The Department of Veterans Affairs has issued guidance to help VA lenders understand better the agency’s interim final rule on a borrower’s ability to repay and qualified mortgages. The guidance was published in a frequently asked questions (FAQs) format to clarify and explain both the VA’s ATR and QM standards. The VA interim final rule became effective on May 9, 2014, the date it was published in the Federal Register. The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 requires residential mortgage lenders to make a reasonable and good faith determination that the consumer has a reasonable ability to repay the loan according to its terms. The statute directed the Consumer Financial Protection Bureau to develop and implement an ATR/QM rule. Under the CFPB’s final rule, a qualified mortgage is a category of loans that have certain, more stable features that ...

The Department of Veterans Affairs and the U.S. Department of Agriculture Rural Housing Service have issued 2016 guidelines for lending to borrowers who have gone through a bankruptcy, foreclosure or a short sale. Under VA guidelines, borrowers emerging from a previous Chapter 7 bankruptcy may apply for a VA loan two years after the bankruptcy discharge. Borrowers with a Chapter 13 bankruptcy may qualify for a new VA loan if they have made at least 12 months of payments and the lender concludes that they have reestablished satisfactory credit. Before the bankruptcy-tainted borrower applies for a VA loan, however, the trustee or the bankruptcy judge must approve the new loan. The lender may put in a good word on behalf of the borrower provided the latter has met all requirements for a new loan. Borrowers may apply for a VA loan two years after a foreclosure or a short sale. In the case of ...

The FHA flood insurance requirements could make it difficult or more risky for lenders to originate FHA loans in states with significant flood risk or where flood maps may not accurately reflect the current flood risks, the Mortgage Bankers Association warned. Testifying during a recent hearing on private flood insurance, Steven Bradshaw, executive vice president of Standard Mortgage and MBA representative, warned that FHA’s current requirement for lenders to secure flood insurance on properties only if it is located within a high flood-risk zone has had some unexpected adverse impact, particularly in the wake of hurricane-related catastrophes. Bradshaw noted that many homes that were destroyed by Hurricane Katrina were not located in special flood-hazard areas (SFHA) and therefore were not required to have flood insurance. “Sadly, these borrowers were often uninsured and the ...

The FHA has given lenders and servicers an additional extension through April 17, 2016, to submit due-and-payable notices when Home Equity Conversion Mortgage borrowers fall behind on their property tax or insurance payments. The extended deadline also provides FHA lenders and servicers an opportunity to pursue loss mitigation before initiating foreclosureThe latest deadline extension was the second such extension. In April 2015, the FHA announced a policy change providing HECM lenders and servicers an additional 60 days in which to initiate foreclosure proceedings against any troubled HECM borrower with a case number issued prior to Aug. 4, 2014, with a non-borrowing spouse. Lenders and servicers are required to comply with reasonable-diligence timeframes for such HECMs. Debenture interest will not be curtailed during this period. The April policy allows mortgagees full discretion as to when to use the extension.

On Jan. 21, 2016, the FHA issued a reminder to lenders to register for one of the three remaining phases of Electronic Appraisal Delivery (EAD) Onboarding, before the electronic appraisal submission requirements become mandatory on June 27, 2016. The remaining onboarding phases are the following: Feb. 15-April 15 (registration closes on Feb. 14); March 15-May 15 (registration closes March 14); and April 15-June 15 (registration closes on April 14). All appraisals for FHA case numbers assigned on or after June 27, 2016, must be submitted to FHA through the ...

Although the CFPB recently issued a “clarifying” letter on errors tied to the TRID integrated disclosure rule, deep concerns remain among originators that fund non-agency product for sale into the secondary market. Moreover, according to interviews conducted by Inside Mortgage Finance, an affiliated publication, some nonbank lenders are seeing noticeable increases in origination costs because loans are taking longer to close and therefore remain on warehouse lines for an extended period of time. Because nonbanks fund almost all of their production using warehouse credit, the implication boils down to this: already squeezed profit margins are going to shrink. Industry efforts to comply with the new disclosures, which merge requirements of the Truth in Lending Act and the Real Estate Settlement ...

The recent letter from CFPB Director Richard Cordray to the Mortgage Bankers Association clarifying certain aspects of the bureau’s integrated disclosure rule has some important take-aways – and certain limitations – the industry should be mindful of, according to some top industry attorneys. In a recent online blog posting, attorneys Donald Lampe and Leonard Chanin of Morrison & Foerster LLP identified a handful of key take-aways for mortgage market participants related to the TRID rule. First, “If mortgage loan originators and others involved in the origination, financing and sales of mortgage loans are not familiar with the benefits of [specific] Know Before You Owe disclosure cure provisions, now is the time to assess them,” the attorneys began. They then noted that Cordray’s ...

The latest installment of the Campbell Surveys/Inside MortgageFinance HousingPulse Survey of real estate agents again found widespread, but generally minor, disruptions to mortgage closings throughout the United States due to the CFPB’s integrated disclosure rule known as TRID. TRID did affect December closings, manifesting as the second month of slight increases in closing times and in the percent of missed closings. “Most housing market metrics continue to be strong, despite the onset of TRID and the entry into the winter season,” said the report, which is sponsored by Inside Mortgage Finance, an affiliated newsletter. Further, “Closing times metrics are still showing a minor effect of TRID, and the predicted significant impact in December did not materialize.” The report also provided ...

Investors in non-agency U.S. residential mortgage-backed securities are unlikely to face much in the way of risk stemming from lender non-compliance with the new requirements of the CFPB’s integrated disclosure rule known as TRID, according to analysts at Fitch Ratings. “Although the frequency of non-compliance issues will likely be elevated initially as lenders implement the new changes, those non-compliance issues are not likely to translate into higher risk for bondholders,” the analysts said in a recent report. Their initial due diligence sampling of prime jumbo mortgages in the secondary market has revealed a high level of compliance issues thus far. However, most of them appear to be good-faith errors. The ratings service is continuing its discussions with market participants on ...

Credit union representatives are urging the CFPB to address the increased regulatory burden associated with complying with the bureau’s new Home Mortgage Disclosure Act regulation, as well as related privacy issues the new rule raises. “The final rule added a significant number of new data points to the reporting requirements established in Regulation C, while modifying almost all the existing data points,” said Alexander Monterrubio, regulatory affairs counsel for the National Association of Federal Credit Unions, in a recent comment letter to the CFPB. While some of the data points were specifically mandated by the Dodd-Frank Act, many of them were added at the bureau’s discretion, and that will prove to be problematic. “These discretionary data points have swelled the ...