Mortgages with high home price-to-income ratios tend to perform worse than mortgages with lower PTI ratios, according to economists at the Federal Reserve. The analysts suggest that PTI ratios are a helpful tool for gauging mortgage risk by tracking housing affordability. “Banks that have greater exposure of mortgages to high PTI regions have higher mortgage delinquency and charge-off rates and significantly higher probabilities of failure, even after controlling for ...

A recent report from the JPMorgan Chase Institute found that payment reduction was the most effective form of post-crisis loan modification, and a 10 percent drop in the mortgage payment lowered default rates by 22 percent.

Overshadowed by all the drama associated with the resignation of CFPB Director Richard Cordray and the struggle over who is to serve as his temporary replacement was some potentially significant legislative activity on Capitol Hill. A number of bills were recently introduced or are in the process of facing votes that could affect the CFPB, some of its rulemakings and the regulations it enforces. Rep. Sean Duffy, R-WI, chairman of the House Financial Services Subcommittee on Housing and Insurance, and Sen. Mike Enzi, R-WY, chairman of the Senate Budget Committee, late last week introduced bicameral legislation to restrain the CFPB’s rates of pay. Specifically, the legislation, H.R.4499, the CFPB Pay Fairness Act, would require the director of the bureau to ...

The mortgage industry continues to have serious consumer privacy and data concerns with the CFPB’s Home Mortgage Disclosure Act proposed guidance. But with new leadership in place, the bureau has a great chance to deal with the issues in a more appropriate manner, according to the Housing Policy Council of the Financial Services Roundtable. With new Acting Director Mick Mulvaney in place, the bureau could change course, electing to satisfy the statutory obligation to follow a formal rule-making process and also reconsidering the CFPB’s position regarding the disclosure of loan-level data, according to Ed DeMarco, president of FSR’s HPC. “Securing sensitive consumer data is a top priority for the financial industry,” said DeMarco, the former chief of the Federal Housing ...

As the end of the year nears, there’s been talk this week about negotiations underway between the Federal Housing Finance Agency and the Trump administration to address the capital situation at Fannie Mae and Freddie Mac. Although no one is confirming the discussion, a Bloomberg report quoted an anonymous source as saying that FHFA officials want Fannie and Freddie each to keep a capital buffer of $2 billion to $3 billion on their books. In return, the report said, the administration wants to limit the GSEs’ activity in the market by tightening restrictions on the type of loans they buy. In late 2013, former FHFA Acting Director Ed DeMarco proposed implementing a loan size limit on...

More than three years after standards for qualified mortgages took effect, investors in the non-agency MBS market appear to be getting more comfortable with products that fall outside its bounda-ries. JPMorgan Chase is preparing to issue a large MBS backed by non-QMs that’s similar to deals from several nonbank issuers.

The CFPB recently told a U.S. District Court it opposes Ocwen Financial’s motion to submit the Department of Justice’s brief filed in another case in lieu of the department’s inaction when it comes to weighing in on Ocwen’s dispute with the bureau. Ocwen recently asked the U.S. District Court, Southern District of Florida, West Palm Beach Division, for permission to file a supplemental memorandum (an earlier brief by the DOJ in PHH Corp. v. CFPB as to the unconstitutionality of the bureau) in defense of the company’s motion to dismiss the consumer regulator’s case against it. The common thread in both cases is that Ocwen and PHH similarly assert that the CFPB’s structure is unconstitutional. During the Obama administration, the ...

Last week, the House Financial Services Committee approved several bills that would override the CFPB on some of its key mortgage-related rulemakings. The voting included the passage of H.R. 1153, the Mortgage Choice Act of 2017, which would exclude from the ability-to-repay calculation of points and fees insurance and taxes held in escrow and fees paid to affiliated companies as a result of their participation in an affiliated business arrangement. The bill passed by a recorded vote of 46 ayes and 13 nays. Jaret Seiberg, an analyst with Cowen Washington Research Group, said in a client note, “This would permit lenders to work with affiliate title insurers without worrying about the points-and-fees cap.” Another measure that survived the legislative gauntlet ...

Last week, the Senate Banking, Housing and Urban Affairs committee endorsed a handful of legislative provisions related to mortgage financing, including a measure that tackles one aspect of the CFPB’s integrated-disclosure rule under the Truth in Lending Act and the Real Estate Settlement Procedures Act.One section of the still-to-be-named bill would remove the three-day waiting period required for the combined TILA/RESPA mortgage disclosure if a creditor extends to a consumer a second offer of credit with a lower annual percentage rate. It also would express the sense of Congress that the CFPB should provide clearer, authoritative guidance with respect to certain issues. A separate section deals with escrow requirements for certain consumer credit transactions. These provisions would provide an ...

More Industry Advice for a Post-Cordray CFPB. Competitive Enterprise Institute financial policy expert John Berlau said last week, “Richard Cordray’s impending resignation as director of the CFPB is long overdue.... Growth of CFPB Leveling Off. The total number of employees at the CFPB came to 1,668 for fiscal year 2017, up 20 positions from the year before, according to the bureau’s latest financial statements for the last two years.... GAO Signs Off on CFPB Financial Statements. The Government Accountability Office audited the CFPB’s financial statements for fiscal years 2016 and 2017, and found they are “presented fairly, in all material respects, in accordance with U.S. generally accepted accounting principles.”...