If you thought the CFPB was finished with the mortgage closing process when it issued its integrated disclosure rulemaking under the Real Estate Settlement Procedures Act and the Truth in Lending Act, think again. The bureau also sought public input on the “pain points” associated with getting a new mortgage, and based on the comments received to date, the agency has identified 1,480 such spots, according to Brian Webster, the originations program manager for mortgage markets at the CFPB.So last week, in a high profile public forum attended by officials of other housing-related federal agencies as well as industry representatives and consumer advocates, the bureau announced it would roll out later this year a voluntary, three-month e-Closing pilot project...
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As part of the CFPB’s public forum last week during which the agency announced its forthcoming eClosing pilot project, the bureau also issued guidelines that articulate the minimum functionalities required of potential participants and spell out the features the CFPB wants to test in the pilot. To join the bureau’s pilot on electronic closings, each participant must currently have a system that meets minimal technical capabilities and requirements, as demonstrated by specific features and functionalities. “The CFPB created these minimum requirements to ensure that the pilot program is focused on the specific features and consumer outcomes that the bureau is seeking to evaluate,” the agency said.First, a pilot participant must have an eClosing solution with the ability to store...
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More regulation of the private student loan sector seems likely after the CFPB issued a report last week critical of “auto-defaults” in private student lending. According to the bureau, borrowers have complained that some lenders demand immediate full repayment upon the death or bankruptcy of their loan co-signer, even when the loan is current and being paid on time. Borrowers also told the CFPB they face bureaucratic barriers to releasing co-signers from their loans, a commonly advertised benefit that could help avoid auto-defaults. “Students often rely on parents or grandparents to co-sign their private student loans to achieve the dream of higher education. When tragedy triggers an automatic default, responsible borrowers are thrown into financial distress with demands of immediate...
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One option that some affiliated business arrangements can use as a mechanism to cope with the CFPB’s ability to repay rule is to change their ownership structure, according to a top industry compliance attorney. Loretta Salzano, a founding partner of Franzén and Salzano, warned attendees at the recent Real Estate Settlement Providers Council’s 2014 annual conference that, “Lenders with affiliated providers must consider the ATR’s impact on their business based on the number and type of affiliates, the break point based on fees of all affiliates, the average loan amount, and the markets served.” Part of that process means lenders have to look and see where their break point is, the point at which they will breach the 3 percent...
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The CFPB and the Federal Housing Finance Agency apparently are mailing $5 bills as “a small token of appreciation” to new homeowners to encourage them to participate in a survey associated with the agencies’ joint project to develop a national mortgage database, Inside the CFPB has learned. “I am writing to ask for your help with an important national survey of consumers about their mortgage loan experiences,” says a joint sample letter prepared with CFPB letterhead, with room for a signature for a representative from both agencies. “I understand that in the last 12 months you obtained a mortgage for your home (or a residence that is rented or otherwise occupied by others). Your recent experience is very important to...
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A steep 46.8 percent plunge in consumer complaints about loan modifications in the first quarter from year-ago levels fueled a 29.3 percent drop in overall gripes to the Consumer Financial Protection Bureau from the same time last year, according to a new analysis by Inside the CFPB. Grievances about the loan application/mortgage origination process fell almost as much, down 26.7 percent, year over year. While mortgage-related complaints were down on a yearly basis, gripes regarding mortgages increased by 20.0 percent in the first quarter of 2014 compared with the previous quarter. Another key quarterly performance metric, grievances about servicing, trended up as well, increasing by 29.1 percent versus the period ending Dec. 31, 2013. [Includes two exclusive charts]...
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Lenders should expect additional enforcement actions from the CFPB along the lines of last year’s move against Castle & Cooke Mortgage LLC, where regulators targeted not just the firm but the executives making the decisions, warned Benjamin Olson, counsel at the law firm of Buckley Sandler. “While this is the only public action, it is certainly not the only action the bureau is currently undertaking” to enforce its loan originator compensation rules, said Olson, former deputy assistant director in the bureau’s Office of Regulations, during a webinar last week sponsored by Inside Mortgage Finance Publications, which publishes Inside the CFPB. “We are seeing civil investigative demands and the bureau’s equivalent to the subpoena, where the CFPB is diving into an...
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A new research report from analysts at Standard & Poor’s Ratings Services confirms earlier industry accounts that mortgage servicers are adapting to the CFPB’s newly implemented mortgage servicing rules, and that the rules are having the effects regulators intended. Back in 2013, S&P asked its ranked servicers to complete CFPB questionnaires as part of its semiannual Servicer Evaluation Analytical Methodology process. “We sent a questionnaire with our mid-year SEAM regarding compliance plans and readiness levels, and asked servicers to complete the questionnaires again after Jan. 10 [the implementation date of the new rules], to indicate their levels of compliance,” analysts at the ratings service said. The questionnaire included key areas of compliance: continuity of contact; dual-track foreclosure; servicing transfers; error...
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Early stage implementation of the CFPB’s ability to repay rulemaking shows no major changes to origination strategies on the part of mortgage lenders, according to a recent report from Standard & Poor’s Ratings Services. “Overall, the majority of our ranked originators are not making any major changes to their origination strategies as a result of the ATR/QM regulations,” S&P said. “Most originators will continue to focus their production efforts on their core origination products and expect their 2014 production mixes to be similar to those in 2013.” Additionally, lenders do not anticipate a significant change to the composition of their primary investors. In connection with Standard & Poor’s ongoing surveillance of its Mortgage Originator Review rankings, the ratings service requested...
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The CFPB is largely ineffective at controlling mortgage risk and is already borderline obsolete, according to a former Wall Street professional now working in the halls of academia. To begin with, Sen. Elizabeth Warren, D-MA, the architect of the bureau, and Richard Cordray, its current director, misunderstood the problem facing mortgage borrowers and lenders, according to Anthony Sanders, a professor of real estate finance at George Mason University and former head of asset-backed and mortgage-backed securities research at Deutsche Bank in New York City.“Essentially, the world that Warren and Cordray wish that existed (1999) when real median household income was at its maximum and mortgage foreclosures were just above 1 percent doesn’t exist anymore,” the professor said in a...
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Reps. Robert Pittenger, R-NC, and Denny Heck, D-WA, recently introduced H.R. 4383, the Bureau of Consumer Financial Protection Small Business Advisory Board Act, which would require the CFPB to establish a small business advisory board. “Consumers, banks, and credit unions already provide valuable insight on what the CFPB proposes, but the smaller operators in finance have a tougher time being heard,” said Heck. “As a small business owner myself, I know local financial service providers in Washington state can partner with the CFPB to better protect consumers and give input on how CFPB actions affect customers and operations.” The Pittenger and Heck proposal would institute a board made up of at least 12 members who are “representatives of small business...
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Sen. Dan Coats, R-IN, has introduced the Community Financial Protection Act, legislation to provide smaller financial institutions such as community banks and credit unions with some regulatory relief from financial regulations enacted after the 2008 financial crisis that many complain are crippling their businesses. The Coats bill would modify the way in which the CFPB requests information from financial institutions with less than $10 billion in assets. Under the Coats proposal, the CFPB must use publicly available information or seek the requested information from existing banking regulators. Specifically, the Community Financial Protection Act would stipulate that the CFPB must use current and existing publicly available information and data prior to requesting any information from the prudential regulator. Also, if the...
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CFPB Staff Answer Bankers’ Questions on Mortgage Compliance. CFPB staff members answered mortgage compliance questions from members of the American Bankers Association during a live webcast last week. Among the key take-aways was the statement that creditors may use lender and seller credits to reduce the amounts that are calculated into the points-and-fees test. A written statement of who is providing which credits is sufficient to indicate compliance, a CFPB staffer said. Also, home equity line of credit resets do not constitute new transactions that would trigger full ability-to-repay rule underwriting.Another take-away is that loan originator bonuses deriving from funds that exclude mortgage profits are not subject to the otherwise applicable 10 percent limits on loan originator compensation. Regarding...
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