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 ...

The CFPB Office of Inspector General found the victim identification process associated with payouts from the bureau’s Civil Penalty Fund is generally effective but could be improved. “During our audit of the CPF, we noted an opportunity to enhance the victim identification process,” the OIG said in a new report. Specifically, the OIG found that the Office of the Chief Financial Officer has not documented the roles and responsibilities of the Office of Technology and Innovation (T&I) in the victim identification process. “The victim identification process is data dependent and in some instances requires the involvement of T&I to produce preliminary lists of eligible victims,” the report added. The OIG attributed the absence of documented roles and responsibilities for T&I ...

PHH, CFPB Have a Court Date. The U.S. Court of Appeals for the District of Columbia has scheduled to hear oral arguments in the case of PHH Corp. v. CFPB on April 12 at 9:30 am ET. Analysts at Compass Point Research & Trading said in a client note that “the oral argument date is consistent with our expectations and supports our 4Q16 estimate for a decision.” The crux of the dispute is the bureau’s assertion that PHH violated the Real Estate Settlement Procedures Act by illegally referring borrowers to mortgage insurance companies in exchange for kickbacks. Back in January 2014, the CFPB initiated an administrative proceeding against PHH. Administrative Law Judge Cameron Elliot subsequently held that PHH’s referrals of ...

Credit Plus Offers Reps-and-Warrants Coverage to Help Lenders Cope with CFPB, OCC Expectations. Credit Plus, a Salisbury, MD-based third-party verifications specialist for mortgage professionals, has come out with representations-and warranties-insurance coverage for all of its services, responding to the CFPB’s and the Office of the Comptroller of the Currency’s expectation that lenders are now ultimately responsible for practicing effective third-party risk management. The insurance coverage allows customers to better defend their companies against the negative financial consequences of a possible loan default and the resulting repurchase requests, the company said. “While we are confident in the quality of our verification services, we are also a strong proponent of best practices,” said Greg Holmes, national director of sales and marketing at ...

Goldman Sachs last week announced it has agreed to a $5.1 billion settlement, the largest regulatory penalty in the firm’s history, concluding an investigation brought by the Residential MBS Working Group of the U.S. Financial Fraud Enforcement Task Force. The agreement in principle is poised to resolve actual and potential civil claims by the U.S. Department of Justice, the New York and Illinois attorneys general, the National Credit Union Administration (as conservator for several failed credit unions) and the Federal Home Loan Banks of Chicago and Seattle. At issue are...

After the Federal Housing Finance Agency filed a motion in November to dismiss a case introduced by two GSE shareholders over the summer, the shareholders have opposed the motion to dismiss and are demanding a jury trial. The original complaint stated that with Fannie chartered under Delaware law and Freddie under Virginia’s jurisdiction, the preferred stock of a corporation cannot be given a cumulative dividend right equal to all the net worth of the corporation “in perpetuity.” In a nutshell, shareholders David Jacobs and Gary Hindes argue that the net worth sweep in which Treasury takes the bulk of the GSEs’ profits is illegal under state law.

Part of the $5.1 billion settlement amount Goldman Sachs agreed to in principle with the federal government last week will be used to provide relief for homeowners who owe more than the current appraised value of their homes. The agreement would resolve an ongoing investigation by the Residential Mortgage-Backed Securities Working Group of the U.S. Financial Fraud Enforcement Task Force, which President Obama established in 2009 to pursue those who played a role in causing the financial crisis. The tentative agreement would resolve...

The number of foreclosed properties and length of time it takes to foreclose is trending downward, but average time to foreclose is taking nearly three years or more in some states. RealtyTrac recently released its 2015 foreclosure report and noted that it took more than 1,000 days to foreclose in six states in the fourth quarter, with New Jersey leading the way at 1,180 days. That number is...

The Internal Revenue Service recently provided guidance to an MBS trustee and master servicer confirming that a settlement with investors was compliant with requirements for real estate mortgage investment conduits. While Private Letter Ruling 201601005 applies only to the unidentified parties that sought the guidance from the IRS, industry attorneys suggest that the letter could be useful when structuring settlements with MBS investors. The letter was released ...