CFPB and Government Updates; March Madness or Lock Lunacy? April, May Should be Solid!

By: Rob Chrisman • Mon, Mar 23 2015, 11:02 AM

Today I head off to Austin, Texas for four days of MBA STRATMOR Peer Group Program meetings - a great opportunity to sit in a room with the MBA, STRATMOR execs, and CEOs & CFOs of dozens of lenders and compare thoughts on the industry and how to improve operations & production. Ahead of the trip I looked at my credit card balance - it would be embarrassing to max it out - and I owe about $1,500 - manageable. I can't fathom $1.5 billion or $1.5 trillion, and according to the Mortgage Bankers Association total commercial and multifamily debt outstanding in the U.S. stood at $2.64 trillion in the fourth quarter of 2014, an increase of $49 billion, or 1.9 percent, over the third quarter of 2014. Looks like some borrowers are taking things to "the next level."

There is no way the government can ever fully extract itself from housing, and recent news firmly suggests that the industry may-as-well grow accustomed to the idea.

On March 19 the Senate Banking Committee held a hearing with the top regulators from the Federal Reserve, OCC, and FDIC in order to examine the merits of enacting legislation providing regulatory relief for regional banks. This hearing serves as a stark reminder of the inherent difficulties - both politically and practically - with altering the Dodd-Frank Act. The road to reducing the regulatory burden for community and regional banks is not going to be smooth. Although the tone during the Senate Banking Committee hearing was less than optimistic, many experts believe the odds favor the $50 billion SIFI bank threshold to be increased in 2015.

But once a regulator has power regulators are concerned about losing regulatory discretion. The witnesses - Federal Reserve, OCC, and FDIC - and two top Senate Democrats expressed their concern that a regulatory relief bill could result in the removal of regulatory discretion and therefore leave the system at risk. For example, there is a concern that new legislative language raising the threshold could prevent regulators from acting to address systemic risk if it emanates from a bank below the new asset threshold. Concerns regarding a curtailment of regulatory discretion will be a focus in the months ahead but our sense is that legislation can be drafted to maintain existing authorizes while still softening certain regulations.

And politicians like to make headlines, and after a lack of them for several months GSE reform proposals are back in vogue. House Representatives John Delaney (D-MD), John Carney (D-DE) and Jim Himes (D-CT) reintroduced their housing finance reform bill, entitled the Partnership to Strengthen Homeownership Act, which utilizes Ginne Mae to guarantee and regulate the conventional market. The legislation furthers the industry's primary objectives of ensuring liquidity for all forms of housing while reducing taxpayer risk.

And the MBA reports that, "industry experts and representatives of community banks and credit unions testified before the House Financial Services Committee on the regulatory burdens posed by the Dodd-Frank Act. Mortgage issues discussed during the hearing include the Qualified Mortgage rule, the implementation of the TILA RESPA integrated disclosure, and general concern over the lack of available credit. The Senate Banking Committee is currently considering regulatory relief legislation targeted at community banks and credit unions, and the House Financial Services Committee is expected to do the same later in the year."

In other political news Senators Brown (D-OH) and Warren (D-MA) both expressed their concern with broader efforts to rollback the Dodd-Frank Act and suggested that regulators have sufficient administrative authority to soften the regulatory impact on community and regional banks. Notably, Senator Brown highlighted the impact of regional banks failing and Sen. Warren used her Q&A session to caution against removing regulatory discretion and, in fact, asked the panel how the Dodd-Frank Act could be strengthened further.

The Consumer Finance Protection Bureau has not been idle. The CFPB spread the word that it has updated the TILA-RESPA regulatory implementation materials to bring them into alignment with a rule published 2/19/2015 that modifies the 2013 TILA-RESPA Final Rule. You can see the updates here. "This rule extends the timing requirement for revised disclosures when consumers lock a rate or extend a rate lock after the Loan Estimate is provided and permits certain language related to construction loans for transactions involving new construction on the Loan Estimate. Additionally, the Bureau is making non-substantive corrections, including citation and cross-reference updates and wording changes for clarification purposes, to various provisions of Regulations X and Z as amended or adopted by the 2013 TILA-RESPA Final Rule. Because this rule also amends the 2013 Loan Originator Final Rule to provide for placement of the Nationwide Mortgage Licensing System and Registry ID (NMLSR ID) on the integrated disclosures, we've also updated the Loan Originator Rule Small Entity Compliance Guide. Check out the Regulatory Implementation page to learn more.

The CFPB released its Final Policy on adding consumer narratives to its complaint database. The CFPB released the details of its expanded consumer complaint database that will include unsubstantiated consumer narratives. Because the vast majority of consumer complaints lodged through the Bureau's complaints portal are resolved with a simple explanation, the MBA had urged the CPFB to narrow the proposed expansion to include the consumer narrative only in instances where the accuracy of the complaint has been verified (such as instances where the lender provided remediation to address the complaint). The final policy makes no provision for ensuring that consumer complaints that the CFPB solicits and posts are valid. And the database does not allow financial institutions to provide a detailed response. Instead, companies are limited to a single selection from a drop down menu. "The MBA believes that - like the rate checker before it - the CFPB's expanded complaints portal will make it more difficult, not easier, for consumers to make well-informed decisions. MBA will continue to work with members to stop this ill-advised project."

"We share industry's disappointment with the CFPB's action...We take little solace in the CFPB's comment in the policy statement's supplementary information that this concern is sufficiently addressed by its disclaimer on the complaint database that 'we don't verify all the facts alleged in these complaints but we take steps to confirm a commercial relationship between the consumer and company.' We doubt many consumers, even if they read the disclaimer, will appreciate what that means for a complaint's validity and will continue to assume that a complaint is true because it is being published on a government website. In other words, complaints will take on an unwarranted level of credibility by virtue of them appearing on the CFPB's website. The CFPB prides itself on being a data-driven agency. Its disclosure of consumer narratives is the antithesis of being data-driven. Instead, the CFPB will be publishing anecdotes much in the same way as an Internet gripe site."

Morrison and Foerster published an article highlighting a bill that was passed last year intending to change the structure of the CFPB. Another bill was recently introduced, H.R. 1266, which would change the CFPB to an independent Financial Product Safety Commission (FPSC) where the director of the CFPB would be replaced by a five member bipartisan committee appointed by the President. The bill was proposed due the Bureau's lack of accountability and transparency. Many financial services trade associations supported the bill (American Bankers Association, National Association of Federal Credit Unions, U.S. Chamber of Commerce, etc.) whereas a combination of consumer groups wrote to Congress, supporting the current CFPB structure. To read more about Morrison and Foerster's article and to stay abreast of the progress of the legislation, click here.

Is your lock desk swamped, and pipeline at or near a record level? Not to take anything away from you, but I am hearing plenty about originators backing pricing off due to capacity constraints. Service levels are already strained. The cautious pricing has caused the primary-secondary spread to widen around the lows and the industry sees no reason to expect anything different if rates were to rally further. Suddenly April and May are looking like great months. Traders have seen increased agency MBS trading due to hedging, and I am hearing lock desks are seeing a nice pick up in lock volumes - some records being broken. Perhaps margins have been dropped, and borrowers & LOs might be thinking that rates are going up and the opportunity for a rate & term refinance is slipping. There will always be cash out refis, right? The long-expected death of the refi biz has been exaggerated. Fannie Mae's trading desk reports, "Primary rates were reported by the majority of lenders in the 3.75% to 3.875% range, with a few aggressive lenders at 3.625%. Using 3.875% as the prevailing rate, the primary/secondary spread is ~117, unchanged week over week."

Here we are at the last full week of March - I don't know why time seems to fly - and another week of thrilling economic numbers. Let's just jump in to the details. Today we will have The Chicago Fed's Activity Index and Existing Home Sales. Tuesday is the Consumer Price Index - who under the age of 30 remembers inflation? We will also have the FHFA House Price Index and New Home Sales. Wednesday the real estate-related news continues with the MBA's mortgage application data, but we will also have Durable Goods. Thursday is Jobless Claims, and then Friday is Gross Domestic Product, Personal Consumption, and several forgettable University of Michigan stats.

For those numerically inclined the yield on the 10-yr at Friday's close was 1.93%, and this morning we're sitting around 1.91% and agency MBS prices are better by nearly .125.

Jobs and Announcements

Looking to take your sales career to the next level? ServiceLink, a Black Knight company and part of the Fidelity National Financial family, is looking to hire experienced Valuation Sales Representatives throughout the country to help expand its Origination, Home Equity, Default, and Capital Markets Valuations business lines. In addition to a minimum 3-5 years of experience the consummate candidate will have a book of business to bring over and solid contacts within our industry for new leads. Since 1983, ServiceLink has been a premier valuation services provider to many of the nation's top lenders and servicers. To find out more about a rewarding career with ServiceLink, please contact Bobbi Englert or within the site one can learn more about the benefits of working for ServiceLink.

Planet Home Lending, LLC announced the expansion of its sales team in its correspondent division. "Planet has hired a team of industry veterans who have extensive experience in mortgage lending: Gary Strohwig, Regional Sales Manager covering the Central markets, Carl Kranig, Regional Sales Manager for the Northeast markets and Ben Fant, Regional Sales Manager for the Southeast markets. The team will be led by James Loving, Director National Sales who has over 40 years of mortgage lending experience and has successfully created and managed several sales teams. Due to its rapid growth Planet is relocating its corporate headquarters into 23,000 square feet of office space in Tampa, Florida." Founded in 2007, Planet Home Lending is a privately held, national residential mortgage lender with multiple business channels positioned to provide competitive products and services. It is an approved originator and servicer for FHA, VA, and USDA as well as a Freddie Mac Seller/Servicer, full Ginnie Mae Issuer and Fannie Mae Servicer, and has a current servicing portfolio is in excess of $15 billion.

If you are a high producing branch or existing owner, there is a unique opportunity out there for qualified leaders. A sales-focused and culturally sound regional lender is looking to continue its growth by adding hubs in the Southwest, Southeast, and Great Plains regions. It will allow the right existing staff to remain intact for both production and operations while offering the Regional Manager a rare opportunity for corporate profit sharing and a seat on the company Board of Directors. The right cultural fit is more important than any other factor although existing production is a must. Aggressive compensation, corporate influence and an opportunity to work in a team first culture have made this offering very attractive to large branches or midsized companies in the past. Contact Dolan via e-mail or 480-748-5226 to find out more.

And a progressive Northeast based closed loan aggregator of prime jumbo residential loans is looking for experienced sales people to fill VP of Correspondent Sales positions with a focus on middle market and regional jumbo lenders, and relationships with Western-concentrated lenders is a plus. Please send confidential inquiries to me at rchrisman@robchrisman. com (excuse any delays due to travel).