Now that the mortgage lending industry has a few months of experience dealing with the qualified mortgage standard under the CFPB’s ability-to-repay rule, some lenders are getting more confident about lending outside the parameters of the QM. Last week, during a webinar sponsored by Inside Mortgage Finance, an affiliated newsletter, industry experts highlighted some key considerations as to how to do so while minimizing the legal risk and otherwise overcoming certain compliance challenges. “A couple of points that I would make is that you want to document every step along the way – because what you’re really managing to is not necessarily the CFPB, not even necessarily a judge. You’re probably managing to the lawyer who is looking to take the...

The U.S. Supreme Court has agreed to resolve a split among the circuit courts over a provision in the Truth in Lending Act that allows a borrower to void a mortgage loan. In reviewing the case, Jesinoski v. Countrywide Home Loans, the SCOTUS will consider whether a borrower may file a lawsuit for rescission after TILA’s three-year repose period if the borrower sent a notice to the lender within that period. The U.S. Court of Appeals for the Eighth Circuit in September upheld a lower court ruling that a borrower seeking to rescind a mortgage loan under TILA must file suit within three years of consummating the loan. Contrary to the plaintiffs’ assertion, the lower court ruled that a borrower’s...

The members of one lender trade group support the CFPB’s proposed survey of consumer experiences with debt collection, but think the bureau is likely going to miss a good opportunity to obtain useful data that can be relied on for policymaking.“Considering the range of issues presented and the fact that the bureau’s policy choices will be felt across the U.S. economy, it is critical that the bureau develop a complete and robust factual record to inform its policy choices,” said Virginia O’Neill, assistant chief compliance counsel for the American Bankers Association, in a recent comment letter to the CFPB. As the ABA sees it, a carefully designed and executed consumer survey can be one valuable element of such a...

FSOC Suggests State Regulators Work With CFPB on Nonbank Servicer Issues. The Financial Stability Oversight Council – of which the CFPB is a member – recommended last week that state regulators collaborate on prudential and corporate governance standards to strengthen nonbank servicers. The FSOC said state regulators should work on the standards with the CFPB and the Federal Housing Finance Agency when appropriate. The CFPB and state regulators have some authority over these companies, FSOC noted, but many of them are not currently subject to prudential standards such as capital, liquidity or risk management oversight. Additionally, in a number of cases, mortgage investors’ ability to collect on mortgages is dependent on a single mortgage servicing company, where failure could have significant negative...

Over the past 10 days, MBS prices have risen by roughly 50 basis points. Since early April, prices have jumped 150 basis points, based on the Fannie Mae 4s, catching market participants off guard. Joe Farr, director of sales for MBSQuoteline, noted, “The expectation was that everyone thought bond prices would fall.” But it hasn’t turned out that way, even with the Federal Reserve continuing to taper its investment in MBS. The problem in the MBS market continues...

There are some potential problems with the evolving peer-to-peer lending sector that need to be resolved before ratings can be assigned to the securitization of such assets, according to Standard & Poor’s Ratings Services. To start to get a handle on this emerging sector, it is important to understand P2P companies’ specific strategies and their target demographic of borrowers and investors. “Platform operators in the P2P lending sector are...

While originating loans that do not meet qualified-mortgage standards does pose litigation risk, many of the lenders willing to offer the loans to prime borrowers have established underwriting standards that minimize the risks while participating in a sector with less competition than the agency market. Mitch Hochberg, general counsel at Ethos Lending and a partner at Fenway Summer, estimated that non-QMs would account for at least 12.5 percent of originations in 2014, assuming a ...

The Consumer Financial Protection Bureau is considering allowing lenders that accidentally trip the debt-to-income ratio threshold for qualified mortgages to cure the mistake and maintain QM status for the loan. The 43 percent DTI ratio standard for QMs currently only applies to non-agency mortgages that aren’t eligible for sale to the government-sponsored enterprises. The limited right to cure DTI mistakes was proposed last week in conjunction with a proposal from the agency to ...

AAG, NCRC Announces Fair Lending Partnership in Reverse Mortgages. American Advisors Group, ranked first among the nation’s Home Equity Conversion Mortgage lenders in 2013 by Inside FHA Lending, has collaborated with the National Community Reinvestment Coalition to ensure fair lending to older borrowers. Through this partnership, AAG employees will complete an NCRC fair housing training course. In addition, the AAG will consult with NCRC to develop best practices for complying with the Fair Housing Act. An umbrella group of more than 600 community-based organizations, the NCRC will also serve as an adviser to AAG in providing HECM mortgages to qualified borrowers age 62 or older. AAG Chief Executive Officer Reza Jahangiri said the partnership is a huge step toward the promotion of fair lending practices and responsible lending. AAG was the top HECM lender in 2013 with $1.4 billion in total originations representing ...

Although the pace of blockbuster servicing deals appears to have slowed, the giants of the mortgage-servicing business continued to leak market share in early 2014. Significantly, there is now just one lender with more than $1 trillion in mortgage servicing. Back in the third quarter of 2005, Countrywide Financial became the first company to amass over $1 trillion in mortgage servicing, and Wells Fargo joined the club by the end of that year. Chase Home Finance became a $1 trillion servicer in the fourth quarter of 2008, shortly after Bank of America took over Countrywide and became the first $2 trillion servicer. But BofA dumped...[Includes two data charts]