Mortgage servicing shops should soon expect extra-special scrutiny from the Consumer Financial Protection Bureau and perhaps even a visit by bureau examiners as part of a servicer supervision strategy announced late last week. “Mortgage servicing has a huge impact on consumers and is a priority for the CFPB,” said Raj Date, special advisor to the Secretary of the Treasury for the CFPB. “The mortgage servicing market has been bogged down by widespread reports of pervasive and profound consumer protection problems. We are going to take a close and measured look at whether servicers are following the law.” The CFPB has indicated that...

The Securities and Exchange Commission has made a good bit of progress in updating its proposal for shelf eligibility conditions for ABS in light of industry comments and the passage of the Dodd-Frank Act. However, there are still numerous areas that concern major players in the mortgage finance industry. A number of commenters took issue with the SEC’s proposal to impose an additional executive officer certification requirement. The agency originally proposed requiring the issuer to file an exhibit to the registration statement consisting of a certification of the chief executive officer of the depositor that, to his or her knowledge, “the securitized assets backing the issue have...

Securitization market participants continue to face significant uncertainty from regulatory forces on both sides of the Atlantic that is dampening securitization activity, raising costs and probably leaving some deals undone. Much of the problem stems from capital requirements and the use of credit ratings, which have fallen into disrepute among many lawmakers and regulators in the wake of the collapse of the subprime mortgage market and the resulting credit market freeze in 2008. After last year’s enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Federal Reserve, the Federal Deposit Insurance Corp., the...

Its decision to dump its wholesale correspondent channel is the latest in a series of moves by Bank of America to distance itself from “legacy” mortgage issues, but analysts remain doubtful. Moody’s Investors Service last week downgraded the bank’s rating. “The downgrades result from a decrease in the probability that the U.S. government would support the bank, if needed,” thanks to the passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the ratings firm said. Moody’s said that the government is likely to continue to provide some level of support to systemically important financial institutions. “However, it is also...

The Securities and Exchange Commission this week approved a proposed conflict-of-interest rule that attempts to walk a tightrope between preventing abusive securitization practices and not interfering with legitimate competitive activity in the market. The agency got a lot of feedback on how to implement the Dodd-Frank Act conflict-of-interest provisions, including from the chief sponsors of the provisions in Congress. Senate Democrats Jeffrey Merkley (OR) and Carl Levin (MI) were largely inspired by dealings in which Goldman Sachs allegedly allowed a hedge fund to choose assets for a collateralized debt obligation and then...

With the mortgage finance industry in turbulence and a fast-changing regulatory landscape, banks have been forced to reevaluate how they optimize processes and become more cost-efficient, making “operational certainty the need of the hour,” according to an expert at a webinar held this week by NelsonHall. The market is seeing an increase in defaults but a decrease in mortgage originations, noted Sandip Sahni, practice head of business process services at Tata Consultancy Services. This has led to mortgage providers having to deal with fluctuations in volume and costs, and in response, service providers are creating more...

Securitization participants and financial services providers flatly rejected a proposal to create an independent federal board that would assign credit rating agencies to initially rate non-agency MBS, ABS and other structured finance transactions. In separate comments, two industry trade groups and Fitch Rating Services opposed the proposal, which is being studied by the Securities and Exchange Commission. The Dodd-Frank Act instructs the SEC to study the concept and report back to Congress by July 2012 with its recommendations for regulatory or statutory changes. The idea of establishing a board to oversee credit rating agencies and address...

A Senate lawmaker and the Mortgage Bankers Association warned House lawmakers that a narrow “qualified residential mortgage” rule will result in overuse of the FHA program and make it more difficult for private capital to re-enter the housing finance market. Testifying before the House Financial Services Subcommittee on Insurance, Housing and Economic Opportunity last week, Sen. Johnny Isakson, R-GA, said the six federal agencies charged with crafting risk-retention requirements apparently failed to consider the impact of a narrow QRM rule on the FHA program. Isakson, who co-authored a Senate exception to...

The American Securitization Forum positioned its new model repurchase principles as a better option to restore investor confidence in non-agency mortgage-backed securities than the risk retention required by the Dodd-Frank Act. “The risk-retention rules proposed by regulators are not sufficiently tailored to different asset classes and will likely cause a host of negative unintended consequences,” said Tom Deutsch, executive director of the ASF. ...