The Federal Reserve’s latest senior loan officer survey found the CFPB’s ability-to-repay/qualified mortgage rule is not having much of an effect on the conforming mortgage market but is being felt in the jumbo and nontraditional spaces. The July survey included a set of three special questions on the effects on the approval rates for home-purchase loans of the ATR and QM standards under the Truth in Lending Act, which came into effect early this year. The first question asks respondents to indicate the extent to which the ATR/QM rule is affecting the likelihood of their banks approving applications from individuals for mortgage loans to purchase homes for each of four categories of residential real estate loans. [includes one exclusive data chart] ...

Nearly three-fourths (74 percent) of senior mortgage executives surveyed by Fannie Mae’s Economic and Strategic Research Group in June indicated that they expect operational costs to increase as a result of the CFPB’s ability-to-repay/qualified mortgage rule. Most lenders (80 percent) said they “do not plan to pursue non-QM loans” or prefer to “wait and see”. “Larger lenders are more likely to pursue non-QM loans to increase their market share,” Fannie said. Also, most firms (84 percent) reported that they expect at least 90 percent of their single-family mortgage origination dollar volume to still be considered qualified mortgages. Further, “Lenders, on net, expect to tighten credit standards as a result of QM rules,” according to the government-sponsored enterprise, with 36 percent ...

A number of mortgage finance industry groups have expressed concern about how the CFPB’s ability-to-repay rule is interfering with the return of private investor capital back into the sector – mostly because of the rule’s assignee liability provisions. The industry comments came in response to a request from the Treasury Department in June for suggestions to encourage private capital to return to the non-agency mortgage-backed securities space. The Association of Institutional Investors said the ATR rule’s assignee liability provision “unfairly punishes investors who have nothing to do with the origination of loans and oftentimes have limited insight into the origination practices.” The assignee liability provision therefore introduces a risk that is almost impossible to price for those not directly involved in ...

Lender profit margins appear set to stop declining, according to a new survey by Fannie Mae of senior executives at 181 institutions. Industry participants suggest that increased demand from borrowers along with operational efficiencies will help steady profit margins. Doug Duncan, senior vice president and chief economist at Fannie, said the significant decline in volume in recent quarters put pressure on profit margins. “That would be expected to ease somewhat ...

Another CFPB Official Heads for the Private Sector. CFPB Enforcement Attorney Manuel Alvarez has been hired away by Affirm, a young financial services company based in San Francisco, to be its first chief compliance officer and general counsel. In his new role at Affirm, Alvarez will oversee and manage the company’s regulatory compliance program and related actives to prevent illegal, unfair or deceptive conduct. He will also take charge of the firm’s working relationships with regulators and Affirm’s service providers. “Consumers often don’t understand the fees or interest they pay on a revolving account. That has to change,” said Alvarez. “Affirm’s commitment to delivering honest and transparent financial products totally aligns with my long-standing commitment to consumer protection.” Alvarez was ...

The risk-retention standard federal regulators are leaning toward establishing isn’t what was intended under the Dodd-Frank Act, according to one of the main authors of the DFA. Barney Frank, a former Democrat congressman from Massachusetts, said aligning the definition for qualified mortgages with the definition for qualified residential mortgages would be a “grave error.” The DFA required federal regulators to establish standards for QRMs ...

The line of companies rolling out new loan menus for non-qualified mortgages is growing longer each week, but it remains to be seen which firm will be the first to issue a non-agency MBS. Citadel Servicing Corp., Irvine, CA, is working on a bond, but has been noncommittal about when it might come to market – and whether its first deal will be public or private. The privately-held nonbank is now funding more than $15 million a month in non-QM/nonprime products. Meanwhile, Impac Mortgage Holdings – an Alt A lender of yesteryear – has just entered...

The Consumer Financial Protection Bureau’s request for comments on whether to allow for a right to cure on debt-to-income ratio issues for qualified mortgages prompted the typical divisions between lenders and consumer advocates. Lenders suggest that borrowers would benefit from the adjustment to QM standards, while consumer advocates warn that the change would weaken QM protections and encourage sloppy underwriting. The 43 percent DTI ratio standard for ...

While originations of loans outside of standards for qualified mortgages appear limited thus far, lenders continue to flood into the non-QM market. And industry analysts suggest that the sector has plenty of room to grow, particularly if the government-sponsored enterprises exit conservatorship. W.J. Bradley announced this week that it’s offering a number of new non-agency mortgage products, including non-QMs for prime borrowers. “We have recognized ...

New FHA guidance regarding voluntary termination of FHA mortgage insurance does not affect separate guidance requiring borrowers to continue payment of their annual insurance premium regardless of the loan’s amortization terms. The FHA made the clarification in relation to Mortgagee Letter 2014-13, which requires written consents by the lender and the borrower in all voluntary terminations of FHA mortgage insurance. The requirement becomes effective on Oct. 1st this year. Specifically, the guidance requires FHA lenders to document that they have obtained the borrower’s informed consent to terminate FHA insurance on the mortgage. The change ensures that the lender would incur no liability and that the borrower understands the terms of the voluntary termination. Under current rules, the FHA may terminate mortgage insurance at the request of the borrower and the lender. The lender may cancel the insurance endorsement upon notification by the FHA commissioner that the insurance contract is terminated.