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Inside Mortgage Finance

July 19, 2012

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Overwhelming Change Management, Timing Issues Top Lenders’ Concerns with CFPB Disclosure Plan

After just a week of sifting through the massive new mortgage disclosure proposed rule released by the Consumer Financial Protection Bureau, mortgage industry officials have already found a lot of problems and will probably find more issues in the months ahead. Rod Alba, senior counsel for mortgage policy at the American Bankers Association, said implementing the CFPB’s proposal as it is right now would be like trying to replace a human being’s skeleton while the person is still alive and functioning. “Just look at the sheer scope of it: 1,100 pages, where every single disclosure that mortgage loan originators and bankers must rely on when they engage in mortgage lending is going to change,” Alba said. “The system is going to... Read More

HUD Working on QM Standards for FHA Loans, But It’s Unclear How Different They Will Be

Officials with the Department of Housing and Urban Development confirmed this week that they are working on ability-to-repay and “qualified mortgage” standards for FHA loans. However, they remained tight-lipped about whether they will craft a QM standard for FHA loans that differs from the Consumer Financial Protection Bureau’s standards, as requested by some lender trade groups. The Dodd-Frank Act requires HUD (for the FHA), the Department of Veterans Affairs, the Department of Agriculture and the Rural Housing Service to develop QM standards for the respective government mortgages that they oversee – in consultation with the CFPB. “Such rules may revise, add to, or subtract from the criteria used... Read More

Wells Fargo Settles With Justice, Bails on Broker Business, Leaving Void for Other Players to Fill

The U.S. Department of Justice, the Illinois Attorney General’s office and the Pennsylvania Human Relations Commission struck a $175 million fair lending settlement with Wells Fargo over allegations that minority customers in its wholesale broker channel were steered to higher-cost loans. According to the federal government’s complaint, Wells placed approximately 2,350 African-American and 1,650 Hispanic wholesale borrowers, along with a number of retail borrowers, into subprime mortgages while putting similarly qualified white borrowers into prime loans. As a result, the minority borrowers paid tens of thousands of dollars more for their mortgages, and were subject to possible prepayment penalties and increased risk of credit problems, default and foreclosure. Wells denied all the accusations leveled against it, and suggested that the problem was due to... Read More

Industry Pressured by Regulators, Plaintiff Bar to Lower Force-Placed Policy Fees

The mortgage industry is facing mounting legal challenges to force-placed insurance practices as evidenced by two class-action lawsuits filed or advanced last week while state and federal policymakers look for ways to reduce homeowner costs on lender-placed insurance. A Florida homeowner filed a class-action lawsuit in federal court in Fort Lauderdale against Wells Fargo Bank, accusing the lender of engaging in a pattern of “unlawful and unconscionable profiteering and self-dealing” by charging inflated force-placed insurance premiums to homeowners who had allowed their coverage to lapse. Ira Fladell, a lawyer representing himself, claims the bank breached its contract with him and acted in bad faith and that the lender bought... Read More

Direct Originations Play a Bigger Role in 1Q12 As Correspondent Production Drifted Lower

While many of the top mortgage producers relied heavily on their own retail origination operations – and even mortgage brokers – a handful of major companies kept the correspondent channel humming during the first quarter of 2012. A total of $266.0 billion of home loans were funded directly by the originator, either in their own retail operations or through mortgage brokers, according to Inside Mortgage Finance. That represented 69.1 percent of total production in the industry. Although direct originations were down 1.1 percent from the previous quarter, the overall market declined even more, by 3.8 percent. Wells Fargo increased... Read More

Refi Activity Strong Halfway Through 2012, Outlook Mixed Beyond the End of the Year

Record low interest rates and loosened underwriting guidelines have induced strong refinance activity during the first half of 2012. Industry participants agree that the refi boom will continue through the third quarter of 2012, but then predictions get hazy. During Wells Fargo’s earnings presentation for the second quarter last week, Timothy Sloan, a senior executive vice president and CFO at the bank, downplayed suggestions that refi activity has declined this month compared with June. “The business is good and we’re optimistic about it,” he said. “Very optimistic,” added... Read More

FinCEN: ‘Thousands of Instances’ of Mortgage Fraud, Suspicious Activity Involving Title, Escrow Companies

Mortgage loan fraud was the most frequent type of suspicious activity reported by depository institutions involving real estate title and escrow related business throughout much of the past decade, according to a new study by the Financial Crimes Enforcement Network. FinCEN’s analysis of suspicious activity reports identified “thousands of instances” where financial institutions – particularly banks and money services businesses – filed SARs involving title and escrow companies “often in connection with mortgage fraud” from 2003 through 2011. “Over 82 percent of the SARs reporting real estate title and escrow related businesses included... Read More

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