The Department of Veterans Affairs will require lenders to provide early disclosures to veterans seeking to refinance into a VA Interest Rate Reduction Refinance Loan. The new policy aims to ensure that the VA streamline refi loan they sought would actually lower their monthly mortgage payments and is not just a scam for lenders to charge higher fees. Loan churning, or serial refinancing, is at the root of the VA policy change. Churning refers to multiple refinancing of an unseasoned mortgage loan within a very short time, often within six months of origination. Serial refinancing may add more payments and interest to the new loan, prolonging debt repayment, and can strip equity. It also potentially raises the risk of default by the borrower. In addition, the risk of prepayment could affect pricing of Ginnie Mae securities, which could cause lenders to charge higher rates on VA loans to make up for the ...

Two recent internal policy memos from the Department of Justice suggest that the agency is reevaluating its approach in two key areas of enforcement, which may significantly affect False Claims Act litigation in FHA cases. Issued last month (one was actually leaked), the memos pertain to the dismissal of frivolous whistleblower cases when the government declines to intervene, and the prohibition of DOJ attorneys relying on an entity’s noncompliance with agency guidance as presumptive or conclusive evidence that the entity violated the law. Written by Michael Granston, director of the DOJ’s Commercial Litigation Branch, Fraud Section, the leaked Jan. 10 memo directs federal prosecutors to consider dismissing meritless FCA complaints by whistleblowers when considering whether DOJ should intervene in the ...

FHA delinquencies rose sharply in Puerto Rico following the devastation brought by hurricanes Maria and Irma last year. At the end of 2017, 28.8 percent of FHA mortgages on the island were at some stage of delinquency, including 15.8 percent that have fallen 90 days behind on their mortgage payments. Deutsche Bank Securities analysts believe the spike in delinquency rates overall is “a short-term phenomenon.” They noted that FHA, Fannie Mae and Freddie Mac have declared temporary moratoria on evictions and foreclosures in Puerto Rico and other hurricane-ravaged regions. Issuer exposures in devastated areas remain unclear and Ginnie Mae has not updated its MBS hurricane exposure data since October last year. In the initial disclosure, the agency reported 9.7 percent (1,066,028 loans) of its total MBS portfolio were impacted by Harvey, Irma and Maria. The affected loans’ unpaid principal ...

The U.S. Court of Appeals for the District of Columbia Circuit last week saved PHH Mortgage and its parent more than $100 million when it sent the lender’s dispute with the Consumer Financial Protection Bureau over issues related to the Real Estate Settlement Procedures Act back to the bureau, basically starting over.

Last week, the en banc panel of the U.S. Court of Appeals for the District of Columbia Circuit issued its long-awaited decision in the tussle between the CFPB and PHH Corp. The ruling addressed two distinct issues in the dispute, the first being the leadership structure of the CFPB, which PHH alleged was unconstitutional. The district court had previously sided with PHH, but the appeals court reversed that component of the ruling, and did so largely on party lines. On the other hand, the appeals court judges transcended party orientation and sided with PHH on the part of the dispute that deals with the Real Estate Settlement Procedures Act. (See following story.) On the question of the constitutionality of the ...

The second part of last week’s ruling by the en banc panel of the U.S. Court of Appeals for the District of Columbia Circuit went in favor of PHH Mortgage in its lengthy legal dispute with the CFPB over issues tied to the Real Estate Settlement Procedures Act. The court upheld the original three-judge panel interpretation of RESPA and its application to PHH in this case, stating that it was improperly applied and that the lender is entitled to the relief granted.More specifically, the en banc court reinstated the Oct. 11, 2016, panel decision related to the RESPA issues, which included vacating the bureau’s order imposing $109 million in disgorgement penalties, and remanded the matter for further proceedings based ...

In response to last week’s ruling by the D.C. Circuit Court of Appeals that confirmed the constitutionality of the CFPB but rejected the bureau’s interpretation of RESPA in its legal dispute with PHH Mortgage, Rep. Jeb Hensarling, R-TX, suggested CFPB Acting Director Mick Mulvaney appeal to the Supreme Court of the United States. “I am deeply disappointed with the court’s decision and hope the Supreme Court will review the ruling in short order,” said Hensarling, chairman of the House Financial Services Committee. “In the meantime, I take great solace in the fact that Mick Mulvaney can use his unchecked, unilateral powers to continue the agency’s transformation into one that will, as he said, ‘exercise [its] statutory authority to enforce the ...

Following up on the recent pledge by CFPB Acting Director Mick Mulvaney to “seek evidence” that the bureau is fulfilling its mission, the CFPB has issued a formal request for information on civil investigative demands, a source of tremendous controversy and uncertainty for the industry during the tenure of former director Richard Cordray. The agency asked for “comments and information from interested parties to assist it in assessing potential changes to the bureau’s CID processes, consistent with law, to consider whether any changes to the processes would be appropriate,” said the document. Entities that have received CIDs as well as their attorneys were invited to comment. “The issuance of CIDs is an essential tool for fulfilling the bureau’s statutory mission ...

The CFPB last week moved to restructure how the agency enforces fair lending laws, consolidating that function under the director’s office, which is headed by interim appointee Mick Mulvaney. In a statement provided to Inside the CFPB, John Czwartacki, senior advisor to the acting director, said: “The bureau’s statutory mandate includes the supervision and enforcement of fair lending laws and regulations [and] the bureau will continue to perform those functions.” He added: “The fact is, it never made sense to have two separate and duplicative supervision and enforcement functions within the same agency – one for all cases except fair lending, and the other only for fair lending cases. By announcing our intent to combine these efforts under one roof, we ...

The Consumer Mortgage Coalition recently wrote to CFPB Acting Director Mick Mulvaney to express the continuing, unresolved concerns its members have with some of the bankruptcy-related provisions of the bureau’s mortgage servicing rules. As of April 2018, mortgage servicers will have to send monthly billing statements to consumers in active bankruptcy cases and certain bankruptcy cases in which the debtor’s personal liability was previously discharged. This is problematic for a number of reasons, according to the CMC. First, these proposed rules conflict with well-settled bankruptcy law prohibiting a creditor from collecting from consumers who are in an active bankruptcy case or who have previously been discharged from personal liability in a prior bankruptcy case. “The courts have held these provisions ...