CFPB Addresses Section 8; NAR, MBA, NAMB, Congress to CFPB: "Don't TRID on Me!"
The NMLS has commenced a study on the role of a MLO - besides being at the receiving end of jokes about AARP in the workplace. All kidding aside, the analysis is to ensure legitimacy of the SAFE MLO National Test with Uniform State Content and is completed every 4 to 6 years. The study is a standard practice in the industry to guarantee that licensure or certification exams are testing areas of knowledge that best relate to the tasks of a given profession. The NMLS is asking for state-licensed mortgage loan originators to complete a survey and provide feedback on the SAFE MLO National Test. Click here to access the survey - responses are due by May 29th.
The Gadsden flag is a historical American flag with a yellow field depicting a rattlesnake coiled and ready to strike. Positioned below the rattlesnake are the words "Don't tread on me". The flag was designed during the American Revolution and is often associated with libertarianism. Will it come to represent the huge backlash against the CFPB and in particular the potential $1 million per day in fines lenders face for violations? Don't TRID on me!
Want a summary of TRID? Beginning August 1, there will no longer be a Good Faith Estimate or Truth in Lending disclosure; those two forms will be combined into a single Loan Estimate, which must be given to consumers within three business days of applying for a loan. At the same time, the HUD-1 Settlement Statement and the final Truth in Lending disclosure will be replaced by the Closing Disclosure form. This form must be given to consumers at least three business days before closing, and any significant changes to the loan terms could reset a new three-day waiting period and delay closing.
Last night I had dinner with Cyndi Fazzio with Mason McDuffie - she runs its builder channel. When the subject of TRID came up she reminded me that public companies, which include lenders, builders, and Realtors, are focused on quarterly results. And she has observed, during her current mission on educating builders, that there is a fear out there that when the first quarter rolls around where closings were delayed, regardless of fault, impacting earnings, impacting stock prices, well... it is a concern - to say the least.
This week it was the National Association of Realtors' turn to urge the Consumer Financial Protection Bureau (CFPB) to implement a grace period for those seeking to comply in good faith with new rules for loan closing procedures and settlement documents. "A trial period with restrained enforcement and liability would allow the industry and CFPB to address implementation issues and minimize costly home closing delays for consumers, said NAR President Chris Polychron in testimony today before the U.S. House Financial Services Subcommittee on Housing and Insurance...The implementation is going to be a learning experience for everyone, however, and we see the potential for significant bumps in the road that could cost buyers time and money, which is why Realtors are asking the CFPB for this grace period."
In Congress, Republican Congressman Steve Pearce and Democratic Congressman Brad Sherman have introduced a bill in the House of Representatives (H.R. 2213) that would provide lenders with a temporary safe harbor from enforcement of the TILA-RESPA integrated disclosure (TRID) rule. The bill provides that the TRID rule cannot be enforced against any person before January 1, 2016 and no suit can be filed against any person for a violation of the TRID rule occurring before that date if such person has made a good faith effort to comply with the TRID rule. The bill is supported by the American Bankers Association. The ABA was among a group of 17 trade associations and organizations, including the MBA, that wrote to the CFPB two months ago seeking a grace period for enforcement of the TRID rule.
Sure enough, this week 8,500 Realtors and guests descended on Washington DC. Their mission was well documented: urge their elected officials to preserve current real estate-related tax policies and extend the Mortgage Forgiveness Tax Relief Act, which expired at the end of 2014 and prevents distressed homeowners from facing excessive income tax bills on forgiven home loan debt. Realtors will also be actively engaging with lawmakers on protecting commercial real estate related tax provisions, such as retaining like-kind exchange provisions and making permanent the 15-year depreciation period for leasehold improvements.
In addition, Realtors are urging members of Congress to enact legislation reforming patent demand letters, setting nationwide data security standards, and ending discrimination against affiliated lenders by passing the Mortgage Choice Act.
Richard Cordray spoke, but the Director did not address an important related issue. The TRID rule limits the amount that lender fees and various other fees may increase, but allows the lender to increase fees based on changed circumstances and similar events. The problem is that except in a very limited situation, only the upfront disclosure, called the "Loan Estimate," may be used to increase fees subject to the TRID rule limits, and the rule does not permit a lender to issue a Loan Estimate after the lender has issued a Closing Disclosure. So if a lender issues a Closing Disclosure for receipt by the borrower at least three business days before consummation, and the lender then learns of changes to the transaction, such as because of a walk through, that would increase loan fees, in many cases the lender will be in the unenviable position of having to bear the increased costs or deny the loan.
As a reminder the Office of the Comptroller of the Currency has released revised TILA and RESPA chapters of its examination manual for consumer compliance exams. The revised chapters incorporate the detailed procedural and substantive requirements of the CFPB's TILA/RESPA integrated disclosures (TRID) rule. The OCC's publication of the chapters follows a similar release from the CFPB last month. The OCC's versions of the TILA and RESPA chapters appear nearly the same as the CFPB's, except for minor formatting adjustments and technical changes. While this likely reflects the agencies' coordination of examination procedures through the Federal Financial Institutions Examination Council, it offers little insight into how, and to what extent, exam priorities may differ for depository institutions, as compared to their non-bank counterparts in the mortgage space.
The other three federal banking agencies-the Federal Reserve, the FDIC, and the NCUA-have yet to update their examination manuals to include the TRID requirements. For the time being, creditors under their supervisory jurisdiction should be able to rely on the versions published to date by the CFPB and the OCC.
What is the public seeing about the upcoming changes 2 ½ months from now? Here is the latest.
While we're talking about the CFPB observers noticed that it sent out a new compliance bulletin (Bulletin 2015-02) reminding creditors of their obligation not to discriminate against applicants because their income includes vouchers from the Section 8 Housing Choice Voucher (HCV) Homeownership program. The CFPB states in the bulletin that it "has become aware of one or more institutions excluding or refusing to consider income derived from the Section 8 HCV Homeownership Program during mortgage loan application and underwriting processes. Some institutions have restricted the use of Section 8 HCV Homeownership Program vouchers to only certain home mortgage loan products or delivery channels."
In the bulletin, the CFPB references the ECOA and Regulation B prohibition that bars a creditor from discriminating in any aspect of a credit transaction against an applicant "because all or part of the applicant's income derives from any public assistance program." The CFPB notes that because "public assistance" as defined by Regulation B includes "mortgage supplement or assistance programs," mortgage assistance provided under the Section 8 HCV Homeownership Program is income derived from a public assistance program for purposes of the ECOA and Regulation B.
Obviously companies are concerned about trying to do the compliant thing but at the same time worried about the CFPB. Back in February Jonathan Foxx, the President and Managing Director of Lenders Compliance Group, published a paper titled, "The Lead Generation Company: Managing the Risks." Jonathan says, "Careful risk management advice should be considered when developing and managing leads, whether obtained from an outsourced entity or a loan originator's own website, in-house, or through online lead generation advertisements." In the article, Jonathan discusses the four rules of lead generation marketing, plus he offers insights regarding regulatory focus, consumer advocacy, lead generation as advertising, the three concerns about online lead generation companies, the scope of reviewing a lead generation company, and planning for a visit from the CFPB."
Time for a little conventional conforming, Fannie/Freddie news?
JPMorgan Chase announced that it will purchase the mortgage servicing rights for 266,000 high quality Fannie Mae loans worth an estimated $45 billion from a subsidiary of Ocwen Financial Corp. Ocwen had previously announced its intent to sell this portfolio of loans at the beginning of March. Chase added that the acquisition is consistent with its desire to enhance the quality and efficiency of the mortgage business.
You can blow off reading this commentary and receive a summary of the previous week's Freddie Mac Single-Family news every Monday morning. Beginning February 23, 2015, its new Single-Family Week in Review email will include links to the previous week's announcements on requirement changes, product offerings, technology updates, and training opportunities. Click the link for the subscription center to Sign Up .
Beginning June 30, 2015, the Uniform Collateral Data Portal® (UCDP®) will deliver new Freddie Mac proprietary feedback messages for appraisals submitted to Freddie Mac and will return a proprietary non-overrideable hard stop code. These new proprietary messages are aligned with our continuing effort to provide improved appraisal quality feedback. Review the Single-Family News Center article for more details, as well as additional information on available resources.
Fannie Mae and Freddie Mac have revised the New Mexico security instrument (Form 3032) to convert it from a deed of trust form to a mortgage form. The revised security instrument provides for judicial foreclosures. Lenders are required to use the new form for mortgage loans with note dates on or after Nov. 1, 2015.
Bopping over to the markets, why is it that a few weeks ago Fed Chairman Yellen and other Fed officials warned that the stock market was inflated - yet here we are at new records again? For bonds, volatility has quieted back down, and certainly rates have come back down (as expected) from earlier this week, and the smart guys in the room think the Fed won't move short term rates next month. As an indicator we closed the 10-yr Wednesday at 2.28%, started yesterday at 2.25%, closed it at 2.24%.
We're done with the quarterly refunding (the Treasury selling 3, 10, and 30 year maturities), but still have a little news today. We've had the Empire State Manufacturing Survey for May (weak but expanding slightly), and later are April's Industrial Production and Capacity Utilization (expected +.1% and unchanged, respectively) and then the preliminary May Michigan Sentiment Index. In the early going the 10-yr is sitting around 2.19% and agency MBS prices are better by .250 versus Thursday's close.
Jobs and Announcements
In job news Genworth's Global Mortgage Insurance division, in Raleigh, North Carolina, is hiring a Sales Training Leader. This person would be responsible for developing a comprehensive sales training program including onboarding as well as professional development for regional, national, and inside sales. This person would also be responsible for designing and conducting training classes including training materials and documentation, for sales representatives on techniques of selling the organization's products and/or services. The successful candidate must have 5+ years of experience in mortgage insurance/mortgage banking, and proven sales training and facilitation experience. For more information and to apply, please view the job posting and enter "GMI17636" in the requisition field. Candidates can also forward their resume or inquiry to Kristin Miller.
On the TRID integrated disclosures front, 3W Partners and Intuit Factory have partnered to deliver consulting and process design expertise to lenders and vendors as the August 1 deadline looms large. "Together, we have a stellar combination of industry and compliance experience, plus a highly structured, simulation-driven approach to process re-engineering and management," said Scott Roller, Principal / Founder of 3W Partners. According to Roop Singh, Partner and Principal Consultant at Intuit Factory, there is continuing interest at two levels. "We are asked to assess existing progress and readiness to meet this complex regulation, giving a structured and methodical third-party analysis, and in some cases we are sought to help organizations start from process integration and then to adoption and managing change," Singh said. CLICK HERE to view a summary of related services and contact info.