Who does the CFPB Examine & Why? How Much is a Lender Averaging $9M a Month Worth?

As a reminder, many in the industry know that as of April 1 new rates kicked in under the National Flood Insurance Program. Policy premiums increased for homeowners in high risk areas by up to 25%. Are we having fun yet?

The CFPB... where does one start?

Many lenders were concerned about the latest CFPB announcement where they will allow consumers to post complaints to the complaint database. Most in the industry agree that consumers are not always entirely accurate with their complaints and are typically one-sided. STRATMOR Group reminded folks that the MortgageSAT Survey is a great tool to mitigate those kinds of complaints. When a borrower completes the survey, if the overall satisfaction score is low, the lender gets an alert which allows them to contact the borrower and neutralize their negative experience. Lenders that actually reach those borrowers say they usually thank the lender by the end of the conversation. STRATMOR also has data  based on over 12,000 surveys this year that show that 70 percent of consumers provide comments when asked to complete a survey on their experience. "Contact Tim Ryan if you'd like to know more about MortgageSAT. STRATMOR is also offering a free survey to determine how lenders are currently surveying their borrowers. Click on this  link MSAT Survey, to participate in this survey and, by participating, receive results to gain a better understanding of what other lenders are doing to survey borrowers, what they are doing with the results and how that can positively impact your bottom line."

The MBA spread the word that the House of Representatives will vote this week on the Mortgage Choice Act (H.R. 685) which would change the way "points and fees" are calculated under the Qualified Mortgage (QM) definition in the Dodd-Frank Act. More specifically it focuses on making two vitally important adjustments to the QM definition of points and fees under the Truth in Lending Act (TILA) as amended by Dodd-Frank to ensure greater consumer choice in mortgage and settlement services under the QM rule. The MBA points out that Dodd-Frank provides that a QM, under its "ability to repay" standards, cannot have points and fees in excess of three percent of the loan amount, which includes charges by affiliated settlement service providers. "This has the unintended effect of limiting the availability of affordable mortgage credit particularly to moderate-income and other families who require smaller loans under $150,000.

H.R. 685 endeavors to restore a full and open competitive market by clarifying the definition of fees and points. In doing so, the legislation will ensure consumers have greater access to mortgage credit and also more choices in credit providers. Proper implementation of the ability to repay and QM requirements is crucial to allowing credit-worthy consumers the ability to purchase or refinance a home at affordable rates. MBA is asking you to please contact your Representatives to urge them to support this important legislation when it comes for a vote this week. Please click HERE to go to the MAA homepage and click on the 'Take Action' button to get started or contact Annie Gawkowski at 202-557-2816 if you need assistance."

Speaking of the union of politicians, regulators, and the industry, the Multi-State Mortgage Committee (MMC) announced a Settlement Agreement and Consent Order between 43 state mortgage regulators and New Day Financial, LLC d/b/a NewDay USA (New Day). It's not chump change: $5.3 million and its COO was shown the door.

"The CFPB is perhaps the single most powerful and least accountable federal agency in all of Washington and demands rigorous oversight." Does it? Texas' Jeb Hensarling, Chairman of the House Financial Services Committee, thinks so. There are plenty in the lending industry who believe the same thing. But then again, if you ask the average person on the street, they will never have heard of the CFPB. It will continue to play out over the years, but in the mean time...

The residential lending industry, unfortunately, must use enforcement actions to guess at the CFPB's intents. Picture a highway with no speed limit signs. Motorists gauge the speed limit, license plate registration laws, texting while driving, whatever, strictly by whenever the Highway Patrol issues a citation. The motorists want specifics and precise verbiage, but the Highway Patrol doesn't give them. Is that any way to run a highway?

Sometimes folks wonder how the CFPB decides who and what to examine. At an appearance a while back, the CFPB's Deputy Director, Steven Antonakes, explained the bureau's risk-based approach to supervision. Antonakes discussed that visiting all the banks and nonbanks that they monitor would be impractical and a fixed-schedule approach would fail consumers by allocating resources to less severe problems, while larger issues awaited their turn. He also explained that the CFPB focuses on risks to consumers instead of risks to institutions and conducts examinations by product line, which allows the bureau to compare product lines across institutions, charters or licenses. Each product line is evaluated by its potential for consumer harm, the size of the product market, the entity's market share and inherent risks to entity's operations and offering of financial products within that market. The CFPB also views debt collection and mortgage servicing as highest risk markets. Furthermore, if there are more significant violations, the CFPB refers matters to its action review committee, who then decides if a matter is resolved through confidential supervisory action or through public information action. In order to ensure decisions are made in a consistent matter, the CFPB uses a common set of factors: violation-focused factors; institution-focused factors; and policy-focused factors. To read more about the CFPB's supervisory and enforcement action, click here.

Last week the CFPB ordered RMK Financial Corporation to pay $250,000 for deceiving borrowers. According to the agency, those practices included advertising that led consumers to believe RMK was affiliated with the government. According to the CFPB, California-based RMK - which also does business under the name Majestic Home Loans - mailed print ads to more than 100,000 consumers in several states, using the names and logos of the Department of Veterans Affairs and the Federal Housing Administration in a way that implied the FHA or VA either sent the ads or endorsed the company's products. Among the consumers who received the ads were "tens of thousands" of veterans and service members, per the CFPB.  The CFPB also alleged that the lender's advertisements failed to satisfy TILA requirements for advertising variable rate loans  and misrepresented interest rates and estimated monthly payments, such as by misleading consumers to believe advertisements were for fixed-rate rather than variable-rate loans. The CFPB charged the lender with violations of TILA, the CFPA, and Regulation N (the Mortgage Acts and Practices Advertising Rule).

Back in January the CFPB did raise an issue with community banks and rural areas. I received a note from an originator in a rural area opining, "In general I have little issue with it. Perhaps the size of the community banks is too large, but I won't quibble. What I do have an issue with, however, is this paragraph: 'Expand the definition of "rural" areas: In addition to counties that are considered to be "rural" under the CFPB's current mortgage rules, the proposal would expand the definition of "rural" to include census blocks that are not in an urban area as defined by the Census Bureau.' Why is a separate emphasis given to Rural Areas and not urban areas that are also underserved? One person asked me if this was divided upon racial boundaries. I understand in rural areas a bank might be an hour's drive in some parts of the country but in some urban communities the commute to a bank could be an equal time frame. Many institutions will not lend in certain urban areas. Basically, I'm questioning the attempted definition that could cause a disparity in treatment, in access to funds, upon two classes of people that would otherwise be economically similar except for their local."

We saw a wee rally in the bond market Monday - for no concrete reason. The market "decided" to rally a little. Of course the market doesn't "decide" anything - the collection of buyers and sellers that make up the market decide that - but I am not going to waste your time with more of an explanation than that. I don't have one.

There is more news today upon which to chew. We've seen March Retail Sales (+.9%, a shade below) and Producer Price Indices (+.2%, as expected). At 3AM Hawai'i time is March NFIB small business optimism gauge and then the February Business Inventories. After the initial round the yield on the 10-yr, which closed Monday at 1.94%, is at 1.89% with agency MBS prices better by .250 than Monday afternoon.

Jobs and Announcements

For senior management roles, PHH Mortgage is in search of a Vice President of Correspondent Operations for its Mt. Laurel, NJ office. The ideal candidate has a strong correspondent and underwriting background as well as leadership skills with the ability to think strategically while remaining customer focused. Interested candidates may send their resumes/questions to Recruiter Jessica Mullett, or visit www.phhjobs.com to view the full job description.

Southern California's Residential Mortgage Lender Majestic Home Loan is expanding its wholesale and correspondent presence and is looking for AEs and Area Sales Managers across the nation. "Approved in 24 states, MHL offers a full line of products, aggressive pricing, revolutionary proprietary system and more importantly, cycle time under 21 days. "If you are losing business due to turn times, or unable to work with your top accounts because your territory is saturated with AEs, give us a call. If you or your customers don't have direct access to underwriters and can't get anything done, or can't close the majority of your approved loans, give us a call. At MHL we know that each transaction creates the overall success of the Account Executives." If you're interested in learning more about working for a true customer oriented company, email Thomas Michel, EVP, National Sales Manager or call him directly at 909-912-7102. MHL is also looking for underwriters, funders, doc drawers. If interested send your resume to careers@mhlmtg.com."

In the retail sector Procura Mortgage Company is looking for experienced sales managers, loan officers and underwriters in the Arizona and Washington markets. "The company strives to exceed expectations of borrowers by always following our core values of service and convenience.  With more than 200 years of combined experience in mortgage lending operations, Procura's leadership team actively supports its productive, client-focused sales team. Procura is FNMA, FHMLC, GNMA direct, offers portfolio products, local processing, underwriting, & closing, along with a competitive compensation package and a generous benefit package: paid vacation, health care, life insurance, long term disability, 401(k) retirement with matching contributions, career opportunity programs and tuition assistance. If you are a highly productive mortgage professional who shares a commitment to providing exceptional client service, contact Kent Bills, General Manager at 602-338-5127.

And heading back to management, "Having successfully expanded our west coast retail partner network that contributed to more than doubling monthly production volume in 2014, a multi-billion dollar nationally-recognized mortgage lender is now searching for two top-tier mortgage professionals in the Northeast and Mid-South to fill a Regional Management role.  Licensed across the country, our unique regionalized model and superior service offers unparalleled opportunity for growth. The ideal candidate, capable of managing multiple branch locations, is currently a mortgage broker or an existing retail branch / territory manager with monthly production of $5+M.  As a direct seller to all agencies, we offer a comprehensive suite of products with virtually no overlays and complete fulfillment within your region, the branch / regional manager direct input into operating margins and MLO compensation, 100% branch credits & multi-branch overrides, and a culture of dedicated corporate support and recruiting assistance allowing the manager to focus strictly on sales and branch network growth. Qualified candidates are encouraged to submit a letter of interest and/or resume to me at rchrisman@robchrisman.com.

In other company news, LendingHome, yet another company that capitalizes a letter in the middle of its name, announced its average fundings over the last year were $9 million per month. But more importantly it has "raised about $109 million across three rounds of financing. The latest is a $70-million investment led by Chinese web firm Renren."