We should all be more
physically fit, right? Leave it to those crafty Muscovites to come up with
something clever to prove it: SquatsForSubwayTickets.
We have 28 business days until
QM is the law of the land, and even after this commentary discussed the CFPB's
policy there still seems to be a small amount of confusion out there about
affiliate fees, and the 3% threshold. Paul Mondor did acknowledge that he
and other Bureau representatives had voiced policies in the past, and he made a
point of indicating that this was the Bureau's definitive position despite
those past, contrary statements. For example, a policy was verbally stated
during the MBA Regulatory Compliance Conference last month. Mr. Mondor was a
presenter at that conference and repeatedly stated that all fees paid to an
affiliate must be counted in the 3% points and fees calculation, regardless of
the amount retained by the affiliate. This was, per the CFPB, is incorrect, as
what was stated by David Silberman at the MBA's committee meeting.
Those individuals, and the
CFPB, have disavowed those past statements specifically, and want the industry
to know it. Last week the commentary noted a conversation, also had last week,
with Managing Counsel Paul Mondor regarding affiliate fees and the 3% points
and fees calculation for QM loans. The policy is indeed: "just the
portion of the fees that is paid to the affiliate and kept by the affiliate is
counted in the 3% points and fees calculation."
End of story on the CFPB's
policy...but that doesn't stop companies from "overlays" or taking
specific actions regarding interpretations. For example, I received this note:
"Rob, regarding the 3% threshold for points and fees, some aggregators are
taking a very defensive position when it comes to your points about counting
all affiliate fees versus the portion that is kept by the affiliate. Some are
divesting themselves of ownership interests they have in title entities, for
example, for this reason along with ownership interest it had with other
affiliates (like credit). LOs at other banks are being told they are going to
count 100 percent of the appraisal fee, tax service fee, and flood fee because
the lender has ownership interest in all three companies. When I added up all
the fees that needed to be counted towards the high fee test it looked like
only loans at $100k or less are affected. In all cases my company could still
do the loan because we were below the 3 percent (or other cap at lower loan
amounts). We cannot, however, offer much of a buy down to borrowers as it would
throw us over the cap. The same logic goes for a fee to float down or return to
float etc., the fee involved could throw us over the cap. I should mention in
our market the origination I was using was in the $800-$1,000 range maximum and
I was taking an expensive appraisal price at $550 to calculate. The guys out
there charging $1,800+ per origination will likely not be able to do a $100k
loan as they will be over the 3% number."
But lenders should remember
that for loans less than $100,000, there is indeed a scaling that happens.
Check out ATRQM, page 36. "For a
loan to be a QM, the points and fees may not exceed the points-and-fees caps.
The points-and-fees caps are higher for smaller loans: 3 percent of the total
loan amount for a loan greater than or equal to $100,000, $3,000 for a loan
greater than or equal to $60,000 but less than $100,000, 5 percent of the total
loan amount for a loan greater than or equal to $20,000 but less than $60,000,
$1,000 for a loan greater than or equal to $12,500 but less than $20,000, and 8
percent of the total loan amount for a loan less than $12,500."
There are many new lending laws
going into effect this January; one of which is the addition of section 1024.20
to Regulation X, which requires lenders to provide a loan applicant (one which
has applied for a federally related mortgage loan) with a list of homeownership
counseling organizations no later than three business days after the
lender/LO/Broker receives the completed application. The final rule is
effective on January 10th 2014, and applies to all transactions in
which an application is received on or after that date. Agents or organizations
required to make this offering will want to acquire the list by either: (a) a
CFPB-maintained website, or, (b) data made available by the CFPB or HUD. Those
wishing to utilize the first source for the official list can refer to the
CFPB's website which will automatically generate the required list subject to
the applicant's zip code: CampCounselors.
And for any doc drawing &
funding employees, or escrow folks, who have been taking a really long nap, as
a reminder On November 20th the CFPB issued a rule requiring mortgage lenders
to provide borrowers with two new mortgage disclosure forms that will replace
the existing Initial TIL disclosure, the GFE and the final TIL disclosure. The
so-called "know before you owe" mortgage forms were developed to
help consumers understand their options, choose the deal that's best for them,
and avoid costly surprises at the closing table. Also, the rule sets forth
limits to how the final transaction can change from the original loan estimate.
The CFPB claim the forms will enable consumers to easily identify risk loan
features such as prepayment penalties, balloon payments, and negative
amortization loans. The final rule is scheduled to take effect on August 1, 2015.
On November 15, the CFPB
announced a settlement with RMIC, who were accused of paying illegal kickbacks
to mortgage lenders in exchange for insurance referrals in violation of Section
8 of RESPA." Buckley Sandler, LLP writes, "The settlement
resolves allegations that the company entered into captive reinsurance
arrangements with lenders across the country pursuant to which the insurer at
first ceded approximately 12% of its premiums per referral to lenders' captive
reinsurers, but over time ceded increasingly large percentages of its
premiums-up to 40% for each referral-in exchange for lenders' continued
referral of customers." Restitution for RMIC comes in the form of a
$100,000 in penalties and is subjected to regular and mandatory compliance
reporting and monitoring for four years. Plus, the company is enjoined from
entering into or otherwise obtaining any new captive mortgage reinsurance
arrangements for a period of ten years and, with respect to pre-existing
arrangements, must forfeit any right to the funds not directly related to
collecting on reinsurance claims: 15 yard penalty, on the offense, for
taunting.
And as mentioned in the
commentary last week, payday lenders have not escaped the CFPB's notice. The
writing has been on the proverbial wall for a few years now: the practices of
payday lenders will certainly be within the scope of the CFPB. Earlier this
summer, the CFPB gave notice that it would hold supervised creditors
accountable for "engaging in acts or practices the CFPB considers to be
unfair, deceptive, and/or abusive when collecting their own debts, in much the
same way third-party debt collectors are held accountable for violations of the
FDCPA." So it is with no surprise that I read last week the CFPB announced
the resolution of an enforcement action against Cash America International, one
of the largest payday lenders in the country. The consent decree alleges that
the lender and an online lending subsidiary made hundreds of payday loans to
active duty military members or their dependents. What's so wrong with that?
Well, it violates the Military Lending Act. In its
first action against a payday lender, the CFPB will receive $5 million in
penalties, and has ordered $14 million in refunds for the overcharging of
customers, the "robo-signing" of documents in debt collection
lawsuits and (gulp) "impeding an investigation". Another 15 yard penalty, on the
offense, for taunting.
On November 18, the CFPB
published a report that examines the amount of money spent by financial
institutions to inform and influence consumers' decisions about financial
products and services. The report finds basis after spending a year researching
financial institution's marketing campaigns; they concluded that financial
institutions spend 25 times more money marketing financial products and
services to consumers than on educating consumers about them. The CFPB, of
course, asserts the need to improve consumers' access to objective information
as opposed to marketing material. The report relays detailed findings about
financial education spending across six major sectors and about annual spending
on awareness advertising and direct marketing of financial products and
services. The complete report can be here.
And don't forget that last
month the five federal regulatory agencies (FED Board of Governors, CFPB, FDIC,
NCUA, and OCC) issued a statement to address industry questions regarding fair
lending risks associated with offering ONLY qualified mortgages. According to
the CFPB, creditors have asked for clarity regarding whether the disparate
impact doctrine of ECOA and its implementing regulation, Regulation B, allows
them to originate only Qualified Mortgages. For the reasons described in the
statement, the five agencies do not anticipate that a creditor's decision to
offer only Qualified Mortgages would, absent other factors, elevate a
supervised institution's fair lending risk. The agencies note the decisions
creditors will make about product offerings in response to the Ability-to-Repay
Rule are similar to decisions creditors have made with regard to other
significant regulatory changes affecting particular types of loans. The
statement counsels that creditors should continue to evaluate fair lending risk
as they would for other types of product selections, including by carefully
monitoring policies and practices and implementing effective compliance
management systems. Here you go: AcronymsUnite.
In a recent Ballard Spahr CFPB
Monitor, they asked an interesting question: should a financial institution sign up to use an online
company portal to view consumer complaints submitted about them to the CFPB?
Once a bank registers with the CFPB, the agency will give them a portal where
they can log into, receive, review, and respond (to the agency) to forwarded
complaints which have been logged by consumers. Alan Kaplinsky writes,
"Under the Dodd-Frank Act, only large banks are required to respond to the
CFPB about how they have handled consumer complaints. However, by registering
with the CFPB to access complaints, a company assumes an obligation to follow
the CFPB's procedures set forth in the "Company Portal Manual." Those
procedures include the CFPB's requirement that all company portal users provide
the CFPB with a response to each complaint within 15 days of when the company
received the complaint in the portal. A response must include the steps taken
to resolve the complaint with the consumer. Within the 15 days, a company can
request up to an additional 45 days to provide a response. However, complaints
for which a company has not responded within 30 days of receipt (or 60 days if
additional time was requested) will be tagged for CFPB review and
investigation. The manual states that regular reports are provided to the CFPB
Offices of Supervision and Enforcement about complaints for which companies
have failed to provide "a timely response." Sounds like the
ever-shrinking lunch hour for Quality Assurance people just got shorter.
However, for the "glass half-full" kind of people out there, this
could represent an opportunity to mitigate CFPB exposure, as the agency has
always made it clear that they will use complaints logged as a deciding factor
of which "non-banking" institutions (mortgage originators) to
examine. By reviewing complaints through the portal, a company may gain insight
into the issues on which the CFPB may focus if the company is examined and an
opportunity to be better positioned for such an examination.
By the way, Ken V. asks,
"Does the CFPB just come in the door to do an exam, or does it give
lenders warning?" That's an easy one - the CFPB provides a warning several
weeks before the exam team walks through the door. The time is used by lenders
to gather the (often times) immense number of documents, files, rate sheets, etc.,
that the CFPB has requested.
Who has time to worry about
interest rates when we need to attend to all of this? Well, the markets, which
are indeed open today, demand some thought. But can this be any clearer? Fed
Chair Bernanke in a recent speech made clear the Fed was committed to keeping
short term rates low for an extended period and reiterated the current 6.50%
unemployment rate and 2.50% inflation rate are thresholds and not triggers. He
said even after the unemployment rate declines below 6.50%, as long as
inflation is below 2.50% the Fed would be patient before increasing the Fed
funds rate. So yes, of course we'll see some fluctuations out there, but
generally rates should stay put. Wednesday's closing yield on the 10-yr was
2.74% and we in the very early going, with
no scheduled news, we're at 2.75% with agency MBS prices close to unchanged.
The
barman says, "We don't serve time travelers in here."
A
time traveler walks into a bar.
Rob
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