We’ve heard of scams that often cost victims hundreds or thousands of dollars, which is bad enough.

But a mortgage title scam that almost victimized an Akron-area man could have cost him what could have been a life savings for many — tens of thousands of dollars, in the high five figures.

Luckily, he and his credit union mortgage specialist realized what was happening before the money was wired.

This scam apparently has been around for a few years, but may just be hitting the Akron area.

The Akron man is no stranger to buying houses. He’s bought two other houses in his lifetime.

He asked for anonymity and didn’t want to publicize the exact amount he could have lost since he felt violated by the potential scam.

Nationally, the scam has victimized others, including a couple who lost $1.5 million, according to an August Associated Press story.

Here’s what happened to our local homebuyer, and it’s very similar to the national scam:

He was going to close on an Akron-area house on a recent Monday. On the Friday before, he went into Towpath Credit Union to meet with Amanda Sibera, his mortgage specialist, to go over paperwork.

He needed to wire money to a bank in California. Federal rules require any payments over $10,000 to be wired.

As the homebuyer was sitting with Sibera on that Friday morning a few weeks ago, the two were reviewing the wiring instructions that Sibera had from previous transactions. All they needed was to confirm the loan number and bank routing numbers.

“It’s good to have another set of eyes on this. This is a lot of money,” the homebuyer told me. “We literally touched each letter and number with a pen.”

Here’s where it gets weird and scary.

They were on the phone with the title company representative. She said she would email the wire instructions within two minutes.

When the buyer opened his email, he already had a message that appeared to be from the title company representative. He did not immediately notice that the email had actually come a few hours earlier.

“This had the correct dollar amount to the loan to the penny. Even though I had opened it, Gmail had flagged it as suspicious,” he said.

Sibera said the email also instructed the homebuyer to wire the money on Friday “to not cause a delay in the closing. That was the trigger word. It was Friday. He wasn’t closing until Monday. The title company didn’t technically need the funds until Monday.”

When the homebuyer and Sibera phoned the title agent back, they asked if she had sent her email. She said no, she was working on it.

When they looked more closely, they noticed though the email appeared to come from the title agent, the reply message was to a random Gmail account. The listed bank also was in a different state than the actual bank he was using.

The homebuyer “was obviously very afraid of what was happening. He felt like his whole life could have just been gone,” Sibera said.

According to other news reports and warnings from the Federal Trade Commission and the National Association of Realtors, the scammers are likely hacking into email systems of those associated with home closings and consumers’ emails in order to see in real time names and exact amounts of down payments in order to send what looks like a legitimate email.

The American Land Title Association, the national association for title companies, has been trying for two years to educate its members and consumers about the fraud, association spokesman Jeremy Yohe said.

“These hackers interject themselves at the moment when it seems legit. As the buyer, the person just wants to get the keys to their house,” Yohe told me. “We are hoping consumers become aware that this hacking is possible and could steal the funds for their home.”

The title company used in the local homebuyer’s case, First American Title, referred questions to its corporate headquarters. The corporate headquarters, in turn, referred me to Yohe’s organization.

“Our members — attorneys and title companies — have taken many steps to try to combat this problem … but these criminals are smart and are constantly altering their tactics to steal the money,” Yohe said. “Fortunately in this case, [the homebuyers] didn’t lose the money.”

First American Title has a fact sheet on its website warning its agents of the growing wire fraud scam at closing. It suggests agents use a safe phone number to contact the homebuyer, not to rely solely on emails. In some cases, agents have begun requiring an in-person meeting to finish the wiring instructions.

Additionally, the national organization said to be wary when wiring information changes at the last minute.

The homebuyer continued to get emails from the would-be scammer.

“I did get two other follow-up emails on late Saturday or Friday asking “Did you send it? You’re in danger of jeopardizing your closing,’ ” the homebuyer said.

In the end, he successfully closed on the house and wired the money to the right bank by the deadline.

He and the folks at Towpath Credit Union hope by sharing his story, it will prevent anyone else in our area from losing tens of thousands of dollars in this scam.

Said Sibera: “I hope this is the only time. [Closing is] never a fun process.… This should be one of the best days of their lives, not one of the worst.”

SCO update

Now for some housekeeping items. In Friday’s business section, I wrote a short story saying Dominion Energy Ohio’s annual auction to determine the formula for the monthly Standard Choice Offer (SCO), which I continue to recommend, came in at a low rate. It wasn’t as low as the previous year, which was 0 cents, but the new “adder” price to determine the monthly rate came in at 7 cents per thousand cubic feet (mcf). That translates to a $7 yearly increase since the average homeowner uses 100 mcf a year, and is much better than some years, when that adder was several dollars. You can read more about it at http://www.ohio.com/betty.

Also, I have been getting questions about a letter from the NOPEC aggregation that many residents have received. I wrote a column two weeks ago about that aggregation. You can read it in the Jan. 27 newspaper or online.

Beacon Journal consumer columnist and medical reporter Betty Lin-Fisher can be reached at 330-996-3724 or [email protected]. Follow her @blinfisherABJ on Twitter or http://www.facebook.com/BettyLinFisherABJ and see all her stories at http://www.ohio.com/betty.

 

Source :https://www.ohio.com/akron/business/taking-action/mortgage-title-scam-almost-costs-homebuyer-tens-of-thousands-of-dollars

WASHINGTON — The U.S. government sent notices to nine lenders this week, warning them that they would be penalized for pressuring veterans into costly home loan refinancing.

The lenders were told they will be kicked out of Ginnie Mae’s mortgage program unless they prove they can correct their actions.

The notices are part of an effort between Ginnie Mae, formally known as the Government National Mortgage Association, and the Department of Veterans Affairs to stop predatory lenders from targeting veterans who use the VA home loan guarantee program.

The occurrence of rapidly and unnecessarily refinancing loans, known as “loan churning,” creates costly fees for veterans, lengthens their debt repayment and threatens the overall VA program, said Ginnie Mae Executive Vice President Michael Bright.

“We need to take these lenders who appear to be operating in a way that doesn’t make sense and put them into this penalty box,” he said.

Ginnie Mae amended its guidelines at the end of January, stating it would be investigating lenders whose actions appear to be out-of-step with other lenders without a logical reason. Regulators said the bad actors accounted for only a handful of outliers.

Removing those outliers is likely to have the effect of lowering borrowing rates for veterans and others who use Ginnie Mae-backed securities by as much as .5 percent, according to Ginnie Mae.

Ginnie Mae did not name the targeted lenders. Bloomberg Politics, citing a source familiar with the matter, reported NewDay Financial, Nations Lending Corp., Freedom Mortgage Corp., LoanDepot.com LLC and Flagstar Bank were among those notified.

“We expect issuers receiving these notices to respond quickly, produce a corrective action plan and come into compliance with our program,” Bright said.

Because of loan-churning, companies that provide capital for the VA program are increasingly weary of lenders taking advantage of veterans who use it, Bright said. Penalizing lenders for churning is likely to improve their confidence.

“People who are backing this program are mad at how these loans are performing,” Bright said. “When we actually do this, my hope is those people who were skeptical see that Ginnie Mae really means it, and that they come back to the program.”

The action could be just the first step in removing predatory lenders that target the VA program, which offers veterans a low-cost mortgage option.

Jeffrey London, director of the VA loan guaranty service, told lawmakers last month that the VA will soon propose rule changes to the program. The regulations could include a requirement for a lender’s refinancing proposal to meet a certain tangible net benefit for veterans, as the Federal Housing Administration already compels lenders to prove before refinancing loans that it insures.

But the process to implement new regulations could be lengthy. The VA must adhere to the federal rulemaking process, which includes a public comment period. London didn’t tell lawmakers an expected timeline and said only the VA would propose new regulations sometime in 2018.

Sens. Elizabeth Warren, D-Mass., and Thom Tillis, R-N.C., introduced legislation in January requiring lenders to demonstrate a benefit to veterans when refinancing their mortgage.

While reviewing VA data in recent months, Ginnie Mae found a fixed-rate refinance of a VA home loan cost veterans an average $6,000 in fees. Their average savings were $90 each month, meaning it would take veterans more than five years to break even on refinancing.

“The American Legion stands with Ginnie Mae and Senators Warren and Tillis as they work to protect veterans from predatory home lending and ensure veterans have an affordable pathway to home ownership,” Denise Rohan, national commander of the American Legion, said in a written statement. “Our veterans didn’t serve their country around the globe in order to be taken advantage of by unscrupulous lenders at home.”

Source: https://www.stripes.com/news/ginnie-mae-penalizes-9-lenders-for-targeting-veterans-1.510746

When real estate investors get this confident, money manager James Stack gets nervous.

U.S. home prices are surging to new records. Homebuilder stocks last year outperformed all other groups. And bears? They’re now an endangered species.

Stack, 66, who manages $1.3 billion for people with a high net worth, predicted the housing crash in 2005, just before prices reached their peak. Now, from his perch in Whitefish, Montana, he says his “Housing Bubble Bellwether Barometer” of homebuilder and mortgage company stocks, which jumped 80 percent in the past year, once again is flashing red.

“It is 2005 all over again in terms of the valuation extreme, the psychological excess and the denial,” said Stack, whose fireproof files of newspaper articles on bear markets date back to 1929. “People don’t believe housing is in a bubble and don’t want to hear talk about prices being a little bit bubblish.”

Bubble? What Bubble?

As the housing market approaches its key spring selling season, Stack is practically alone in his wariness. While price gains may slow, most analysts see no end in sight for the six-year-old recovery.

There are plenty of reasons to be optimistic. The housing needs of two massive generations — millennials aging into homeownership and baby boomers getting ready for retirement — are expected to fuel demand for years to come if employment remains strong. Sales in master-planned communities, many of which target buyers who are at least 55, reached a record last year, according to John Burns Real Estate Consulting. Last month, a gauge of confidence from the National Association of Home Builders/Wells Fargo rose to the highest level in 18 years, and starts of single-family homes in November were the strongest in a decade.

“As soon as homes are finished, they’re flying off the shelf,” said Matthew Pointon, Capital Economics Ltd.’s U.S. property economist.

Homebuilders, which have focused on pricier homes since the market bottomed in 2012, are now getting ready for a wave of first-time buyers left with little to choose from on the existing-home market. Investors are rushing to builders of starter homes, because lower-priced homes in the U.S. are in the shortest supply. Shares of LGI Homes Inc., which targets renters with ads that trumpet monthly payments instead of prices, rose 161 percent last year. D.R. Horton Inc., the biggest builder, powered by its fast-selling Express entry-level brand, gained 87 percent.

Overall, the S&P 500’s index of homebuilders increased 75 percent last year, about four times as much as the stock market as a whole. A subset that includes just the three largest builders was the best performer of the 158 S&P groups.

“Over the past year, we’ve really seen a pickup in the first-time buyer, and that’s what’s driving a lot of the stocks,” said Samantha McLemore, who co-manages Bill Miller’s Miller Opportunity Trust, which has stakes in PulteGroup Inc. and Lennar Corp. “In the long term, we continue to see strong earnings growth for years to come.”

‘Rot in the Woodwork’

Stack has a different perspective. While the market might gradually correct itself, history shows that it’s more likely to “come down hard” with the next recession, he said. He described the pattern as a steep run-up in housing prices spurred by low interest rates. The last downturn came about when economic growth slowed after a series of rate increases, exposing the “rot in the woodwork” and prompting loan defaults, Stack said.

He noted that the Fed has projected three rate increases for this year, and said that “raises the risk that today’s highly inflated housing market will again end badly.” He’s watching homebuilder stocks closely because they’re a leading indicator, peaking in 2005, the year he called the crash — and the year before home prices themselves hit a top.

Stack has been studying median home prices, too, which typically track long-term inflation as measured by the Consumer Price Index. Last summer, they were as high as 32 percent above the measure; in 2006, just before the housing bust, values were about 35 percent higher, according to data from the National Association of Realtors. Half of the 50 largest metropolitan areas were overvalued relative to incomes in November, compared with 36 percent two years earlier, according to an analysis by data provider CoreLogic.

“If we see mortgage rates at more historical levels, house prices can’t stay where they are,” Stack said. Corp

A rate rise from 4 to 5 percent for a 30-year loan would drive up monthly mortgage costs by 12 percent. For buyers, that’s on top of the annual median price gain — 7 percent for existing homes in November, according to CoreLogic. By comparison, disposable income, or earnings adjusted for taxes and inflation, increased just 1.9 percent, according to data from the Bureau of Economic Analysis.

Bill McBride, who runs the Calculated Risk blog and also called the crash, doesn’t think home prices are inflated this time around. Unlike in 2005, lenders are acting responsibly and the Wild West of real estate speculation hasn’t returned, he said. There is less to speculate on, too. Compared with the overbuilding that preceded the bust, today’s pace of construction isn’t fast enough, he said.

“Lending standards are still pretty good,” McBride said, and he doesn’t expect mortgage rates to “take off” in the short term.

The Tax Twist

One wild card is the U.S. tax overhaul, which could cut both ways for homebuilders. They got a lower corporate rate, and many of their consumers will benefit from the doubling of the standard deduction. But it also caps the mortgage deduction at $750,000 instead of $1 million and limits deductions of property taxes, which mighthurt expensive markets such as New York, New Jersey and California.

As a result of the tax plan and an expected gradual rise in mortgage rates, existing-home sales will be flat this year and prices will rise only 1 or 2 percent, said Lawrence Yun, the chief economist for the National Association of Realtors, which opposed the tax bill.

“The housing market has been doing relatively well during the recovery,” Yun said. “But 2018 will be a year where we begin to see some change.”

Homebuilders have a lot going for them, said Carl Reichardt, an analyst for BTIG LLC. Still, he has a hold rating on most of them, a sell on KB Home and a buy only on Lennar and D.R. Horton. That’s because many of those positives are already baked into the share prices, he said, and home construction can grow only so much, given the tight supply of skilled laborers and finished lots.

Slow and Steady

“It’s almost better for the stocks if the general consensus is for moderate growth rather than supercharged growth,” Reichardt said. “It’s the sense that a slow and steady recovery creates more predictability.”

New-home sales will probably increase 8 to 12 percent this year after rising about 11 percent in 2017, said analyst Alex Barron with the Housing Research Center in El Paso, Texas. At 675,000 to 700,000 sales, that’s still almost 50 percent below peak levels in 2005.

“Ever since Trump took over, the mood has been incrementally positive,” Barron said. “Now that tax reform went through, people will have more money in their pockets.”

Bill Smead, whose Smead Capital Management has 11 percent of its $2.4 billion portfolio in NVR Inc. and Lennar, said stocks in general could fall in the short run and that will provide an opening for investors to buy homebuilder shares.

“Nobody wants to take their gains now,” Smead said. “There are no sellers.”

— With assistance by Charles Stein, and Vince Golle

 

Source : https://www.bloomberg.com/news/articles/2018-01-22/housing-bears-hibernate-as-u-s-homebuilders-swagger-into-2018

Banks and credit unions are markedly more worried about regulatory compliance and risk management, according to new data. The results of the Wolters Kluwer Regulatory and Risk Management Indicator revealed that overall risk management concern is up 13 percent over the year. Regulatory concerns are up 3 percent for the same period.

According to the Indicator, which polled more than 600 banks and credit unions across the country, top regulatory concerns include the fair lending exam, new Home Mortgage Disclosure Act rules, and the ability to track, maintain, and report to regulators. Just under 50 percent of respondents said they’ve noticed increased scrutiny based on their most recent fair lending exam, while HMDA changes came in as the single-biggest concern across the board.

As for risk management, cybersecurity and data security topped the list, with a whopping 83 percent of those surveyed saying they’re either “concerned” or “very concerned.” IT risk and regulatory risk also came in high.

According to Timothy R. Burniston, Senior Adviser and Principal Regulatory Strategist at Wolters Kluwer, 2017’s many data breaches are likely to blame.

“These results—compiled against a backdrop of highly publicized data breaches at well-known entities, and at a time when financial institutions are preparing for the implementation of the most significant set of HMDA changes in several decades—drove the increase in concerns expressed in this year’s survey,” Burniston said.

On the compliance front, respondents were mostly concerned with optimizing their compliance spend, reducing exposure to financial crime, and managing their compliance monitoring and testing efforts.

“These responses, when viewed collectively, reinforce for financial institutions the strategic imperative of having a proactive, well-staffed and supported corporate compliance program that operates across the three lines of defense —the business units, along with compliance/risk and audit areas—in tandem with an overarching risk management framework integrated with all lines of business,” Burniston said.

source:http://www.dsnews.com/daily-dose/12-20-2017/hmda-data-security-among-chief-concerns-banks-credit-unions

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