Kroll Bond Rating Agency warned recently that it might refuse to rate certain non-agency mortgage- backed securities subject to the TRID mortgage disclosure rule until the CFPB issues formal guidance.The rating service said it’s currently unclear whether certain corrections of errors under the bureau’s integrated disclosure rule will subject non-agency MBS investors to assignee liability. This is an issue that the Structured Finance Industry Group continues to work on, with SFIG also stressing that formal guidance from the CFPB is necessary. “In instances where these violations go un-corrected by an originator, KBRA believes the risks associated with TRID-eligible loans, in material concentration, become more significant and that KBRA may consider additional credit enhancement, applying a rating cap, or declining ...

Fannie Mae and Freddie Mac are not conducting loan-level reviews for compliance with the CFPB’s integrated disclosure, and that threatens investors in the pair’s future credit-risk transfer transactions with the possibility of some modest losses because of lender compliance violations, according to a recent report from Moody’s Investor Service. “We expect overall losses on these transactions owing to TRID violations to be fairly small, despite our expectations that the frequency of violations will be high, at least initially,” analysts at the rating service said. “Furthermore, lender representations and warranties and the government-sponsored enterprises’ ability to remove defective loans from the transactions will likely mitigate some of these losses.” Damages for TRID violations are less significant for a securitization transaction compared ...

Nonbank mortgage servicers could find themselves subject to more thorough registration requirements or greater data reporting mandates – or both – after the Government Accountability Office concluded that the CFPB does not have all the information it needs to oversee all such entities. “CFPB directly oversees nonbank servicers as part of its responsibility to help ensure compliance with federal laws governing mortgage lending and consumer financial protection,” GAO said in a new report. “However, CFPB does not have a mechanism to develop a comprehensive list of nonbank servicers and, therefore, does not have a full record of entities under its purview. As a result, CFPB may not be able to comprehensively enforce compliance with consumer financial laws.” According to the government watchdog ...

Former Federal Trade Commission official Todd Zywicki had a blunt message for the U.S. Senate Banking, Housing and Urban Affairs Committee recently when it comes to the CFPB and its voluminous new mortgage rules: Many smaller banks have simply chosen to exit the residential finance sector rather than bear the increased regulatory costs and risks. The former director of policy planning at the FTC cited a survey conducted by George Mason University’s Mercatus Center which found “64 percent of small banks reported that they were making changes to their mortgage offerings because of [the] Dodd-Frank [Act], and 15 percent said that they had either exited or were considering exiting residential mortgage markets entirely.” Also, almost 60 percent of small banks ...

Many mortgage industry attorneys seem convinced that PHH Corp. will succeed – at least at the appellate court level – in defying the CFPB in its ongoing legal dispute with the bureau. The crux of the dispute is the bureau’s assertion that PHH violated the Real Estate Settlement Procedures Act and harmed consumers through a mortgage insurance kickback scheme tied to a captive MI. Last week, the U.S. Court of Appeals for the District of Columbia heard oral arguments in the case, PHH Corp. v CFPB, and the day did not go well for the bureau. Former CFPB enforcement attorney Jennifer Lee, now a partner with the Dorsey & Whitney law firm in Washington, DC, succinctly summarized the tough day the bureau ...

Over the past year, The Blackstone Group has been aggressively expanding into many facets of the mortgage business and is now ready to make what might be considered a bold move: investing and originating in residential loans that don’t meet the qualified-mortgage test. But just how big might Blackstone get? That’s hard to say at this point. A source inside the company, who spoke under the condition his name not be used, confirmed...

Approximately 300 FHA lenders are seeing their recertifications held up because they failed to report in a timely manner events or changes that may affect their eligibility to participate in FHA programs.Delays are occurring because lenders have failed to notify the FHA of material events as soon as they have occurred and waited until the annual recertification to report them, according to industry sources. Under rules of the Department of Housing and Urban Development, a notice of material event alerts the agency to a significant change to the information provided by the lender at application that may affect its status as an FHA-approved lender. The department strongly encourages lenders to notify FHA within 10 days of the event to prevent delays during the annual recertification. Each FHA lender must complete the annual recertification process in order to retain its FHA approval. Lenders must ...

The FHA has issued new, more permissive loss-mitigation guidelines for Home Equity Conversion Mortgages, including an optional extension for mortgagees when submitting due-and-payable requests. Additionally, the guidelines allow mortgagees to cure a HECM borrower’s taxes and/or insurance defaults as long as the FHA incurs no cost and the mortgagee agrees to refrain from seeking loan assignment for at least three years. The guidelines further remove a previous restriction prohibiting the use of the permissive loss-mitigation options announced in Mortgagee Letter 2015-11 for borrowers in foreclosure. Accordingly, for HECM loans that were in the process of foreclosure prior to the issuance of ML-2015-11, mortgagees may assess those borrowers for a repayment plan in accordance with the mortgagee letter. The repayment plan must have the ...

Cutting back on its FHA business helped reduce JPMorgan Chase’s foreclosure inventory but made it harder for the bank to meet its community reinvestment goals, according to the bank’s top executive. In a letter to shareholders, Jamie Dimon, president/CEO of JPMorgan Chase, said he would rather see the bank no longer service defaulted loans. “If we had our druthers, we would never service a defaulted mortgage again,” he wrote. “We do not want to be in the business of foreclosure because it is exceedingly painful for our customers, and it is difficult, costly and painful to us and our reputation.” Chase has cut back on FHA lending and has reinstated overlays in response to stiff penalties it paid to resolve False Claims Act allegations brought by the federal government. In 2014, Chase agreed to a $614 million settlement with the Department of Justice over allegations of ...

The U.S. Department of Agriculture’s Rural Housing Service (RHS) last week published a final rule revising current regulations regarding lender indemnification, refinancing and qualified mortgage requirements, only to withdraw it later without explanation. The final rule was published in the March 29, 2016, issue of the Federal Register and was withdrawn abruptly on March 31. The RHS’ one-paragraph correction notice said the rule had been “inadvertently published” and, thus, was being recalled. The agency neither elaborated nor returned calls seeking comment. The final rule would expand the RHS’ lender indemnification authority for loss claims in the case of fraud, misrepresentation or noncompliance with applicable loan origination requirements. By taking such action, the RHS aims to improve its ability to manage the risk of its single-family housing guaranteed loan program. In addition, the final rule would ...