Lenders offering non-qualified mortgages that rely solely on a borrower’s assets need to carefully prove the borrower’s ability to repay, according to guidance from the Consumer Financial Protection Bureau. In a notice issued this week, the regulator cautioned that a large downpayment alone isn’t sufficient to prove a borrower’s ability to repay a non-QM that is based on the consumer’s assets. The spring edition of the CFPB’s supervisory highlights publication provides insights from ...

Rep. Jeb Hensarling, R-TX, introduced a revised version of the Financial CHOICE Act this week. The bill would impact many regulatory reforms included in the Dodd-Frank Act, which was signed into law in 2010. Perhaps most significant for the non-agency market, the CHOICE Act would apply qualified-mortgage protections to home loans held in portfolio. Banks offering mortgages with interest-only features, balloon payments or high debt-to-income ratios that don’t currently ...

Late last week, House Financial Services Committee Chairman Jeb Hensarling, R-TX, released a detailed discussion draft of a revised version of his Financial CHOICE Act that would eviscerate the Consumer Financial Protection Bureau and make a number of other changes to the Dodd-Frank Act and a host of its mortgage-related regulations. Title VII of the draft, recently dubbed CHOICE Act 2.0, would dismantle the parts of the CFPB that the lending industry and other critics have found to be most problematic: its rulemaking, supervisory and enforcement authority, including unfair, deceptive or abusive acts or practices. The previous version of the bill would have retained...

The CFPB was not alone in its crackdown last week on Ocwen Financial over its alleged mortgage servicing failures and violations. The same day the bureau announced its action, Florida Attorney General Pam Bondi and Office of Financial Regulation Commissioner Drew Breakspear filed a federal civil consumer protection lawsuit against Ocwen and subsidiaries, Ocwen Loan Servicing, LLC, and Ocwen Mortgage Servicing, Inc., for what they called “mortgage servicing misconduct.” According to the complaint, Ocwen harmed citizens of the Sunshine State by filing illegal foreclosures, mishandling loan modifications, misapplying mortgage payments, failing to pay insurance premiums from escrow and collecting excessive fees. Ocwen services roughly 125,000 home mortgages in the state. The complaint, filed in federal court in West Palm Beach, ...

The CFPB has put out a proposed rule to help mortgage lenders comply with the updates it made to the Home Mortgage Disclosure Act regulation back in 2015, most of which haven’t even taken effect yet. “The Home Mortgage Disclosure Act shines a much-needed spotlight on the mortgage market, which is the largest consumer financial market in the world,” said CFPB Director Richard Cordray. “Today’s proposal reflects the bureau’s ongoing and substantive engagement with stakeholders in the marketplace, and will help industry meet its new reporting obligations.” Among the suggested alterations in the agency’s proposed rule is the clarification of certain key terms, such as “temporary financing.” The CFPB wants to amend the commentary to the current final rule to ...

Industry representatives thanked the CFPB for making an effort to facilitate compliance with the pending Home Mortgage Disclosure Act final rule, most of which takes effect Jan. 1, 2018. However, the fact that revisions are being offered at all is a sign that the bureau just cannot get it right, according to some officials. Anne Canfield, executive director of the Consumer Mortgage Coalition, said her membership always appreciates any effort any of the regulators make to improve a regulation. “However, the CFPB’s proposed amendments to its HMDA regulation falls far short of what is needed,” she said. One of the CMC’s concerns is that since the bureau has not identified what it intends to do with the data, how does ...

The Trump administration’s Department of Justice has convinced the U.S. Court of Appeals for the District of Columbia Circuit to grant it 10 minutes to present its unusual case when oral arguments are heard in the upcoming en banc proceedings in PHH Corp. v. CFPB. “Upon consideration of the unopposed motion of the United States for leave to participate in oral argument, it is ordered that the motion be granted,” the appeals court said in its one-page order. PHH Corp. et al., as petitioners will have 30 minutes to make their case, as will the CFPB as respondent. “The United States agrees with petitioner PHH Corp. that the for-cause removal provision is unconstitutional, but agrees with the CFPB that the ...

The Conference of State Bank Supervisors urged the leadership of the Senate Banking, Housing and Urban Affairs Committee to enact legislation that would grant qualified-mortgage status under the CFPB’s ability-to-repay rule for loans held in portfolio, as part of a broader set of proposals to stimulate economic growth. The CSBS was one of a number of groups that responded to an invitation by the banking committee to provide ideas for stimulating economic activity. “State regulators have long supported a flexible approach to underwriting for institutions that retain mortgages in portfolio because interests are inherently aligned between consumers and lenders that retain 100 percent of the risk of default,” said the CSBS. “One solution that would tailor the requirement to the ...

Research by two economists in the CFPB’s Office of Research found that many homebuyers do not shop around for a mortgage, and that costs them a pretty penny. “Close to half of consumers did not shop before taking out a mortgage,” CFPB economists Alexei Alexandrov and Sergei Koulayev said in a new white paper. They cited the National Survey of Mortgage Originations, a representative survey conducted jointly by the bureau and the Federal Housing Finance Agency, which found that almost half of consumers “seriously considered” only one lender before making a choice. Also, “Barely any consumers considered more than three lenders,” the economists added. “Worse, many consumers do not seem to realize that there is price dispersion.” In other words, ...

The CFPB’s latest fair lending report to Congress, quietly distributed earlier this month, indicates that two mortgage issues will stay on the agency’s front burner: redlining and servicing. On the redlining front, the CFPB said it will “work to evaluate whether lenders have intentionally discouraged prospective applicants in minority neighborhoods.” When it comes to servicing, the bureau indicated it will “determine whether some borrowers who are behind on their mortgage … payments have more difficulty working out a new solution with the servicer because of their race, ethnicity, age, or gender.” The agency continued: “We are committed to ensuring fair, equitable and nondiscriminatory access to credit by finding and eliminating discriminatory lending practices, and also by encouraging lenders to maintain ...