pointed out to the bureau during the Small Business Regulatory Enforcement Fairness Act panel, the doubling of the number of reported fields can be expected to cause the error rate to increase exponentially.” Some small business participants raised...

The Federal Housing Finance Agency and the Obama administration could secure their legacies during the next two years by releasing Fannie Mae and Freddie Mac from conservatorship as two stable and smaller government-sponsored enterprises, say some experts. Speaking during a conference call sponsored by GSE shareholder rights group Investors Unite, Clifford Rossi – founder and principal at Chesapeake Risk Advisors – reiterated his call for an administrative solution that would recapitalize the GSEs and bring them out of conservatorship under strict conditions. “Knowing that it’s going to be an uphill battle to get any sort of resolution from Congress, it could be...

In a noteworthy concession to the mortgage lending industry, the CFPB last week finalized a “right to cure” loans in which a lender inadvertently breaches the 3 percent cap on points and fees for a loan that would otherwise be deemed a qualified mortgage under the agency’s ability-to-repay rule. Under amendments finalized this past Wednesday, if a lender discovers after the loan has closed that it has exceeded the 3 percent cap, there are limited circumstances in which it can pay a refund of the excess amount with interest to the consumer and the loan will still be considered a QM. First, the refund must occur within 210 days after the loan is made. The lender must also maintain and ...

The CFPB’s latest Student Loan Ombudsman’s Annual Report found fault with the performance of servicers in the relatively small number of instances in which borrowers – most of whom were struggling – have complained to the CFPB (less than 9,000), out of a universe of millions of loans outstanding.Since the bureau began accepting private student loan complaints in March 2012, the largest subset of complaints stem from borrowers seeking to avoid default during a period of financial hardship, the report noted. “Most frequently, borrowers submitting complaints are seeking to modify repayment terms to obtain a payment they can actually afford,” said the CFPB. “While student loan industry participants have stated that they intend to increase the number of programs to assist ...

After rising for two consecutive quarters, borrower complaints to the CFPB about their private student loans have dropped for the last two reporting periods, according to a new analysis and ranking by Inside the CFPB. Following up on the second quarter drop of 16.3 percent, borrower gripes fell 14.5 percent in the third quarter, the latest data from the bureau’s consumer complaint database show. Among the top 10 companies ranked by borrower grumblings, a wide variety of results could be clearly seen. Six of the top 10 saw double-digit declines during the third quarter, but two others saw increases of that magnitude, most notably Nelnet, up 33.3 percent from the second quarter. The biggest drop among the top 10 was ...

The $13 million settlement reached between the CFPB and Castle & Cooke Mortgage Co. back in November 2013 was not the end of the dispute for the mortgage lender. It now faces a possible class-action lawsuit brought by one of the aggrieved parties who had already been compensated under the terms of the settlement with the bureau. Homeowner Luis Cabrales, on behalf of himself and perhaps in excess of 9,500 similarly situated individuals, recently filed his complaint in the U.S. District Court for the Eastern District of California, Fresno Division. The class, so far, has not been certified. The legal argument is that the applicable statutes of limitation of the claims alleged in the new complaint were “tolled” (suspended or ...