Getting a mortgage today is much different than it was before the financial crisis.

Loans have to meet certain standards and there are many rules lenders and servicers have to follow. But after a shakeup in leadership at the Consumer Financial Protection Bureau, the future of some policies is uncertain.

Here’s why: The new acting director of the CFPB, budget director Mick Mulvaney, is expected to review regulations that haven’t been finalized, and he may try to alter rules that are already in place.

Here are three policies Mulvaney could change and what adjustments to them might mean for homeowners and homebuyers. The CFPB has already announced plans to reconsider certain rules.

Home Mortgage Disclosure Act

When you apply for a mortgage, some information – including your race, ethnicity and sex – could be released to the public.

For thousands of lenders, reporting mortgage information is mandatory under the Home Mortgage Disclosure Act (HMDA). While the law has been around since 1975, the amount of data made publicly available is increasing, and not everyone is thrilled.

The mortgage industry believes that publishing so much data raises concerns about consumer privacy. And there’s no way to opt out of having your information shared, notes Richard Andreano Jr., partner at the Ballard Spahr law firm.

“They expanded the data set so much that there was a concern that if it was all made public, at what point are borrowers able to be identified using HMDA data?” asks Alexander Monterrubio, director of regulatory affairs at the National Association of Federally-Insured Credit Unions (NAFCU).

Consumer advocates want more information released. Doing so, they argue, protects borrowers from discriminatory lending. It also holds lenders accountable for their actions, says Jaime Weisberg, senior campaign analyst at the Association for Neighborhood & Housing Development (ANHD).

The latest HMDA requirements go into effect January 1, 2018, but the CFPB, the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency announced that lenders won’t be penalized for mistakes made while collecting data in 2018 or reporting it in 2019. They also won’t have to resubmit data unless errors are “material.”

The CFPB also said that it would revisit certain aspects of HMDA.

“HMDA could be made almost worthless,” says Peter Smith, a senior researcher at the Center for Responsible Lending. “We need a good body of rules to make sure lenders are playing a fair game with consumers.”

Ability-to-Repay and Qualified Mortgage Standards

Another rule that has been subject to debate is the qualified mortgage (or ability-to-repay) rule implemented in 2014. It requires most lenders to make a “good-faith effort” to determine whether someone can afford a mortgage and eventually pay it back.

Critics say the new standards have kept many people, including low-income individuals, from becoming homeowners.

The CFPB is obligated to review the ability-to-pay rule since the bureau is required to assess existing regulations within five years.

With the CFPB’s change in leadership, there may be pressure to loosen lending requirements, says Barry Zigas, director of housing policy at the Consumer Federation of America. There’s already a Senate billaiming to give qualified mortgage status to loans offered by many banks and credit unions without requiring the lender to meet every condition under the ability-to-repay rule.

The bill’s supporters say it would give more consumers access to mortgages. But Zigas calls it a “dangerous effort to undermine consumer protections.” If it passes, a financial institution may legally avoid going through all of the steps lenders take to ensure borrowers can repay their loans, like considering their debt obligations, verifying income and employment history, and calculating their monthly debt-to-income ratio.

TRID Rule

In 2015, the CFPB combined the mortgage disclosure obligations required by the Truth in Lending Act and the Real Estate Settlement Procedures Act under the TILA-RESPA Integrated Disclosure (TRID) rule. One result of the TRID rule is that consumers preparing to close on a house have two documents explaining their closing costs and mortgage terms, rather than four.

While the new forms helped simplify the closing process for homebuyers, the TRID rule created other problems. For one, it could prevent buyers from closing on their homes as quickly as they want to, says Brandy Bruyere, vice president of regulatory compliance at NAFCU.

For many items on the disclosures, there’s little or no tolerance for last-minute changes, and lenders have had to choose between rejecting borrowers’ requests and eating additional fees.

The CFPB has worked to fix the TRID rule and clear up confusion for lenders. But it hasn’t addressed every issue, leading members of Congress to create a bill that would make additional adjustments.

“The TRID disclosures are solid, and any significant change would add additional costs and uncertainty to the closing process,” says Smith from the CRL.

Rules won’t change overnight

The CFPB’s final rules can’t be modified without issuing a notice and asking the public for feedback. Take these steps to ensure your voice is heard, especially if you’re concerned about how rule changes could affect you.

Comment on any potential policy changes. When the opportunity arises, visit the CFPB’s website and comment on the rules the agency is proposing. “The CFPB doesn’t have to do what the comments say, but they have to provide a reason for not doing so to avoid the rule being struck down as arbitrary and capricious,” says Benjamin Olson, a former deputy assistant director for the Office of Regulations at the CFPB. 

Contact your representative. Congressional leaders can review certain rules issued by the CFPB and potentially overturn them. That’s what happened with the CFPB’s arbitration rule. The policy would’ve made it easier for consumers to file class action lawsuits against banks, but lawmakers used their powers under the Congressional Review Act to kill it before it could take effect. Legislators are now considering the CFPB’s final rule on payday lending and may seek to repeal it. 

Use the complaint database. If you’ve had issues with your mortgage lender or servicer and you’re having trouble resolving them, file a complaint with the CFPB. Typically, you’ll receive a response within 15 days. You can use the same database if you’re having problems with other financial entities, like the bank managing your checking or savings account.

If you’re looking at mortgage rates and preparing to buy a home for the first time, read reviews and do your homework before choosing a lender.

source:https://www.bankrate.com/mortgages/borrowers-beware-these-mortgage-rules-could-soon-get-a-face-lift/

2017 began with a bang as hope permeated the banking industry.

A new administration promised to ease the compliance burden through deregulation, even commanded such through an Executive Order to revoke two existing regs for each new one issued.

Despite these attempts, the year went out with a whimper. The industry has yet to see any substantive change that could be considered burden reduction. While many changes remain bottlenecked inside the legislative process, agencies continued to finalize new regulatory requirements that had already been in the reg-writing pipeline before the reduction order took effect.

Because of this uncertainty, financial institutions have had to rethink their regulatory change management processes. In a climate rife with continuous and often complicated change, the industry turned to technology, which some call “regtech”—as well as hybrid solutions that combine expertise with technology—as a source of stability and to generate predictable outcomes.

Last year presented more “actionable items”—our term for a regulatory tweak that requires a financial institution to take some sort of action in response—than any time in recent banking history. There were more final rules issued (including one repeal); guidance documents published; updated booklets; and manuals updated—than ever before. Regulators issued a staggering 200-plus of these actionable items.

Against the backdrop of a desire for deregulation, other key themes rounded out the year:

• New exam criteria sharpened supervisory expectations for consumer compliance.

• Administrative controversy plagued the CFPB, as its authority (and existence) underwent review.

• Public sentiment turned against regulators in the wake of high-profile scandals and breaches.

• Controversial rules on payday lending and arbitration were delayed or modified.

• Mayhem prevailed in mortgage compliance with HMDA reporting and servicing rules seeing significant overhaul.

Let’s look at each of these developments in more detail.

New exam criteria

During this murky time, an element of clarity was the newly updated consumer compliance rating system. The first upgrade to this rating methodology in over 40 years offered meaningful and actionable guidance on how financial institutions can prepare for examinations across 12 assessment criteria.

The new criteria require examiners to assess four elements of board and management oversight (including how well institutions manage regulatory change), plus four elements of the compliance program in place. The last four criteria direct examiners how to evaluate violations of law, if found, and the extent of consumer harm such violations caused. Examinations taking place after March 31 applied the new rating system.

Confusion at CFPB

Since its inception, and well before Director Cordray’s resignation, CFPB has been a source of controversy. Legislators have sought to eliminate or modify the single-Director structure of the bureau, with several different bills proposing a panel structure or various advisory councils for governance. Talk also surfaced at various times about decommissioning or de-funding the bureau. Previously, the U.S. Appeals Court announced that a case deeming the CFPB unconstitutional in its nature would move forward in 2018.

Richard Cordray’s resignation, preceded by his nomination of Leandra English as his acting replacement, and President Trump’s appointment of Mick Mulvaney to the same acting post, has stoked ambiguity. The situation is still unfolding, in part because New York-based Lower East Side People’s Federal Credit Union has called on a federal court to remove Mulvaney and affirm English as the acting head of the bureau, citing the regulatory chaos that his appointment has caused. Meanwhile, English has been pursuing an injunction intended to install herself as acting head of the bureau.

While the fate and nature of CFPB remains uncertain, the silver lining is that even a shift in structure or leadership is unlikely to impact the methodology by which banks and credit unions are evaluated. The last methods were applied for four decades, so change in the short term is unlikely. Developing a solid compliance management system that adheres to the principles mandated in the assessment criteria was and will remain a sound strategy for years.

Changing public sentiment toward regulators

Two significant events impacted public sentiment toward regulatory bodies: Wells Fargo’s ongoing woes and the Equifax security breach.

In July, Wells Fargo’s forced placement of collision insurance on approximately 800,000 consumer auto loans resulted in thousands of wrongful delinquencies and repossessions. This public scandal came less than a year after CFPB fined Wells Fargo $185 million for wrongfully opening accounts for consumers without their.

During the first Wells Fargo scandal, there was speculation that CFPB would issue rules or guidelines on account opening incentives to discourage similar activity in the future. Although both events were widely discussed, consumers typically have a short memory for these types of controversies and public outcry quickly died down.

The Equifax data breach happened in March, and was publicly disclosed by the company in September. This breach had a more widespread impact on consumers, and heightened industry concerns around cybersecurity. Modest estimates placed the impact of the data breach at 143 million consumers, nearly half of the population of the U.S.

Experts were surprised and dismayed to learn of the vulnerabilities of a service provider as large and sophisticated as Equifax. Financial institutions reacted strongly, taking a renewed interest in how their third-party vendors manage cybersecurity risks.

The number of affected consumers added to the industry’s concerns regarding cybersecurity, and underlined the need for more direct and specific regulatory oversight of this area at the federal level. Consumer-friendly states like New York led the charge on adopting enhanced regulations. Federal regulators have yet to follow suit, though in his first meeting with reporters new Comptroller Joseph Otting indicated concerns in this area.

Controversy around payday lending

One of the more controversial regulations of the year was the CFPB payday lending rule finalized in October. The new regulations place an emphasis on lenders determining a borrower’s ability to repay; enforce cutoffs that restrict how often lenders can attempt to debit a borrower’s account; and encourage smaller loan amounts with longer repayment timelines and less risky loan options for lenders.

The ruling becomes effective on Jan. 16, 2018, and has a mandatory compliance deadline of Aug. 19, 2019.

While traditional bankers see the rule as an overdue attempt to curtail predatory lending, many payday lenders have taken steps to sue CFPB over the new reg. And last December 2017, a bipartisan resolution to repeal the rule was introduced in the House. Supporters cited the importance of these loan types for consumers with short-term cash flow issues.

In addition to legislative threats, the rule is even more vulnerable thanks to the bureau’s leadership controversy. Acting Director Mulvaney lacks authority to repeal the rule, but he can extend its effective date or reopen the comment period. The drama unfolding around payday lending regulations showcases the divided perception of the role of regulatory requirements, especially in 2017, when this sharp rift has resulted in so many consecutive changes to the same regulations (i.e. HMDA and Mortgage Servicing).

Arbitration: perfect snapshot of 2017 regulatory environment

The finalization and subsequent congressional repeal of the CFPB arbitration agreements rules illustrates the confusion and uncertainty in the regulatory environment.

The original rule prevented financial services providers from forcing consumers into arbitration instead of enabling them to pursue lawsuits. Immediately following publication of the final rule, certain members of Congress and lobbyists called for its repeal.

That repeal, by way of a House-passed Congressional Review Act resolution, was approved by the Senate and signed by the President in November. The industry had never seen a regulation issued and then repealed so quickly.

HMDA amendments impacting lending, including CRA and ECOA

2017 saw amendments to amendments as well. This year’s changes to the 2015 HMDA Amendments had a profound impact on the industry upon their release in August organizations have scrambled to prepare for the Jan. 1, 2018, deadline.

In keeping with the tone of uncertainty, industry insiders believe bankers should brace for the possibility of even more HMDA changes in 2018. Congress may even attempt to extend the due date and revise the reporting criteria.

Amendments to the Community Reinvestment Act (CRA) and the Equal Credit Opportunity Act (ECOA) were also needed to align with the HMDA amendments.

The CRA amendments use definitions of “home mortgage loan” and “consumer loan” that are consistent with the revised HMDA reporting criteria. ECOA was amended to permit creditors to collect the expanded demographic information required by the new HMDA rules. Without these updates to CRA and ECOA, lenders would be forced to apply disparate definitions for the same loan types, and the different demographic data collection rules would also make reporting extremely challenging.

Guidance offered on TRID through amendments

CFPB finalized amendments to TRID in 2017 and proposed additional amendments. (TILA RESPA Integrated Disclosures) Some additional mortgage lending regulations that CFPB proposed this year focused on clarifying TRID, specifically offering guidance around common questions that lenders had raised over the last two years. Some of those updates include clarification around common construction lending questions and whether making changes to a loan a few days before closing requires a new statement. This represents one attempt of many in 2017 to clarify existing regulations.

Clarifying common mortgage servicing concerns

In July, CFPB published amendments to its 2016 Mortgage Servicing amendments, effective in October 2017 and April 2018. Early intervention notice requirements were amended effective Oct. 19, 2017, and proposed amendments to periodic statements will become law in April 2018.

The general rule established in 2016 states that once a borrower becomes delinquent, mortgage servicers must notify that consumer of available foreclosure prevention options every 45 days. At the same time, servicers are prohibited from sending the notices more than once in a 180-day period.

Lenders expressed concern about this 180-day window for providing a subsequent notice, observing that if the day fell on a weekend or holiday, it would be impossible to comply. In response to this concern, the amendment provides a ten-day extension period. CFPB also clarified timing requirements for modified statements for borrowers in bankruptcy.

In other important but less complicated developments:

• A revised Call Report template was introduced effective with the March 31 filing for use by financial institutions with no foreign branches and assets under $1 billion.

• Regulation CC was amended to modernize electronic check collection and return procedures. The new rules, effective July 1, 2018, establish warranties for electronic presentment.

Summing it up

In conclusion, 2017 presented the financial services industry with a challenging and confusing regulatory environment in a constant state of flux. Supervisory agencies and Congress seemed to have conflicting objectives at times, which manifested in startlingly swift responses or retractions of each other’s progress.

Regulatory change in all forms, whether new requirements or deregulation efforts, requires significant time and effort to implement.

Because of the incessant changes throughout this year, with more than 200 actionable items that financial institutions carefully implemented, the regulatory burden has been more strenuous than ever.

Part 2 of this series will offer insights for 2018 and strategies for managing regulatory change.

About the authors

Pam Perdue is chief regulatory officer and executive vice-president at Continuity. Donna Cameron is director of regulatory I/O, CRCM, CCBCO. Continuity is a provider of regulatory technology (regtech) solutions that automate compliance management for financial institutions of all sizes.

source:http://www.bankingexchange.com/news-feed/item/7273-2017-regulatory-review-a-mixed-bag?Itemid=639

This battle over credit scores could shake up the mortgage market

Millions in home mortgages may be on the line as the Federal Housing Finance Agency debates whether to accept a new credit scoring system for loans backed by Fannie Mae and Freddie Mac.

Currently, Fannie and Freddie won’t buy mortgages unless lenders assessed the borrowers using the FICO credit score, which was created decades ago by Fair Isaac Corp. But several non-bank lenders argue that the system is too restrictive and excludes millions of potential borrowers from the mortgage market. They want the FHFA to start accepting VantageScore, a rival credit scoring system created by Equifax, Experian and TransUnion.

Last month, the FHFA asked lenders to chime in on the issue as it weighs a decision, the Wall Street Journal reported. Because around half of all U.S. mortgages are backed by Fannie and Freddie, the decision could have a big impact on the housing market.

VantageScore argues that it could assign credit scores to 30 million more people than FICO and potentially make 7.6 million more people who use little to no credit eligible for a mortgage. “Doing something just because you’ve always done it that way isn’t a good enough reason,” Mat Ishbia, CEO of United Wholesale Mortgage, told the Journal.

But some banks worry that a change could loosen lending standards and lead to more defaults. [WSJ] — Konrad Putzier 

source:https://therealdeal.com/2018/01/03/this-battle-over-credit-scores-could-shake-up-the-mortgage-market/amp/

Almost anyone who has searched for a house recently knows there are not enough houses for sale.

One simple number defines the problem:

In October 2017, the nation had a 3.9-month supply of existing homes for resale. That means, at the pace seen then, it would have taken 3.9 months to sell all the homes on the market. A supply under six months puts home buyers at a disadvantage.

“Inventory is tighter than it appears. It’s much lower for entry-level buyers,” said Sam Khater, deputy chief economist for CoreLogic, a data provider for the real estate industry. He spoke at the Urban Institute’s annual housing finance symposium on Nov. 1.

Why don’t millennial, first-time buyers and Generation X move-up buyers have more to choose from? Who is responsible for the shortage of homes for sale and why? We’ve identified some suspects.

1. Boomers won’t move

More than three-quarters of baby boomers own their homes. For millennials to buy their first homes, and for homeowning Gen Xers to move up to their second home, boomers have to sell. But boomers are staying put.

Realtor.com conducted a survey this year that found that 85% of boomer homeowners planned to stay put over the next 12 months. “The reasons for that could be that they’re living longer, they’re living healthier and so staying in place is more possible for them,” says Danielle Hale, chief economist for Realtor.com.

“[Baby boomers] have been slower than previous generations to sell the family home, thus exacerbating the shortage of houses for sale,” concluded a Freddie Mac research report.

Also, thanks to rising home prices, would-be downsizers can’t find smaller homes that cost much less than their current homes, says Dennis Cisterna, chief executive officer of Investability Solutions, a real-estate investor marketplace. So they stay put. “There’s no urgency to sell right now unless you have to,” he says.

2. Landlords won’t sell

Millions of single-family homes were converted to rentals after the foreclosure crisis, Cisterna says. “Those investors have no incentive to sell,” he says. When a house goes up for sale, “now you’re competing not only with your neighbor who wants to buy that house, you’re also competing with investors.”

Renters made up 36% of households in the third quarter of 2017, up from 31% in 2005, according to the Census Bureau.

With greater demand for homes, but less supply, home values rise. Meanwhile, rents are rising faster than home prices. “Both of those factors would tend to encourage landlords to hold onto those homes and rent them out,” Hale says.

3. Owners are hooked on low mortgage rates

Over the last three years, the interest rate on outstanding mortgages averaged just 3.8%, according to the Department of Commerce. People savor their low mortgage rates and don’t want to give them up.

So as mortgage rates rise, homeowners tend to keep their homes a little longer, said Frank Nothaft, chief economist for CoreLogic, at the Urban Institute symposium.

“That means the inventory of homes for sale, which is already very low, is likely to remain that way if we see higher interest rates,” Nothaft said.

4. Builders ignore entry-level buyers

Through the first nine months of 2017, about 473,000 newly constructed houses were sold, according to the Census Bureau. Fifty-five percent of those homes cost $300,000 or more. “Of the new homes that we are building, the vast majority are move-up products,” Cisterna says. “They’re not for the entry-level buyer anymore.”

Builders counter that they pay $45,000 for a typical buildable lot nationally and around three times that in New England. And they say they face a shortage of skilled construction labor because experienced workers dropped out of the construction trades during the Great Recession, younger people aren’t replacing them, many job applicants can’t pass drug tests, and immigration enforcement is scaring some laborers away.

5. Regulations add costs

Homebuilders say regulations — including environmental protection, infrastructure fees and rules that specify minimum lot sizes — add tens of thousands of dollars to the cost of every home. Regulations account for about one-quarter of the cost of each home, said Michael Neal, assistant vice president for forecasting and analysis for the National Association of Home Builders.

A Freddie Mac report concurred. “Land-use regulations have become more burdensome” in the last 30 years, making it costlier to build, it said. Freddie Mac found that it takes just 3.5 months to get a building permit in lenient New Orleans, whereas it takes 17 months to get a building permit in restrictive Honolulu. A longer permitting process costs money as developers carry the investments on their books while awaiting permission to build.

6. Owners want to restrict supply

Local zoning and land-use regulations aren’t bestowed by a hidden hand. They’re enacted by officials who were elected by the people. When planning and zoning officials limit the number of houses that can be built in a neighborhood, or when they set minimum square footage for houses, they’re limiting the supply of homes and making them more expensive. They’re responding to constituents.

“There are regulations that are more about the neighbors’ sensibilities than they are about the safety of the people living in the houses,” says Miriam Axel-Lute, associate director of the National Housing Institute, a nonprofit that examines how social issues affect housing.

“It’s neighbors who want their property values to go up, in most cases, who are insistent upon some excess safety design standards or minimum lot sizes or other things,” she says. “They either want their property values to go up or they don’t want, quote, ‘the wrong sort of people’ in their neighborhoods. This is the pressure behind a lot of the most damaging regulations out there.”

How can home buyers respond?

Clearly, it will take time and concerted effort to fix the problem of not enough houses for sale. Meantime, there are things home buyers can do:

Be realistic about how long it will take to find and buy a home. Real-estate agents can provide an estimate, based on market conditions.

Save plenty of money for a down payment and reserves.

Improve your credit score to get a good mortgage deal.

Be ready to make a competitive offer when a suitable home comes on the market.

That advice works for any real-estate market, whether it favors sellers or buyers. But these tips are especially appropriate when inventory is low.

Source:  https://www.nerdwallet.com/blog/mortgages/6-reasons-there-arent-enough-homes-for-sale/

With strict new federal mortgage regulations on banks coming in January, more borrowers – and investors – will be looking at alternative financing. Investing in alternative mortgage lending is already a fast-growing, multi-billion dollar industry.

Two key avenues for investors are Mortgage Investment Corporations (MICs) and syndicated mortgages. They both lend money to higher-risk borrowers, but  investors must understand the pros and cons of each, and what makes them so different.

Mortgage Investment Corporation (MIC)

An MIC is a pool of capital that is raised through shareholders and is collectively lent to a diversified pool of residential and commercial mortgages. You are buying shares in a corporation that invests on your behalf.

Pros:

Since you are investing in a pool of mortgages you can mitigate a great deal of the typical risk associated with direct private or syndicated mortgages.

An MIC has a team of professional mortgage underwriters who review mortgage loans every day and can determine the risk on your behalf.

It creates regular monthly cash flow that can be tax f ree savings account (TFSA) or registered retirement savings plan  (RRSP) eligible.

If a mortgage goes into default, it is only one of many, so the MIC can begin the foreclosure procedure without having to disrupt monthly cash distributions to the investor.

Targeted returns are typically from 7 per cent to 8 per cent, annually.

The monthly payment is a “flow-through” from the pool of monthly mortgage payments back to the shareholders. There is no term; it is continuous.

A MIC will have an offering memorandum that clearly outlines the parameters and lending restrictions, including: maximum loan to value and percentage allowable for commercial real estate, raw land or development.

Cons:

An MIC has higher overhead and, as such, charges a management fee. The gains are net after fees. Thus net returns are often closer to 7 per cent rather than the 10 per cent targeted by privates or syndicates.

Caution is required that the MIC does not do the following: allocate an excessive amount of loans to farmland, raw land or developments, since these are hard to foreclose on, and it can be difficult to recuperate the loan in the event of a forced sale; or loans lent to personal friends or management partners.

Check that the MIC you invest with has a third-party independent advisory board that oversees the nature of the loans and ensures that they are consistent with their operating memorandum.

Syndicated mortgages

This is the scenario in which two or more individuals lend their money to a specific project and borrower. The money could be lent on anything from a single-family house to a developer with a large project.

Pros:

A syndicated loan is a direct loan to an individual with no fees to a middleman, so the return can be higher – typically above 10 per cent.

The syndicated group can be on title.

A mortgage broker who tends to “de-risk” the investment typically sources syndicated mortgages.

You know exactly whom you are lending to and what you are lending on.

It provides monthly cash flow.

Cons:

The biggest downside is that you are lending directly to a single individual or developer.

Any individual can encounter problems beyond his or her control, which could cause a default on the mortgage, even foreclosure.

In the event of such trouble, the syndicated partners may not have the experience and/or willingness to foreclose, a process that can take months.

If you have to foreclose, your money, cash flow and return can be held in limbo for months. If you lent to a development that was half complete when foreclosed on, the syndicate could lose a large portion of its investment.

A syndicated loan can be re-paid early (depending on terms) and it may take time to find the next “deal” or person to lend to. The return on syndicated loans looks attractive but your money is not always at work for 365 days a year. Your real annualized returns over a five-year period may be closer to 8 per cent.

Not all syndicated mortgages are TFSA or RRSP eligible.

Summary

Investing through a syndicated mortgage will generate higher returns than an MIC, but in doing so you take on more risk.

There is always a risk that some people will default on their mortgage – remember, there is a reason they did not qualify at the bank. The single biggest difference between an MIC and a syndicated mortgage is that with an MIC, you bought shares in a fund that invests in a pool of mortgages, so if up to 5 per cent go into default, 95 per cent are still paying monthly. With a syndicated mortgage, if the person you lent to defaults, your income stops and your money is at risk.

Syndicated mortgages are more appropriate for the sophisticated investor who understands the risks associated and expects a higher return.

MICs are more suitable for the less-experienced investor who is willing to accept a slightly lower return in exchange for increased security.

 

Source: http://www.westerninvestor.com/news/finance/investing-in-alternative-mortgage-lending-risks-and-rewards-1.23105791

Mortgage lender Guaranteed Rate alleges that while still employed at the company, one of its “most highly compensated executives” planned and participated in an exodus of more than 20 employees to a newly formed rival, according to a lawsuit filed by the Chicago-based company.

Joseph Caltabiano, the former senior vice president of mortgage lending at Guaranteed Rate who is named in the lawsuit, disputes those claims. “I deny the allegations that I did anything inappropriately,” he said.

The employees who left Guaranteed Rate allegedly joined the staff of Bemortgage, a recently launched mortgage lender that operates as a division of Bridgeview Bank Group, according to the lawsuit, filed Wednesday in Cook County Circuit Court. Caltabiano joined Bemortgage’s ranks as senior vice president of mortgage banking about two weeks ago, he said Friday.

Guaranteed Rate paid Caltabiano about $1.75 million this year through Nov. 15, according to the lawsuit. He was one of the three highest producing loan originators employed by the company, and remains the ninth largest shareholder, the complaint states.

The company “terminated” Caltabiano on Nov. 16, according to the suit. Court documents say Caltabiano allegedly coordinated the transition of Guaranteed Rate’s Chicago-area team to Bemortgage with senior executives at Bridgeview, some of who had also previously been employed at Guaranteed Rate.

Those team members’ transition allegedly had been planned while Caltabiano was still employed at Guaranteed Rate, according to the complaint. The lawsuit alleges that Caltabiano breached his fiduciary duties to Guaranteed Rate by soliciting its employees to leave and join Bemortgage and by competing with it on behalf of Bemortgage.

“Mr. Caltabiano was terminated for misconduct, as described in our lawsuit,” Guaranteed Rate said in a statement Friday.

Caltabiano denied those allegations and said he disagrees that Guaranteed Rate terminated him. He said he worked there for 15 years and that it was a good place to work, but the time had come to explore more opportunities.

“I have a staff that works with me that voluntarily decided to pursue other opportunities as well,” he said. “You’ve got a lot of new opportunities in the mortgage banking space that weren’t here five years ago.”

Also named in the suit is Bridgeview Bancorp, holding company of Bridgeview Bank, which has about 15 locations throughout the Chicago area. The lawsuit also alleges Bridgeview and Caltabiano conspired to breach their fiduciary duties. Peter Haleas, chairman of Bridgeview’s board, said the bank did nothing wrong.

“I know that Bridgeview conducted itself in the full spirit of the law and business ethics, and we have no culpability,” he said.

In May, Guaranteed Rate filed an unrelated lawsuit alleging an employee and two former employees solicited other workers to join competitor Cross Country Mortgage and planned to open competing branches while still employed by Guaranteed Rate. The case was dismissed in September, according to court documents.

 

Source: http://www.chicagotribune.com/business/ct-biz-guaranteed-rate-lawsuit-20171201-story.html

Regulation N – Mortgage Acts and Practices – Advertising was issued by the Consumer Financial Protection Bureau (CFPB) to implement requirements of the Credit Card Accountability and Responsibility and Disclosure Act of 2009 (CARD Act) and Dodd-Frank Wall Street Reform and Consumer Financial Protection Act of 2010 (Dodd-Frank Act). The Federal Trade Commission oversees compliance with Regulation N for entities over which it exercises jurisdiction.

Regulation N defines mortgage credit product as any form of credit that is secured by real property or a dwelling and that is offered or extended to a consumer primarily for personal, family, or household purposes. For a mortgage credit product, the regulation prohibits certain material representations in any commercial communication about any term of a mortgage credit product, including:

The interest charged for the product – amount of interest in the monthly payment, loan amount, or total amount due;

The annual percentage rate, simple annual rate, periodic rate, or any other rate;

Information about the existence, nature, or amount of fees or costs to the consumer for the mortgage credit product;

Information about the existence, nature, or amount of fees or costs to the consumer for any additional product that may be sold in conjunction with the mortgage credit product;

The terms, amounts, payments, or other requirements relating to taxes or insurance associated with the mortgage credit product;

Any prepayment penalty associated with the mortgage credit product;

Any comparison between a rate or payment that will be available for a period less than the full length of the mortgage credit product and an actual or hypothetical rate or payment;

The type of mortgage credit product;

The amount of the obligation and the nature of cash or credit components of the obligation;

The existence, number, amount, or timing of any minimum or required payments;

The potential for default under the mortgage credit product and circumstances of default;

The effectiveness of the mortgage credit product in helping the consumer resolve difficulties in paying debts;

The association of the provider of the mortgage credit product with any other person or program;

The source of any commercial communication about the mortgage credit product;

The right of the consumer to reside in the dwelling that is the subject of the mortgage credit product;

The consumer’s ability or likelihood to obtain any mortgage credit product or term;

The consumer’s ability or likelihood to obtain a refinancing or modification of any mortgage credit product or term; and

The availability, nature, or substance of counseling services or any other expert advice offered to the consumer regarding any mortgage credit product or term..

Source: http://www.mortgagecompliancemagazine.com/compliance/alphabet-soup/mortgage-acts-practices-advertising-rule-2/

In October, new regulations went into effect regarding reverse mortgages. The reason for the changes was that the federal Department of Housing and Urban Development was facing large losses associated with their guarantees to reverse mortgage borrowers and lenders.

One of the things borrowers like about reverse mortgages is that the lender can never recover more than the fair market value of the home, regardless of the amount of money owed on the mortgage.

Borrowers may stay in their home as long as they maintain the property and pay the required real estate taxes and homeowner’s insurance. If they fail to do any of these things, or if they voluntarily leave the home (or vacate the property for 12 months, for health reasons or for any other reason), the lender takes possession and may sell the home.

One of the things lenders like about reverse mortgages is that if the outstanding loan exceeds the fair market value of the property, the lender does not incur a loss on the transaction. HUD bears the loss.

HUD has been facing larger losses recently, so it has made the following changes:

• Previously, HUD charged an upfront insurance premium of 0.5 percent for borrowers who took less than 60 percent of the maximum loan amount, and 2.5 percent of for those who took more than 60 percent. It now takes 2 percent for all loans.
• Previously, HUD imposed an annual mortgage insurance premium (MIP) of 1.25 percent of the loan outstanding. Now, new borrowers pay an annual insurance fee of 0.5 percent.
• The maximum loan amount has also been reduced. Previously, a borrower could borrow 60 or 70 percent of the property value; now that maximum is based on the applicant’s age, the mortgage rate and the property value. It is estimated that the amount that can be borrowed now is approximately 5 percent less than what was available before the new regulations.

One strategy for using a reverse mortgage is to take advantage of the growth of the available line of credit. (Some call this taking a “standby” reverse mortgage.) The credit line grows based on the loan rate plus the annual insurance premium. Since the annual insurance premium has been reduced, the line of credit will now grow at a slower pace.

In summary, borrowers will now find that they can borrow less under the new regulations, and the line of credit will grow more slowly.

On the other hand, the reduction in the annual MIP to 0.5 percent means that the homeowner’s loan balance will increase much more slowly, and accordingly the equity in the home will be retained.

The changed regulations are not a “game-changer” regarding the benefits of obtaining a reverse mortgage. However, they are factors to take into consideration. If you are obtaining a reverse mortgage in order to take advantage of the flexibility of the line of credit, you should understand how the line of credit is computed and how large it will be based on how long you expect to reside in the home.

For those borrowers planning to get cash up front, reverse mortgages may still be advantageous. Front-end costs and interest rates vary between lenders, so you have to comparison shop. In addition, do not base your decision solely on the mandated review/approval of a certified HUD adviser. You should have the proposal or contract reviewed by your own financial adviser or attorney. Any decision should be consistent with your long-term financial plan.

Source: http://host.madison.com/wsj/business/new-rules-change-costs-associated-with-reverse-mortgages/article_b47b184f-c19c-5b0c-9d7d-4ae68537e368.html

Dreaming of an oceanfront condo in Southern California or a cabin escape on the slopes in Aspen? Or perhaps you’re moving to a new town and are looking at apartments? No matter what type of place you’re searching for, chances are you’ve used Zillow.

Launched in 2006, the Seattle-based real estate giant is a free platform that provides consumers with “data, inspiration and knowledge.” So, how did this free, consumer-dedicated platform find itself in the crosshairs of the Consumer Financial Protection Bureau?

Simple: government oversight run amok.

Originally proposed by Elizabeth Warren in 2007 and established in 2011, the CFPB was intended to prevent financing companies from treating consumers unfairly. But the bureau has a history of overstepping that mandate, with its aggressive tactics hurting both consumers and businesses alike.

Over the past several years, the CFPB has used anti-kickback laws in the Real Estate Settlement Procedures Act (RESPA) to slap companies with multi-million dollar fines for engaging in historically-common business practices. The CFPB regularly sues mortgage lenders and real estate agencies that have simply partnered in routine marketing service agreements (MSAs), whereby a realtor advertises or recommends a lender or broker.

Two years ago, the CFPB trained its sights on Zillow and began investigating the online platform for allowing advertising by real estate agents and mortgage lenders with MSAs.

To provide free services to consumers, Zillow sells ad space to realtors, rental companies, builders, lenders, and others in the home industry. Zillow simply provides a neutral platform for businesses to reach customers interested in real estate to advertise.

Monthly advertising accounts for around 70 percent of Zillow’s revenue, nearly $190 million in the second quarter of 2017 alone.

The CFPB is now demanding that the real estate giant settle to the tune of millions of dollars or face legal action for allowing realtors and lenders with MSAs to advertise on its site.

Zillow, baffled by the allegations, reached out to the CFPB to discuss the matter, but has not received a formal response. The agency also declined to comment on news stories related to its vague charges.

In a recent article about the case in GeekWire, a Zillow spokesperson said the CFPB has “failed to give concrete feedback, and we’re aware of no evidence of consumer harm or any actual consumer complaints…this is a clear overreach, and one of main examples of the CFPB legislating by fiat.”

Additionally, the agency’s logic in going after Zillow is questionable.

If the CFPB’s priority is to protect consumers—as one would assume given the bureau’s name—going after a website such as Zillow is puzzling. Zillow and similar websites provide valuable tools to consumers at no cost. They help would-be homebuyers or sellers access important information critical to negotiating the terms of a real estate sale or purchase. And it would be a stretch to argue that Zillow somehow restricts consumers’ access to other real estate agents or lenders simply by allowing businesses to purchase advertising space.

Given these facts, why would the CFPB push so hard to settle this case with such scant evidence?

It appears CFPB’s battle against Zillow is more about politics and less about consumer protections.

Late last year, mortgage company PHH Corp. successfully defended a $109 million fine imposed against them by the CFPB. The court lambasted the CFPB’s actions as a clear overreach.

After such a ruling, the CFPB should have pumped the brakes on the anti-kickback witch-hunt, but CFPB Director Richard Cordray sees it differently.

Cordray, who has dramatically expanded the intended scope of the CFPB during his tenure, is rumored to be plotting a run for governor in Ohio next year. A “win” against Zillow provides another campaign talking point to brand himself as a top consumer watchdog.

No matter the purpose of the CFPB’s new hunt for RESPA violations, the vague anti-kickback statute confuses and harms the real estate industry and consumers.

Baseless allegations against Zillow and others invalidate the bureau’s claims of consumer protection. The CFPB is unconstitutional and its unaccountable overreach has no place in our government.

Cameron DeSanti is a student at George Washington University and a former policy intern at Americans for Prosperity.

If you would like to write an op-ed for the Washington Examiner, please read our

source: http://www.washingtonexaminer.com/zillow-falls-victim-to-cfpbs-latest-witch-hunt/article/2636954

You want the good news or the bad news on HMDA? Let’s go with the good news: After collecting expanded data on borrowers under the Home Mortgage Disclosure Act rule changes, lenders are going to have greater insight than ever before on their lending practices. The bad news? So is everyone else.

“Your lending practices are about to become a wide-open book,” said Mitchel Kider, chairman and managing partner, Weiner Brodsky Kider PC.

“When there is more information available to the public and to regulators, there will be a lot more scrutiny and potential liability.”

Kider was one of the experts who spoke Monday about HMDA rule implementation at the Mortgage Bankers Association’s 2017 Annual Conference and Expo. The panel’s unofficial theme, as outlined by John Haring, director of compliance enablement at Ellie Mae, was “we scare because we care,” due to the anxiety some lenders feel about what the HMDA changes mean for them.

Updated HMDA requirements involve a significant expansion of data collection, including 25 new fields that have to be reported. These changes are the latest attempts by federal regulators to ensure fair lending by identifying possible discriminatory patterns.

In the past, Kider said, regulators looked at HMDA data as part of their fair lending review, but the data wasn’t comprehensive enough by itself to determine discrimination. With the HMDA changes, the data will provide a complete picture for regulators, and lending pattern outliers will trigger an investigation.

“Now, all that data is available in a consistent electronic format and it will be very easy for others to compare you to peers, to drill down to specific information that was more difficult to obtain before,” Kider said.

That new data includes pricing information, origination charges, discount points, lender credits, interest rates, combined LTV ratio, credit score and DTI ratio.

“Fair lending will receive greater visibility when federal agencies and private litigants have additional data under HMDA to support their analysis,” Kider said.

In addition, poor data quality by itself can be the basis for action against lenders.

“Substance is important, but the accuracy of HMDA data is independently important as well,” Kider said. “Does this [poor data quality] mean you have to resubmit? No, this means civil money penalties as well. It is a reflection of having a poor compliance management system in all other areas.”

Maurice Jourdain-Earl, managing director at ComplianceTech, compared the HMDA implementation to an iceberg, with the expanded data points making up an unseen, bulky mass under the water line.

“Things are about to get very real,” Jourdain-Earl said. “We’ve been tiptoeing with HMDA data and a lot of lenders go through the process of collecting and submitting, but many don’t do what they need to in order to understand what it says. That need is about to become paramount. The new HMDA rules will be a game changer. We are going to experience a major paradigm shift, and HMDA can be either friend or foe.”

All of the HMDA panelists, which also included Richard Andreano Jr., practice group leader, mortgage banking group at Ballard Spahr, saw the HMDA changes as an opportunity for lenders to see, understand and hopefully improve, their lending practices.

“The responsible thing for lenders to do, is understand what their data is saying. How can you use your data to establish a process of benchmarking where you compare your business process and performance metrics to industry norms and best practices,” Jourdain-Earl said.

Part of the new data collected includes the unique identifier for the loan officer, which means regulators will have transparency into the lending practices of not just companies or branches or managers, but all the way down to the level of loan officer.

“With new HMDA data, regulators will be able to more scientifically identify a peer, and a peer with a similar business model. Are their outcomes the same or different than yours?” Jourdain-Earl asked.

In addition to the challenges of the HMDA reporting, Haring pointed out the difficulties of getting ready for implementing the HMDA changes while the CFPB is still adjusting requirements, including changes to the filing instruction guides.

The bureau is still developing the platform that lenders will use to submit HMDA data starting on March 1, 2018, but has not provided a specific date when it will be completed.

“Lenders want to test against that platform today,” Haring said.

Source: https://www.housingwire.com/articles/41641-what-hmda-changes-mean-for-lenders