The Department of Veterans Affairs said there may be a need for further clarification of its newly issued qualified mortgage (QM) rule to allay lender fear of potential liability if they originate VA streamlined refinances, also known as Interest Rate Reduction Refinance Loans (IRRRL), with a rebuttable presumption. Industry sources say VA lenders remain apprehensive despite assurances by agency officials that little has changed in the VA lending process as a result of the agency’s interim final rule. VA issued its QM document on May 9 in compliance with the Dodd-Frank Act, defining the types of VA loans that are “qualified mortgages” for purposes of the new ability-to-repay (ATR) provisions of the Truth in Lending Act. The Act also imposed similar requirements upon the FHA and the Department of Agriculture for the loans they insure or guarantee. The agency said it issued the rule on ...

Echoing an assessment that has become all too common across the housing and mortgage markets, CFPB Director Richard Cordray said excessive student loan debt is keeping many young people from buying a house and taking on a mortgage. “The consumers we hear from tell us how their debt burden has stopped them from buying a home, opening a small business, or starting a family,” Cordray said in a speech last week. With student-loan debt now having reached $1.2 trillion, the CFPB estimates that more than 7 million Americans are in default on a student loan. “For those who default early in their lives, the negative consequences for their credit report can make it more difficult to pass employment background checks...

The fourth edition of the CFPB’s Supervisory Highlights report, released last week, reveals that recent “nonpublic supervisory actions” and self-reported violations in a number of program areas have resulted in more than $70 million in remediation for approximately 775,000 consumers. The report also highlighted what the bureau characterized as illegal actions uncovered by the agency’s supervision of the payday, debt collection and consumer-reporting markets – which are now being supervised on a federal level for the first time due to the authority conferred upon the CFPB by the Dodd-Frank Wall Street Reform and Consumer Protection Act. “For the first time at the federal level, nonbank financial institutions are subject to supervisory oversight that holds them accountable for how they treat consumers,"...

Providers of consumer financial services products, be forewarned: If the CFPB has not gotten around to regulating you yet, don’t rest too easy. It definitely plans to do so. The latest edition of the CFPB’s Supervisory Highlights report indicated larger indirect nonbank auto lenders are next on its to-do list. But if past is prologue, the odds are strong that sector won’t be the last to feel the bureau’s expanding scrutiny.As per the Dodd-Frank Wall Street Reform and Consumer Protection Act, the CFPB has authority to supervise certain nonbanks, including mortgage companies, private student lenders, and payday lenders, as well as nonbanks the bureau defines through rulemaking as “larger participants.” To date, the agency has issued rules to supervise...

Qualified mortgage guidelines under the CFPB’s ability-to-repay rule were among the top 10 issues identified as problem areas likely affecting home selling, according to a new Campbell Surveys study sponsored by Inside Mortgage Finance, an affiliated newsletter. Among real estate agents surveyed, 26.4 percent cited QM guidelines as an obstacle. “Due to the new Dodd Frank guidelines, fewer buyers will be qualified to purchase homes, which will ultimately affect my livelihood as well,” one Realtor said. Another commenter said, “QRM [qualified residential mortgage] and QM guidelines are already causing issues for some buyers,” even though the QRM has yet to be finalized. “Lenders won’t pre-approve but only pre-qualify. Buyers are frustrated even with good credit scores and good ratios.” A...

House Financial Services Committee Formally Passes More CFPB Legislation. The House Financial Services Committee took final votes on some potentially significant CFPB-related measures. H.R. 1779, the Preserving Access to Manufactured Housing Act of 2013, introduced by Rep. Stephen Fincher, R-TN, was approved by voice vote. H.R. 4521, the Community Institution Mortgage Relief Act of 2014, introduced by Rep. Blaine Luetkemeyer, R-MO, was approved 43-16. H.R. 4466, the Financial Regulatory Clarity Act of 2014, introduced by Rep. Shelley Moore Capito, R-WV, was approved 34-25. H.R. 2673, the Portfolio Lending and Mortgage Access Act, introduced by Rep. Andy Barr, R-KY, was approved 36-23. H.R. 3211, the Mortgage Choice Act of 2013, introduced by Rep. Bill Huizenga, R-MI, was passed by voice vote ...

Ford Credit priced a $1.08 billion deal earlier this month backed by prime auto-loan receivables that included a noteworthy twist, according to John McElravey, director of consumer ABS research at Wells Fargo Securities. The deal will revolve for five years before paying principal with a soft-bullet maturity. “In our opinion, this deal adds an interesting new dimension to prime auto-loan ABS,” McElravey said in a recent report. “We would not be surprised if other prime lenders eventually adopted similar structures based on market pricing and the pace of investor acceptance. Upon reflection, it is somewhat surprising that more prime auto-loan ABS have not been structured in this way.” Moody’s Investors Service explained...

Originations that don’t meet standards for qualified mortgages have largely been held in bank portfolios in the months since the Consumer Financial Protection Bureau’s ability-to-repay rule took effect. However, nonbanks are also eyeing the products, and industry participants suggest that non-QMs will eventually be included in non-agency mortgage-backed securities. Laurence Platt, a partner at the law firm of K&L Gates, said a number of hedge funds and investment banks are ...

The 3 percent points-and-fees cap for qualified mortgages will likely accelerate an emerging practice of lenders rolling a variety of fees into the rate sheet price as the market continues to evolve toward a no-points mortgage, according to a leading industry consultant. “There has been a shift in the market over the last five years toward zero point loans as lenders build the traditional one percent origination fee into the rate-sheet price,” said Nicole Yung, a managing director with the Stratmor Group, a mortgage banking consulting firm. “This change has been driven by a consumer preference for low up-front costs and the historically low interest rates.” However, there seems...

In a report released last week, the Financial Stability Oversight Council recommended that its members, federal regulators, should finish risk-retention requirements as part of an effort to facilitate “increased private mortgage market activity.” The rulemaking was mandated by the Dodd-Frank Act, which set an April 2011 deadline for issuance of a final risk-retention rule that would cover non-agency MBS, commercial MBS and non-mortgage ABS. The rule will require securitizers to retain a 5 percent interest, although this would be waived for transactions backed by “qualified” assets, including qualified residential mortgages. The Department of Housing and Urban Development, Federal Deposit Insurance Corp., Federal Housing Finance Agency, Federal Reserve, Office of the Comptroller of the Currency and Securities and Exchange Commission issued...