The Office of the Comptroller of the Currency has finalized a rule replacing certain credit rating references with alternative standards of credit worthiness to help banks determine whether a security is investment grade. Published in the June 13 Federal Register, the final rule is identical to the rule proposed by the OCC in November 2011 to implement directives in the Dodd-Frank Act to prevent over-reliance on credit ratings. Congress partly blamed inflated credit ratings for the financial crisis when triple A-rated mortgage securities lost their value as interest rates rose and home values...
Capital rules proposed by federal regulators last week for banks could have a significant impact on originations and holdings of non-agency mortgages and mortgage-backed securities. The changes are part of Basel III reforms. Non-bank special servicers have already started to increase their portfolios due to sales by banks getting a head start on complying with Basel III rules. Industry analysts warn that originations of non-vanilla mortgages will also be curtailed. Following the qualified mortgage rules and ...
The Consumer Financial Protection Bureau has been able to identify a number of improvements it can make in a rulemaking that will merge the consumer mortgage disclosures required under the Truth in Lending Act and the Real Estate Settlement Procedures Act, thanks to input from a small business review panel it convened earlier this year. During the small business review panel [process] and our other outreach, industry identified several areas in which the current rules create uncertainty about how to comply, CFPB Deputy Director Raj Date said during a hearing of the House Financial Services Subcommittee on...
While modifications through the Obama administrations Making Home Affordable programs have slowed in pace, the now-implemented Tier 2 expansion may soon increase activity. New activity in the program was down in every category during the first quarter of 2012, according to an Inside Mortgage Finance analysis of Treasury Department data. The number of new trial modifications fell 9.0 percent from the fourth quarter, while new permanent mods were down 21.2 percent. Because a major servicer in January revised the number of trial mods it had offered since the program began, its...(Includes one data chart)
The Obama administration is on the same page as Fannie Mae and Freddie Macs regulator in its desire to shift some of the mortgage credit exposure the government-sponsored enterprises hold to private investors. But exactly how to develop some sort of GSE risk-sharing program continues to bedevil policymakers, a Treasury Department official noted last week. Michael Stegman, a special advisor to Treasury Secretary Timothy Geithner, explained in a speech to real estate professionals that the Treasury is actively engaged in helping to make this [GSE risk sharing] initiative work but the...
Mortgage industry participants support a new proposed definition of subprime consumer loans for banks with more than $10.0 billion in assets. However, some raised concerns that the Federal Deposit Insurance Corp.s proposal could unnecessarily impact holdings of nontraditional mortgages. In March, the FDIC proposed a revised definition of higher-risk consumer, commercial and industrial loans and securities for the large bank pricing model, which determines deposit insurance rates. Instead of defining subprime loans based ...
Most major non-agency servicers met the June 1 deadline for the start of Tier 2 of the Home Affordable Modification Program, according to the Treasury Department. While overall HAMP performance has improved, some non-agency servicers have more improvements to make. HAMP Tier 2 was designed to help borrowers with debt-to-income ratios below 31 percent as well as those with rental properties. The Treasury this week revealed the HAMP Tier 2 progress for 18 servicers. Bank of America, Green Tree Servicing and ...
The mortgage lending industry won a comprehensive and authoritative victory and a great deal of legal certainty from the Supreme Court on the issues of fee-splitting and markups under the Real Estate Settlement Procedures Act. Last week, in Freeman et al. v. Quicken Loans Inc., the nations highest court unanimously sided with the lender and ruled that a plaintiff has to show that a fee charged for a real estate settlement service was shared between two or more persons to prove a violation of Section 8(b) of RESPA has occurred. In this case, the plaintiffs were three couples, the Freemans, Bennetts...
The Supreme Court of the United States last week sided with Quicken Loans while unanimously rejecting the legal arguments of two federal agencies in affirming a lower courts determination that a plaintiff must prove a settlement fee was split by two or more persons in order to successfully stake a claim under the Real Estate Settlement Procedures Act. The relevant portion of RESPA at issue in Freeman et al. v. Quicken Loans Inc. is the provision that [n]o person shall give and no person shall accept any portion, split, or percentage of any charge made or received for the rendering of a...