While federal regulators issued a final rule setting risk-retention requirements for a variety of MBS and ABS in December 2014, uncertainty regarding implementation persists. Industry participants are seeking guidance from regulators on a variety of issues, including the application of risk retention to asset classes that weren’t prevalent when the Dodd-Frank Act was drafted. “It’s absolutely astonishing how much becomes unclear when you actually sit down to build a risk-retention solution,” Rick Jones, chair of finance and real estate groups at the Dechert law firm, said in a recent commentary. He noted...

Financial institutions will be required to provide much more data to monitor fair lending compliance and access to credit under the Home Mortgage Disclosure Act, thanks to a new, 800-page, final rule the CFPB issued last week. Under the new rule, lenders must provide more information about mortgage loan underwriting and pricing, such as an applicant’s debt-to-income ratio, the interest rate of the loan, and the discount points charged. “This information will enhance the ability to screen for possible fair lending problems, helping both institutions and regulators focus their attention on the riskiest areas where fair lending problems are most likely to exist,” said the CFPB. “This information will also help the bureau and other stakeholders monitor developments in specific ...

The mortgage lending industry had a less-than-enthusiastic greeting for another rulemaking from the CFPB that goes on for hundreds of pages. The initial reaction from the American Bankers Association was muted. Frank Keating, president and CEO, said his organization is pleased that the bureau extended the compliance date and excluded the collection of data on most commercial transactions, something the ABA advocated. “However, we continue to be concerned about the privacy of bank customers’ data and ensuring that their information is properly protected. We look forward to commenting on these important issues,” he added. “The rule also imposes significantly expanded data reporting and collection requirements, so we remain concerned about the appropriate balancing of costs and benefits in order to ...

The CFPB recently issued much-sought but quite limited guidance to the mortgage industry on marketing services agreements, emphasizing the legal and regulatory risks for lenders. “We are deeply concerned about how marketing services agreements are undermining important consumer protections against kickbacks,” said CFPB Director Richard Cordray. “Companies do not seem to be recognizing the extent of the risks posed by implementing and monitoring these agreements within the bounds of the law.” The guidance, in the form of a five-page bulletin, explains that, while marketing services agreements are usually framed as payments for advertising or promotional services, “in some cases the payments are actually disguised compensation for referrals. Any agreement that entails exchanging a thing of value for referrals of settlement ...

A cross-section of industry representatives and analysts were not very impressed with the long-sought guidance on marketing services agreements that the CFPB put out recently. Michael Barone, a director of legal and regulatory compliance at Lenders Compliance Group, a consulting firm in Long Beach, NY, said the guidance – which he characterized as very short and informal – “was an effort to get something out very quickly,” in response to all the congressional criticism that CFPB Director Richard Cordray received at the hands of critics on Capitol Hill. “It really does not have a lot of teeth at all,” he said of the bulletin. Further, the guidance doesn’t “tell us anything more than where we were an hour before this guidance came ...

A number of industry trade groups said that CFPB Director Richard Cordray’s determination earlier this year that PHH Corp.’s former mortgage reinsurance activities violated the anti-kickback provision of the Real Estate Settlement Procedures Act was wrong and ill-founded on multiple levels. Jointly submitting an amicus brief to the U.S. Court of Appeals for the District of Columbia in PHH et al. vs. Consumer Financial Protection Bureau, the organizations argued that the director’s order cannot be reconciled with RESPA, the bureau’s governing regulations, or longstanding policy guidance. First, the directive contravenes the text, structure and purpose of RESPA Section 8(c)(2) by relegating it to “a mere rule of construction, rather than treating that provision as the exemption to liability that it ...

Earlier this month, the House of Representatives voted 303-121 in favor of H.R. 3192, The Homebuyers Assistance Act. The legislation would provide the mortgage industry with a regulatory and legal safe harbor until Feb. 1, 2016, for mortgages originated in good faith under the CFPB’s Truth in Lending Act/Real Estate Settlement Procedures Act Integrated Disclosure rule, otherwise known as TRID. The rule, designed to streamline the mortgage disclosures under the two laws, took effect Oct. 3, 2015, after nearly two years of notice from the CFPB. “The CFPB and House Republicans agree that a transitional period for TRID compliance which enables lenders to test their systems and ensures there is no large-scale disruption to mortgage lending is necessary,” said Rep. ...

ComplianceEase, an automated compliance solutions provider based in Burlingame, CA, has come out with an insurance-backed warranty program for loans that have been audited by its ComplianceAnalyzer solution. The program, called AssureCert, provides warranty coverage for compliance defects, including ones related to the CFPB’s Truth in Lending Act/Real Estate Settlement Procedures Act Integrated Disclosure Rule (TRID) and the ability-to-repay/qualified mortgage regulation, as well as federal and state consumer lending and high-cost laws and regulations. “The new QM and TRID rules have exposed lenders and investors to civil lawsuits, as well as fines and repurchase risk,” said John Vong, president of ComplianceEase. “Our insurance-backed AssureCert warranty will offer our clients – both large and small –additional protection and peace of mind.” The ...

Bank of America Pulls the Plug on All Marketing Services Agreements. Bank of America, the third-largest residential retail lender in the U.S., has pulled the plug on all marketing services agreements it has with realty firms, sibling publication IMFnews reported last week. The bank confirmed the move to the newsletter, noting that it will discontinue all “space rental agreement programs due to recent regulatory developments.” It added: “We expect our MSA agreements will conclude by Nov. 1, 2015, and we will terminate our lease agreements for space in accordance with their terms. While the decision to wind down our MSA and SRA programs was difficult, the end of these programs allows us to pursue different ways we might help builders ...

Some observers say the reduction in the annual mortgage insurance premium earlier this year has put the FHA Single Family Mutual Mortgage Insurance Fund on an accelerated path to recovery. Whether that is enough to get the fund back to its statutory 2 percent capital reserve ratio remains to be seen. The FHA is getting stronger faster, said Brian Chappelle, a mortgage industry consultant, in an analysis foreshadowing the FHA’s November actuarial report on the state of the MMIF. Last year’s independent actuary projected FHA’s total loan production in 2015 at $124 billion, but the MIP cut has led to a 60 percent increase in the volume forecast, said Chappelle. In all likelihood, the FHA could be looking at more than $200 billion in total originations this year, he predicted. “When a business lowers its prices, it’s going to make it up in volume,” the consultant noted. “Thus, FHA revenue is going to be ...