The Consumer Financial Protection Bureau any day now could release its long-awaited regulation finalizing its proposed amendments to its 2013 mortgage servicing rules, posing yet another compliance challenge and requiring one more round of systems upgrades from the industry as a result. According to a consensus of industry experts, the two biggest subject areas have to do with bankruptcy proceedings and successors in interest. “On the eve of the servicing rules taking effect, the bureau made...

The U.S. Senate this week passed legislation that includes reforms to current FHA restrictions on condominium financing, among other provisions. H.R. 3700, the Housing Opportunity Through Modernization Act of 2016, was approved without amendment by unanimous consent. The bill passed in the House of Representatives by a vote of 427-0 in February. The bill addresses problems facing buyers and sellers of condominiums. Specifically, the bill modifies the Department of Housing and Urban Development’s rental assistance and public housing programs, FHA’s requirements for condo mortgage insurance and the U.S. Department of Agriculture’s single-family housing guaranteed loan program. Among other things, the bill requires the FHA to make recertifications “substantially less burdensome,” while lowering the ownership-occupancy requirement from 50 percent to 35 percent. The current ...

A mortgage industry group wants to turn the TRID disclosure tables back on the regulators and reveal to homebuyers all the fees – including those imposed by the government – they have to pay for their home purchases, and not just those generated by the industry. The mortgage broker organization known as NAMB – The Association of Mortgage Professionals wants the CFPB and the Federal Housing Finance Agency to further clarify the TILA/RESPA Integrated Disclosure Rule by including a new line item that clearly states the “hidden” guarantee-fees and loan- level price adjustments from Fannie Mae and Freddie Mac. [However, it should be noted that the FHFA has no authorities under the Truth in Lending Act nor the Real Estate Settlement Procedures Act.] ...

Secondary market participants’ reluctance to invest in mortgages out of fear of liability from the loans being originated with TRID errors seems misplaced or overblown, a new report from Moody’s Investors Service suggests. Violations of the CFPB’s integrated-disclosure rule will not notably increase losses in prime jumbo residential mortgage-backed securities, according to a recent analysis by the ratings service.As Moody’s sees it, TRID violations in prime jumbo RMBS will be minimal and often curable. “Prime jumbo RMBS exposure to loans that violate TRID will largely be kept in check thanks to third-party due diligence reviews,” Moody’s said. On top of that, lenders and aggregators will be able to correct most TRID violations before issuers place the affected mortgages in ...

Fitch Ratings recently updated its U.S. residential mortgage-backed securities rating criteria, partly to include adjustments to due diligence grades having to do with the CFPB’s Truth in Lending Act/Real Estate Settlement Procedures Act Integrated Disclosure rule, otherwise known as TRID. Fitch said it expects that participating third-party due-diligence review firms will determine whether mortgages being reviewed for inclusion in MBS have been closed in compliance with the disclosure rule. Further, the ratings service said it would request that due diligence firms grading loans determine whether the findings are more likely to carry statutory damages and assignee liability or just assignee liability. When it comes to grading TRID loans under the revised criteria, Fitch said unresolved errors that carry an increased ...

The CFPB and the Department of Justice late last month announced a $10.6 million enforcement action against BancorpSouth, a regional bank headquartered in Tupelo, MS, alleging the lender engaged in discriminatory mortgage lending practices that harmed African-Americans and other minorities. Of particular note, the bureau said, “This is the CFPB’s first use of testing, sometimes referred to as ‘mystery shopping,’ to support an allegation of discrimination.” The government’s complaint accuses BancorpSouth of illegally redlining in Memphis, TN, denying certain African-Americans mortgage loans more often than similarly situated non-Hispanic white applicants, and charging African-American customers more for certain mortgage loans than non-Hispanic white borrowers with similar loan qualifications. The agencies also alleged the lender implemented an explicitly discriminatory loan denial policy...

The redlining risk that lenders face these days is morphing to include not just a consideration of a bank’s internal behavior but also a comparison of the bank’s performance against its peers – a far more nebulous and uncertain standard of accountability. During a presentation at the American Bankers Association’s regulatory compliance conference last month in San Diego, Carl Pry, a managing director at Treliant Risk Advisors, told attendees, “Regulators are defining redlining risk a little bit differently these days. Traditionally, redlining involved looking at your own bank’s map: you plot out where your applications are, where the loans are, where the denials are – and you stand back and take a look and see, perhaps, that there are a lot of ...

Banking institutions on the verge of coming under CFPB oversight – those crossing the $10 billion asset size threshold for four consecutive quarters – will need to cultivate a new kind of compliance culture if they are going to thrive in their new regulatory environment, according to some top compliance professionals.Speaking to attendees at the American Bankers Association’s regulatory compliance conference last month in San Diego, Randall Patton, director of compliance at MidFirst Bank, suggested lenders approaching that threshold start preparing by getting to know the CFPB, perhaps indirectly at first. First, “Consider utilizing the CFPB examination procedures in your compliance testing,” he said. It would be a good idea as well for such lenders to use the exam procedures to ...

Among a host of best practices and other tips lenders should consider for complying with the CFPB’s new Home Mortgage Disclosure Act rule is coordinated institutional planning, according to Ellen Costa, vice president of strategy and business capability development at Wells Fargo Home Lending. Speaking to attendees at the recent regulatory compliance conference sponsored by the American Bankers Association, Costa said, “All of the CFPB's regulatory changes – HMDA in particular – mean significant change management within your institution. It is a best practice to be very agile and proactive about coordinating a project plan that includes a strategy upfront, really understanding what the regulations are driving at.” A solid plan developed ahead of time and properly executed will allow a clear ...

During the first four months of the year, most mortgage originators seemed to do a good job complying with the CFPB’s regulations – including existing Truth in Lending Act and Real Estate Settlement Procedures Act disclosure provisions – but some appeared to be coming up short in terms of their overall compliance management systems. According to the CFPB’s latest supervisory highlights report, “Examiners found general compliance with the reviewed federal consumer financial laws, though many entities continue to have CMS deficiencies.” For example, at least one supervised institution had weak oversight of its automated systems, including inadequate testing of codes that calculate the finance charge and the amount financed when originating residential loans to consumers. In addition, at least one supervised entity ...