Representatives of the various segments of the mortgage banking world are mostly receptive to a hypothetical “right to cure” an otherwise qualified mortgage loan that inadvertently breeches the QM 43 percent debt-to-income threshold – despite the complexity associated with putting it into play. Most supporters of such a corrective mechanism agreed with the Consumer Financial Protection Bureau that utilizing it could be complicated. “We agree that creditors’ use of any DTI cure provision would be limited. Nevertheless, we do not believe the idea should be dismissed simply because it may be complicated,” the Consumer Mortgage Coalition said in its public comment letter to the agency. The Housing Policy Council of the Financial Services Roundtable also acknowledged...

The Consumer Financial Protection Bureau late last week said it will take a close look at mortgage brokers acting as mini-correspondents, particularly if they are just trying to get around disclosure requirements and limits on broker compensation. The CFPB is concerned that some mortgage brokers are claiming to be mini-correspondent lenders by establishing warehouse funding lines when they are still essentially just facilitating a transaction between a borrower and a lender. “While some brokers may be setting up such arrangements because they intend to grow into full correspondent lenders, the bureau is concerned...

Redwood Trust took three months off from issuing jumbo MBS but came back with something of a doozy this week: a $306.05 million deal that will include some loans that don’t meet standards for qualified mortgages and some loans that weren’t subject to third-party due diligence reviews. Sequoia Mortgage Trust 2014-2 is set to receive AAA ratings with credit enhancement of 7.75 percent on the top-rated tranche. While the credit enhancement requirements are somewhat high, a jumbo MBS from Redwood in November had even higher credit enhancement levels, suggesting that the non-QMs and lack of full due diligence aren’t a major concern. Only three of the 438 mortgages to be included in the deal are...

The next gold rush in the mortgage industry may be home loans that fall outside the legal safe harbor for qualified mortgages under new rules that took effect in January. And like any bonanza, it’s hard to tell how big the mother lode is. According to Deutsche Bank Securities, it could be a staggering $600 billion a year, but that estimate comes with a lot of caveats. For starters, Deutsche Bank estimated that about $52 billion of 2013 mortgage originations were ...

Mortgage wholesalers are being extra careful these days on how much they pay loan brokers in a table-funding transaction to make sure they don’t run afoul of the points-and-fees cap on qualified mortgages set by the Consumer Financial Protection Bureau. According to interviews conducted by Inside Mortgage Finance over the past few weeks, table funders are capping those fees at anywhere from 2.20 percent to 2.75 percent. Some may go as low as 1.40 percent. The cap for qualified mortgage eligibility set by the CFPB under the Dodd-Frank Act is...

A number of consumer advocates strongly oppose a proposal from the Consumer Financial Protection Bureau that would allow lenders to cure mistakes regarding debt-to-income ratios on qualified mortgages. Lenders calling for the DTI ratio right-to-cure on QMs are making “Chicken Little” claims to support their arguments, according to the National Consumer Law Center and the National Association of Consumer Advocates. In April, the CFPB requested...

The National Association of Mortgage Brokers is doing another survey of its membership to determine the amount of closing cost credits given back to consumers at closing during 2013 – part of a broader effort on the part of the trade group to persuade the CFPB to loosen aspects of its ability-to-repay rule. Last year, NAMB submitted a letter to the CFPB to detail the mandatory credits a broker is required to provide consumers when rate sheet pricing exceeds the broker’s contractually obligated Lender Paid Compensation agreement. NAMB contends that the mortgage broker community provides mortgage credits back to the consumer that range in the billions annually, thus stimulating the nation’s economy. In order to demonstrate this, NAMB polled a number ...

The Conference of State Bank Supervisors told the CFPB it is concerned that certain bad actors within the mortgage lending industry could take advantage of the bureau’s proposed “right to cure” an otherwise qualified mortgage loan that inadvertently falls outside the ability-to-repay rule’s 3 percent cap on points and fees. The CSBS concern revolves largely around bona fide discount points. “State banking regulators support measures that would increase access to credit for consumers who are at the margins of the points-and-fees limits,” the CSBS said in public comment letter to the bureau. “However, there is concern that the proposed ‘cure’ mechanism for inadvertent points and fee miscalculations could disguise or promote the misuse of discount points by unscrupulous lenders seeking ...

A diverse group of mortgage lending industry representatives including Realtors, credit unions and behemoth Bank of America is more or less supportive of a possible “right to cure” a qualified mortgage loan that would inadvertently slip beyond the QM 43 percent debt-to-income ratio threshold. “We support a DTI cure that would allow creditors to take corrective action where there is an inadvertent error in calculating a consumer’s debt or income or where a creditor has stopped documenting income in the mistaken belief that sufficient validated documentation supporting the 43 percent test has been obtained,” BofA said in a public comment letter to the CFPB. According to the lender, both of these instances could easily be fixed, either by correcting a ...

Credit union industry representatives want the CFPB to expand some exemptions in some of its recent rulemakings so their CU members could reach larger portions of their targeted markets. One of the recent amendments the bureau proposed to its mortgage rules issued in 2013 would provide an alternative definition of “small provider” applicable to Internal Revenue Code Section 501(c)(3) nonprofit entities that service loans for a fee and on behalf of other nonprofit entities within the same overall organization.This is the so-called “small servicer exemption.” Also for 501(c)(3) nonprofit entities, the proposed rule would exempt certain interest-free, contingent subordinate liens from the credit extension limit under the ability-to-repay rule. This is what’s known as the “small creditor exemption.” As ...