The Conference of State Bank Supervisors told the CFPB it is concerned that certain bad actors within the mortgage lending industry could take advantage of the bureau’s proposed “right to cure” an otherwise qualified mortgage loan that inadvertently falls outside the ability-to-repay rule’s 3 percent cap on points and fees. The CSBS concern revolves largely around bona fide discount points. “State banking regulators support measures that would increase access to credit for consumers who are at the margins of the points-and-fees limits,” the CSBS said in public comment letter to the bureau. “However, there is concern that the proposed ‘cure’ mechanism for inadvertent points and fee miscalculations could disguise or promote the misuse of discount points by unscrupulous lenders seeking ...

Credit union industry representatives want the CFPB to expand some exemptions in some of its recent rulemakings so their CU members could reach larger portions of their targeted markets. One of the recent amendments the bureau proposed to its mortgage rules issued in 2013 would provide an alternative definition of “small provider” applicable to Internal Revenue Code Section 501(c)(3) nonprofit entities that service loans for a fee and on behalf of other nonprofit entities within the same overall organization.This is the so-called “small servicer exemption.” Also for 501(c)(3) nonprofit entities, the proposed rule would exempt certain interest-free, contingent subordinate liens from the credit extension limit under the ability-to-repay rule. This is what’s known as the “small creditor exemption.” As ...

Compliance management systems are a “fundamental focus of supervision” for the CFPB, regardless of whether a given entity is a bank or nonbank, a top official told members of the industry recently. During a recent webinar sponsored by Inside Mortgage Finance, an affiliated newsletter, Ann Thompson, a senior analyst in the CFPB’s Office of Supervision Policy, discussed the critical relevance of a sound and solid CMS. “We think that a fully developed compliance management system is important because it should lessen risks to consumer and reduce the potential for violations of federal consumer financial laws,” Thompson said. “Even though the CFPB does not require a particular CMS structure, our supervisory experience has found that an effective CMS commonly has four ...

U.S. Bank became the latest casualty in the government’s offensive against lax underwriting and improper origination of FHA mortgages after the bank to pay $200 million to settle all related charges. The Minneapolis-based bank became the seventh FHA lender since 2012 that has entered into settlement agreements with the Department of Justice and the Department of Housing and Urban Development to resolve alleged violation of the False Claims Act and the Financial Institution Reform, Recovery and Enforcement Act, according to Inside FHA Lending’s analysis of government data. The government lawsuits allege that the banks’ certification of loans as eligible for FHA insurance under the direct endorsement program violated the FCA. The banks’ misconduct allegedly contributed to the legacy losses that crippled the FHA Mutual Mortgage Insurance Fund and placed the ...

It has been barely a month since the FHA deployed its Lender Electronic Assessment Portal (LEAP 3.0), but lenders are already having difficulty executing some functions in the new system. Lenders are complaining about how hard it is to provide access to independent public accountants (IPA) for purposes of recertification functions, as well as difficulties in making changes to existing branches or adding new ones or changing cash flow accounts. Lenders are concerned they may be sanctioned or penalized if they make a mistake, but the FHA seems not inclined to do this because the system is new. “[We] are highly focused on correcting these issues, and hope to have these functions working properly very soon,” the agency promised in a recent note to FHA lenders. The FHA said it is also aware of the complications that some lenders have faced in submitting their annual recertification in LEAP. Many of these problems have been addressed and the deadline for submission of recertification packages has been extended as well, the agency noted.

The FHA has extended indefinitely the timeframe during which servicers may begin to foreclose on properties with reverse mortgages while it considers possible steps to protect non-borrowing spouses of deceased reverse-mortgage borrowers from outright eviction from their homes. The latest action stemmed from a June 10 court order, which found that current statutory protection for reverse mortgage borrowers against forced eviction and foreclosure extended to their spouses even if the latter is not a co-signer on the note. Non-borrowing spouses of deceased Home Equity Conversion Mortgage borrowers sued in federal district court in Washington, DC, last year to stop foreclosure on their homes and to challenge the Department of Housing and Urban Development’s interpretation of the regulation. Since launching the HECM program, HUD has required that a HECM be ...

The FHA is seeking comment on two new sections of a proposed single-family handbook for mortgage lenders. The handbook is in development. Once completed, it will serve as the centralized source of current and future FHA policies. Agency staff is collating policies from several handbooks, rules, mortgagee letters, notices and other sources to incorporate into the handbook. The FHA is publishing two new sections, “Doing Business with FHA – FHA Lenders and Mortgagees” and “Quality Control, Oversight and Compliance,” for comment. The “Doing Business” section lays out the requirements for FHA lender approval, including eligibility requirements, application processes, operating requirements and post-approval changes. The section also contains the recertification process as well as processes for applying for ...

The issue of eminent domain is rearing its head again, compelling mortgage and securitization industry groups to once more mobilize their resources to deep-six the latest initiatives. The most recent manifestation of a resurgent interest in eminent domain is in California, where John Avalos, a member of the San Francisco Board of Supervisors, has sponsored a resolution seeking to enter the city into a joint powers authority agreement with Richmond, CA, a vehicle by which both cities could seize underwater but performing mortgages using eminent domain. Avalos’ resolution targets...

Senate Banking Committee Approves HUD, FHFA IG Nominees. The Senate Committee on Banking, Housing and Urban Affairs recently approved the nomination of Julian Castro as the next secretary of the Department of Housing and Urban Development. Castro, D, is the incumbent mayor of San Antonio, TX. The panel also approved the nomination of Laura Wertheimer as inspector general of the Federal Housing Finance Agency. The Senate has yet to confirm their nominations. Meanwhile, HUD Secretary Shaun Donovan’s nomination for director of the Office of Management and Budget was approved by the Senate Committee on Homeland Security and Governmental Reform on June 25. FHA Policies on Arm’s Length Transactions and Compliance with State Laws. The FHA is developing guidance to address concerns that laws in certain states may conflict with its arm’s length transaction requirements for preforeclosure/short sales. Until the guidance is issued, FHA lenders should seek guidance and assistance from the FHA National Servicing Center in matters of ...

Secondary mortgage market participants generally support the Consumer Financial Protection Bureau’s proposed “right to cure” a mortgage that inadvertently breaches the qualified mortgage 3 percent points-and-fees cap – but they want to see it made more assignee-friendly. Earlier this year, the CFPB proposed allowing a limited cure for a points-and-fee violation if the creditor in good faith intended to originate the loan as a QM under the bureau’s ability-to-repay rule and the loan otherwise meets the requirements of a QM. A refund of the overage would have to be paid to the consumer and the party seeking to cure the violation (either creditor or assignee) would have to follow certain policies and procedures for post-consummation review of loans. In its comment letter to the CFPB, Fannie Mae suggested...