Six months into the new ability-to-repay rule, industry compliance professionals seem confident in the efforts they’ve made to get ready for the regulation and acknowledge that the sky hasn’t fallen – yet. But it’s far too early to draw definitive conclusions about the success of the rule itself and its overall effect upon the market, according to experts at the American Bankers Association’s 2014 regulatory compliance conference in New Orleans this week. “Clearly, the new rules have increased the bank’s risk profile and have put pressure on the decentralized operating market,” said Cheryl Snyder, head of retail banking for Park National Bank, the lead bank in a $6 billion bank holding company headquartered in Newark, OH, and an originator of qualified mortgages and non-QM loans. Citing the lending industry’s technology preparations in the much-hyped run-up to the year 2000, Snyder told...

Industry groups are supportive of a proposal by the Consumer Financial Protection Bureau to provide a reasonable cure for inadvertent overages in points and fees on qualified mortgages, but they disagree over the appropriate length of the cure period and other issues. The proposed CFPB rule would amend certain mortgage rules issued last year under the Truth in Lending Act. It would provide a limited cure mechanism for QM loans that exceed the points-and-fees limit for such mortgages and provide an alternative “small servicer” definition for nonprofit groups that meet certain requirements. Also, the bureau has proposed to amend the current exemption from the ability-to-repay rule for qualified nonprofits. In addition to the specific proposals, the CFPB sought...

The Federal Housing Finance Agency is set to take a comprehensive view of the impact any changes to the government-sponsored enterprises’ guaranty fees would have on the MBS market. Late last week, the regulator issued a “request for input” on the g-fees charged by Fannie Mae and Freddie Mac, prompting speculation that any changes to the fees won’t be implemented until 2015. The FHFA noted that the GSEs’ g-fees have increased from an average of 22 basis points in 2009 to 55 bps in 2013. The increases have been prompted by the FHFA along with Congress and changes made by the GSEs. Because of loan-level pricing adjustments – which in nearly all cases are rolled into the mortgage coupon – g-fees vary...[Includes one data chart]

It looks like the Securities and Exchange Commission has yielded to the majority view of the other federal regulators and agreed to a simplified qualified residential mortgage definition that could make it easier for issuers of non-agency MBS. The SEC dropped its insistence on a downpayment requirement, according to an account this week in the Wall Street Journal. In exchange, the other federal agencies involved in the rulemaking agreed to revisit the QRM issue two years after the final risk-retention rule goes into effect. Deals backed...

As safe as the qualified mortgage space might appear to be, there have been a number of challenges to address and overcome for smaller institutions originating QM loans intended for sale in the secondary market, according to a representative of one such lender at the American Bankers Association’s 2014 regulatory compliance conference in New Orleans this week. Bruce Schultz, senior vice president and head of secondary mortgage operations for SpiritBank, a family-owned community bank in Tulsa, OK, told attendees he’s heard from several industry peers who have expressed the view that the secondary market ‘would be a slam-dunk’ for his institution under the QM rule because “‘you’ve got automated underwriting.’” Maybe not...

Organizations representing different segments of the mortgage lending industry generally strongly support the overall thrust of the CFPB’s proposed amendments to its 2013 mortgage rules that would enable a limited “right to cure” a “qualified mortgage” that inadvertently falls outside the points-and-fees cap. The 120-day cure period would only be available if the creditor originated the loan as a QM loan in good faith, the loan otherwise meets the QM requirements, and the creditor or assignee maintains and follows policies and procedures for post-consummation review and refunding of overages. “The proposed cure period for points and fees overages would be...

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...