The Department of Veterans Affairs said there may be a need for further clarification of its newly issued qualified mortgage (QM) rule to allay lender fear of potential liability if they originate VA streamlined refinances, also known as Interest Rate Reduction Refinance Loans (IRRRL), with a rebuttable presumption. Industry sources say VA lenders remain apprehensive despite assurances by agency officials that little has changed in the VA lending process as a result of the agency’s interim final rule. VA issued its QM document on May 9 in compliance with the Dodd-Frank Act, defining the types of VA loans that are “qualified mortgages” for purposes of the new ability-to-repay (ATR) provisions of the Truth in Lending Act. The Act also imposed similar requirements upon the FHA and the Department of Agriculture for the loans they insure or guarantee. The agency said it issued the rule on ...

Qualified mortgage guidelines under the CFPB’s ability-to-repay rule were among the top 10 issues identified as problem areas likely affecting home selling, according to a new Campbell Surveys study sponsored by Inside Mortgage Finance, an affiliated newsletter. Among real estate agents surveyed, 26.4 percent cited QM guidelines as an obstacle. “Due to the new Dodd Frank guidelines, fewer buyers will be qualified to purchase homes, which will ultimately affect my livelihood as well,” one Realtor said. Another commenter said, “QRM [qualified residential mortgage] and QM guidelines are already causing issues for some buyers,” even though the QRM has yet to be finalized. “Lenders won’t pre-approve but only pre-qualify. Buyers are frustrated even with good credit scores and good ratios.” A...

House Financial Services Committee Formally Passes More CFPB Legislation. The House Financial Services Committee took final votes on some potentially significant CFPB-related measures. H.R. 1779, the Preserving Access to Manufactured Housing Act of 2013, introduced by Rep. Stephen Fincher, R-TN, was approved by voice vote. H.R. 4521, the Community Institution Mortgage Relief Act of 2014, introduced by Rep. Blaine Luetkemeyer, R-MO, was approved 43-16. H.R. 4466, the Financial Regulatory Clarity Act of 2014, introduced by Rep. Shelley Moore Capito, R-WV, was approved 34-25. H.R. 2673, the Portfolio Lending and Mortgage Access Act, introduced by Rep. Andy Barr, R-KY, was approved 36-23. H.R. 3211, the Mortgage Choice Act of 2013, introduced by Rep. Bill Huizenga, R-MI, was passed by voice vote ...

Originations that don’t meet standards for qualified mortgages have largely been held in bank portfolios in the months since the Consumer Financial Protection Bureau’s ability-to-repay rule took effect. However, nonbanks are also eyeing the products, and industry participants suggest that non-QMs will eventually be included in non-agency mortgage-backed securities. Laurence Platt, a partner at the law firm of K&L Gates, said a number of hedge funds and investment banks are ...

The 3 percent points-and-fees cap for qualified mortgages will likely accelerate an emerging practice of lenders rolling a variety of fees into the rate sheet price as the market continues to evolve toward a no-points mortgage, according to a leading industry consultant. “There has been a shift in the market over the last five years toward zero point loans as lenders build the traditional one percent origination fee into the rate-sheet price,” said Nicole Yung, a managing director with the Stratmor Group, a mortgage banking consulting firm. “This change has been driven by a consumer preference for low up-front costs and the historically low interest rates.” However, there seems...

Consumer Financial Protection Bureau Director Richard Cordray has repeatedly told mortgage lenders that there are plenty of good loans to be made outside the confines of the qualified mortgage. Increasingly, it looks like market dynamics are backing him up. During a webinar last week hosted by Inside Mortgage Finance, Larry Platt, a partner with the K&L Gates law firm, noted that some lenders are looking outside the QM box to bolster loan origination volume that has plummeted. “The volume is down, and we’ve moved into a purchase-money market,” he observed. Also, there’s...

Members of the Senate Banking, Housing and Urban Affairs Committee from each party said there is interest on Capitol Hill in moving technical corrections legislation aimed at the Dodd-Frank Wall Street Reform and Consumer Protection Act. However, housing finance reform legislation comes first, said Sen. Bob Corker, R-TN, and Sen. Heidi Heitkamp, D-ND, in comments to attendees at the Independent Community Bankers Association of America’s recent 2014 Washington policy summit. Neither explained exactly why housing reform is the priority, but one observer speculated that, in football terms, “it’s probably because housing reform is closer to the goal line.” Given the suddenly deteriorating prospects for the leading measure in that regard, the so-called Johnson-Crapo bill, that doesn’t bode well for those...

The mortgage lending industry caught a break recently when the CFPB proposed a much-sought “right to cure” a mortgage that would otherwise be considered a qualified mortgage under the bureau’s ability-to-repay rule, except for an inadvertent deviation from the 3 percent points-and-fees cap. The points and fees charged to a consumer on a QM loan generally cannot exceed 3 percent of the loan principal, with higher thresholds specified for various categories of loans below $100,000. If a lender believes, in good faith, that it has offered a QM but afterwards discovers that it has exceeded the 3 percent cap, the proposed rule issued by the CFPB lays out limited circumstances under which the excess can be refunded and still have...

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...

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...