Portfolio lenders as well as those looking to issue non-agency mortgage-backed securities cautioned the Consumer Financial Protection Bureau against setting specific thresholds for debt-to-income ratios on “qualified mortgages.” Some non-agency MBS investors countered that a bright line DTI ratio would be useful. In June, the CFPB reopened the comment period on the pending ability-to-repay rule, with an emphasis on data relating to DTI ratios. The deadline for comments was last week. The Clearing House Association ...

Servicing rules previewed by the Consumer Financial Protection Bureau in April are flawed, overreaching and need to be adjusted, according to four trade groups representing servicers and lenders. The CFPB said it plans to propose disclosures this month for servicers to send to borrowers as well as servicing procedures, some of which are required by the Dodd-Frank Act. The DFA requires a notice to be sent to hybrid ARM borrowers six months before the initial interest rate reset. The CFPB said it is considering expanding ...

The Consumer Financial Protection Bureau last week released its long-pending proposal for combined mortgage disclosures, with an emphasis on characteristics common in nonconforming mortgages. “In particular, explanations of how rates and payments can change over time are not always made clear [from current disclosures],” said Richard Cordray, director of the CFPB. Currently, the Real Estate Settlement Procedures Act and the Truth in Lending Act require different disclosures for borrowers. As directed by the Dodd-Frank Act ...

The vast majority of repurchase requests on mortgages in non-agency mortgage-backed securities were in dispute in the first quarter of 2012, according to an Inside Nonconforming Markets analysis of Securities and Exchange Commission 15Ga disclosures. However, industry analysts expect settlements to increase during the second half of this year. Securitizers reported $29.03 billion in mortgages in non-agency MBS with repurchase demands in the first quarter of 2012, with 98.6 percent of the volume classified as in dispute ... [Includes one chart]

Principal reduction loan modifications completed by five major banks as part of the national servicing settlement have not been applied disproportionately to mortgages in non-agency mortgage-backed securities, according to Fitch Ratings. Non-agency MBS investors have raised concerns that servicers that agreed to the recent $25.0 billion settlement will complete their mandated principal reduction mods on non-agency MBS instead of on portfolio loans. “Although still early, there has been no evidence of ...

Wells Fargo agreed last week to pay more than $125.0 million and offer $50.0 million in downpayment assistance to settle subprime-related fair lending claims by the Department of Justice and others. The claims center on brokered originations for African-American and Hispanic borrowers. The DOJ alleged that between 2004 and 2009, Wells charged approximately 30,000 African-American and Hispanic wholesale borrowers higher fees and rates than non-Hispanic white borrowers because of their race or national origin ...

Mortgage-backed security investors continue to claim that a proposal in San Bernardino County to seize certain mortgages in non-agency MBS via eminent domain is unconstitutional. They also warn that if the “Homeownership Protection Program” is implemented there will be negative consequences. “It could severely negatively impact the value of your home, it could scare away jobs from the desert, it could scare away new construction, it might even result in the inability to get a mortgage or financing anywhere in the county ...

The number of loans potentially subject to strict rules for “high-cost” mortgages would dramatically increase, based on a proposal last week by the Consumer Financial Protection Bureau. However, because so few lenders actually originate loans subject to Home Ownership and Equity Protection Act requirements, the CFPB said it believes that such loans will continue to constitute a small percentage of mortgage originations. The CFPB proposed expanding the high-cost definition to include essentially all closed-end mortgages and ...

Manipulation of the London Interbank Offered Rate could have resulted in lower interest rates for subprime ARM borrowers, according to Laurie Goodman, a senior managing director at Amherst Securities Group. Interest rates on close to 80.0 percent of subprime ARMs outstanding in May were linked to LIBOR, according to data from Lender Processing Services, whose data covers about two-thirds of outstanding mortgages. As of the end of May, 70.3 percent of eligible second liens have received a modification via ... [Includes six briefs]

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...