The mortgage industry and supporters on Capitol Hill are keeping up the heat on the CFPB, urging the powerful consumer regulator to issue official guidance on TRID disclosure errors and assignee liability as problems continue to plague the non-agency secondary market. David Stevens, president and CEO of the Mortgage Bankers Association, said recently: “As one who believes that the bureau has done a lot of good work, it is a phenomenon to me that the simple request for clarity to specific questions we have submitted, amidst the clear and fact-based challenges facing responsible lending in its focus on efforts to be compliant, is being met with such resistance.” According to the MBA chief, this isn’t just lenders bellyaching. “This is ...

According to recent interviews, problems persist in the secondary mortgage market because certain jumbo investors won’t buy loans even if there’s just one, minor TRID error. At least one lender – W.J. Bradley Mortgage in Colorado – has closed (in part) because of TRID-related snafus tied to jumbo loan sales. Meanwhile, there’s new speculation that as many as four more lenders, all nonbanks, are contemplating filing for bankruptcy protection because non-agency product is stuck on their warehouse lines. No names have been mentioned so far, and it could be that talk of bankruptcy protection is premature and being looked at as a last resort. On the other hand, the secondary market for TRID “scratch-and-dent” loans is “still going fast and furious,” said ...

Respondents to a recent survey conducted by Campbell Surveys and sponsored by Inside Mortgage Finance, an affiliated newsletter, provided a down-in-the-trenches perspective on broader conceptual and philosophical concerns trade group officials in Washington, DC, often talk about when it comes to the CFPB’s integrated disclosure rule. Survey respondents were asked about the effect TRID was having on their closings. Some representative comments follow: On confidentiality issues, one agent said, “I do not like TRID at all. The closing disclosures cannot be shared. How can we as agents verify all information is correct? Buyers’ agents cannot verify before closing that their commission is correct as well. It’s a complete mess on all ends.” Another agent said, “The biggest problem with TRID ...

Kroll Bond Rating Agency warned recently that it might refuse to rate certain non-agency mortgage- backed securities subject to the TRID mortgage disclosure rule until the CFPB issues formal guidance.The rating service said it’s currently unclear whether certain corrections of errors under the bureau’s integrated disclosure rule will subject non-agency MBS investors to assignee liability. This is an issue that the Structured Finance Industry Group continues to work on, with SFIG also stressing that formal guidance from the CFPB is necessary. “In instances where these violations go un-corrected by an originator, KBRA believes the risks associated with TRID-eligible loans, in material concentration, become more significant and that KBRA may consider additional credit enhancement, applying a rating cap, or declining ...

Fannie Mae and Freddie Mac are not conducting loan-level reviews for compliance with the CFPB’s integrated disclosure, and that threatens investors in the pair’s future credit-risk transfer transactions with the possibility of some modest losses because of lender compliance violations, according to a recent report from Moody’s Investor Service. “We expect overall losses on these transactions owing to TRID violations to be fairly small, despite our expectations that the frequency of violations will be high, at least initially,” analysts at the rating service said. “Furthermore, lender representations and warranties and the government-sponsored enterprises’ ability to remove defective loans from the transactions will likely mitigate some of these losses.” Damages for TRID violations are less significant for a securitization transaction compared ...

Many mortgage industry attorneys seem convinced that PHH Corp. will succeed – at least at the appellate court level – in defying the CFPB in its ongoing legal dispute with the bureau. The crux of the dispute is the bureau’s assertion that PHH violated the Real Estate Settlement Procedures Act and harmed consumers through a mortgage insurance kickback scheme tied to a captive MI. Last week, the U.S. Court of Appeals for the District of Columbia heard oral arguments in the case, PHH Corp. v CFPB, and the day did not go well for the bureau. Former CFPB enforcement attorney Jennifer Lee, now a partner with the Dorsey & Whitney law firm in Washington, DC, succinctly summarized the tough day the bureau ...

Two rating services published reports in recent days stressing that non-agency MBS with loans subject to TRID mortgage disclosures can be rated, even when the loans have TRID violations. The reports are part of an industry effort to deal with the rule that combines disclosure requirements of the Truth in Lending Act and the Real Estate Settlement Procedures Act that was promulgated by the Consumer Financial Protection Bureau and took effect in October. Kroll Bond Rating Agency and Morningstar Credit Ratings published separate reports in the past week stating expectations that TRID will have a “limited” impact on non-agency MBS investors. A number of other rating services have made similar statements since TRID took effect, though that has done little to spur issuance. Only one non-agency MBS with TRID loans has been issued...

With Fannie Mae and Freddie Mac doing only surface checks for TRID regulatory compliance and not complete reviews, future credit-risk transfer deals from the two government-sponsored enterprises could be at risk from lender compliance violations, according to Moody’s Investors Service. Numerous challenges have arisen in the non-agency secondary market because of concerns about liability for errors in the new mortgage disclosures. But since TRID became effective on Oct. 3, 2015, Fannie and Freddie are only checking to make sure that the correct forms are being used. This lack of diligence for TRID violations may amount...

Overall net losses in subprime auto ABS are on the rise due to an increasing number of deals from smaller lenders that cater to borrowers with weak credit. Amid this trend, however, subprime auto ABS performance varies by lender, according to a new report from Moody’s Investors Service. Moody’s analysts said competition among auto lenders has tightened as new, mostly smaller, lenders – driven by low losses on post-crisis auto loans and low interest rates – enter the market and compete for borrowers. The crowded market has driven...

Republican and Democrat members of the Senate Banking, Housing and Urban Affairs Committee were at odds during a hearing this week over whether there is much of a liquidity problem in the fixed-income markets today, and if so, to what extent the Dodd-Frank Act or Federal Reserve monetary policy may be responsible. Federal regulators, on the other hand, told the lawmakers that markets are functioning well enough and still evolving in a new, post-crisis environment. They suggested the thing to worry about is how much liquidity there will be in five or 10 years and how it will function. Sen. Dean Heller, R-NV, asked...