National trade groups representing mortgage lenders of all sizes recently advised the CFPB to broaden the scope of its pending assessment of its ability-to-repay/qualified mortgage rule. The Mortgage Bankers Association, for instance, provided the bureau with multiple concerns it believes must be addressed, such as making sure the rule better serves millennials and immigrants who are entering the housing market. Other concerns include “the limitations of the 43 percent debt-to-income requirement that does not include compensating factors,” and whether the underwriting guides of the government-sponsored enterprises and government programs could serve as alternatives to Appendix Q. The Consumer Mortgage Coalition recommended that the agency begin its review process by analyzing the products and product structures that contributed to the financial ...

Mortgage settlement service company representatives claim the CFPB’s ability-to-repay/qualified mortgage rule discriminates against affiliated business arrangements (AfBAs) when it comes to the calculation of points and fees, compromising borrower choice of service provider, and urged the bureau to revise the rule accordingly. “The QM rule discriminates against AfBAs by requiring a mortgage lender with affiliates to count the affiliate charges against the 3 percent cap on fees and points,” the Real Estate Services Providers Council said in a comment letter to the CFPB regarding its pending ATR/QM assessment. For example, if a mortgage lender has an affiliate title or insurance company involved in the transaction, it must count the title agency or insurance agency charges toward the fees and points ...

The trade group for the mortgage insurance industry, U.S. Mortgage Insurers, suggested that as the CFPB reviews its ability-to-repay/qualified mortgage rule, it assess whether lenders have engaged in regulatory arbitrage at the expense of borrowers. The organization advised the bureau to pay particular attention to the different treatment among the QM standards of the calculation of points and fees and the maximum borrower debt-to-income (DTI) ratio. In terms of the former, USMI noted, “The various QM standards provide for different treatment of points and fees – a difference that drives lender behavior without a concomitant consumer benefit.” For instance, consumers with downpayments of less than 20 percent of the purchase price may have an option to finance with a conventional product ...

The CFPB’s so-called TRID 2.0 amendments, and the related proposal to deal with the “black hole” problem – the limited ability of a lender to reset tolerances with a closing disclosure – were published in the Aug. 11, 2017, Federal Register. That act establishes Oct. 10, 2017, as the effective date of the TRID 2.0 amendments, as well as the comment deadline for the black hole proposal. The amendments, which were finalized in July, essentially codify the CFPB’s informal guidance on various issues and make additional clarifications and technical amendments. They also create tolerances for the total of payments, adjust a partial exemption mainly affecting housing finance agencies and nonprofits, and extend coverage of the Truth in Lending Act/Real Estate Settlement Procedures ...

Mortgage lending representatives told the CFPB they support its proposal to temporarily increase the institutional and transactional coverage thresholds for open-end lines of credit under the Home Mortgage Disclosure Act. However, more needs to be done along those lines, they said in comment letters filed at the end of last month. Under the CFPB’s HMDA rules scheduled to take effect in January 2018, financial institutions are generally required to report HELOCs if they made 100 such loans in each of the past two years. Under the proposal released early last month, the bureau would increase that threshold to 500 loans through calendar years 2018 and 2019 in order to give the agency the time to consider whether to make a ...

In the event of a severe global recession, Fannie Mae and Freddie Mac could need a bailout of up to $99.6 billion, according to the Federal Housing Finance Agency’s annual stress test report released this week. The test of severely-adverse scenarios, required by the Dodd-Frank Act for companies with consolidated assets of more than $10 billion, is based on Fannie and Freddie portfolios as of Dec. 31, 2016. The bailout would be needed on an incremental basis and would also depend on the treatment of the GSEs’ tax-deferred assets. Under this hypothetical economic scenario, elevated stress in corporate financial and commercial real estate markets include situations where...

A number of new issuers appear set to come to market with non-agency MBS backed by newly originated jumbo loans and non-qualified mortgages. Officials at Redwood Trust said they see new issuers emerging, which they said will put pressure on loan prices for aggregators while increasing liquidity in the secondary market. Since the third quarter of 2016, the jumbo MBS arena has been dominated...

The clock is ticking on the phrase-out of the London Interbank Offered Rate, or LIBOR, a benchmark the mortgage market has relied on for the past few decades. Now comes the debate: is it something to worry about or no big deal? A new report from Bank of America Merrill Lynch suggests that when it comes to MBS at least, the changes will be felt, depending on the sector. “Certain agency MBS cash flows will be impacted directly,” BAML notes. “For example, underlying cash flows on LIBOR-indexed hybrid ARMs may change if an alternate index is chosen.” The researchers noted...

The private mortgage insurance industry is calling for a level playing field between the government-sponsored enterprises and FHA and VA as the Consumer Financial Protection Bureau begins its assessment of the ability-to-repay rule. In comments to the CFPB, U.S. Mortgage Insurers urged the bureau to determine whether potential arbitrage in QM standards for Fannie Mae and Freddie Mac and those for FHA and VA have had any negative effect on consumers ...

Non-qualified mortgages are starting to look attractive to some nonbanks with refinance activity declining and interest rates projected to increase. Officials at Nationstar Mortgage revealed late last week that they plan to launch a non-QM offering later this year or in early 2018. “You’re starting to see some activity there,” Jay Bray, Nationstar’s president, chairman and CEO, said during the nonbank’s recent earnings call. “And when we look at our portfolio, we may be in the best position in the industry, frankly, to offer some of those products.” Nationstar serviced...