The CFPB and the Department of Justice have separately filed motions opposing a proposal from a handful of state attorneys general to take $15.14 million of unused settlement funds from the bureau’s $50 million enforcement action against Sprint and instead redirect it to two other purposes. The AGs of Connecticut, Indiana, Kansas and Vermont recently proposed taking $14.0 million of the unused money from the U.S. Treasury, which could receive it under the terms of the redress plan, and instead giving it to the National Association of Attorneys General to establish a National Attorneys General Training and Research Institute Center for Consumer Protection. The AGs also want to repurpose the remaining unspent amount, $1.14 million, and give it to a ...

In response to President Trump’s recent executive orders on regulatory reform, the Department of Housing and Urban Development announced it is looking for industry feedback on any of its existing regulations that might be outdated, ineffective or excessively burdensome. As required by Executive Order 13777, “Reducing Regulation and Controlling Regulatory Costs,” HUD said it is in the process of establishing a regulatory task force charged with identifying agency regulations that should be repealed, replaced or modified. As part of that review, the agency is inviting the public to weigh in on the adequacy and relevancy of its current regulatory framework. “HUD’s goal in conducting the review is to make the department’s regulations more effective and less burdensome in achieving HUD’s ...

Financial Freedom, an Austin, TX-based servicer, agreed to an $89 million settlement with the U.S. Department of Justice to settle allegations that it violated the False Claims Act, the Financial Institutions Reform, Recovery, and Enforcement Act, and FHA servicing requirements in connection with its participation in FHA’s Home Equity Conversion Mortgages, or “reverse mortgage,” program. The Justice Department alleged that Financial Freedom sought to obtain insurance payments for interest from FHA “despite failing to properly disclose on the insurance claim forms it filed with the agency that the mortgagee was not eligible for such interest payments because it had failed to meet various deadlines relating to appraisal of the property, submission of claims to the Department of Housing and Urban ...

The Department of Veterans Affairs has issued guidance clarifying its requirements for completing the Interest Rate Reduction Refinance Loan Worksheet. The guidance is effective for all IRRRL applications originated on or after July 2, 2017. The VA said it has received many inquiries from lenders regarding the proper completion of IRRRL Worksheet (VA Form 26-8923) since the implementation of the TRID-LE and CD (Truth in Lending Act-Real Estate Settlement Procedures Act Integrated Loan Estimate and Closing Disclosure.) The guidance clarifies and establishes VA policy regarding the following: Amount of the existing allowable loan balance (Line 1); Principal reduction from veteran (Line 2); Maximum allowable discount points (Line 5); Maximum allowable closing costs (Line 8); Maximum allowable closing costs (Line 11); and Maximum loan amount (Line 18). VA said it understands the ...

The House Financial Services Committee last week spent three days marking up the Republican majority’s alternative to the Dodd-Frank Act. H.R. 10, the Financial CHOICE Act, introduced late last month by committee Chairman Jeb Hensarling, R-TX, would make a number of changes to the mortgage regulatory landscape. One provision would provide a safe harbor against litigation for residential mortgages held on the lender’s balance sheet since the origination of the loan if the mortgage fails to comply with ability-to-repay requirements. The measure also would revise the definition of “points and fees” under the Truth in Lending Act to exclude fees paid for affiliated business arrangements. Other language in the bill would exempt smaller creditors from TILA’s escrow requirements. Another provision ...

As the House Financial Services Committee prepared to begin marking up the Financial CHOICE Act last week, the Consumer Mortgage Coalition warned lawmakers that the bill would actually interfere with fixing the problems with the CFPB’s mortgage rules, despite the improvements it would otherwise make in the regulatory landscape. “A major problem facing the mortgage industry today is the Rube Goldberg morass of CFPB regulations that are so poorly written that no one knows how to comply,” the CMC said in a letter to lawmakers prior to the hearing. “The mortgage markets will not heal until the CFPB mortgage regulations are fixed. Fixing the regulations requires revising them through the normal notice and comment rulemaking process.” The problem, however, is ...

Rep. Andy Barr, R-KY, last week re-introduced the Portfolio Lending and Mortgage Access Act (H.R. 2226), legislation that aims to expand access to mortgage credit by conferring qualified mortgage status upon loans originated by a bank and held in portfolio. The bill sponsor also hopes that it will discourage the practices that led to the 2008 financial crisis and the resulting taxpayer bailouts of Fannie Mae, Freddie Mac, and too-big-to-fail financial institutions. The legislation had some bipartisan support when Barr introduced it in the previous Congress, passing the U.S. House of Representatives by a vote of 255-174. However, the measure never made it out of the Senate Banking, Housing and Urban Affairs Committee. Supporters hope this time around will be ...

Ocwen Financial Corp. recently filed two related motions that seek an early court ruling that the CFPB is unconstitutional, and therefore its enforcement action against the lender/servicer should be thrown out.Echoing an argument made earlier by PHH Corp. in its own dispute with the bureau, Ocwen told the U.S. District Court for the Southern District of Florida, West Palm Beach Division, that the CFPB is unconstitutionally structured because it vests “too much unfettered power” in the hands of the agency’s director and in the bureau itself. The company informed the court and the Department of Justice that it intends to directly challenge the CFPB’s constitutionality at the earliest possible opportunity and to seek dismissal of the case on this ...

Ocwen Financial Corp. is facing more trouble than just its struggle with the CFPB and a number of state regulators. The mortgage lender/servicer also faces the increasing likelihood of some ratings downgrades as well as pending class-action lawsuits. Fitch Ratings recently revised Ocwen’s U.S. residential mortgage-backed securities servicer ratings outlook to negative. “The revision of the rating outlook for the servicer ratings is based on uncertainty surrounding the financial and operational impact of new regulatory actions taken by the CFPB and the multi-state actions following the findings of the Multi-State Mortgage Committee,” Fitch said. The negative rating outlook also takes into consideration Ocwen’s financial condition. Fitch placed the company’s and its corporate parent’s long-term issuer default rating on “rating watch ...

Lenders should think twice about offering non-qualified mortgages that depend only on a borrower’s assets – particularly a big downpayment – to establish the borrower’s ability, a new report from the CFPB suggests. In the spring edition of the bureau’s supervisory highlights, issued last week, the regulator warned that a large downpayment alone is not enough to prove a borrower’s ability to repay a non-QM that is based on the consumer’s assets. “As an initial matter, a downpayment cannot be treated as an asset for purposes of considering the consumer’s income or assets under the ATR rule,” said the CFPB. “The ATR rule requires creditors to consider a consumer’s reasonably expected income or assets, ‘other than the value of the dwelling, including ...