Tag Archives: Consumer Financial Protection Bureau
20 Apr

ALTA President’s Congressional Testimony Highlights Three Regulatory Reforms

Introduces Three Regulatory Reforms to Benefit Businesses and Consumers


3. Congress should pass H.R. 1195 as soon as possible. This bipartisan legislation establishes a small business advisory board at the CFPB.

Washington, DC (PRWEB) April 16, 2015

American Land Title Association (ALTA) President Diane Evans NTP submitted the following testimony today before the Financial Institutions and Consumer Credit subcommittee of the House Committee on Financial Services.

During the hearing titled “Examining Regulatory Burdens on Non-Depository Financial Institutions,” Evans will highlight three regulatory reforms that will benefit businesses and consumers:

1. The Consumer Financial Protection Bureau (CFPB) should publicly commit to a hold harmless period for enforcement through the end of the year following the Aug. 1 implementation of the Bureau’s new integrated mortgage disclosures. A hold harmless period will help ensure consumers have a positive experience when obtaining a mortgage and purchasing a home. Without a hold harmless period, businesses will likely follow more stringent risk-management procedures that limit access to credit and settlement services. This will likely result in fewer options for consumers and less companies to choose from to get their transaction completed.

2. The CFPB’s new Closing Disclosure will confuse consumers because the government-mandated form will disclose different prices than the actual costs a homebuyer sees while shopping for title insurance. This is the only cost disclosed at closing that the CFPB prevents consumers from receiving their actual charge. The Bureau should resolve this issue by allowing the industry to disclose the actual title insurance premiums required in each state.

3. Congress should pass H.R. 1195 as soon as possible. This bipartisan legislation establishes a small business advisory board at the CFPB. It will provide formal and open channels of communication between Bureau staff and industry.

19 Aug

Stated income loans make comeback as mortgage lenders seek clients

Thu, Aug 14 2014

By Michelle Conlin and Peter Rudegeair

(Reuters) – Mortgage applicants who can’t provide tax returns or pay stubs to show their income are getting stated income loans again as companies such as Unity West Lending and Westport Mortgage chase customers they can no longer afford to ignore.

Lenders say these aren’t the same products as the so-called “liar loans” that were pervasive before the housing bust. Instead, the loans are going to borrowers such as small business owners or investors buying properties they intend to rent who can demonstrate an ability to repay, verifiable through bank or brokerage statements. Lenders said they look for enough assets to pay six to 12 months of payments, while also demanding high down payments to reduce the chance of default.

“This is not a return to the wild and wooly days of, if you fogged the mirror, you can have a loan,” said Paul Lebowitz, founder of Westport Mortgage. “They have a smarter edge to them now.”

Some rival lenders said the stated income loans on offer could be abused if borrowers fudge bank statements or don’t have enough money to repay the loan. None of the three biggest banks offer them. Sam Gilford, a spokesman for the Consumer Financial Protection Bureau, said the agency is concerned, though he wouldn’t say whether it is investigating them.

The CFPB’s rules don’t give specific minimums for assets required to demonstrate an ability to repay a mortgage, but critics said a year’s worth of payments for a three-decade loan may not be enough.

“It’s easier to falsify bank statements than income tax returns,” said Julia Gordon, director of housing finance and policy at the Center for American progress.

To avoid the housing-bust taint, the new stated income loans are being called such things as “alternative documentation loans,” “portfolio programs,” “alternative-income verification loans” and “asset-based loans.”

Borrowers usually have to have credit scores of about 700, though some lenders, like San Jose, California.-based Western Bancorp, will accept credit scores as low as 620. Credit scores range from 300 to 850, with 640 seen as the line between prime and subprime. Borrowers typically pay one-half to three-quarters of a percentage point above conventional mortgage rates.

Jae Chang, president of Los Angeles-based National Mortgage Service, started offering stated-income loans five months ago. “We are targeting those borrowers who have excellent credit, and a lot of liquid reserves, but who are having difficulties proving their income,” he said. National Mortgage Service is doing $15 million worth of stated-income loans a month.

Compared to the roughly $1 trillion of U.S. home loans anticipated this year, the stated income mortgage volume at National Mortgage Service is tiny. There is no available data about how widespread stated income mortgages are, and experts said that any growth in these products is off a small base.

But the shrinking mortgage market is prompting some lenders to expand their potential pool of customers. The MBA’s forecasts for this year’s mortgage lending volumes are down 30 percent from 2013 levels. Volumes started falling last year as rising rates cut into demand.


Among the customers that lenders are targeting are small business owners, whose personal income tax returns may not reflect their ability to repay a loan. Many keep income in their business to reduce their personal income tax obligation. Stated income loans are also often geared toward investors, who don’t fall under the same rules imposed by the 2010 Dodd-Frank financial reform legislation.

Other lenders lowering their standards to win new business include Wells Fargo & Co, the biggest home lender in the United States, which said earlier this year it is willing to make loans to borrowers with credit scores as low as 600, down from a previous limit of 640.

The Dodd-Frank law said that, for all owner-occupied mortgages made in the United States, lenders must make sure the borrower has the capacity to repay, or face enforcement from the Consumer Financial Protection Bureau as well as consumer claims in court, where lenders could be liable for up to three years of finance charges and fees.

Ability-to-repay rules apply only to mortgages for people who will live in the house. That means there is potential for abuse if borrowers apply for the mortgages saying they’ll rent out the property when in fact they intend to live there. Because these kinds of loans are not subject to ability-to-repay rules and require less documentation, borrowers could be talked into taking on mortgages they cannot afford, a lender at a large bank said.

The law, and the CFPB’S rules on the matter, will likely prevent lenders from re-embracing the worst varieties of stated income loans during the bubble years, such as so-called “ninja” loans, a near-acronym for “no income, no job or assets.”

While even ninja loans could easily be securitized before the mortgage bubble burst, packaging non-standard home loans into bonds and selling them to investors is much more difficult now. Most stated income loans today are either held in lenders’ portfolios or sold to private investors.

(Reporting by Michelle Conlin and Peter Rudegeair. Editing by Dan Wilchins and John Pickering)

© Thomson Reuters 2014. All rights reserved.

Fitch Finalizes U.S. RMBS Qualified and Non-Qualified Mortgage Criteria

20 Mar

Posted on March 19, 2014 @ 11:02 am in Daily Dose

Fitch Ratings announced it has finalized its criteria for analyzing loans securing U.S.residential mortgage-backed securities (RMBS) under the new qualified mortgage (QM) and Ability-to-Repay rule (the Rule) recently adopted by the Consumer Financial Protection Bureau (CFPB).

Fitch developed assumptions with respect to the probability of challenges to the Rule or a mortgages QM status, as well as the potential costs or damages.

“We expect some defaulted borrowers will likely challenge the Rule, but a lack of legal precedent could make the first few cases high profile and prone to significant legal costs,” said senior director Suzanne Mistretta.

The announcement commented, “Fitch will make upward adjustments to its credit enhancement calculations if the originator designates the loan as higher priced QM (HPQM) or non-QM. Loans identified by the lender and confirmed by third party due diligence as safe harbor QM (SHQM) will not receive an adjustment.”

Fitch makes a few assumptions regarding how to handle new loans. First, Fitch will consider the lifetime probability of default (PD) derived from Fitch’s mortgage loan loss model. Additionally, the population is narrowed further to indicate only those borrowers who are likely to default within five years of origination. Finally, a states foreclosure process, either judicial or non-judicial, plays a factor.

Mistretta noted, “Lower credit quality pools will see a larger effect on credit enhancement relative to higher credit quality pools primarily due to their higher probability of default and smaller loan balances.”

Fitch will make mark a key difference between structures—those that provide for expenses to be paid from available funds, and those that deduct expenses from the mortgage pool’s net weighted average coupon (Net WAC).

The announcement clarified, “Where expenses are absorbed by the pool’s Net WAC and the note rate is capped at the Net WAC, Fitch will not adjust its loss expectation for the pool. Although expenses are borne by both senior and subordinated investors, this provision does not affect the trust’s ability to pay contractual amounts due.”

“The loan designation and determination of potential challenges and legal costs and damages will be highly dependent on the results of Fitch’s review of the originator’s/aggregator’s underwriting guidelines and origination processes,” the release added.

URL to article: http://dsnews.com/fitch-finalizes-u-s-rmbs-qualified-non-qualified-mortgage-criteria/

The Value Of A Competent Title Company: Avoid Problems In Closing

21 Jan


Consumer protection agency wants to know about snags that arise in real estate closings

By , Published: January 9 | Updated: Friday, January 10, 9:40 AM

The federal government has a question for consumers who have bought or refinanced homes, a question that’s certain to generate more than an earful or replies: Were there any problems when you went to close the deal?

Any last-minute glitches or surprises that delayed the settlement, required unexpected negotiations or, worst of all, blew up the sale or refi? Did you get your settlement sheet in advance so that you could review the documents intelligently? Were there any errors or discrepancies that popped up — charges that were considerably higher than you had expected, loan-related fees or an interest rate that differed from what you thought you had signed up for? Was the whole process pleasant? Was it “empowering”?

Wow. Talk about stirring up hornets. The Consumer Financial Protection Bureau, which has broad regulatory powers in the real estate settlement arena, wants to know whether there are common problems that need to be fixed. If so, it may make what it euphemistically calls “interventions” in order to right what seems to be wrong.

The bureau also wants to hear from realty professionals, lenders, title insurance and escrow agents, lawyers and others who play roles in closings on homes — the people who produce, bless and witness the signings of mounds and pounds of paper associated with the settling of America’s home transactions.

From industry accounts, the vast majority of closings are successful. The National Association of Realtors estimates that roughly 10 to 12 percent of all pending sales don’t close, for various reasons. But conversations with agents suggest that a much higher percentage of settlements experience problems that arise just before or during the event, snags that either delay or complicate the process.

Though eleventh-hour delays can occur because of issues related to title insurance and other factors, a disproportionate number appear to be related to the mortgage. Late in the game, the lender might inform the borrower: Sorry, but we’ve encountered some underwriting red flags in your application that you’ll need to resolve before we can proceed. Or oops, we didn’t get all the loan documents to the closing agent in time. Or worst of all, we’ve changed our mind. We simply cannot do this loan and we sincerely regret that we’re telling you this on the day before your scheduled closing.

Gary Kassan, an agent with Pinnacle Estate Properties in Valencia, Calif., says that he routinely gets buyers preapproved by lenders but that in at least 20 percent of purchases, problems that threaten to delay or disrupt closings pop up after the preapproval. In early January, Kassan was waiting for a lender to agree to close on a deal that had originally been scheduled for late December. The problem: underwriters’ questions about the borrower’s income that arose late in the process.

“I want to ask all these [loan officers] ‘Why didn’t you bring this up earlier, before you gave [my client] a preapproval letter?’ ”

Cindy Westfall, an agent with Premiere Property Group in the Portland, Ore., area, has had two recent sales knocked off track by underwriting issues just before the closing; one of them caused the entire sale to blow up, forcing her buyers to start their home search all over again. “My clients were very stressed” by the entire experience, she said in an interview.

Rhonda Masotta, an agent with Bright Realty in Sarasota, Fla., almost found herself in the same situation: Last year, she was sitting at a table for her buyer’s closing on a $1.25 million home. The only thing missing was one essential item: confirmation that the bank committed to do the loan had wired the money needed to complete the transaction.

“We all waited for hours,” but there was no word from the bank, Masotta said. The closing was rescheduled for the following day, but then came the bad news: The bank had decided to back out of the deal. That’s usually a death sentence on a home sale, but Masotta and her colleagues on both sides of the transaction opted for an emergency rescue attempt and found a bank willing to underwrite and fund the loan on an expedited basis later the same day.

That’s not the way closings are supposed to work, but stuff happens.

If you want to share your experiences with the Consumer Financial Protection Bureau, e-mail your account by Feb. 7. Detailed instructions for submitting comments — and postings of comments made to date — are online in the Jan. 3 Federal Register, at www.federalregister.

Ken Harney’s e-mail address is kenharney@earthlink.net.

Bloomberg Reports Change To CFPB Proposed Title Disclosure Requirements

21 Nov

Bloomberg.com yesterday reported that a U.S. rule that would have wrapped title insurance into the total costs listed on a simplified mortgage-disclosure form was dropped by the Consumer Financial Protection Bureau after industry complaints.


The rule first proposed by the consumer bureau in July 2012 would have incorporated these costs into the calculation of the annual percentage rate on a simplified new mortgage disclosure form. The agency backed down after feedback suggested that the all-in APR, is the rule is known, “might have affected the types of loans available to consumers,” it said in an e-mailed statement today.


The APR feeds into calculations under other regulations that determine whether a mortgage is a higher-priced loan. If a higher APR pushes a loan into that category, lenders could be more vulnerable to lawsuits under a separate CFPB rule that takes effect in January.

“We applaud the CFPB for listening to our members and eliminating the ‘all in’ APR as it would not help consumers shop for a mortgage and could limit their settlement choices,” Michelle Korsmo, chief executive officer of the American Land Title Association, a Washington-based trade group, said in a statement.

Willard Ogburn, executive director of the Boston-based National Consumer Law Center, criticized the CFPB’s decision to step back from its initial proposal.

“There is no evidence that better disclosure restricts access to credit,” Ogburn said at a CFPB field hearing in Boston where the new form requirements were introduced today. “Instead, it creates a more transparent and well-functioning market, which enables consumers to avoid abusive lenders.”

CFPB Director Speaks at American Bankers Association

22 Oct

At the American Bankers Association’s annual conference in New Orleans this week, Consumer Financial Protection Bureau (CFPB) Director Richard Cordray said loan originators face huge advantages under the agency’s mortgage rules that will take effect January.


The CFPB issued its Ability-to-Repay rule—also known as the Qualified Mortgage or QM rule—earlier this year in order to prevent bad lending practices.  The purpose of the rule is to make sure consumers are getting mortgages they can afford to pay back.


In addition to the QM rule, CFPB also issued mortgage servicing rules designed to correct many “sloppy and unsatisfactory practices” and to ensure fairer and more effective processes for borrowers at risk of losing their homes.


Both rules were “desperately needed” by the financial industry, Cordray said, as they have paved the way for the agency to issue guidance on how to comply with them, while also helping to resolve ambiguities and unclear interpretations when the rules were proposed in January 2013.


“For example, under the statute you would not have been permitted to charge any points or fees on any loan on which you paid compensation to any loan originator, regardless of whether that was your own employee or a mortgage broker,” Cordray said.


CFPB specified the effective date of its mortgage rules for January 2014.


“The central concept behind this project is our belief that compliance with regulations is a concern we all share, because successful compliance is good for everyone—consumers, industry, and regulators,” Cordray said. “We believe that working together makes the process go more smoothly, attains greater understanding, and helps achieve better results.”


“We believe that such a marketplace is the right outcome for all involved, and will lead to more stable and sustainable financial conditions that strengthen the future of this country,” Cordray said.
adapted from Reverse Mortgage Daily

Clarification of Mortgage Rules Comes From CFPB

20 Sep

The Consumer Financial Protection Bureau (CFPB) this month finalized amendments and clarifications to its January 2013 mortgage rules to help the industry comply and to better protect consumers.

In January of this year the CFPB introduced the Ability-to-Repay rule, requiring lenders to make a “reasonable, good-faith determination” that prospective borrowers have the ability to repay their loans.


On June 24, 2013, the CFPB proposed several amendments and clarifications to the mortgage rules adopted in the final rule, which is intended to clarify interpretive issues and facilitate compliance. One of the Bureau’s modifications is to clarify what servicer actives are prohibited in the first 120 days of delinquency. This rule prohibits servicers from making the “first notice or filing” under state law during the first 120 days a borrower is delinquent.


Under the rule, servicers will be allowed to send certain early delinquency notices required under state law to borrowers that may provide beneficial information about legal aid, counseling or other resources.


Another rule the CFPB aims to clarify is the definition of a loan originator.  Under the CFPB’s new rules, persons classified as loan originators are required to meet qualification requirements and are also subject to certain restrictions on compensation practices.


The provisions of the CFPB’s loan originator compensation rules that have not yet gone into effect were scheduled to take effect on January 10, 2014.  The  CFPB has changed the effective date for certain provisions of the rule to January 1, 2014.

“Our mortgage rules were designed to eliminate irresponsible practices and foster a thriving, more sustainable marketplace,” said CFPB Director Richard Cordray. “Today’s rule amends and clarifies parts of our mortgage rules to ensure a smoother implementation process, which is helpful to both businesses and consumers.”

CFPB New Rules

14 Feb


The Consumer Financial Protection Bureau list of new mortgage rules can be read in full at the link above.  Some of these will be implemented by January 2014.

Final rules issued by the CFPB for 2013

January 22 Remittance Rule (Regulation E) Temporary Delay

January 20 Loan Originator Compensation Requirements under the Truth in Lending Act (Regulation Z)

January 18 Appraisals for Higher-Priced Mortgage Loans (issued jointly with other agencies) Disclosure and Delivery Requirements for Copies of Appraisals and Other Written Valuations Under the Equal Credit Opportunity Act (Regulation B)

January 17 Real Estate Settlement Procedures Act (Regulation X) and Truth in Lending Act (Regulation Z) Mortgage Servicing Final Rules

January 10 Ability to Repay and Qualified Mortgage Standards Under the Truth in Lending Act (Regulation Z) Escrow Requirements under the Truth in Lending Act (Regulation Z) High-Cost Mortgage and Homeownership Counseling Amendments to the Truth in Lending Act (Regulation Z) and Homeownership Counseling Amendments to the Real Estate Settlement Procedures Act (Regulation X)

CFPB Issues Final LO Compensation Rule

22 Jan

” The final rule implements the Dodd-Frank Act and clarifies the scope of the rule as follows:

• The final rule defines “a term of a transaction” as “any right or obligation of the parties to a credit transaction.” This means, for example, that a mortgage broker employee cannot receive compensation based on the interest rate of a loan or on the fact that the loan officer steered a consumer to purchase required title insurance from an affiliate of the broker, since the consumer is obligated to pay interest and the required title insurance in connection with the loan.

• To prevent evasion, the final rule prohibits compensation based on a “proxy” for a term of a transaction. The rule also further clarifies the definition of a proxy to focus on whether: (1) the factor consistently varies with a transaction term over a significant number of transactions; and (2) the loan originator has the ability, directly or indirectly, to add, drop, or change the factor in originating the transaction.

• To prevent evasion, the final rule generally prohibits loan originator compensation from being reduced to offset the cost of a change in transaction terms (often called a “pricing concession”). However, the final rule allows loan originators to reduce their compensation to defray certain unexpected increases in estimated settlement costs.

• To prevent incentives to “up-charge” consumers on their loans, the final rule generally prohibits loan originator compensation based upon the profitability of a transaction or a pool of transactions. However, the final rule clarifies the application of this prohibition to various kinds of retirement and profit-sharing plans. For example, mortgage-related business profits can be used to make contributions to certain tax-advantaged retirement plans, such as a 401(k) plan, and to make bonuses and contributions to other plans that do not exceed ten percent of the individual loan originator’s total compensation.”


“Regulation Z already provides that where a loan originator receives compensation directly from a consumer in connection with a mortgage loan, no loan originator may receive compensation from another person in connection with the same transaction. The Dodd-Frank Act codifies this prohibition, which was designed to address consumer confusion over mortgage broker loyalties where the brokers were receiving payments both from the consumer and the creditor. The final rule implements this restriction but provides an exception to allow mortgage brokers to pay their employees or contractors commissions, although the commissions cannot be based on the terms of the loans that they originate.”

The rules will take effect in January 2014, except for the prohibition on mandatory arbitration and on the financing of credit insurance which will take effect in June 2013

A summary of the rule can be read here:


Making Comments on CFPB Proposed New Forms

11 Jul

Did you know that you may comment on the new mortgage forms proposed by the CFPB (Consumer Financial Protection Bureau)?

The link below allows you to search for the proposed forms and make a comment on their improvement.  Comments will be accepted through November 6.


Considering that getting a mortgage is probably the biggest financial decision most people will make, the CFPB aims to make disclosure forms more readily understood by the general public.

This means that mortgage professionals will have to learn to use and explain the new forms.  There is sure to be a learning process involved, but the end result will provide greater clarity in the costs and terms of a loan.