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August 18, 2017 - Inside FHA/VA Lending

Private MI Trade Group Urges CFPB To Establish Single QM Rule for All

The private mortgage insurance industry has called for harmonized qualified-mortgage standards to discourage potential arbitrage that might adversely affect consumers. In a comment letter, the U.S. Mortgage Insurers urged the Consumer Financial Protection Bureau to assess whether the various QM standards established under the Dodd-Frank Act have created arbitrage opportunities to the detriment of consumers. The CFPB is about to begin a reevaluation of its ability-to-repay rule/QM rule. QM standards are different for Fannie Mae, Freddie Mac and the Federal Home Loan Banks than for FHA, VA and the U.S. Department of Agriculture. The USMI said analysis should focus on the different treatment of points and fees and maximum borrower debt-to-income ratio among the various QM standards. The CFPB can address the calculation of points and fees under its ATR/QM rule by ...


August 18, 2017 - Inside FHA/VA Lending

Industry Experts Favor Unified GSE, FHA/VA Servicing Policies

Simplifying and aligning the default servicing policies of the conventional conforming and the government-backed mortgage markets would better serve the mortgage industry and homeowners, according to industry experts. In a recent discussion on how regulatory burden and high servicing costs might impede lending, members of the Mortgage Servicing Collaborative agreed on the need for streamlined and harmonized federal, state and agency policies and rules on servicing. Increased regulatory requirements have caused mortgage-servicing costs to skyrocket in recent years, experts said. Even though the quality of servicing has improved, the new regulations are complex and costly, they noted. Multiple pressures placed upon servicers have suppressed mortgage lending, making it harder for borrowers with tainted credit to obtain a mortgage, according to the ...


August 18, 2017 - Inside Nonconforming Markets

Chase, Wells Call for Changes to ATR Rule

The Consumer Financial Protection Bureau’s planned review of the ability-to-repay rule prompted comment letters from trade groups representing various industry participants along with individual comment letters from JPMorgan Chase and Wells Fargo. The big banks were critical of certain aspects of the ATR rule and requested changes that could increase originations of non-agency mortgages. “The ATR/qualified mortgage rule is not working as desired,” said Michael Weinbach, a ...


August 14, 2017 - Inside the CFPB

As the Financial Crisis Fades, Are Servicers Poised for New Era?

Ten years after the financial crisis, the residential mortgage servicing industry could be on “the edge of glory,” according to a new report from S&P Global Ratings. “With the regulatory heat they’ve received in the past decade, servicers are working to ensure they’re compliant with all relevant servicing regulations,” said the S&P analysts. “Even if some deficiencies occur, as might happen when servicing thousands or millions of accounts, quickly correcting them and preventing recurrence is key because reputational damage alone can be quite substantial and long-lasting.” In recent years, mortgage servicers have been slapped with fines totaling tens of millions of dollars, and face an increasingly tougher regulatory and supervisory regime. “A positive outcome of the settlements and new regulations ...


August 14, 2017 - Inside the CFPB

Industry Supports CFPB HELOC Proposal, Says More Needed

Mortgage lending representatives told the CFPB they support its proposal to temporarily increase the institutional and transactional coverage thresholds for open-end lines of credit under the Home Mortgage Disclosure Act. However, more needs to be done along those lines, they said in comment letters filed at the end of last month. Under the CFPB’s HMDA rules scheduled to take effect in January 2018, financial institutions are generally required to report HELOCs if they made 100 such loans in each of the past two years. Under the proposal released early last month, the bureau would increase that threshold to 500 loans through calendar years 2018 and 2019 in order to give the agency the time to consider whether to make a ...


August 14, 2017 - Inside the CFPB

TRID Related Deadlines for Amendments, Comments Now Set

The CFPB’s so-called TRID 2.0 amendments, and the related proposal to deal with the “black hole” problem – the limited ability of a lender to reset tolerances with a closing disclosure – were published in the Aug. 11, 2017, Federal Register. That act establishes Oct. 10, 2017, as the effective date of the TRID 2.0 amendments, as well as the comment deadline for the black hole proposal. The amendments, which were finalized in July, essentially codify the CFPB’s informal guidance on various issues and make additional clarifications and technical amendments. They also create tolerances for the total of payments, adjust a partial exemption mainly affecting housing finance agencies and nonprofits, and extend coverage of the Truth in Lending Act/Real Estate Settlement Procedures ...


August 14, 2017 - Inside the CFPB

House GOP Pushes Again for Contempt Charges Against Cordray

Prior to lawmakers heading out of the nation’s capital for their annual summer recess, Republicans on the House Financial Services Committee released a second staff report that could lay the groundwork for contempt-of-Congress charges to be brought against CFPB Director Richard Cordray. The GOP legal analysis asserts that Cordray has failed to satisfy subpoenas the committee issued for records related to the bureau’s controversial rule banning mandatory arbitration in most consumer financial services contracts. The rule does not address the use of such provisions in residential mortgages, which were banned by Congress in 2004. “Staff believes there is ample basis to proceed against Director Cordray for contempt of Congress due to his default” on his obligations under the congressional subpoenas ...


August 14, 2017 - Inside the CFPB

Mortgage Insurers Urge CFPB to Review QM Regulatory Arbitrage

The trade group for the mortgage insurance industry, U.S. Mortgage Insurers, suggested that as the CFPB reviews its ability-to-repay/qualified mortgage rule, it assess whether lenders have engaged in regulatory arbitrage at the expense of borrowers. The organization advised the bureau to pay particular attention to the different treatment among the QM standards of the calculation of points and fees and the maximum borrower debt-to-income (DTI) ratio. In terms of the former, USMI noted, “The various QM standards provide for different treatment of points and fees – a difference that drives lender behavior without a concomitant consumer benefit.” For instance, consumers with downpayments of less than 20 percent of the purchase price may have an option to finance with a conventional product ...


August 14, 2017 - Inside the CFPB

Settlement Agents Say ATR Rule Discriminates Against AfBAs

Mortgage settlement service company representatives claim the CFPB’s ability-to-repay/qualified mortgage rule discriminates against affiliated business arrangements (AfBAs) when it comes to the calculation of points and fees, compromising borrower choice of service provider, and urged the bureau to revise the rule accordingly. “The QM rule discriminates against AfBAs by requiring a mortgage lender with affiliates to count the affiliate charges against the 3 percent cap on fees and points,” the Real Estate Services Providers Council said in a comment letter to the CFPB regarding its pending ATR/QM assessment. For example, if a mortgage lender has an affiliate title or insurance company involved in the transaction, it must count the title agency or insurance agency charges toward the fees and points ...


August 14, 2017 - Inside the CFPB

Lender Groups Urge CFPB to Expand Scope of ATR/QM Review

National trade groups representing mortgage lenders of all sizes recently advised the CFPB to broaden the scope of its pending assessment of its ability-to-repay/qualified mortgage rule. The Mortgage Bankers Association, for instance, provided the bureau with multiple concerns it believes must be addressed, such as making sure the rule better serves millennials and immigrants who are entering the housing market. Other concerns include “the limitations of the 43 percent debt-to-income requirement that does not include compensating factors,” and whether the underwriting guides of the government-sponsored enterprises and government programs could serve as alternatives to Appendix Q. The Consumer Mortgage Coalition recommended that the agency begin its review process by analyzing the products and product structures that contributed to the financial ...


August 14, 2017 - Inside the CFPB

CSBS Says ATR Hurts Community Banks, Pushes Portfolio Loan QM

The Conference of State Bank Supervisors told the CFPB that the ability-to-repay /qualified mortgage rule has negatively affected financial institutions that, because of their proximity to the local community, rely on more flexible underwriting and determination of ability to repay. “State regulators continue to support the principles that drive the ATR/QM rule, but have several recommendations to better tailor the rule commensurate to the community bank business model,” the CSBS said in its comment letter on the bureau’s proposal to begin assessing the rule. Citing Federal Deposit Insurance Corp. data, the regulators noted that since 2010, 1,173 community banks have either left the residential mortgage lending space or extensively restricted those business lines. Rural Lending is Suffering “Although this decline ...


August 14, 2017 - Inside the CFPB

Its Investigation Now Complete, CFPB Tells Zillow: Settle or Else

The CFPB has told Zillow, the online real estate database firm, to settle with the agency over alleged violations of the Real Estate Settlement Procedures Act or face an enforcement action, the company revealed last week in its 10-Q filing with the Securities and Exchange Commission. “Based on correspondence from the CFPB in August 2017, we understand that it has concluded its investigation,” the firm said in its SEC disclosure. “The CFPB has invited us to discuss a possible settlement and indicated that it intends to pursue further action if those discussions do not result in a settlement.” At issue are certain co-marketing activities, which Zillow defended. “We continue to believe that our acts and practices are lawful and that ...


August 14, 2017 - Inside the CFPB

Trump DOJ Expected to Enter Ocwen’s Dispute With CFPB

Given the Trump administration’s expressed interest in scaling back federal regulation and giving corporate interests greater freedom to conduct their business as they see fit, political and legal observers expect the Department of Justice to respond in the affirmative to a recent judicial invitation to formally opine on Ocwen Financial’s dispute with the CFPB. The nonbank mortgage servicer recently asked Judge Kenneth Marra with the U.S. District Court for the Southern District of Florida to invite the U.S. attorney general to appear and to participate in the company’s challenge to the constitutionality of the bureau. “There are at least two clear reasons to invite the attorney general to participate here,” said the company. “First, inviting the views of the attorney ...


August 11, 2017 - Inside Mortgage Trends

USMI Seeks One QM Rule for All

The private mortgage insurance industry is calling for a level playing field between the government-sponsored enterprises and FHA and VA as the Consumer Financial Protection Bureau begins its assessment of the ability-to-repay rule. In comments to the CFPB, U.S. Mortgage Insurers urged the bureau to determine whether potential arbitrage in QM standards for Fannie Mae and Freddie Mac and those for FHA and VA have had any negative effect on consumers ...


August 10, 2017 - Inside Mortgage Finance

Ocwen Wins One as Judge Invites DOJ to Weigh in On Nonbank’s Challenge to Constitutionality of CFPB

Ocwen Financial caught a potentially big break last week when the judge overseeing its dispute with the Consumer Financial Protection Bureau granted its request to invite the Department of Justice to weigh in. “There are at least two clear reasons to invite the Attorney General to participate here,” the company told Judge Kenneth Marra, of the U.S. District Court for the Southern District of Florida. First, it noted, district courts are required to notify the attorney general of a constitutional challenge in any action in which the U.S. government is not a party. Second, the U.S. attorney general recently filed...


August 10, 2017 - Inside Mortgage Finance

Looking for Some Good News on PHH, Ocwen And Walter Investment? You May Have to Wait.

PHH Corp., Ocwen Financial and Walter Investment Management Corp. have quite a bit in common these days: all are large publicly traded lender/servicers that continue to lose money while struggling to find a path to both regulatory redemption and a business model that works. But recent earnings reports and public filings suggest immediate relief looks elusive for all three. For now, Walter – the parent of Ditech Financial, the nation’s 10th largest servicer – appears...


August 4, 2017 - Inside FHA/VA Lending

USMI Urges CFPB to Include Fed Agencies in ATR/QM Assessment

The private mortgage insurance industry urged the Consumer Financial Protection Bureau this week to consider including the qualified-mortgage standards of the FHA, VA and the U.S. Department of Agriculture in its assessment of the ability-to-repay/QM rule. In a comment letter, industry trade group U.S. Mortgage Insurers said it would be impossible to perform a full assessment of the ATR/QM rule without considering the different federal agency QM rules. If it does not expand the scope of its assessment, the CFPB should at least consider the impact the rules have on consumers in relation to the agency QM rules. In May, the CFPB notified stakeholders of its plan to evaluate the effectiveness of the ATR/QM rule in terms of its benefits and costs. Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2010, which established new standards for mortgage lending, including requiring lenders to assess consumers’ ability to repay. The statute also established a class of “qualified mortgage” loans that cannot have certain risky product features and are presumed to comply with the ATR requirement.


August 4, 2017 - Inside Nonconforming Markets

Ocwen Takes $44 Million Net Loss in 2Q

Ocwen Financial reported a net loss of $44.44 million for the second quarter of 2017, with legal issues accounting for a large portion of the loss. The nonbank also agreed on terms with New Residential Investment to transfer mortgage servicing rights on non-agency mortgages. Ocwen had a $33.60 million expense in the quarter tied to legal settlements. “We settled additional legacy litigation matters further reducing future uncertainty,” said Ron Faris, the company’s president and CEO ...


August 4, 2017 - Inside MBS & ABS

SFIG Raises Questions About Underwriting Self- Employed Borrowers Under CFPB’s ATR Rule

Mortgage investors and lenders alike have a number of questions about underwriting self-employed borrowers under the federal ability-to-repay rule issued by the Consumer Financial Protection Bureau. As the CFPB undertakes a mandatory review of the ATR rule and its qualified-mortgage provisions, the Structured Finance Industry Group pointed to the self-employment issue, starting with how the term is defined and the documentation required by the rule’s Appendix Q underwriting guidance. “Many times, consumers have...


August 3, 2017 - Inside Mortgage Finance

Industry Trade Groups Call on CFPB to Address ATR/QM’s GSE Patch, One Way or the Other

As the Consumer Financial Protection Bureau prepares to begin assessing its ability-to-repay/qualified mortgage rule, national representatives of the mortgage industry and other financial services participants this week urged the regulator to deal with what’s known as the “GSE patch.” The patch provides a temporary safe harbor for mortgages eligible to be sold to the government-sponsored enterprises that have debt-to-income ratios that exceed 43 percent, the maximum allowed under the ATR rule. The Housing Policy Council of the Financial Services Roundtable noted...


August 3, 2017 - Inside Mortgage Finance

With Unfinished HMDA Rule Bits Still Pending, Industry Asks CFPB to Delay Implementation

The clock is ticking on the effective date of a host of new data collection and reporting requirements under the Home Mortgage Disclosure Act, and mortgage lenders are still waiting for the Consumer Financial Protection Bureau to complete some components of the rule necessary for full compliance. For this reason, the regulator should delay mandatory compliance much later than the scheduled January 2018 implementation date, industry trade groups said. “Although we greatly appreciate the CFPB’s work to facilitate implementation of this major data collection and reporting rule, the CFPB’s regulatory process and technological framework for this rule are still incomplete,” lender representatives said in a letter this week to the agency. Proposed amendments have not been finalized...


July 31, 2017 - Inside the CFPB

Other News in Brief

Best Odds of Success in Making Consumer Complaint Data Confidential Rest With a New Director at the CFPB. Industry observers and lobbyists are increasingly of the view that the most likely way the industry will see the kind of substantive regulatory reform and relief it needs is not through federal legislation, but rather from a new director at the CFPB... ICYMI: The Financial CHOICE Act Would Exclude AMCs from Points and Fees Calculations. One overlooked provision in H.R. 10, the Financial CHOICE Act, which was passed by the House of Representatives on June 13, deals with residential mortgage appraisals...


July 31, 2017 - Inside the CFPB

Spike in Mortgage Servicing Complaints Belies Mixed Results

As previously reported, the only area of mortgage-related consumer complaints that saw an increase in the second quarter was servicing, which saw a jump of 17.5 percent. But a deeper dive into the data shows a more complex and nuanced performance by the industry during that period of time, one perhaps dominated by extremes. As the chart on the following page illustrates, a handful of companies saw triple digit increases from the first quarter to the second, with Bayview Loan Servicing leading the way with a 152.6 percent surge. There was also a second tier of big increases in the upper double digits, led by TD Bank, which registered a leap of 90.9 percent...


July 31, 2017 - Inside the CFPB

OIG Plans to Review CFPB’s Internal Sharing of Complaint Data

The CFPB Office of Inspector General has taken on a new planned project to evaluate the effectiveness of efforts by the bureau’s Office of Consumer Response to share complaint data within the regulatory agency, according to the latest OIG work plan, released last week. “Specifically, this project will examine the extent to which [the Office of] Consumer Response is achieving its objective to share useful complaint data and analysis with internal stakeholders and Consumer Response’s controls over access and distribution of shared complaint data, which can contain sensitive consumer information,” the OIG said. The Office of Consumer Response is responsible for sharing complaint data with internal stakeholders within the CFPB in order to help the bureau supervise companies, enforce federal ...


July 31, 2017 - Inside the CFPB

House Dem Report Documents, Celebrates CFPB Achievements

Rep. Maxine Waters, D-CA, and other Democrat members of the House Financial Services Committee recently released a detailed report in defense of the CFPB and its accomplishments in protecting consumers in the wake of the mortgage market collapse and the financial crisis that led to the Great Recession. “The consumer bureau has worked tirelessly to comply with its statutory mandate to ensure consumers are treated fairly, and that financial institutions are held accountable for predatory and other unscrupulous conduct,” the report said. According to the minority report, the CFPB has produced strong results, such as returning almost $12 billion to 29 million harmed consumers; implementing rules ensuring consumers have access to a fair and competitive marketplace; and requiring clear disclosures ...


July 31, 2017 - Inside the CFPB

Industry Again Calls for Delay Implementing New HMDA Rules

A handful of top industry trade groups again wrote to CFPB Director Richard Cordray urging him to delay implementation of the bureau’s new Home Mortgage Disclosure Act rules. “Although we greatly appreciate the CFPB’s work to facilitate implementation of this major data collection and reporting rule, the CFPB’s regulatory process and technological framework for this rule are still incomplete,” said the organizations. For one thing, proposed amendments to the rule are not yet finalized. “Moreover, the HMDA data reporting portals, geocoding tools, data validation, and rule edits are not yet issued,” the groups added. “All of these items are needed to ensure compliant business process and systems changes by the effective date.” Additionally, the CFPB has not yet initiated a ...


July 31, 2017 - Inside the CFPB

Reform to CFPB Mortgage Rules Needed to Attract Capital: PIMCO

If lawmakers and regulators are interested in bringing capital back to the private mortgage market and facilitating borrower access to credit in a responsible manner, they must make much-needed reforms to a handful of key mortgage rules promulgated by the CFPB, according to bond giant Pacific Investment Management Co. One recommended revision is eliminating the expansion of assignee liability for investors under the CFPB’s ability-to-repay rule. “Currently under the Dodd-Frank Act, mortgage investors are liable for mistakes made by lenders in the mortgage origination process for certain mortgage loans that are not deemed qualified mortgages,” said PIMCO. “Since investors have no role or discretion in the mortgage origination process, we believe this is not only nonsensical, but also has the ...


July 31, 2017 - Inside the CFPB

ABAs Not Dead Yet, as CFPB Suffers Another RESPA Blow

Earlier this month, the U.S. District Court for the Western District of Kentucky ruled against the CFPB and in favor of a Kentucky law firm over allegations it paid kickbacks in violation of the Real Estate Settlement Procedures Act. The bureau accused the Borders & Borders law firm of Louisville, KY, and its principals, Harry Borders, John Borders Jr. and J. David Borders, of illegally paying kickbacks for real estate settlement referrals through a network of shell companies. The case began back in February 2011 when the Department of Housing and Urban Development notified the law firm it was being investigated for potential violations of RESPA’s anti-kickback provision. In April 2012, the CFPB advised Borders & Borders that it, rather ...


July 31, 2017 - Inside the CFPB

Compliance Pros Fret Arbitration Rule Will Fuel Litigation

If Republicans in Congress are as successful in overturning the CFPB’s arbitration rule as they have been in canning the Affordable Care Act, various sectors of the financial services market could face a great deal of legal risk, according to one top attorney. “The irony here is that CFPB enforcement is frequently a factor in preventing private class-action litigation,” said Joseph Cioffi, chair of the insolvency, creditors’ rights and financial products practice group at the Davis & Gilbert law firm in New York City. “But this rule eliminating arbitration and the void left from President Trump’s moves toward deregulation can act like a supercollider for litigation against lenders, accelerating class actions and ricocheting through the credit markets.” He went on ...


July 31, 2017 - Inside the CFPB

House Votes to Overturn CFPB’s Controversial Arbitration Rule

The U.S. House of Representatives voted recently to overturn the CFPB’s controversial arbitration rule, which is due to kick in Sept. 18. The final rule prohibits “covered providers of certain consumer financial products and services from using an agreement with a consumer that provides for arbitration of any future dispute between the parties to bar the consumer from filing or participating in a class action concerning the covered consumer financial product or service.” It also requires covered providers that are involved in an arbitration proceeding per a pre-dispute arbitration agreement to submit specified arbitral records as well as specified court records to the bureau. House Joint Resolution 111 utilized the authority of the Congressional Review Act to undo the rule ...


July 31, 2017 - Inside the CFPB

CMC Calls for Bureau to Provide More Servicing Clarifications

As the CFPB prepares to do the Dodd-Frank Act required assessment of its 2013 mortgage servicing rule under the Real Estate Settlement Procedures Act, one industry trade group has urged the bureau to provide servicers with more regulatory guidance and clarifications of the current rule. The Consumer Mortgage Coalition said in a letter to the regulator that it has appreciated the opportunity to work with the bureau as it developed the final servicing requirements. “However, as the CFPB is aware, the final regulatory requirements are very prescriptive, yet unclear, and sometimes conflict with other statutory or regulatory requirements,” said the CMC. “In some areas of the regulation, the CFPB misunderstood the reason for the problems it was trying to solve ...


July 31, 2017 - Inside the CFPB

CFPB to Propose Substantive Changes to Servicing Rule

The CFPB plans to make some significant, but unspecified, changes to its mortgage servicing rule sometime this fall, in response to concerns raised by the industry, the bureau revealed in a blog posting about its latest semiannual rulemaking agenda, released earlier this month. The document is current as of April 1, 2017, and does not reflect the bureau’s issuance of its arbitration final rule, its assessments of its mortgage servicing rule under the Real Estate Settlement Procedures Act and its ability-to-repay rule, nor its proposed temporary increase in the institutional and transactional thresholds for home equity lines of credit. The agency said it is “considering concerns raised by industry participants regarding a few substantive aspects of the mortgage servicing rule ...


July 27, 2017 - Inside Mortgage Finance

CFPB to Propose Substantive Changes to its Mortgage Servicing Rule, Latest Agenda Reveals

The Consumer Financial Protection Bureau plans to make some significant, but as yet unspecified, changes to its mortgage servicing rule sometime this fall, in response to concerns raised by the industry, the bureau revealed in a blog posting about its latest semiannual rulemaking agenda. The agency said it is “considering concerns raised by industry participants regarding a few substantive aspects of the mortgage servicing rule that we used in August 2016. These aspects may be posing particular complexities for implementation that were not anticipated in the course of the original rulemaking. We expect to issue a proposal to make one or more substantive changes to the rule in response to these concerns this fall – perhaps as early as September.” Edward Mills, an analyst with FBR Capital Markets & Co., said...


July 27, 2017 - Inside Mortgage Finance

Industry Officials Call for Revisions to CFPB’s Many Mortgage Regulations

While policymakers in Washington, DC, are paying renewed attention to housing-finance reform, some industry representatives took advantage of the opportunity provided by a related hearing on Capitol Hill to also urge changes be made to a number of the mortgage-related rules promulgated in recent years by the Consumer Financial Protection Bureau. Bond giant PIMCO issued a report that called for a handful of key revisions to the mortgage regulatory landscape before any reform of Fannie Mae and Freddie Mac is undertaken. “To bring capital back to the private mortgage market and ensure credit is extended...


July 21, 2017 - Inside Nonconforming Markets

Non-Agency Participants Call for More TRID Fixes

The Consumer Financial Protection Bureau needs to do more to address problems with the TILA-RESPA Integrated Disclosure rule, according to participants in the non-agency market. The final rule issued this month by the CFPB was seen as helpful but insufficient. The final rule from the CFPB clarified some issues and formalized some guidance. The Structured Finance Industry Group said uncertainty regarding TRID violations persists. “SFIG applauds the efforts of the CFPB to ...


July 21, 2017 - Inside MBS & ABS

CFPB Arbitration Rule Could Fuel Litigation, Impair Securitization Market Liquidity

Last week, the Consumer Financial Protection Bureau issued its long-awaited rule banning mandatory arbitration in consumer financial contracts. The industry concern is that, if left intact, the rule could lead to a rash of litigation impairing liquidity in the secondary markets and limiting consumer access to credit as companies seek to pull back on their risk exposure. The final rule prohibits “covered providers of certain consumer financial products and services from using an agreement with a consumer that provides for arbitration of any future dispute between the parties to bar the consumer from filing or participating in a class action concerning the covered consumer financial product or service.” It further requires...


July 21, 2017 - Inside MBS & ABS

PIMCO Says Tackle Changes to Non-Agency Market, Then Do GSE Reform; Firm Critical of Plans Thus Far

Pacific Investment Management Company published an opinion piece this week calling for changes in the non-agency market before policymakers enact reforms that affect the government-sponsored enterprises. PIMCO was also critical of other GSE reform proposals. “Without a functioning private mortgage market, it will be nearly impossible for the GSEs to shrink their footprint without significant disruption to the housing market and to the underlying homeownership rate,” PIMCO said. PIMCO was...


July 20, 2017 - Inside Mortgage Finance

As New HMDA Regime Approaches, CFPB Cuts Some Limited Slack, While Calls Continue for Delay

With the new data collection and reporting requirements under the Home Mortgage Disclosure Act now less than six months away, anxious industry calls for regulatory relief met with some limited success recently, while others continue to urge a broader extension of the implementation period. Late last week, the Consumer Financial Protection Bureau relented somewhat, proposing to temporarily ease HMDA reporting requirements for lenders that make a small number of home equity lines of credit. The agency proposed raising the threshold for HELOC reporting from 100 loans to 500 loans, starting in January 2018. Officials acknowledged they may have...


July 20, 2017 - Inside Mortgage Finance

CFPB Suffers Another RESPA Blow as Law Firm’s Affiliated Business Arrangement Validated by Court

Affiliated business arrangements may not be dead after all. Late last week, the U.S. District Court for the Western District of Kentucky ruled that such a network at the heart of a lawsuit brought by the Consumer Financial Protection Bureau was in fact legitimate as constituted under the Real Estate Settlement Procedures Act. In this case, which the bureau brought four years ago, the agency accused the Borders & Borders law firm of Louisville, KY, and its principals, Harry Borders, John Borders Jr. and J. David Borders, of illegally paying kickbacks for real estate settlement referrals through a network of shell companies. According to the CFPB’s complaint, the law firm operated...


July 17, 2017 - Inside the CFPB

Extend HMDA Implementation Period, Industry Urges CFPB

The American Bankers Association and banking associations from each of the 50 states and Puerto Rico last week called upon the CFPB to delay the new Home Mortgage Disclosure Act data collection and reporting requirements, which are scheduled to kick in Jan. 1, 2018. “We appreciate the bureau’s efforts to help lenders comply with the new reporting requirements,” the trade groups began. “Nonetheless, banks of all sizes are gravely concerned that they will not be able to assure proper compliance by the January timeframe.” For one thing, the new HMDA rules are inherently complex and very expensive to implement, according to the ABA and its affiliates. Also, they are incomplete. “Recently proposed adjustments to the rule are complicating compliance efforts...


July 17, 2017 - Inside the CFPB

Most Mortgage Complaints Plunge, But Gripes About Servicing Jump

Based on plunging consumer gripes sent to the CFPB, the mortgage market looks like it’s in great shape – with one glaring exception: mortgage servicing. According to a new analysis by Inside the CFPB of second quarter data from the bureau’s consumer complaint database, mortgage servicing saw a 17.5 percent jump in borrower grousing during the second quarter, but a milder 1.4 percent uptick from the first half of 2016. That latter level would be barely perceptible were it not in such stark contrast to the double-digit drop-offs seen in all other mortgage-related areas tracked by this publication. For instance, kvetching about loan modifications plummeted 81.5 percent from the first quarter of this year to the second, and [With exclusive data charts]...


July 17, 2017 - Inside the CFPB

Arbitration Rule a Risk to Banks’ Safety and Soundness, OCC Says

It’s one thing for a regulatory agency to promulgate a rule and catch a lot of slack from the affected industry. It’s quite another when another regulatory agency takes issue with a rule. The CFPB got a bit of a surprise in this regard when it issued its arbitration final rule last week: the Office of the Comptroller of the Currency expressed concerns about the potential risk the rule could pose to the safety and soundness of the U.S. banking system. In a letter to CFPB Director Richard Cordray, OCC Acting Comptroller of the Currency Keith Noreika, a recent appointee of President Trump, said, “The OCC has a mandate to ensure the safety and soundness of the federal banking system...


July 17, 2017 - Inside the CFPB

Bureau Issues Final Rule to Ban Mandatory Arbitration Clauses

The CFPB has finally issued its long-awaited final rule banning mandatory arbitration in consumer financial contracts. For starters, the final rule prohibits “covered providers of certain consumer financial products and services from using an agreement with a consumer that provides for arbitration of any future dispute between the parties to bar the consumer from filing or participating in a class action concerning the covered consumer financial product or service.” Further, the final rule requires “covered providers that are involved in an arbitration [proceeding] pursuant to a pre-dispute arbitration agreement to submit specified arbitral records to the bureau and also to submit specified court records.” The new rule applies to the major markets for consumer financial products and services overseen by...


July 17, 2017 - Inside the CFPB

CFPB Cuts Small-Volume HELOC Lenders Some HMDA Slack

Last week, the CFPB issued a proposal to temporarily ease reporting requirements under the Home Mortgage Disclosure Act for small banks and credit unions that issue home-equity lines of credit – but based on the number of such loans, not asset size of the institution. Under the CFPB’s HMDA rules scheduled to take effect in January 2018, financial institutions are generally required to report HELOCs if they made 100 such loans in each of the past two years. Under the proposal released last week, the bureau would increase that threshold to 500 loans through calendar years 2018 and 2019 in order to give the consumer regulator the time to consider whether to make a permanent adjustment. “Home-equity lines of credit worsened ...


July 17, 2017 - Inside the CFPB

JPMorgan Details Reforms Needed to Mortgage Servicing Regulation

JPMorgan Chase told the CFPB it supports the bureau’s mission of protecting consumers and recognizes that regulatory guardrails are necessary to make sure mortgage servicers adequately address consumers’ needs. “However, certain provisions of Regulation X [which implements the Real Estate Settlement Procedures Act] impose burdens on servicers that increase servicing costs and impact access to consumer credit without providing proportional benefits to consumers,” the servicer said. JPMorgan was one of the industry participants commenting on the CFPB’s proposal to start assessing the effectiveness of its mortgage servicing rules under RESPA. The financial institution went on to some of the problem areas in Reg X that still need to be addressed, one of which has to do with rules for loss...


July 17, 2017 - Inside the CFPB

Industry Suggests Improvements to Servicing Rule Assessment

Trade organizations representing the mortgage banking industry provided a number of important suggestions for the CFPB as it proceeds with a Dodd-Frank Act requirement to assess its mortgage servicing rules at the five-year mark. The first issue the American Bankers Association raised in this regard in its comment letter to the bureau was the scope of the assessment. “The CFPB should incorporate all of the servicing rules into its review, including the rules that implement the Truth and Lending Act and the amendments that the CFPB adopted to the servicing rules in 2016,” the ABA said – not just the rules promulgated under the Real Estate Settlement Procedures Act. The bureau also should take into account the rules’ effects upon consumers...


July 17, 2017 - Inside the CFPB

Bureau Issues Proposed Rule to Address TRID’s ‘Black Hole’

In addition to the so-called TRID 2.0 final rule, the CFPB recently issued a notice of proposed rulemaking related to what’s known in the mortgage industry as TRID’s “black hole,” which refers to situations in which a lender is not permitted to use a closing disclosure to reset fee tolerances. More specifically, the proposal addresses when a creditor may use a Closing Disclosure (CD), instead of a Loan Estimate (LE), to determine if an estimated closing cost was disclosed in good faith and within tolerance. Currently, lenders are permitted, under certain limited circumstances, to use revised estimates, instead of the estimate originally disclosed to the borrower, to compare to the charges actually paid by or imposed on the borrower in...


July 17, 2017 - Inside the CFPB

CFPB Codifies Final Changes to TRID, Permits Sharing of the CD

The CFPB recently published long-awaited updates to its “Know Before You Owe” integrated disclosure mortgage rule, finalizing, among other things, amendments on finance charge disclosures, disclosures tied to housing assistance that a borrower receives, and when information can be shared with third parties, including real estate agents. The KBYO rule took effect in early October 2015 as part of an effort to simplify disclosures under two laws: the Truth in Lending Act and the Real Estate Settlement Procedures Act. The lending industry commonly refers to the combined disclosures as TRID, short for TILA/RESPA Integrated Disclosure rule. In a statement on the amendments, the CFPB noted that TRID “changed the total of payments calculation so that it did not make specific...


July 13, 2017 - Inside Mortgage Finance

CFPB Warns of Schemes to Steal Closing Funds from Homebuyers

Scams aimed at stealing homebuyers’ closing funds persist, according to a warning last week from the Consumer Financial Protection Bureau. The warning follows similar notices in recent years from the Federal Trade Commission. “The scammers attempt to steal the homebuyer’s closing funds – for example, their downpayment and closing costs – by sending the homebuyer an email posing as the homebuyer’s real estate agent or settlement agent (title company, escrow officer or attorney),” according to Davida Farrar, counsel in the CFPB’s consumer education and engagement division. In a post on the CFPB’s website, Farrar said...


July 13, 2017 - Inside Mortgage Finance

CFPB Finally Issues TRID 2.0 Clarifying Final Rule, Decides to Handle the ‘Black Hole’ Separately

After a few months of delay, the Consumer Financial Protection Bureau last week issued its long-awaited final rule clarifying a number of aspects of its integrated disclosure rulemaking under the Truth in Lending Act and the Real Estate Settlement Procedures Act, otherwise known as TRID 2.0. The most noteworthy revisions relate to good faith and revised disclosures, calculating cash to close, construction-to-permanent loans, and the sharing of disclosures during the origination process. In terms of good faith and revised disclosures, the 2017 TRID rule provides...


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