Beginning June 15, rating services involved in MBS and ABS will be subject to increased disclosure standards from the Securities and Exchange Commission. Rating services expect to make a number of changes to comply with the final rule that was issued last August, with some concerns about the usefulness of the increased disclosures. The SEC is requiring nationally recognized statistical rating organizations to disclose rating histories, make changes to rating methodologies and disclose details on findings by third-party due diligence providers, among other issues. Moody’s Investors Service noted...

First Tennessee Bank’s agreement with federal agencies to pay $212.5 million to resolve allegations of violation of the False Claims Act is the latest proof of the government’s unrelenting pursuit of FHA lenders over underwriting and quality control issues. The settlement once again demonstrates the federal government’s commitment to combat FHA fraud using the FCA to recover taxpayer losses, according to an analysis by Boston law firm Greene LLP. “[The Department of Housing and Urban Development] made a point of saying that this behavior is exactly what led to the financial crisis and housing market downturn,” Greene’s compliance attorneys said. HUD and the Department of Justice have vowed to continue to pursue and hold accountable lenders who put profits ahead of their customers and legal obligations, the attorneys added. According to the DOJ, First Tennessee, a regional bank, admitted ...

The Department of Veterans Affairs expects to issue a final rule establishing ability-to-repay (ATR) standards and defining a “qualified mortgage” in October, according to the agency’s regulatory agenda for the second half of 2015. Proposed in May 2014, the rule would implement provisions of the Dodd-Frank Act, which, among other things, would require the VA to define the types of loans that are QMs under the new ATR provisions of the Truth in Lending Act. VA loans that are designated as QM would have either safe-harbor protections or the presumption that the borrower is able to repay the mortgage loan, in accordance with the new ATR provisions. The final rule would not change VA’s regulations or policies regarding mortgage originations, except when lenders want to originate QMs, the VA said. A VA spokesman clarified that action dates on any particular rulemaking are not ...

Total originations of reverse mortgages with FHA insurance increased in the first three months of 2015, according to an Inside FHA/VA Lending analysis of agency data. Home Equity Conversion Mortgage production, overall, rose 3.0 percent to $3.9 billion from the fourth quarter of 2014 and was down 2.0 percent on a year-over-year basis. HECM purchase loans far outpaced refinances, which accounted for only 14.5 percent of total HECM volume in the first quarter. Lenders reported a total of $2.3 billion in initial HECM principal amount at loan origination. Meanwhile, there is continued investor interest in HECM mortgage-backed securities (HMBS), according to Ginnie Mae. The unpaid principal balance of HMBS climbed to $48.9 billion in FY 2014 and the number of participations (the funded portions of HECM loans that have been securitized) has increased to 6,585, 856. HMBS issuance was ... [1 chart]

RPM Mortgage recently agreed to pay the Consumer Financial Protection Bureau $19 million to settle allegations that it violated the agency’s loan officer compensation rule by steering consumers to costlier mortgages and then paying illegal bonuses to LOs for bringing in the higher yielding paper. But shortly after the ink was dry on the June 4 settlement announcement, the privately held RPM and its owner and CEO Robert Hirt went on the offensive, trying to give its side of the story in regard to one pertinent fact: the higher yielding mortgages cited by the agency. A spokeswoman for RPM contacted...

The Financial Industry Regulatory Authority started publishing pricing data for a broad range of ABS this week in an effort to increase transparency. Industry participants suggest that the new disclosures will prompt a decrease in trading and have some impact on pricing. The ABS pricing details are available through the Trade Reporting and Compliance Engine and include deals issued as 144A private placements. “The dissemination of transaction information in ABS is...

More than 250 members of the House of Representatives have signed onto a letter to Consumer Financial Protection Bureau Director Richard Cordray, urging he institute a “grace period” of enforcement with the bureau’s pending integrated disclosure rule that takes effect Aug. 1, 2015. The lawmakers have joined the mortgage lending industry in calling for an ease on tight enforcement of the TILA/RESPA Integrated Disclosure (TRID) rule from the Aug. 1 effective date through the end of the year. “[T]his complicated and extensive rule is likely to cause challenges during implementation, which is currently scheduled for Aug. 1, 2015, that could negatively impact consumers,” said the lawmakers. “As you know, the housing market is highly seasonal, with August, September and October ...

Yet another industry concern about the CFPB’s pending TILA/RESPA Integrated Disclosure (TRID) rule has emerged. Technology vendor eLynx, based in Cincinnati, has determined that many lenders will be relying at least in part on manually entered data to create the CFPB-mandated Closing Disclosure (CD) after the Aug. 1, 2015, implementation of the new rule. According to the vendor, lenders are concerned that manual data re-entry will be a major cause of disclosure mistakes when the agency’s TRID rule takes effect. eLynx conducted a survey of the hundreds of lenders and settlement professionals currently using its services. “The results are alarming,” the company said. “Only 6 percent have a fully automated process for collecting property-related data from settlement service providers (SSPs).” ...

The latest wave in the tsunami of rulemakings from the CFPB is the pending integrated disclosure rule under the Truth in Lending Act and the Real Estate Settlement Procedures Act. And just the timing aspects related to providing the consumer the loan estimate and the closing disclosure could cause havoc, a top industry attorney warned recently. According to Phillip Schulman, a partner in the Washington, DC, office of the K&L Gates law firm, the biggest problem with the TILA/RESPA Integrated Disclosure (TRID) rule has to do with the timing requirements. “You have to give the loan estimate to the borrower within three business days of receiving the application, and no sooner than seven days before consummation or closing of the ...

FSOC Advises Continued Collaboration on Nonbank Mortgage Servicers. The Financial Stability Oversight Council, of which the CFPB is a member, expressed continuing concern about the large share of mortgage servicing rights being handled by nonbank mortgage servicers these days, and urged continued collaboration between state and federal regulators in ratcheting up their oversight to strengthen such companies. “[N]onbank mortgage servicing companies, which in recent years have purchased large amounts of mortgage servicing rights from banks and thrifts, have grown to account for a material portion of the mortgage servicing market,” the report said. FSOC went on to note that in January of this year, the Federal Housing Finance Agency proposed new minimum financial eligibility requirements for mortgage seller/servicers that do ...