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Inside the CFPB

January 25, 2016

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Life Under TRID: TRID Compliance Mess Continues, Many Investor Woes

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 ... Read More

Attorneys Highlight Take-Aways, Limits of TRID ‘Clarifying’ Letter

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 ... Read More

Survey Finds Continued Minor Effect of TRID, No Big Impact

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 ... Read More

TRID Non-Compliance Risk is Modest for Investors: Fitch

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 ... Read More

HMDA Rule Adds to Regulatory Burden, Privacy Concerns

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 ... Read More

Mortgage Complaints to the CFPB Continue to Fall Broadly

In another sign that the mortgage market is continuing to heal – at least from the borrower perspective – consumer complaints to the CFPB about their mortgages continued to drop, falling broadly and by double digits in every category tracked by Inside the CFPB during the fourth quarter. Leading the way during 4Q15 was a 45.1 percent plunge in consumers disputing a company’s response to an original complaint, our analysis of information from the consumer complaint… Read More

CHLA Urges CFPB to Require Universal Loan Originator Test

On the three-year anniversary of the adoption of the CFPB’s final loan originator compensation rule, the Community Home Lenders Association wrote the bureau, renewing its call for “ending the exemption bank loan originators enjoy from passing a mortgage competency test.” The Jan. 20, 2013, LO comp rule implemented Section 1402(b)(1)(A) of the Dodd-Frank Act, which requires that all mortgage loan originators be “qualified.” In the final rule, the CFPB elected not to impose a Secure and Fair Enforcement for Mortgage Licensing Act (SAFE Act) test requirement on bank loan originators or impose other related SAFE Act requirements that are imposed on non-bank LOs. Subsequently, the CHLA has called for higher bank loan originator qualifications standards, including a mandatory universal requirement ... Read More

OIG Sees Room to Improve CFPB’s Victim Identification Process

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 ... Read More

More About TRID

Here are the Top 10 TRID Deficiencies, According to One Lender. The folks at Stearns Correspondent Lending recently published a list of the top 10 compliance deficiencies associated with the CFPB’s integrated disclosure rule, as follows: 1.The Closing Disclosure was not provided to the borrower within three business days of the closing date. 2. Various unspecified issues with the Loan Estimate.3. The Loan Estimate was not disclosed to the borrower within three business days of the application date. 4. Borrower(s) did not receive the Loan Estimate within four business days of the closing date. 5. The lender failed to provide a valid change of circumstance for all subsequent Loan Estimates in the file. 6. The lender failed to ... Read More

CFPB News in Brief

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 ... Read More

Vendor Update

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 ... Read More

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