Freddie's Non-Usage Fees; LO Comp, Land Sales, and Reg. E Tidbits - It's a Compliance World
If you're like me and rest your weary eyes each night by reading the Fair Housing Act of 1968, then you don't need to be told that the act "prohibits discrimination in the sale, rental, or financing of dwellings and in other housing-related activities on the basis of race, color, religion, sex, disability, familial status, or national origin". It would also come as no surprise to you that the good people over at HUD are chartered with the authority and responsibility for interpreting and enforcing the Fair Housing Act, with the power to make rules for implementation. The Act does not specify a standard for proving a discriminatory effect (disparate impact) violation. Notwithstanding this statutory omission, HUD and the eleven federal appellate courts that have ruled on this issue agree that practices with unjustified discriminatory effects violate the Act. To clarify, HUD issued a final rule formalizing its long held recognition of discriminatory effect liability under the Fair Housing Act and a three-part burden-shifting test for determining whether a given practice has an unjustified discriminatory effect. Don't tell me how it ends, I'm only on page 11,464 sub-section C, and I know this is "old" material but I am asked about it periodically, so here is the link: http://portal.hud.gov/hudportal/HUD?src=/press/press_releases_media_advisories/2013/HUDNo.13-022.
And compliance just keeps on, keeping' on. Recently the CFPB laid out loan originator compensation restrictions, and dropped "Zero-Zero Requirements". Although the loan originator compensation rule finalized by the Consumer Financial Protection Bureau in January passed without as much fanfare as the Bureau's QM rule, the new mandate will result in significant challenges to the mortgage lending industry's compliance efforts. The CFPB's 'Final Rule' answers some of the questions left open by the previous loan originator compensation rule implemented by the Federal Reserve Board in 2010, prior to the transfer of Truth-in-Lending Act authority from the Board to the Bureau.
Of particular interest to lenders, brokers and loan originators are answers to the following questions: what constitutes a proxy for a loan's terms? When may a loan originator grant concessions to a borrower? What bonuses may a creditor pay its loan originators? K&L Gates has an outstanding write-up which can be found on their site. But we could easily be sitting here a year from now, trying to remind ourselves that the intentions of LO comp changes are good (to prevent borrowers from being guided into a bad program) but the execution and changes leave a wake of confusion.
The Consumer Financial Protection Bureau has finalized revisions to its remittance transfers rule (Reg E, for all those keeping score at home) and set October 28, 2013, as the rule's new effective date. While not entirely eliminating the requirement for remittance transfer providers to disclose recipient institution fees, the revised final rule does recognize some business realities and restricts the scope of that requirement and makes other favorable changes. Interested parties should look no further than CFPB's own site for complete Reg. E amendments: http://www.consumerfinance.gov/remittances-transfer-rule-amendment-to-regulation-e/
One hears more and more about CFPB "victories" in consumer compliance claims, and fines levied against banking institutions, but where does the money go once the check has been cut? Earlier this month in our government's own blog ("Our government has a blog?" Yes, our government has a blog!) the Federal Register the CFPB issued a final rule (final, final?) that establishes a Consumer Financial Civil Penalty Fund into which the agency will deposit any civil penalty it obtains against any person in any judicial or administrative action under Federal consumer financial laws. Money in the Civil Penalty Fund may be used for payments to the victims of activities for which civil penalties have been imposed under Federal consumer financial laws.
Today from 12PM to 1PM EDT, Ballard Spahr will put on a webinar where the group will cover the CFPB and the Land Sales Full Disclosure Act (ILSA). Topics of discussion will be CFPB investigations, including how the CFPB identifies targets, and the investigation process and the CFPB's involvement in ILSA cases. Participation in the webinar is by registration only, and the process starts by visiting its site.
The Federal Deposit Insurance Corporation (FDIC) issued its list of state nonmember banks recently evaluated for compliance with the Community Reinvestment Act (CRA). The list covers evaluation ratings that the FDIC assigned to institutions in February 2013. The CRA is a 1977 law intended to encourage insured banks and thrifts to meet local credit needs, including those of low- and moderate-income neighborhoods, consistent with safe and sound operations. As part of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA), Congress mandated the public disclosure of an evaluation and rating for each bank or thrift that undergoes a CRA examination on or after July 1, 1990. A list of the recent evaluated banks can be found HERE.
On to some personnel, state, agency, and investor updates. As always, it is best to read the actual bulletin for the nitty-gritty details.
Congrats to Brian Gould, United Guaranty Corporation's new Chief Operating Officer (COO). He's been with UG for fourteen years, and now oversees underwriting, claims, loss mitigation, customer support, and business analytics, as well as the company's service operations and enterprise services groups. Gould also has functional oversight of these areas for United Guaranty's international businesses.
Freddie Mac has opened applications for its new Streamlined Modification program, making it available to all eligible borrowers immediately, six weeks earlier than originally planned. The company said the early implementation was made to expedite financial relief for potentially thousands of distressed families. Under the program, originally set to begin on July 1, servicers are required to send modification offers to borrowers who are at least 90 days, but no more than 720 days, delinquent on mortgages that are at least 12 months old and meet other eligibility criteria. Eligible borrowers are not required to submit documentation and the modification becomes permanent if the borrower makes on-time payments during the three month trial period.
(This is interesting. Freddie is planning to charge approved seller services essentially "non-usage" fees if the lender doesn't service enough or sell enough production.) "We are introducing new Seller/Servicer activity thresholds in Single-Family Seller/Servicer Guide (Guide) Bulletin 2013-8, and a new fee that will be assessed if a Seller/Servicer does not meet at least one of these thresholds. This new requirement supports our risk management efforts and offsets the costs incurred to maintain our Seller/Servicers and monitor their compliance with our eligibility requirements. To give you time to prepare for this new requirement, the Low Activity Fee will not be assessed until January 1, 2014. New Seller/Servicer activity thresholds and Low Activity Fee. Beginning January 1, 2014, Seller/Servicers that do not meet one of the following activity thresholds will be assessed the Low Activity Fee of $7,500: Sell mortgages to Freddie Mac with an aggregate unpaid principal balance (UPB) greater than $5 million during the immediately preceding calendar year, or Service, or be a servicing agent for, mortgages for Freddie Mac with an aggregate UPB of at least $25 million as of December 31 of the immediately preceding calendar year. New Seller/Servicers will not be subject to these thresholds until they have been approved for a full calendar year."
The state of Montana recently revised the Montana Mortgage Act to bring it into compliance with federal rules. These revisions include changes to mortgage broker/lender licensing requirements updates to licensing exceptions and educational requirements, as well as new additions to the reasons for license denial. These amendments shall be effective on October 1, 2013.
Caliber Funding, LLC introduced its new correspondent lending channel, which will expand its production capacity and allow it to provide more competitive product offerings to customers. As previously announced, on January 17, 2013, Caliber and Vericrest Financial entered into a merger agreement. Caliber's entry into the correspondent lending channel supports the combined company's goal to create a full-service, consumer-focused residential mortgage banking organization offering both loan origination and loan servicing solutions. Caliber's new correspondent lending channel will enable the Company to leverage its state-of-the-art technology to provide multiple product offerings and excellent customer service to an even broader customer base. Caliber is also investing in two fulfillment centers in Florence, South Carolina and Irving, Texas to ensure efficient and exemplary customer service for its partners and customers.
As lenders are staring at a month end next week, rates have not come back down and funding departments are waiting for the inevitable funding crunch. And don't look for rates to come back down, as the U.S. economy seems to be doing pretty well: the index of leading economic indicators rose, as did retail sales, consumer sentiment, and housing permits. Since the release of the stronger-than-expected April Employment report on May 3, investor sentiment toward bonds has turned more negative. Remember, the Fed has talked about how QE3, and the bond buying program which holds rates artificially low, is dependent on the labor market. So in spite of the bad news that might ordinarily push rates lower (Europe being in a recession, first-time unemployment claims rising, manufacturing activity declining, zero inflation, housing starts weakening, and industrial production & capacity utilization dropping), the market seems intent on keeping rates a little higher than where they have been.
Tradeweb noted that "flows on Monday were the typical below normal (roughly ¾ of the daily average) and supply was not much better at $2 billion." There was no economic news, and by the time the dust settled agency MBS prices were worse between .125-.250. Here this morning, in the very early going, the 10-yr is unchanged from Monday's close (at 1.96%) as are agency MBS prices.
The industry's thoughts and prayers go out to the victims and survivors of the monstrous tornado that roared through suburbs of Oklahoma City, flattening entire neighborhoods and destroying a primary school. For me the events are especially poignant, having just been in Oklahoma last month and today traveling from Texas to Kansas, but my feelings are nowhere near what the families of those directly impacted by the storm must be feeling.