The Treasury Department’s report on reforming financial regulation in the U.S. blames rules ushered in under the Dodd-Frank Act – and promulgated by the CFPB – for tight credit conditions in the mortgage market. “While Dodd-Frank and the ATR/QM [ability to repay/qualified mortgage] rule were not intended to eliminate markets for loans that did not meet the QM standards, the reality is that the vast majority of lenders remain unwilling to make loans that do not meet those standards, eliminating access to mortgages for many creditworthy borrowers,” Treasury wrote in the 142-page report. (At best, $3 billion to $4 billion in nonprime/non-QM mortgages might be originated this year out of total industrywide originations of $1.5 trillion.) The administration took aim at Appendix ...

The American Bankers Association recently detailed a handful of major concerns it continues to have with the approach federal regulators take toward fair lending. The first such concern it listed in a new white paper sent to the Treasury Department is the expanded use of the disparate-impact concept. “Federal agencies responsible for ensuring compliance with national fair lending laws have in the last few years aggressively applied a controversial legal theory, disparate impact, to brand banks with violations of fair lending rules,” said the ABA. Under the disparate-impact theory, regulators rely heavily, sometimes solely, on statistical sketches to justify lawsuits or other enforcement actions, it added. “In doing so, since June 2015 they have largely ignored the analytical framework established ...

Industry compliance officers, trade group representatives and legal experts at the American Bankers Association’s regulatory compliance conference, held in Orlando last week, expressed mixed sentiments about whether the CFPB ought to delay the effective date of the new requirements it is ushering in under the Home Mortgage Disclosure Act. They were responding to the suggestion of such a delay made by the Treasury Department in its recent report as per President Trump’s Executive Order 13772. “Obviously, a delay has to be for at least a year because the nature of HMDA is such that you can’t delay for six months,” Rodrigo Alba, the ABA’s senior vice president and senior regulatory counsel for mortgage finance, told an audience during a working ...

More than 68 percent of mortgage defects reported in 2016 involved TRID-related and/or loan package documentation issues, according to the latest mortgage quality control industry trends report from ACES Risk Management (ARMCO). “In 2016, the entire lending industry was impacted by the enhanced regulatory oversight of the CFPB as the long-awaited implementation of TRID was fully realized,” the report noted. “Many lenders spent the better part of the first quarter addressing the multitude of mistakes associated with TRID.” In some instances, this produced loans that could not be sold on the secondary market. “A wave of corrective action followed, and soon the sheer amount of resources directed at solving these issues became overwhelming for many lenders,” ARMCO added. The top...

The Treasury Department said the so-called GSE patch gives Fannie Mae and Freddie Mac an unfair advantage in the mortgage market, and it recommended eliminating this exception to the qualified-mortgage rule. In a financial regulations report released this week, the Treasury detailed a host of executive actions and regulatory changes that it believes can immediately stimulate economic growth, increase capital access and protect taxpayers. Adjusting and clarifying the ability-to-repay/qualified mortgage rule and phasing out the GSE patch are among those changes listed. The GSE patch, created under Dodd-Frank, allows GSE eligible loans to qualify for QM status, even if the DTI exceeds the standard 43 percent ratio.

A new lawsuit arguing the merits of the Treasury net worth sweep was filed in Michigan, while other cases continue to hang in the balance in various phases of discovery. Michael Rop, Stewart Knoepp and Alvin Wilson v. the Federal Housing Finance Agency was filed this month by three shareholders who want the court to vacate the third amendment to the preferred stock purchase agreement and declare the structure of the Federal Housing Finance Agency unconstitutional.According to court documents, the trio is looking to challenge “both past and ongoing abuses of power by a federal agency that operates wholly outside of the system of limited and divided government established by the constitution.”

This week, the Federal Reserve’s Open Market Committee provided a bit more information on the process it plans to follow in shrinking the size of its massive balance sheet, once it decides the time is right to finally begin. “Provided that the economy evolves broadly as the committee anticipates, we currently expect to begin implementing a balance sheet normalization program this year,” Fed Chair Janet Yellen said in her post-meeting press conference. The hope is to initiate an incremental and largely predictable decline in the U.S. central bank’s securities holdings. The FOMC intends...

The Trump administration wants to pare back regulations that inhibit the non-agency MBS and ABS market and tilt current securitization economics that favor the government-sponsored enterprises over private issuers. “In order to revitalize a responsible [private-label securities] market, it is important to improve incentives for issuers through reasonable reductions in costs and regulatory burdens,” the Treasury Department said in a new report released this week. In particular, it aimed at adjusting relative economics for the government-sponsored enterprises and FHA/VA mortgage programs. On the regulatory side, Treasury recommends...

Fannie Mae General Counsel Brian Brooks is rumored to be up for a top post at the Treasury Department, a development that if consummated would add yet another seasoned industry veteran familiar with the government-sponsored enterprises to the agency. What that might mean for “administrative” reform of Fannie Mae and Freddie Mac is another question. As Inside MBS & ABS went to press this week, Brooks – who joined Fannie from OneWest Bank in November 2014 – had not been...

The average daily trading volume in agency MBS fell to $185.1 billion in May, the lowest reading of the past 17 months, according to the Securities Industry and Financial Markets Association. Year-to-date, the average is still ahead of last year’s pace but not by much: $204.2 billion compared to $201.9 billion for 2016. But these are interesting times for investors as both bonds and stocks continue to rally near new highs. Earlier this week, the yield on the benchmark 10-year Treasury fell to 2.12 percent, the lowest reading since the November election. It’s...