Small nonbanks want the CFPB to exercise the risk-based approach to supervision mandated by the Dodd-Frank Act, arguing that regulators don’t understand the sector’s business model. A group of over 50 lenders sent a letter to the CFPB last week asking the bureau to exempt smaller independent mortgage bankers from its examinations and audits. They argued that the Dodd-Frank Act requires the agency to exercise risk-based supervision, taking into ...

The CFPB’s request for information on enforcement has drawn a lot of attention from industry groups, consumer advocates and individuals. Acting CFPB Director Mick Mulvaney said the agency will end regulation by enforcement and stop pushing the envelope in its interpretation of the law. Trade groups have offered up numerous nitty-gritty suggestions on improving its enforcement practices. The agency “has made no secret about the fact that, over the ...

Banking groups had plenty of suggestions in response to the CFPB’s request for feedback on its supervisory activities, starting with better communication and coordination. The CFPB supervises banks with more than $10 billion in assets and nonbanks that offer consumer financial products or services. Trade groups railed against the agency’s so-called regulation by enforcement, and instead urged the bureau to provide more guidance. “To date, the bureau’s ...

A recent announcement by the Department of Housing and Urban Development to seek public comment on its 2013 disparate-impact rule is an opportunity for both HUD and the industry to clarify the liability issues it raises, said compliance experts. On May 10, HUD announced it would formally seek public input on whether the disparate-impact regulation is in tune with the Supreme Court of the United States’ 2015 decision in Texas Department of Housing and Community Affairs v. Inclusive Communities Project, Inc. The HUD rule affirmed the use of disparate impact to establish liability for violations of the Fair Housing Act. It lays out a three-step approach to determining FHAct liability. The first step requires the plaintiff to demonstrate that a practice or a policy has a discriminatory effect on a protected class of persons. According to the rule, liability may be established even if the ...

PHH Corp. decided not to appeal to the U.S. Supreme Court a lower court ruling that effectively overturned the CFPB’s controversial interpretation of the Real Estate Settlement Procedures Act under former Director Richard Cordray. The lender’s lawsuit also unsuccessfully challenged the constitutionality of the CFPB. In January, the en banc panel of the U.S. Court of Appeals for the District of Columbia Circuit sided with PHH on the RESPA components of the dispute, invalidating ...

Although there are fewer than two months left for Mick Mulvaney as the CFPB’s interim director, he continues to bring in his people to key positions in almost all divisions of the bureau, potentially weakening the role of career staffers. It is the first time that the consumer agency has experienced a political transition, and the new leadership appears to have adopted a dramatically different approach on how to treat consumers and the industry. To help reset the new political agenda at the ...

With overall production levels falling, there was a modest increase in several risk vectors of FHA and VA loans pooled in Ginnie Mae mortgage-backed securities during the first quarter of 2018.A new Inside FHA/VA Lending analysis shows the average credit score for FHA loans in Ginnie MBS issued during the first quarter was 671.1, the lowest level since Ginnie began reporting loan-level data on its securities. That was down from 673.2 in the fourth quarter and 679.2 a year ago. Part of the slide in FHA credit scores likely reflects the increased share of purchase mortgages, which typically have lower scores than refinance loans. The same thing happened in the VA market, where average credit scores fell 1.1 points to 707.8 in the first quarter. A year ago, the average VA score was 710.2. Debt-to-income ratios also drifted higher, suggesting more risk of default. Among FHA loans, the average DTI rose to ... [Charts]

Acting FHA Commissioner Dana Wade voiced concern over increasing shares of FHA-insured loans with high debt-to-income ratios, cash-out refinances and purchase loans with downpayment assistance. Testifying recently before the House Appropriations Committee on the agency’s FY 2019 budget, Wade warned that such disturbing trends suggest that FHA’s exposure to loss could rise and put the Mutual Mortgage Insurance Fund and taxpayers at risk. Wade said FHA’s financial health and the impact of the volatile reverse mortgage portfolio are a continuing concerns. Last year, the fund’s economic net worth declined by $1.9 billion and the capital reserve ratio fell to 2.09 percent from 2.35 percent the previous year due to losses associated with Home Equity Conversion Mortgage loans. Wade noted an increase in the proportion of borrowers with DTI ratios in excess of 50 percent. In February, the ...

An approved issuer suspended last month due to alleged VA loan churning activities is back in Ginnie Mae’s multi-issuer mortgage-backed securities program. Nations Lending, ranked 97th in Inside FHA/VA Lending’s top 100 VA lenders, was reinstated after reaching a confidential agreement with Ginnie Mae, according to a source familiar with the case. The Ohio-based lender has been “fully reinstated and [again] able to use all of Ginnie Mae’s programs that are available for lenders in good faith,” said the source, who asked not to be identified. The source declined to provide details of the agreement, maintaining Nations has been very transparent and was “ahead of the curve” in terms of dealing with the churning problem. “Nations began addressing the issue even before Ginnie took action,” he said. Ginnie neither confirmed nor commented on the report. “The evidence will show what is happening in the ...

Many low-income and minority borrowers are forced into FHA loans by risk-based pricing and overlays in the conventional market, only to be stymied by higher FHA premiums and non-cancellable mortgage insurance premiums, according to a new study from the Center for Responsible Lending. The study, “Repairing a Two-Tiered System: The Crucial but Complex Role of FHA,” examines FHA’s pre- and post-crisis lending to white and minority borrowers. It also evaluates the impact of risk-based and FHA pricing as well as the impact of False Claims Act enforcement, which have limited the FHA program’s effectiveness in meeting homeownership goals, said authors Peter Smith, CRL senior researcher, and Melissa Stegman, senior policy counsel. The authors used Home Mortgage Disclosure Act data from 2004 through 2016, focusing solely on single-family purchase mortgages made to ...