The Consumer Financial Protection Bureau’s effort to go after corporate executives in connection with its financial-crisis enforcement actions so far has led to 12 cases in which individuals were named as defendants or respondents. Individuals who have been included in CFPB complaints are primarily decision-makers or a party to the consumer transaction. Under the law, they include not only providers of consumer financial products or services, but also those with managerial responsibilities and a “material” participant in the transaction. Individual accountability is...

The odds seem to be increasing that student loan servicers are going to face tougher legislation or regulation – or both – as members of Congress and the Consumer Financial Protection Bureau pay more attention to the sector. During a hearing this week of the Senate Banking Financial Institutions and Consumer Protection Subcommittee, Chairman Sherrod Brown, D-OH, drew a comparison between the mortgage market’s collapse and the resulting financial crisis and today’s student loan market – with an emphasis on the role of servicers in both contexts. Last year, Brown wrote...

Before the Consumer Financial Protection Bureau implemented standards for qualified mortgages, few lenders admitted that they were willing to offer non-QMs. However, in recent weeks, a number of lenders have touted their entrance into the sector, providing Ethos Lending with plenty of competition. Some of the non-QM lenders are sticking to relatively safe offerings of interest-only mortgages to well-qualified borrowers, while others see a strong market in non-QMs for borrowers that might not qualify for agency financing. This week, Caliber Home Loans announced...

Lenders that dabble in loans that don’t pass the qualified-mortgage test are going to be very selective about which borrowers they accept, and the loans are most likely to be held in portfolio, according to speakers at a recent industry conference in New York City. “We have used our balance sheet to retain non-QM loans in certain situations,” said Russell Brady, an assistant vice president at Elevations Credit Union. “This can make sense, but you have to do it in a controlled way with all the controls in place,” he said during a panel at the Secondary Market Conference sponsored by the Mortgage Bankers Association. The QM limit of 43 percent on debt-to-income ratio is...

Officials at Hudson City Bancorp said the jumbo portfolio lender is facing a significant loss of potential originations this year due to the documentation requirements included in the Consumer Financial Protection Bureau’s ability-to-repay rule. In January, Hudson City stopped offering mortgages with reduced-documentation standards due to the implementation of the ATR rule. Such loans accounted for 22.0 percent of the lender’s $3.44 billion in production in 2013. “We discontinued...

The Consumer Financial Protection Bureau’s ability-to-repay rule is unlikely to prompt a significant increase in litigation, according to DBRS. The rating service last week released its criteria for non-agency MBS with loans subject to the ATR rule and standards for qualified mortgages. “Although there are no historical ATR claim data to help forecast the rate of borrower challenges, DBRS anticipates that any action against lenders within a securitization trust will be minimal due to the uncertainty of borrower success and significant legal costs that potentially can be incurred.” In addition, third-party due-diligence reviews that confirm ATR compliance and representations-and-warranties obligations that motivate lenders to adhere to underwriting guidelines make litigation less likely, the rating service said. DBRS added...

While lenders affiliated with homebuilders tend to lend to riskier borrowers than other originators, their mortgages actually perform better, according to new research published by the Federal Reserve Bank of Chicago. The researchers suggest that the stronger performance is related to the hands-on nature of homebuilder lending, among other factors. The Chicago Fed published the findings in a study authored by Sumit Agarwal, Gene Amromin, Claudine Gartenberg, Anna Paulson and Sriram Villupuram, who note that their findings run counter to assumptions about the quality of builder-affiliate originations. “At first glance, the allegations of the nefarious role played by the homebuilders in the crisis are consistent...

When it comes to the legal theory of disparate impact and the Supreme Court of the United States, perhaps the third time around will be the charm. Recently, the Texas Department of Housing and Community Affairs requested the nation’s highest court to agree once again to take on the issue of disparate impact under the Fair Housing Act. The questions presented to the high court in Texas Department of Housing and Community Affairs, et al., Petitioners v. The Inclusive Communities Project, Inc. are...

There has been a resurgence of city lawsuits lately against major banks seeking to recover lost property tax revenues, which city officials say were needed to pay for expensive foreclosure-related city services. The latest in these lawsuits was filed by the City of Los Angeles against JPMorgan Chase alleging discriminatory mortgage lending led to a wave of foreclosures that continues to diminish revenue for basic city services. The new litigation against Chase comes...

The spring 2014 semi-annual regulatory agenda of the Consumer Financial Protection Bureau indicates the CFPB remains on schedule on a handful of mortgage-related rulemakings, including an eventual rule implementing Dodd-Frank Act changes to the Home Mortgage Disclosure Act. The good news for the mortgage industry is that the bulk of Dodd-Frank-required mortgage rules have already been issued. On the HMDA front, the CFPB recently convened...