The TRID 2.0 clarifying rulemaking proposal fails to alleviate most of the concerns that investors in the secondary mortgage market have about their potential legal liability, according to Pacific Investment Management Company. In its recent comment letter to the CFPB, PIMCO noted, “In most cases, the errors that relate to the [TRID] disclosures are subtle and technical in nature and do not result in corresponding consumer harm or confusion. Nevertheless, because the … rules implement provisions of the Truth in Lending Act that may carry actual or statutory damages and assignee liability to purchasers, there are serious concerns among secondary purchasers due to the rules’ expansion of liabilities in mortgage origination and investing.” Moreover, asset managers and other loan purchasers ...

Although the CFPB said it was not going to revisit the TRID rule in its entirety when it issued its clarifying rulemaking earlier this year, a number of industry players were still disappointed that more problems were not dealt with. At the top of a list provided by the Community Mortgage Lenders of America of issues that still need to be addressed is loans submitted by mortgage brokers. “An issue that continues to vex the industry is how to treat loans from mortgage brokers that are submitted following rejection by another lender,” the trade group said. “As is typically the case, the submission of a loan to a wholesale lender by a mortgage broker, following rejection of the same loan ...

TRID-related mortgage defects dropped slightly during the second quarter of 2016, the first decline since the rule kicked in Oct. 3, 2015, ARMCO, a risk management technology vendor, said in a new quality control analysis. “TRID-related defects continue to be the leading area of concern in post-closing reviews; however, corrective action planning taken by the lending community has produced positive results that can now be visualized in the 2Q data,” said Phil McCall, chief operating officer at the company. According to the report, the overall critical defect rate dropped to 1.63 percent for the period ending June 30, 2016, the most recent period for which relevant data were available, thus ending the upward swing that stretched back to 3Q15. The ...

Mortgage programs that use less than 24 months of bank statements to verify a borrower’s ability to repay back a loan are riskier than more traditional mortgages and may be prone to running afoul of the CFPB’s ATR rule, according to a new report from Moody’s Investors Service. “Although longer-term bank statement programs would likely satisfy the CFPB’s ATR rule, short-term programs may not,” analysts at Moody’s said. “To fully understand cashflow patterns typical of the borrower’s line of work, the longer the track record, the better,” they added. “The fewer statements a program requires, the higher the likelihood for inconsistencies in the calculation of available income from loan-to-loan.” Under the ATR rule, as Moody’s noted, the originator is required ...

In the wake of the Wells Fargo scandal involving the creation of unauthorized deposit and credit card accounts, the CFPB has issued a warning to lenders about the risks consumers face from improperly managed sales incentives. In CFPB Compliance Bulletin 2016-03, Detecting and Preventing Consumer Harm from Production Incentives, the bureau remarked, “The risks these incentives may pose to consumers are significant and both the intended and unintended effects of incentives can be complex, which makes this subject worthy of more careful attention by institutional leadership, compliance officers, and regulators alike.” For instance, “Such incentives may lead to outright violations of federal consumer financial law and other risks to the institution, such as public enforcement, supervisory actions, private litigation, reputational ...

CFPB Issues Small Entity Compliance Guide for Its Mortgage Servicing Final Rule. The Consumer Financial Protection Bureau has published an updated version of its Small Entity Compliance Guide for its 2016 mortgage servicing final rule, incorporating amendments made to mortgage servicing provisions in Regulation X and Regulation Z. ... Bureau, Other Regulators, Hold Exemption Threshold for Appraisals for Higher-Priced Mortgage Loans Steady. The CFPB, the Federal Reserve and the Office of the Comptroller of the Currency decided to maintain at $25,500 the exemption threshold for appraisals for higher-priced mortgage loans under the Truth in Lending Act (Regulation Z). ...

The Consumer Financial Protection Bureau has ditched the antiquated method for assessing servicer compliance with reverse mortgage-servicing rules in favor of new examination procedures. Depending on the scope, each reverse mortgage-servicing exam will include one or more of eight modules covering various facets of reverse mortgage servicing. There are two kinds of reverse mortgages. The FHA, under the Home Equity Conversion Mortgage program, insures most reverse mortgages. As with other FHA mortgage products, it has a maximum loan amount. Some lenders also offer proprietary (non-HECM) reverse mortgages, which are designed generally for borrowers with higher home values and more equity, the CFPB noted. Proprietary reverse mortgages are not federally insured. However, companies that offer them copy the consumer protections found in the HECM program, including ...

Stakeholders voiced support for an FHA proposal to revive the agency’s single-unit approval policy for condominium financing but differed on owner-occupancy requirements. Both items are part of a proposed rule which would give the FHA more wiggle room in formulating its condo rules. The proposed rule’s 60-day comment period ended on Nov. 28. Among other things, the FHA is proposing to reinstate “spot approval” financing on individual units in condo projects that are not currently approved for FHA insurance. The Department of Housing and Urban Development terminated single-unit approvals a few years ago in favor of mandatory condo-project approval. Ultimately, the current approval process proved to be more cumbersome, resulting in many condo projects opting out of FHA. Under the proposed rule, single-unit approvals are limited to a maximum of 20 percent of the units in the ...

The Department of Housing and Urban Development has expressed concern about the inspector general’s decision to withhold its opinion on the results of FY 2016 audits of HUD and Ginnie Mae. In its audit report, the HUD inspector general said it has issued a disclaimer of opinion on HUD’s fiscal years 2016 and 2015 (restated) consolidated financial statements because of the agency’s failure to deliver both statements and their accompanying notes in a timely manner. In addition, there were several unresolved audit matters from past audits that prevented the IG from completing an examination of HUD’s and Ginnie Mae’s accounts and rendering an opinion. These unresolved matters related to a number of things, including the Office of General Counsel’s refusal to sign a management representation letter, HUD’s improper use of budgetary accounting methods, and the $4.2 billion in ...

With CFPB Director Richard Cordray’s tenure possibly on the line while a pro-business President-elect Donald Trump works on staffing up his incoming administration, the bureau earlier this month filed its highly anticipated appeal to the full U.S. Court of Appeals for the District of Columbia Circuit in its long-running dispute with PHH Corp. Back in mid-October, in PHH Corp. v. CFPB, a three-judge panel of the court nixed the agency’s $109 million penalty against the lender under the Real Estate Settlement Procedures Act, and determined that the CFPB’s leadership structure was unconstitutional because it is run by a sole director who can only be removed for cause. While an appeal by the bureau was widely expected, the issue took on ...