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Inside the CFPB

June 5, 2017

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CFPB to Assess ATR/QM Rule, But Dodd-Frank Limits Change

The CFPB recently announced its plan to review and evaluate the effectiveness of its ability-to-repay/ qualified mortgage rule, as per the requirements of the Dodd-Frank Act, and is soliciting interested parties for their input. “We are asking the public to comment on our plan, to suggest sources of data, and generally to provide information that would help with the assessment,” bureau officials said in a blog posting revealing the plan. They added that the agency views the pending review and evaluation as an opportunity. “Conducting the assessment will advance our knowledge of the benefits and costs of the key requirements of the ATR/QM rule,” said the officials. “The assessment will also provide the public with information on the mortgage lending market, ... Read More

Does Reliance on GSE Patch Give Fannie, Freddie Too Much Power?

Perhaps the single most critical aspect of the CFPB’s pending assessment of its ability-to-repay/qualified mortgage rule will be what happens to the so-called GSE patch. Under the patch, one of the discretionary elements the bureau added to the Dodd-Frank Act parameters of the rule, loans eligible for sale to the two government-sponsored enterprises, Fannie Mae and Freddie Mac, are granted safe-harbor QM status regardless of the loans’ debt-to-income ratio, as long as they meet other QM requirements. “Without that exemption, the bureau realized that being left with the standard QM (with the 43 percent DTI and Appendix Q) would have significantly limited mortgage lending,” said Richard Andreano, a partner in the mortgage banking unit at the Ballard Spahr law firm ... Read More

ABA Pushes Portfolio QMs, Ditching the 43 Percent DTI

The American Bankers Association sent a letter to Secretary Treasury Steve Mnuchin late last month detailing a handful of key reforms it believes are needed to the ability-to-repay/qualified mortgage rule promulgated by the CFPB. The trade group’s correspondence was in response to President Trump’s Executive Order 13772 and the circulation of his core principles for regulating the U.S. financial system.For starters, the ABA said all mortgages originated and held in a bank’s own portfolio should be considered QM, and should be afforded safe harbor legal treatment. “This approach is consistent with safe lending principles because holding loans in portfolio means that the bank is retaining 100 percent of the risk on that loan,” said the organization. Banks will offer ... Read More

Industry Reps Call for Changes to Bureau’s TRID Rule

The American Bankers Association’s letter to Secretary Treasury Steve Mnuchin also detailed a handful of key changes it said the CFPB should make to its controversial Truth-in-Lending Act/Real Estate Settlement Procedures Act Integrated Disclosure (TRID) rule. First, the bureau ought to revise the TRID tolerances. Currently, the rule requires creditors to observe closing cost tolerances that prohibit fees from increasing beyond initial disclosures by specific amounts. “TRID’s cost tolerance system is extremely convoluted, operating under a three-prong tolerance system that contains uncertain exemptions and rules for corrections,” the trade group said. “ABA believes that the current tolerance system should be entirely eliminated and replaced with a single tolerance standard of 10 percent, with more focused applicability.”Under this proposal, a ... Read More

Industry Needs More Time, Calls for Changes to HMDA Amendments

The Mortgage Bankers Association called on the CFPB to delay the Jan. 1, 2018, effective date for its new and expanded data collection and reporting requirements under the Home Mortgage Disclosure Act.“Considering the fact that much remains to be done by the CFPB, including rules and deliverables, MBA respectfully urges the bureau to delay these amendments and the final rule for at least one year in order to provide the bureau and HMDA reporters with sufficient time to complete, implement and test their data collection and reporting processes,” the trade group said in a comment letter to the agency. The additional time “will allow several necessary actions and relevant materials to be delivered by the bureau in time for ... Read More

Full House Expected to Vote This Week on CHOICE Act 2.0

The full House of Representatives is scheduled to vote sometime this week – perhaps as early as Tuesday evening – on H.R. 10, the Financial CHOICE Act of 2017, Inside the CFPB has learned. The exact day the vote will occur had not been set as of press time, but it will likely take place after the House Rules Committee formally provides a structured amendment process for the legislation. That is slated to take place sometime in the evening on Tuesday, June 6. H.R. 10, introduced earlier this year by House Financial Services Committee Chairman Jeb Hensarling, R-TX, was passed out of committee early last month. Prospects in the Senate are slim, however, because the Republicans just do not have the votes ... Read More

Voters in Battleground States Support a CFPB Commission

A new industry poll found that most registered voters (58 percent) in key battleground states agreed that the CFPB should be run by a bipartisan commission, such as that at the Federal Deposit Insurance Corp. Just 14 percent said the bureau should keep its current single-director leadership structure. The poll of voters in Indiana, Maine, Michigan, Missouri, Montana, North Dakota, Ohio and West Virginia was conducted in May by Morning Consult and commissioned by the Consumer Bankers Association, the Independent Community Bankers of America, and the American Land Title Association. Morning Consult also found that three in five voters agreed that a commission would make the CFPB fairer (63 percent), more representative (62 percent), more accountable (62 percent), and more ... Read More

Lenders More Ready to Comply, More Confident to Lend

Mortgage lenders in the U.S. seem to be in a better frame of mind when it comes to their ability to comply with new regulations and to operate in the post-election environment, according to a study from Lenders One, a cooperative of independent mortgage bankers, correspondent lenders and suppliers of mortgage products and services. “Lenders are ready for new regulatory requirements, such as updates to the Home Mortgage Disclosure Act, with two-thirds (65 percent) indicating they are very prepared for HMDA changes,” Lenders One said. However, the biggest HMDA compliance challenge for lenders involves the additional resources needed to report transactional data, such as home equity lines of credit and dwelling-secured loans for apartments, the survey found. “While lenders are ... Read More

Compliance Costs Consume 21 Percent of Operating Expenses

The cost of complying with the plethora of mortgage regulations, including the high-profile rules promulgated by the CFPB, consume nearly a quarter of lenders’ operating revenue and hurt both sellers and buyers with extended closing delays. Those were some of the chief findings of a survey performed by mortgage market research expert Tom Lamalfa, president of TSL Consulting, Cleveland Heights, OH, at the Mortgage Bankers Association National Secondary Market Conference in May. The results were distributed to MBA members last week via email. Among the questions posed to survey participants was, “Compliance costs consume about what percentage of your total operating expenses?” Of the 31 executives who responded, the average was 21.4 percent of total operating expenses. “The ranges were ... Read More

After Oral Arguments in PHH Case, Final Resolution Anyone’s Guess

Oral arguments in PHH Corp. et al. v CFPB were recently held by the U.S. Court of Appeals for the District of Columbia Circuit, and reactions to the proceedings were all over the map, suggesting to some that the event functioned like a legal Rorschach test. FBR Capital Markets & Co. analyst Edward Mills said in a client note he thinks the case is bound for the U.S. Supreme Court, probably sometime next year. “Given the makeup of the en banc panel [mostly Democrat appointees], we would give a bias to the previous ruling to be overturned,” Mills said. “Despite the headlines from the ruling, we fully expect that either party will appeal the case to the Supreme Court, which ... Read More

Other News in Brief

CFPB Web Site Still Insecure, OIG Finds. Despite the work the CFPB has done to secure its consumerfinance.gov website, it hasn’t been enough, according to a report released last week by the bureau’s Office of Inspector General, which found that several control deficiencies need to be mitigated to protect the website from compromise.... Mortgage Complaints Among the Top for Older Consumers. Debt collection, home equity conversion mortgages (or reverse mortgages) and credit reporting were the top three most-complained-about consumer financial products and services among seniors, collectively representing about 60 percent of older consumer complaints submitted in March 2017, the CFPB said in its latest monthly consumer complaint report.... Read More

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