In a follow-up development to earlier reports of the demise of W.J. Bradley Mortgage as a result of the CFPB’s integrated disclosure rule, affiliated newsletter IMFnews reported last week that at least $20 million worth of jumbo loans originally funded by the lender have hit the TRID “scratch-and-dent” market, citing an investor who plays in the space. The loans were offered by Texas Capital Bank, which several sources have identified as a key warehouse lender to WJB, a now defunct privately held non-depository. Early reports on the company’s voluntary closure suggest that TRID errors on non-agency mortgages played a key role in the firm’s demise. Sources contend that a few months back WJB tried to sell at least $30 million ...

The Association of Mortgage Investors wrote to the CFPB last week for guidance on the integrated disclosure rule known as TRID, warning that the marketplace woes stemming from the new rule may extend to the conforming mortgage loan market. “The recent evidence is that the rule, while extremely well-intentioned, has resulted in a climate of legal uncertainty and is chilling private investment in the U.S. mortgage market,” said Chris Katopis, executive director of the AMI. Further, “We urge the bureau to open a new public comment period to address the concerns of mortgage investors,” he added. “We seek formal written guidance clarifying the liability for a violation of each individual TRID requirement, as well as the scope and applicability of ...

A single mortgage would have to meet nearly 150 requirements to achieve compliance with the TRID integrated disclosure rule, according to a framework proposed last week by members of the Structured Finance Industry Group. Third-party due diligence firms will test loans for most of the rule’s requirements, according to a draft of the TRID compliance “review scope” obtained by Inside Nonconforming Markets, an affiliated publication. Since the integrated disclosure rule took effect in October, due diligence firms have found widespread violations on non-agency mortgages, limiting sales of loans with violations due to liability concerns. The SFIG proposal suggests that many of the TRID compliance violations could be cured after being uncovered by a due diligence firm, but violations of about ...

In response to the recent enactment of federal legislation, the CFPB recently issued an interim final rule that broadens the availability of certain “qualified mortgage” special provisions under the ability-to-repay rule for small lenders that operate in rural or underserved areas. The new rule, which kicked in March 31, 2016, implements the Helping Expand Lending Practices in Rural Communities (HELP) Act, legislation that allows more small creditors operating in rural or underserved areas to offer balloon-payment QM loans and balloon-payment high-cost mortgages, and makes them eligible for the escrow exemption. Prior to the HELP Act, a small lender was only eligible for these provisions if it operated predominantly in rural or underserved areas. The bureau’s prior rules had interpreted that ...

Although much of the oxygen in the room is being taken up these days with concerns about the CFPB’s integrated disclosure rule, industry participants need to mind their Ps and Qs when it comes to the bureau’s loan originator compensation rule. During a recent webinar sponsored by Inside Mortgage Finance, an affiliated publication, top legal experts discussed how the industry can navigate a safe passage, compliance-wise. “We know that they’re going to really be looking at loan originator compensation plans this year,” said Kristie Kully, a partner with the Mayer Brown law firm in Washington, DC. “We know that they expect to find some problems in the LO comp area, and often when they expect to find them, they will ...

Mortgage banking industry representatives told the CFPB it should not be in a rush to make any changes to its resubmission guidelines for data that will be submitted under the bureau’s new Home Mortgage Disclosure Act rule. Because of continuing problems in implementing the integrated disclosure rule, “companies have not yet had available sufficient resources to begin HMDA implementation in earnest,” the Mortgage Bankers Association told the bureau in a recent comment letter. “Also, considering the unprecedented expansion of data elements required under the new HMDA rule, it can be anticipated that when implementation begins, there will be a far better understanding of myriad issues including appropriate resubmission guidelines.” Consequently, MBA said that while some changes may now be warranted, ...

For years, banks have had a losing record in FHA cases involving False Claims Act allegations. Hence, a federal appeals court’s decision to uphold dismissal of a $2.3 billion lawsuit against a major bank is a rarity. In U.S., ex rel. Advocates for Basic Legal Equality (ABLE) v. U.S. Bank, the U.S. Court of Appeals for the Sixth Circuit affirmed the dismissal of an FCA lawsuit against U.S. Bank because the conduct alleged by the qui tam relator had been previously disclosed publicly in a consent order with federal banking regulators. The court held that ABLE’s claims were barred because the conduct that allegedly violated the FCA had already been disclosed when the plaintiff filed suit in 2013. The Department of Justice declined to intervene. The relator suit alleged that U.S. Bank had a practice of initiating foreclosure on FHA-insured mortgages without complying with the ...

The Department of Veterans Affairs has issued additional lender guidance for dealing with the public water contamination problem in Flint, MI. The guidance expands on the agency’s minimum requirements for properties backed by VA loans. The guidance refers to policy in the VA Lender’s Handbook which requires properties to have “a continuing supply of safe and potable water for drinking and other household uses,” before being approved for a VA-backed home loan. In the VA’s view, safe and potable water also refers to water used for bathing, showering and sanitary uses. Properties not in compliance with this requirement will not be eligible for the VA guaranty. Proper mitigation of lead-contaminated water must include a central filtering system that is acceptable to local health authorities and that can provide safe and potable water. Appraisers must comment and adjust for any ...

Late last week, secondary market officials said the CFPB has been informed about the recent failure of W.J. Bradley Mortgage of Colorado and how it was caused by jumbo loans backing up on the nonbank’s warehouse line due to errors complying with the bureau’s integrated disclosure rule. At this point, it’s hard for some industry observers and officials to gauge just how bad those errors were. However, the bigger issue may be that curing TRID errors (especially small ones) is the key to solving the current TRID-mess afflicting the residential finance industry. Some industry observers wonder whether a fix can be made that helps mortgage compliance attorneys sleep at night. Right now, the answer to that question appears to be ...

Despite efforts by certain factions of the industry to come up with legal protections regarding errors on TRID disclosures, the “scratch and dent” market for problem loans continues apace. According to Jeff Bode, CEO of Mid America Mortgage – one of the most active buyers of mortgages with TRID errors – product is still being offered on a regular basis. “Offerings have not slowed,” Bode told affiliated publication IMFnews, “though, eventually, I think it will.” On average, Mid America bids on at least eight TRID scratch-and-dent loans a day. Some lenders report they have totally adjusted to the new TRID disclosures, while others continue to be plagued by errors and delays. Meanwhile, the CFPB plans to hold an hour-long webinar on Tuesday,...