There’s no one-size-fits-all compliance solution for mortgage lending institutions these days, regardless of their size. But some top compliance professionals recently offered a variety of principles and guidelines to help compliance officers build the best framework possible for their banks. Speaking at the American Bankers Association’s regulatory compliance conference in New Orleans this month, Lyn Farrell, managing director at Treliant Risk Advisors ...

If compliance professionals are fortunate enough to discover a compliance issue before the CFPB does, they’ll likely be best served by self-reporting to the CFPB – after they get to the root cause of the problem and begin remediation efforts. That was perhaps the single most important take-away from one of the breakout sessions at the American Bankers Association’s 2014 regulatory compliance conference, held in New Orleans earlier this month. According to Christopher Spellman, corporate compliance director for Heartland Financial USA, the first step in the process is, what is the issue and how was it discovered? “The answer to that question can impact the remediation process,” Spellman said. “Obviously, it’s best if you discover it yourself internally,” said John Podvin ...

As the lending compliance landscape continues to evolve under the influence of multiple CFPB rulemakings, it’s critical compliance professionals keep their eyes on emerging risks as soon as they develop, compliance professionals said during the American Bankers Association’s recent 2014 regulatory compliance conference held earlier this month in The Big Easy. “Inevitably, I always have someone ask me what things keep me up at night. For me, I could pull out a list of all the issues I’ve identified and am working on,” said Carol Yee, chief compliance officer for People’s United Bank in Bridgeport, CT. “But what really keeps me at night are the things I have not detected. These are the emerging risks that are developing and that ...

SunTrust Mortgage’s recent settlement of a dispute with the federal government and 49 state attorneys general over defective FHA loans and Wells Fargo’s losing bid to quash a similar lawsuit are raising concerns about doing business with the FHA. Industry attorneys say the lesson for lenders in these recent industry debacles is that it is “extraordinarily dangerous” to do FHA loans these days given the outcome of the two cases. It is also getting harder to trust mortgage settlement agreements with the government, they added. “The scariest part in all these is the combination of government forces involved in these claims – state AGs, Department of Justice, Department of Housing and Urban Development and the Consumer Financial Protection Bureau,” said an attorney, who worked on both cases. “When they want to get you, they can get you.” Others believe these developments could have a ...

Two federal agencies have announced separate actions to protect reverse mortgage borrowers and rural home purchasers from deceptive advertising and marketing. This week, the FHA warned lenders participating in the Home Equity Conversion Mortgage program not to use misleading or deceptive language in marketing FHA-insured reverse mortgages to consumers. The FHA said the guidance is intended to protect HECM borrowers from advertising and presentations that appear to limit their options rather than informing them of the full range of available HECM products. Underscoring senior borrowers’ “freedom of choice,” FHA Commissioner Carol Galante said the agency wants lenders to know their marketing and advertising practices are under constant surveillance to prevent customers from being steered to unsuitable reverse mortgage products. Galante noted the ...

Barring any unpleasant news, Julian Castro, President Obama’s nominee for secretary of the Department of Housing and Urban Development, apparently has passed his job interview with the Senate Banking, Housing and Urban Affairs Committee. This week, Castro, a three-term mayor of San Antonio, TX, laid out his priorities as HUD secretary before committee members if he is confirmed for the job. Castro underscored the importance of “partnership and pragmatism” as the key drivers in running a city. As HUD secretary, Castro said he would enhance “cross-agency collaboration” and emphasize the value of “measuring results” by setting precise goals, consulting with the public on major issues, developing a public report card and annual updates – tools he employed in his municipal housing education and affordable housing initiatives in San Antonio. As mayor, Castro worked to ...

NY Passes Bill to Reduce Number of FHA Loans that Would Fall Under Subprime. The New York Assembly recently passed legislation that would result in fewer FHA loans being classified as “subprime” under state banking law, according to the law firm Ballard Spahr. Already passed by the Senate, the bill would make permanent prior emergency rules issued by the Department of Financial Services, which raised the subprime threshold 75 basis points for those loans subject to the revised FHA mortgage-insurance premium cancellation policy. Although the emergency rules were set to expire on Dec. 31, 2013, the DFS granted an extension to allow the state legislature additional time to find a permanent solution, said Ballard Spahr attorneys. The bill passed with overwhelming bipartisan support and strong industry backing, and is expected to ...

Have you heard about “fair servicing” and “disparate maintenance?” Well, you’re going to. With servicing-related issues making up the lion’s share of consumer complaints about their mortgages, a new supervisory trend that has emerged in recent months is a move toward what could be called a “fair servicing” expectation, according to a pair of experts at the American Bankers Association’s 2014 regulatory compliance conference in New Orleans this week ...

FHA lenders are generally supportive of the agency’s proposal to add a new method for evaluating lender performance but may request certain adjustments to ensure they are not at great risk for enforcement action, according to compliance experts. Lenders believe the proposal for an additional performance metric to supplement the lender compare ratio under the Credit Watch Termination Initiative is a positive step toward providing a more well-rounded analysis of a lender’s performance when the FHA is considering further action. “In and of itself, the proposal is not a panacea, but it is certainly a step in the right direction,” said Brian Chappelle, a mortgage industry consultant. The proposal reflects the FHA’s belief that a number of factors influence a lender’s performance, not just its compare ratio. The compare ratio compares a lender’s rate of early defaults and claims to those for ...

The FHA is reportedly considering reinstating “spot” loans in condominium projects that were not on its approved development list to boost FHA-insured condo lending. Spot loans are currently prohibited, but the FHA is said to be reevaluating the product because of reports of first-time homebuyers having difficulty in obtaining FHA financing for condo unit purchases and seniors seeking reverse mortgages to tap the equity in their units. The National Association of Realtors is trying to break the impasse between the FHA and reluctant board of directors of condo projects that do not have FHA certification to resolve the financing issue. FHA-insured condominium lending has dropped to $884.4 million in the first quarter of 2014, down 70 percent from the $2.98 billion in total originations reported in the first quarter of 2013, according to Inside FHA Lending’s analysis of agency data. Even as the NAR tries to ...