Mortgage lenders need more help implementing law’s abrupt changes

Posted on August 26, 2018 in Uncategorized | Add Your Voice

Mortgage lenders need more help implementing law’s abrupt changes

The Economic Growth, Regulatory Relief and Consumer Protection Act, signed into law in late May, addressed several important issues facing the mortgage industry. The legislation, however, may have created unexpected implementation challenges for mortgage lenders. Certain provisions of the legislation failed to provide implementation timelines, guidance and clear definitions, particularly regarding changes to Home Mortgage Disclosure Act (HMDA) reporting requirements and Ginnie Mae pooling criteria for refinanced loans guaranteed by the Department of Veterans Affairs (VA).

“Regulators are still working out some of the details of the legislation, leaving lenders waiting for further instruction,” said Tim Rood, Chairman of The Collingwood Group. “Our clients are particularly struggling with the abrupt rollout of the VA churning rule changes.”

HMDA Reporting

The legislation outlined changes to HMDA reporting requirements. The Bureau of Consumer Financial Protection (BCFP) has already issued guidance on partial exemptions for depository institutions and credit unions. While the legislation dictated a reduction in the amount of HMDA data collected, it did not specify which fields should be eliminated.

Roughly 85% of lenders fall under the umbrella of the new HMDA exemptions created by the legislation. There has been some confusion, however, about certain technical requirements of lenders that are exempt from HMDA reporting. Lenders are unsure of their requirements to collect HMDA data, despite not being required to report it. The Federal Deposit Insurance Corporation weighed in on the issue. Jonathan Miller, deputy director of deposit and consumer protection at the FDIC, said at a recent public agency meeting, “From our point of view, we do not think the law requires you to collect the data if you don’t have to report it.”

The Dodd-Frank Wall Street Reform and Consumer Protection Act, signed into law in 2010, expanded HMDA reporting from nine data fields to 23 data fields. The BCFP further expanded reporting requirements, adding another 25 data fields under the leadership of former Director Richard Cordray. Acting Director Mick Mulvaney has suggested in previous remarks that he plans to eliminate the 25 fields added by Cordray, but the industry is still waiting for more formal guidance and/or rulemaking.

“We’ve seen a complete 180 on HMDA in the past year. There have been changes to everything from enforcement approach to exemptions and reporting requirements,” said Rood. “We are close to a final picture of what HMDA reporting will look like under the Trump administration, but additional regulatory guidance is needed to provide clarity to lenders and vendors.”

To read the complete commentary on implementation challenges, click here.

Nonbank mortgage lenders may need to brace for more cuts

Intensifying margin pressure could spur another wave of cost-cutting at nonbank mortgage lenders, unless other strategies, like consolidation or a mortgage servicing book that could increase in value, offset it.

For publicly traded nonbank mortgage companies, the average ratio of total expenses to total revenue from 2014 through the second quarter of this year, with one-time items excluded, is 121%, according to a Fitch Ratings report.

“An expense ratio over 100% implies operating expenses that are higher than net revenues and weaker profitability,” Johann Juan, a director in Fitch’s financial institutions ratings group, said in an interview.

Read more: National Mortgage News

Mulvaney’s long history with key consumer tool puts its future in doubt

A fight is heating up over whether millions of consumer complaints against financial institutions should be made public.

And consumer advocates are deeply worried about what comes next.

Every month since 2011, the Consumer Financial Protection Bureau has released reports of public grievances made by consumers against institutions including Bank of America, Wells Fargo and Equifax.

Last November, the bureau abruptly stopped releasing them. Now, 10 months later, it’s unclear exactly whether it will resume.

The bureau is considering whether to change how it manages its consumer complaint database, including whether it should permanently halt releasing grievances publicly, according to a government notice. Officials at the agency are now combing through hundreds of comment letters from financial institutions, trade groups and consumers that were due on July 16.

Read more: CNN

Existing-home sales tumble to a 2½-year low; many buyers give up

Existing-home sales ran at a 5.34 million seasonally adjusted annual rate in July, down 0.7% versus June, the National Association of Realtors said last week. That was the lowest pace since February 2016, and missed the MarketWatch consensus forecast of 5.40 million.

Sales of previously owned homes slid for the fourth consecutive month as supply remained too scarce and prices too high to tempt would-be buyers. July’s selling pace was 1.5% lower than a year ago, and at the current sales rate, it would take 4.3 months to exhaust available supply, the same as in June, and well below long-time historical averages.

After a brief uptick in June, inventory was unchanged compared to a year ago in July and down 0.5% for the month.

For years, the Realtors have been warning that many would-be buyers, particularly at the lower end of the market, are being priced out. Now they’re also acknowledging that many others are just deciding to sit it out until market conditions change.

Read more: MarketWatch

US new-home sales fall to nine-month low while supply rises

U.S. purchases of new homes unexpectedly dipped to the weakest pace in nine months as higher prices and mortgage rates sideline demand, adding to signs of a cooling in the housing market, government data showed last Thursday.

The first back-to-back decline since January was led by a 52.3 percent drop in the Northeast to 21,000 home sales, the fewest since 2015, as well as a 3.3 percent decline to 355,000 in the South, the biggest region. The West and Midwest recorded gains.

The figures follow data from earlier last week showing sales of previously owned homes fell for a fourth month to the lowest since early 2016. A separate report showed home prices rose 1.1 percent in the second quarter from the previous three months, the smallest gain in four years, according to the Federal Housing Finance Agency.

Read more: Bloomberg

Is the tide turning on tech’s boom? Seattle’s hot real estate market finally cools in new Zillow report

Smoky skies may have kept us from seeing this one coming, but during the hottest time of the year in Seattle – in the nation’s hottest market – the housing situation has cooled a bit.

According to Seattle-based Zillow Group’s Real Estate Market Report for July, Seattle is among U.S. cities showing the greatest slowdown in home value appreciation over the past year. It’s relative, of course, since values are still rising – it’s just not happening at the blistering pace set in 2017.

According to Zillow, Seattle metro home values rose 9.1 percent over the past year, down from 14.2 percent a year ago. Over time, the average rate of home value growth in the city is 5.6 percent, so values are still rising faster than average.

Zillow also said the median home value in Seattle is $487,600, which easily eclipses the nationwide number of $218,000 – the highest value the U.S. home values rose 8 percent across the country in the past year, 0.7 percentage points faster than the year before.

Seattle went from the leading market in terms of home value appreciation, to 12th fastest, joining Portland, Sacramento, Calif., and Tampa, Fla., among cities with the biggest dips.

Read more: Geekwire

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