While originations of loans that don’t meet standards for qualified mortgages can subject lenders to increased liability, underwriting and compensating factors can help limit risks from non-QMs, according to Moody’s Investors Service. “Non-QM loans typically carry higher default risks than QM loans, but lenders can mitigate those risks by originating loans with attributes that compensate for the weaknesses that put the loans outside of the QM guidelines,” analysts at Moody’s said in a report published late last week. The rating service said...

The CFPB’s latest Student Loan Ombudsman’s Annual Report found fault with the performance of servicers in the relatively small number of instances in which borrowers – most of whom were struggling – have complained to the CFPB (less than 9,000), out of a universe of millions of loans outstanding.Since the bureau began accepting private student loan complaints in March 2012, the largest subset of complaints stem from borrowers seeking to avoid default during a period of financial hardship, the report noted. “Most frequently, borrowers submitting complaints are seeking to modify repayment terms to obtain a payment they can actually afford,” said the CFPB. “While student loan industry participants have stated that they intend to increase the number of programs to assist ...

After rising for two consecutive quarters, borrower complaints to the CFPB about their private student loans have dropped for the last two reporting periods, according to a new analysis and ranking by Inside the CFPB. Following up on the second quarter drop of 16.3 percent, borrower gripes fell 14.5 percent in the third quarter, the latest data from the bureau’s consumer complaint database show. Among the top 10 companies ranked by borrower grumblings, a wide variety of results could be clearly seen. Six of the top 10 saw double-digit declines during the third quarter, but two others saw increases of that magnitude, most notably Nelnet, up 33.3 percent from the second quarter. The biggest drop among the top 10 was ...

It’s Official: QRM = QM. Last week, the Office of the Comptroller of the Currency, the Federal Reserve Board, the Federal Deposit Insurance Corp., the Securities and Exchange Commission, the Federal Housing Finance Agency, and the Department of Housing and Urban Development adopted a final version of their risk-retention rule for securitized mortgages. Under the new rule, the definition of a “qualified residential mortgage” (QRM) will be no broader than the definition of the “qualified mortgage” (QM) as promulgated by the CFPB in its ability-to-repay rule. Mortgage lending industry representatives were generally pleased with the move. Independent analysts said they expected the near-term impact of the QRM to be quite limited. However, others noted that the development does place a ...

Issuers of securities backed by assets other than residential mortgages were able to win some concessions from federal regulators in the final risk-retention rule that was approved this week. However, the standards for “qualified” loans that are exempt from risk-retention requirements are much more stringent than those for qualified-residential mortgages, even including downpayment requirements in some instances. The risk-retention requirements for non-mortgage ABS and commercial MBS take effect two years after the final rule is published in the Federal Register. Securities that include loans that don’t qualify for exemptions will be required to have risk-retention of at least 5.0 percent, though there are instances when the required retention can be lower. The final standards qualifying commercial loans, commercial real-estate loans and auto loans were...

New issuance of non-mortgage ABS faltered again in the third quarter of 2014, slipping 5.4 percent from the second quarter, according to a new Inside MBS & ABS ranking and analysis. Issuers produced $46.48 billion of new ABS during the third quarter. While that marked the second straight quarterly decline after the robust $53.44 billion issued in early 2014, current issuance levels remained relatively high for the post-crisis period. Through the first nine months of 2014, new ABS issuance totaled...[Includes three data charts]

Subprime loans are accounting for a larger share of auto ABS issuance and losses on auto ABS are increasing. However, rating services suggest that the trends aren’t too worrisome, with ratings performance on track to record one of the best years ever. Some $66.9 billion in auto ABS were issued this year through September, up 26.8 percent from the same period in 2013. Subprime deals accounted for 25.8 percent of auto ABS issued this year, and volume ($17.0 billion) was down slightly from a year ago. But subprime auto loans also show up...

The Consumer Financial Protection Bureau was critical this week of aspects of the student loan securitization process as well as servicer performance as it issued its latest annual report on private student-loan borrowing. The report analyzed more than 5,300 private student loan complaints between Oct. 1, 2013, and Sept. 30, 2014, an increase of 38 percent over the previous year. “Lending practices in the private student-loan market in the years preceding the financial crisis shared...

After a rough first quarter in which consumer complaints filed with the CFPB rose by 29.1 percent (mostly because of credit reports), the second and the third quarters have seen double-digit declines, 14.8 percent in 2Q14 and 14.6 percent in 3Q14, according to a new analysis by Inside the CFPB. Of the nine categories of gripes tracked, seven showed declines, all by double digits, with the money transfer sector leading the drop-off, down 28.4 percent from the second quarter. Debt collection criticisms slid 20.5 percent, followed by mortgages (17.6 percent), bank accounts (15.4 percent), student loans (14.5 percent), credit cards (12.1 percent) and credit reports (10.0 percent). The two rough spots were grievances about consumer loans, which were up 28.4 percent [with two exclusive data charts] ...

The Securities and Exchange Commission’s release of a final rule setting loan-level disclosure requirements for certain structured finance products has only slightly reduced the uncertainty regarding the impact of the so-called Reg AB2 requirements. Among other issues, the SEC left parts of its initial proposal from 2010 unfinished, with no indication of if or when further action will be taken. For example, the SEC had originally proposed extending loan-level disclosure requirements to the 144A private-placement market in addition to requiring such disclosures for certain SEC-registered securities, including residential MBS, commercial MBS, ABS backed by auto loans and re-securitizations of such collateral. At the recent ABS East conference produced by Information Management Network in Miami Beach, Rolaine Bancroft, a senior special counsel at the SEC, said...