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 ...
After just a week of sifting through the massive new mortgage disclosure proposed rule released by the Consumer Financial Protection Bureau, mortgage industry officials have already found a lot of problems and will probably find more issues in the months ahead. Rod Alba, senior counsel for mortgage policy at the American Bankers Association, said implementing the CFPB’s proposal as it is right now would be like trying to replace a human being’s skeleton while the person is still alive and functioning. “Just look at the sheer scope of it: 1,100 pages, where every single disclosure that mortgage loan originators and bankers must rely on when they engage in mortgage lending is going to change,” Alba said. “The system is going to...
The mortgage industry is facing mounting legal challenges to force-placed insurance practices as evidenced by two class-action lawsuits filed or advanced last week while state and federal policymakers look for ways to reduce homeowner costs on lender-placed insurance. A Florida homeowner filed a class-action lawsuit in federal court in Fort Lauderdale against Wells Fargo Bank, accusing the lender of engaging in a pattern of “unlawful and unconscionable profiteering and self-dealing” by charging inflated force-placed insurance premiums to homeowners who had allowed their coverage to lapse. Ira Fladell, a lawyer representing himself, claims the bank breached its contract with him and acted in bad faith and that the lender bought...
Two of the three biggest barriers to a return of the non-agency mortgage sector – the premium capture cash reserve account and the qualified mortgage definition – are embedded in the Dodd-Frank Act, industry officials say. And the third is what’s not in the controversial law: any substantive reform of Fannie Mae and Freddie Mac. The biggest challenge to reducing the government’s domination of the mortgage market is the lack of direction on the government-sponsored enterprises, said Tom Deutsch, executive director of the American Securitization Forum, during a hearing this week.
Mortgage securities investors have as much at risk as lenders from the emerging ability-to-repay consumer protection standard because borrowers will be able to challenge compliance with far fewer time restrictions, according to the American Securitization Forum. In a comment letter to the Consumer Financial Protection Bureau, the ASF urged the agency to set objective and clear standards for qualified mortgages – which will satisfy the ability-to-repay underwriting requirement imposed by the Dodd-Frank Act – and a legal safe harbor. “Otherwise, the resulting significant risk and costs of potential litigation will constrain investors from purchasing...
Lenders are potentially abusing reverse mortgage borrowers, according to the Consumer Financial Protection Bureau. Last week, the CFPB released a study on reverse mortgages and issued a request for information on the products along with threats of increased regulation. “In some situations the product can be misused in ways that harm borrowers,” said Richard Cordray, director of the CFPB. He noted the age of reverse mortgage applicants and lump sum payments to borrowers as particular concerns. The CFPB’s study ...
The Consumer Financial Protection Bureau expects to undertake a project to refine and integrate disclosure requirements under the Truth in Lending Act and the Real Estate Settlement Procedures Act for reverse mortgages to improve consumers’ understanding of the product. The In a recent 231-page study submitted to Congress, the CFPB said consumers are still confused about how reverse mortgages work, despite the required disclosures and industry efforts to educate the public on this type of equity-based lending. The rising-balance and falling-equity nature of reverse mortgages is particularly ....
The appraisal industry is calling upon Congress to enact legislation to reform the current regula-tory structure for appraisers, at the same time warning that any unauthorized action by appraiser regula-tory agencies to toughen oversight would hurt and jeopardize the profession. Testifying before the House Financial Services Subcommittee on Insurance, Housing and Economic Opportunity last week, the Appraisal Institute said the Appraisal Subcommittee of the Federal Financial Institutions Examination Council and the Appraisal Foundation, an authorized private regula-tory body, have agreed to...
A continued outpouring of concerned industry commentary about the Consumer Financial Protection Bureau’s pending ability-to-repay rule has prompted the bureau to hit the reset button on the public comment period, giving the mortgage lending industry another opportunity to address some limited, specific issues before the rule becomes final. During a hearing in the Senate Banking, Housing and Urban Affairs Committee, Sen. Mike Crapo, R-ID, pressed his concerns about the rule with CFPB Director Richard Cordray and questioned him about the bureau’s intentions. “The housing credit market...
The Consumer Financial Protection Bureaufs recently proposed method of extending its supervisory powers to nonbank mortgage lenders it considers potentially risky seems fairly straightforward. But look closely and several potential sinkholes emerge for such lenders, one leading attorney serving the mortgage industry suggested. Despite its outward simplicity, the proposed process presents several potential pitfalls for nonbanks, according to Eric Mitzenmacher, an associate attorney in the Washington, DC, office of the K&L Gates law firm. To begin with, the bureau does not define griskh...
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