"A
man goes to his nearest zoo. He walks around the entire place and the only
animal there is a dog. It was a shih tzu." In a similar vein, I guess, but
not humorous in the least, New York's financial regulator is seeking authority
to make criminal cases against compliance officers. The
Securities and Exchange Commission has a more lenient approach, according to a
speech on the issue by Andrew Ceresney, director of the SEC's Enforcement
Division. He said the agency would take action against compliance officers
"only when the conduct crossed a clear line." We'll see if this moves
from investment banks into all financial services...
Last
week I posted a notice that STRATMOR had launched a "STRATMOR
Spotlight" survey entitled "4-Months of TRID - Impact and Experience."
STRATMOR Senior Partner Dr. Matt Lind tells me that thus far they've received a
strong response from lenders - not surprising since what lender wouldn't want
to know the answer to such questions as: How well did the LOS vendors meet TRID
requirements? What's been the overall experience thus far? What process changes
have lenders implemented? What's worked well? What hasn't? What's TRID cost and
how have these costs been absorbed? As I noted last week, taking this survey
costs nothing. You pay a modest fee only if and when you choose to view and
download survey results, which are expected to be available by mid-March. This
way you know how large the survey response has been before purchasing. My view
is that participating in this survey is a low cost way to compare your own TRID
experience and implementation with that of your peers.
The
creator of "Know Before You Owe" - the CFPB, had tongues wagging
yesterday when it released a policy to "facilitate consumer-friendly
innovation." On regular contributor tritely asked, "The headline
suggests they are dismantling themselves?" Remember that this is a
different division of the CFPB that rules by enforcement action! "The CFPB
finalized a policy to facilitate consumer access to financial products and
services that promise substantial benefit to consumers. The new policy
establishes a process for companies to apply for a statement from Bureau staff
that would reduce regulatory uncertainty for a new product or service that
offers the potential for significant consumer-friendly innovation."
The policy was proposed in October 2014 - 18 months ago! The policy is available here. "The new policy was created as part of
CFPB's Project Catalyst initiative and is intended to enhance regulatory
compliance in specific circumstances where a product holds the promise for
significant consumer benefit and where there may be uncertainty around how the
product fits within an existing regulatory scheme. For example, the policy
could be appropriate in a case where an innovative product is being developed
that involves technology that did not exist and may not have been contemplated
at the time existing regulations were adopted."
"The
new policy announced today creates a process for companies to apply for a
statement from Bureau staff, known as a no-action letter. This letter would
indicate that Bureau staff reviewed the company's application and have no
present intention to recommend enforcement or supervisory action with respect
to the particular aspects of the company's product and under the
specifically-identified provisions and applications of statutes or regulations
that are the subject of the no-action letter....When assessing applicants,
Bureau staff will take into account the factors laid out in the policy,
including the company's relevant government supervision and enforcement
history. Under the policy, the letters are not binding and are also
revocable at any time. If a no-action letter is issued, it will be posted
on the Bureau's website along with a version or summary of the company's
request.
And
this week the CFPB published the Home Mortgage Disclosure Act (HMDA) file specifications for 2017 and 2018. Notice this is
"next year" - which always seems to arrive faster and faster.
"We want to highlight one change in particular for your attention: the
file format is being changed from a fixed field file to a delimited file
format. We are providing notice of the updated file format through these file
specifications to provide as much time as possible for systems updates should
any need to be made."
And
last week law firm Ballard Spahr put out a summary regarding the CFPB and
the FTC. "The FTC has sent its annual letter to the CFPB reporting on the FTC's activities
related to compliance with the Equal Credit Opportunity Act and Regulation B.
The FTC has authority to enforce the ECOA and Reg B as to nonbank providers
within its jurisdiction...Like last year's letter on the FTC's 2014 ECOA activities, the
letter on 2015 activities does not include any specific 2015 FTC ECOA
enforcement activity and only contains information about some of the FTC's
research and policy development efforts and educational initiatives. With
respect to fair lending research and policy development, the FTC's efforts
included hosting a public workshop on the growing use of online lead generation
in various industries. The workshop was the subject of a series of three blog posts written by my colleagues Chris
Willis and Teddy Flo. The FTC also published a notice seeking comment on
a proposed survey of consumers to learn about their
experiences in buying and financing automobiles at dealerships. The FTC's
consumer and business educational initiatives included updating its publication
on mortgage discrimination and issuing information on its business
blog about changes to its Business Center website.
Last
month the Community Home Lenders Association (CHLA) sent a letter to the CFPB renewing its call for a universal SAFE
Act test requirement for all mortgage loan originators. The letter also
highlighted that 99 percent of banks (banks with assets less than $10 billion)
are exempt from CFPB exams and that many registered bank loan officers failed
the SAFE Act test. The CHLA also raised questions in the letter to the CFPB to
see what steps they have taken to adopt the rule.
A TransUnion survey revealed that 75% of lenders
are finding it increasingly difficult to find and acquire new customers and
many are turning to alternative data for the solution. TransUnion's survey
confirms that while there were 26 million additional personal, auto and credit
card loans in 2015 compared to 2014, the number of U.S. consumers who are not
able to access credit is still far greater - a staggering 45 million people
according to the CFPB. Some key benefits derived from lender use of
alternative data, according to survey respondents, include: 87% of lenders
using alternative data do so to evaluate thin-file or no-file consumers. 83% of
those using alternative data to score credit applicants report seeing tangible
benefits. 67% use alternative data to evaluate non-prime borrowers. 66% of
lenders using alternative data say it is helping them reach more creditworthy
consumers in their current markets. 56% of lenders using alternative data
say the data has opened up new markets.
Of course lenders and investors are still grappling
with the issue. For example, here I produce a recent bulletin from Citi
in its entirety to show the complexity of trying to adapt a system to replace
one (GFE & TILs) that was developed over decades of use.
"To assist with the Truth in
Lending Act/Real Estate Settlement Procedures Act Integrated Disclosure Rule
(TRID Rule), Citi updated its previously published TRID Best
Practices. While all Loan disclosures and related documents, processes,
and practices must be completed and performed per TRID Rule requirements, some
key practices have been added or modified.
"Loan
Estimate: Modified February 2016. 1. On all loans, the Contact Information
section on page 3 under Additional Information must be completed in full,
including NMLS # or State ID # where applicable. First and last name of
contacts should be completed. If a phone number and/or email is not
provided for the Lender's Loan Officer, then a general phone number and email
is required, including third party originated loans. 2. A Loan Estimate
cannot be created or re-issued on or after the date of the "initial"
Closing Disclosure. Therefore, the issue date of the latest dated Loan Estimate
must be at least one day prior to the issue date of the "initial"
Closing Disclosure. Re-issuing a Loan Estimate is NOT an acceptable practice to
resolve suspense issues.
"Closing
Disclosure: Added February 2016. 1. The final disbursement Closing
Disclosure must be identified as FINAL. 2. The spirit of the TRID Rule is to
reduce documentation provided to borrowers by initially disclosing actual terms
and costs on the Closing Disclosure. Correspondents must act in good faith and
use due diligence in obtaining the best information reasonably available at the
time of disclosure. Only Closing Disclosures that are issued and
delivered to the consumer should be put in the loan file. 3. The figures in
Loan Estimate column of the Calculating Cash to Close table on the final
Closing Disclosure must match the final Loan Estimate. 4. Additional/Addendum
pages are allowed per the rule to be included with the Closing Disclosure if
all of the existing allotted space is used up and no more information will fit
in the allotted space.
"Miscellaneous
Items: Modified February 2016. 1. Service Providers List - If there are any
fees listed in Section C of the Loan Estimate then the Service Providers List
must be present in the Loan file with all sections completed, including, but
not limited to, the estimated charge(s). Fees disclosed to the borrower
as 'can shop' as documented by the Service Providers list must be located in
section C of the LE. If the borrower choses a provider from the lender's
list, these fees must be disclosed in section B of the Closing Disclosure and
are subject to the 10% tolerance. 2. Corrections - Corrections as
permitted by the Rule must be clearly identified and itemized on a Letter of
Explanation to the borrower and a copy in the Loan package. Loan may not
be purchasable if corrections are not completed within 60 days of consummation.
Note: Not all Rule violations are correctable." Thank you Citi!
Turning to the secondary markets, a new
post from Liberty Street Economics has been published on the Capital Markets
page: Primary Dealer Participation in the Secondary U.S. Treasury
Market. It turns out that primary dealers no longer account for most
trading volume on the interdealer brokerage platforms, but do account for most
trading activity in the secondary market for U.S. Treasury securities.
While
we're yapping about the markets, agency MBS prices ended higher (rates lower)
on Thursday. The yield on the 10-year risk-free T-note, which was down in the
1.50's recently, hit 1.83%. The U.S. economic data was just slightly better
than expected with the Philly Fed index of manufacturing activity edging higher
in February and initial jobless claims beating forecasts. By the time traders
were on the subways heading home the new 10-year note ended about .5 better to
yield 1.76%.
This
morning we've already seen January's Consumer Price Index. Expected to show a slight
decline, it was unchanged, core +.3%, slightly higher than expected. But after
these initial pieces of information the 10-year is at 1.77% with agency MBS
prices worse about .125.
Excerpts
by rchrisman@robchrisman.com
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