The debate on what caused the financial crisis and how the federal government should respond continued this week in the House Financial Services Committee. At a hearing on the Financial CHOICE Act sponsored by Rep. Jeb Hensarling, R-TX, Republicans and banking-industry participants largely supported the bill while Democrats and a consumer advocate offered dire warnings. The Financial CHOICE Act would allow banking institutions to opt in to a regulatory system that puts an emphasis on capital. Under the bill, firms with an average leverage ratio of at least 10 percent would be functionally exempt from provisions in the Dodd-Frank Act, Basel III capital and liquidity standards and other regulations. “Freeing well-capitalized, well-managed financial firms from the chokehold of an overly intrusive, heavily politicized regulatory regime will help create...

CFPB Firmly in CHOICE Act’s Crosshairs. Since Inside the CFPB went to press last, House Financial Services Committee Chairman Jeb Hensarling, R-TX, released more details about the Republican alternative to replace the Dodd-Frank Act. Dubbed the Financial CHOICE (Creating Hope and Opportunity for Investors, Consumers and Entrepreneurs) Act, the bill not only includes provisions to provide a qualified-mortgage safe harbor for any mortgage that has been held in portfolio by a depository institution since origination, but also a host of provisions targeting the structure of the CFPB itself. For instance, the bill could change the name of the CFPB to the “Consumer Financial Opportunity Commission (CFOC),” and task it with the dual mission of consumer protection and competitive markets, with ...

Originations of interest-only mortgages increased sharply in the first quarter of 2016, according to a new analysis by Inside Nonconforming Markets. A group of 12 lenders originated $8.72 billion in IOs in the first quarter, up 26.9 percent from the previous quarter and a 29.8 percent increase from same period in 2015. IO originations in the first three months of 2016 even topped the $8.61 billion in IO originations by the lenders in the second quarter of 2015. [Includes one data chart] ...

FHA lenders will face stiffer maximum monetary penalties later this year for various violations of agency rules and regulations. The higher monetary penalties are the result of legislation signed into law late last year requiring federal agencies to adjust the current maximum penalty amounts for inflation in order to maintain their deterrent effect. Specifically, the Federal Civil Penalties Inflation Adjustment Act of 2015 (2015 Act) requires federal agencies to adjust the level of civil monetary penalties with an initial “catch-up” adjustment through an interim final rule and subsequent annual adjustments for inflation. The interim final rules with the initial penalty adjustments must be published by July 1, 2016. The new penalty levels must take effect no later than Aug. 1, 2016. Additionally, agencies are required to make annual inflation adjustments, starting Jan. 15, 2017, and for each year going forward. The adjustments will ...

Rep. Jeb Hensarling, R-TX, chairman of the House Financial Services Committee, rolled out some of the details of a Republican proposal to replace the Dodd-Frank Act, the Financial CHOICE (Creating Hope and Opportunity for Investors, Consumers and Entrepreneurs) Act. The proposal includes the text of a measure already passed by the House, which would provide a QM safe harbor for any mortgage that has been held in portfolio by a depository institution since origination.

HUD Sends Final Condominium Rule to OMB for Clearance. The Department of Housing and Urban Development has sent a final rule to the Office of Management and Budget that would make it easier for borrowers to obtain FHA financing for certified condominium units. Once issued, the final rule will replace temporary guidance which HUD issued in November last year to ease FHA’s condo approval process. The move is aimed at increasing affordable housing options for first-time and low-income homebuyers. The final rule is expected to reflect measures in the interim guidance, including modification of the requirements for condo project recertification, revised calculation of FHA’s required ownership-occupancy percentage, and expansion of eligible condo-project insurance coverages. IG Scrutinizes HUD Oversight of SFHAs’ Downpayment Assistance Programs. Residential lenders that rely on ...

MBA Calls for New QM Rules, Warns About ‘Regime Change’ Risk. The Mortgage Bankers Association is calling on the CFPB to develop a new qualified mortgage rule because the current one only works because of the so-called “GSE patch.” At the trade group’s annual secondary market conference in New York, MBA President and CEO Dave Stevens noted that Fannie Mae and Freddie Mac currently are approving “a lot” of loans that exceed the benchmark debt-to-income cap of 43 percent that is codified in the current QM rule. That GSE patch disappears in 2021 or when Fannie and Freddie are taken out of conservatorship, whichever comes sooner...

Industry participants are gearing up for non-agency MBS backed by non-qualified mortgages, but don’t expect a flood of volume anytime soon. Four non-agency MBS backed by new nonprime mortgages were issued in 2015, the largest of which was a $150.35 million deal from Angel Oak Capital Advisors. None of the deals were subject to risk-retention requirements that took effect at the end of 2015 and none were rated. A rating on a non-QM MBS could improve...

Angel Oak Capital Advisors is working on what should turn out to be its second nonprime mortgage securitization of the past six months, a deal that should be similar in size to its first offering of roughly $150 million, Inside MBS & ABS has learned. A source close to the company, who spoke under the condition his name not be used, could not commit to an exact issuance date except to say the security could be issued “soon.” To date, investor interest in the small amount of nonprime/non-qualified mortgage deals that have come to market has been...

Banks generally eased their lending standards for most types of residential mortgage loans in the first quarter of 2016, even as consumer demand for such credit increased, according to the Federal Reserve’s latest senior loan officer opinion survey. During the period ending March 31, a “moderate net fraction” of banks reported having eased standards on mortgages eligible for purchase by the government-sponsored enterprises, Fannie Mae and Freddie Mac, while a similar number of institutions indicated they had eased standards on “qualified mortgage” and non-QM jumbo mortgages, as well as on QM non-jumbo, non-GSE-eligible and on non-QM, non-jumbo residential mortgage loans. At the same time, banks left...