As I have written in the past, payday lending has been, and will continue to be, the focus du jour of the CFPB. The Bureau has been building a case against what it sees as, not only a pervasive problem, but a systemic problem as well. It is expected that the Bureau, will issue a notice of proposed rulemaking in which it concludes that repeated payday loan borrowing is "unfair" or "abusive" under the Dodd-Frank Act. On the same day of Director Cordray's speech at a field hearing on the issue, the CFPB released a payday lending report, in which it addressed "loan sequencing," which ultimately is at the heart of the issue. Ballard Spahr writes, " In conjunction with a hearing in Nashville, the CFPB Office of Research has released another payday lending report, this one focused on measuring "loan sequences," which it defines as "a series of loans taken out within 14 days of repayment of a prior loan." Specifically, the CFPB considers a renewal to mean either rolling over a loan for a fee or re-borrowing within 14 days after repaying a loan. The Bureau likely will use this new, broad definition of "renewal" to prevent consumers from repeatedly borrowing within the same pay period that they repay a prior loan." Many expect the CFPB will move forward with their rulemaking efforts irrespective of alternative credit options, which may be available to payday consumers. Director Cordray's remarks.
I'm not sure I'd want to be
reminded twice by the CFPB to do anything, let alone be in compliance of the
Fair Credit Reporting Act (FCRA). But such appears to be the case with the
Agencies recent bulletin. Back in September, the CFPB released a bulletin to companies
that furnish information to consumer reporting agencies (CRA) reminding them of
their obligation under the FCRA to investigate consumer disputes forwarded by a
CRA and that they have an obligation to "review all relevant
information" relating to the dispute; warning that it will take
"appropriate supervisory and enforcement actions to address furnisher
violations of the FCRA or other federal consumer financial laws, including
requiring restitution to harmed consumers." In this most recent bulletin,
the CFPB yet again reminds such business' of their obligation to remain
compliant under the FCRA, and to investigate disputed information referred to
them and it is not sufficient under the requirements of the FCRA to simply
direct the consumer reporting agency to delete the item without first
conducting an investigation.
MountainView Capital Group
spread the word that "Second Lien and HELOC Demand Exceeds Supply in
Secondary Market". As veteran LOs and industry observers can
predict, a lot of homeowners with very low fixed-rate 1st liens are
going to want to refinance out of them, and the demand for 2nd
mortgages (HELOCs, TDs, whatever) will only increase as homes appreciate.
MountainView says, "Very few packages of home equity loans, including
second liens and home equity lines of credit, were offered in the secondary
market during 2013, according to a market activity analysis by residential
whole loan sales advisor MountainView Capital Group. The lack of offerings was
in spite of investor demand and an uptick in new origination. 'Second lien
trading activity during 2013 was light and down from 2012 levels, both in total
unpaid principal balance and number of transactions,' said Jonas Roth, a
managing director at MountainView Capital Group and an author on the company's
latest market activity analysis. 'This was primarily due to a finite number of
sellers, and 2014 looks like more of the same,' added Roth." MountainView
saw its share of second lien deals, but the report notes that,
"Non-performing second liens had higher demand than performing second
liens during 2013. However, large financial institutions, the major holders of
non-performing second liens, were unmotivated to sell these assets, even though
massive amounts are migrating to an out of statute category...Bright spots for
2014 are that there are more niche buyers with state-specific inquiries,
significantly more capital on the sidelines looking for product, and stronger
pricing versus what we have seen in the past," said Roth."
The report finished up with,
"Pricing for performing second liens with life of loan clean pay histories
is generally in the mid-60s to low 70s as a percentage of UPB. Additionally,
there are a few buyers who have paid into the 80s for specific characteristics
such as higher coupon, lower combined loan-to-value percentages, and overall
larger pool sizes. Re-performing second liens trade in a wider range: from the
low 20s to the 50s, depending on consistency of cash flows and other favorable
pool characteristics. Secured, non-performing second lien loans trade between
one percent and five percent of current UPB. The high end of the range would
have loans that include attractive first lien statuses and CLTVs, low
bankruptcy percentages, and favorable geography. Unsecured, non-performing
seconds trade in the 10 to 50 basis point range. Higher bankruptcy percentages
and out of statute loans are the reasons pricing continues to fall."
Using a FICO credit score of
650, if that is the line drawn in the sand for "subprime", which is
arguable, about 15 per cent of Helocs entering the repayment period over the
next five years are considered subprime, according to the OCC. Per Kelly
Kockos, head of home equity at Wells Fargo, the biggest originator of such
loans, "The bulk of the customers are choosing to enter their repayment
period" rather than refinance.
Thursday rates dropped again
with the yield on the 10-yr. heading back to 2.67%. Traders reported the
interest in buying U.S. fixed income securities to the heightened tensions
related to Ukraine and Russia. Once again, we are seeing events overseas
determining our rates, and once again, when tensions lessen in a peaceful way,
we are exposed to rates moving higher. But on top of that supply of MBS is
lower than the demand, which also helped push prices higher and rates lower.
(Yesterday's report from the NYFRB showed agency MBS purchases totaled $10.8
billion for the week ending March 26, or $2.16 billion per day on average. With
another $5 billion in tapering starting in April, buying for that month is
estimated to ease slightly to an average of $2 billion per day.)
For housing news, the
National Association of Realtors released its monthly Pending Home Sales Index
for February which was not only weaker than expected but it was its eighth
consecutive decline and lowest level since October 2011. But as with any
housing news, one must wonder if it is due to real estate slowing or a lack of
properties available for sale. http://globalhomefinance.blogspot.com
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