Basel III Final Rule Issued; MBA Provides Analysis

Risks from mortgages were a focus in the 2012 Basel III proposed rules and its treatment of mortgage servicing rights and the risk weighting of residential mortgages threatened to change the way the real estate finance industry does business. MBA lobbied the Federal Reserve Board, Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency aggressively since then, including several letters and a face-to-face meeting between MBA members and the regulators last December.

On July 2, the Federal Reserve took the first step among the regulators in formally issuing a Final Rule by voting to approve the regulation. The Final Rule did not treat mortgage banking assets as severely as the proposed rule had done. However, the in the Final Rule mortgage servicing rights were not given favorable treatment. In fact, the rule now requires that certain assets, including MSRs–which individually exceed 10 percent of the common equity component of tier 1 capital–be deducted from that component. In addition, FHA and VA loans will see their risk weighting increase from zero to 20 percent.

For the benefit of MBA members, MBA prepared a summary of the Final Rule here.

Mortgage Bankers Association 1717 Rhode Island Avenue, NW
Washington, DC 20036
(800) 793-6222

MBA Successful in Appeal of Overtime Compensation Case

On July 2, in the case of Mortgage Bankers Association v. Seth Harris, the U.S. Circuit Court of Appeals for D.C. gave MBA a significant victory. The Court ruled in MBA’s favor in the appeal of a lower court decision on how the Department of Labor imposed overtime compensation requirements on loan officers under the Fair Labor Standards Act.

In its suit, MBA asserted that DOL did not follow proper rulemaking procedures in 2010 when the Department withdrew its previous opinion that certain loan officers qualify for the Administrative Exemption from overtime requirements under FLSA rules. MBA had contended that the DOL’s withdrawal of the 2006 opinion letter should not have occurred without a formal notice and an opportunity for public comment. In its ruling, the court ordered DOL to vacate the 2010 Administrative Interpretation.

In response to the decision, the Department may choose to ask for a rehearing by a larger panel of the Court or appeal the decision to the Supreme Court in order to preserve its ability to issue interpretations of this kind without notice and comment. Alternatively, the Department might seek to readopt the challenged policy through a formal notice and comment process. Please click here<http://mba-pac.informz.net/z/cjUucD9taT0yNDY3OTAwJnA9MSZ1PTc4MTYyNzU0MCZsaT0xMjgzODcxNg/index.html> to view the Court’s ruling.

Key MBA Action

MBA Submits Comments to CFPB on 2013 Mortgage Rules
On June 3, MBA submitted two comment letters to the Consumer Financial Protection Bureau regarding its April 19 proposed amendments to 2013 mortgage rules under the Real Estate Settlement Procedures Act (Regulation X) and the Truth in Lending Act (Regulation Z). 

First, MBA sent a letter concerning the amendments to the small servicer exemption for certain rules, as well as the relation to state laws sections of the proposed amendments. In this letter, MBA urged the CFPB to consider a larger limit beyond the 5,000 or fewer mortgage loans to qualify as a small servicer. The letter further suggested that a small servicer should not be defined as one that services only for its own portfolio or that originates all mortgage loans it services. In addition, MBA encouraged the CFPB to reemphasize and reiterate its mortgage servicing rules to the states, regardless of whether absolute field preemption exists.

A separate letter was also submitted concerning the temporary category (eligible for GSE or government agency purchase, guarantee or insurance) of qualified mortgage loans under the Ability to Repay/QM rule.

MBA supported CFPB’s proposed clarifications: (1) on what it means to be eligible for purchase by a GSE or insurance or guarantee from another government agency; (2) that only a repurchase or indemnification request that is based on a factor that “specifically apply to the qualified mortgage status” could be relevant to QM status; and (3) that the mere occurrence of a repurchase or indemnification demand would not invalidate a loan’s status as a QM.

Enroll or Re-Enroll in the Mortgage Action Alliance
Whether you are already a MAA member or this newsletter was forwarded to you by one, MAA is stronger when you choose to participate. All MAA members must voluntarily enroll every 365 days to remain active, so please take a moment to begin or renew your membership by clicking here and filling out the brief form. The larger the group, the louder the voice.

Mortgage Bankers Association 1717 Rhode Island Avenue, NW
Washington, DC 20036
(800) 793-6222

Volume VII | Issue 19 | May 28, 2013

 The Consumer Financial Protection Bureau came under intense scrutiny last week at an oftentimes contentious subcommittee hearing on the Ability to Repay rule. Both Democrats and Republicans criticized the Bureau for crafting a Qualified Mortgage definition that would restrict access to many otherwise qualified borrowers. The hearing also focused on the definition of points and fees, with members of the subcommittee speaking out in support of H.R. 1077, the Consumer Mortgage Choice Act, which would amend this calculation. As a reminder, on May 17th MBA sent out a Call to Action to Mortgage Action Alliance members urging them to ask their members of Congress to co-sponsor H.R. 1077 and  S. 949, its Senate companion bill. You can still take action  by clicking here. You will need to sign in using your MAA user name and password.

 Key MBA Actions

MBA, HPC Send Comment Letter to CFPB on QM Requirements

On May 24, MBA and the Housing Policy Council sent a joint comment letter to the Consumer Financial Protection Bureau advising various changes calculated to improve certainty when mortgage lenders use Appendix Q to define the debt-to-income ratio for qualified mortgages under the general definition.

In addition to the letter, the Associations provided CFPB with a detailed grid highlighting the outstanding issues with Appendix Q, as proposed originally and as amended. Both the letter and grid attempt to reduce the overreliance on subjective qualifications that could necessitate the use of manual underwriting processes rather than automatic underwriting systems.

 The letter makes three recommendations to help ensure that Appendix Q can be used to underwrite loans for as many qualified borrowers as possible:

 (1) Subjectivity makes the process more difficult for both the consumer and the lender; it should be removed where possible. Currently, the lender must affirmatively conclude the consumer’s income will continue. Instead, the Associations recommend that the lender receive confirmation of employment, which will suffice unless the consumer or employer offers a statement suggesting that the employment will not continue.

 (2) The version of Appendix Q released with the QM rule requires a lender to analyze the consumer’s prospects for continued employment using employment records, qualifications, training and education, and receipt of a confirmation of continued employment from the employer. The Associations support the CFPB’s April 19 amendments striking the requirement to analyze qualifications, training and education and believe that confirmation and documentation of current employment and employment history is sufficient.

 (3) The letter and grid recommend a new and simple quantitative test for determining the amount of income to include in the DTI analysis. This clear test would require lenders to use the lesser amount of the average of two year’s past income or the most recent year’s earnings. Taken together, the recommendations in the letter and grid seek to make Appendix Q’s QM DTI definition simpler and easier to determine.

 MBA Submits Joint Trades Letter to CFPB on Delay of Prohibition on Financing Credit Insurance Premiums

On May 23, MBA and other representatives of the real estate finance industry wrote to the Consumer Financial Protection Bureau in support of the CFPB’s proposal to delay the June 1 effective date for section 1026.36(i), which prohibits the financing of single-premium credit insurance offered in connection with residential mortgages.

Additionally, the CFPB has also indicated that when it proposes a new effective date for section 1026.36(i), it also will seek public comment on the applicability of the prohibition to transactions in which credit insurance premiums are charged periodically.

In the letter, MBA and the joint trades expressed appreciation for the CFPB’s willingness to consider the effect of its original rule on these products, and offered some initial thoughts on the subject.

CFPB Greenlights State Use of Uniform State Test, Partners with CSBS on Framework for States

On, May 20, the Consumer Financial Protection Bureau expressly stated in CFPB Bulletin 2013-05 that state-licensed mortgage loan originators may be tested on their professional qualifications by the Uniform State Test.

More specifically, “presenting test questions through a UST rather than a separate State test component would not preclude the test from being a qualified test under the SAFE Act, so long as all the requirements for a qualified test are satisfied. Therefore, a State may use a UST if it adequately tests required laws and regulations.” This public guidance by CFPB indicates that the UST, developed by the Nationwide Mortgage Licensing System and Registry, is a valid process for MLO testing.

Based on feedback from state MBAs who urged their regulators to embrace the UST, MBA wrote to the CFPB in February to express its support for the UST, as well as to request that CFPB indicate in writing that a state’s adoption of the UST will not violate the Secure and Fair Enforcement for Mortgage Licensing Act of 2008.

In its letter, MBA noted that many non-adopting states/agencies had expressed their desire for CFPB’s public approval, in order to consider joining the current landscape of adopters, which totals 31 agencies in 29 states. The UST is a clear example of how the real estate finance industry and regulators are cooperating to meet consumer protection needs, while alleviating many of the unintended economic and employment constraints created by the SAFE Act.

 The following day, CFPB and the Conference of State Bank Supervisors–acting on behalf of state financial regulatory authorities–built on in this desire for cooperation by announcing a framework which “establishes a process for coordination on supervision and enforcement matters. The framework will apply in situations where the CFPB and state regulators share concurrent supervisory jurisdiction.”

Among other things, this framework provides processes for their coordinating of exam schedules; development of comprehensive supervisory plans for particular institutions; coordination of information requests; streamlining of information sharing; and provision of advance notice of corrective actions.

MBA President and CEO Discusses Housing on CNBC

On May 23, MBA President and CEO David Stevens appeared live on CNBC’s Street Signs to discuss the state of, and future outlook for, the housing market. To view Stevens’ appearance, please click here.

 MBA’s Holds Legal Issues/Regulatory Compliance

MBA held a highly successful Legal Issues and Regulatory Compliance Conference last week, in Boca Raton, Fla. Nearly 900 lawyers, compliance officers, business leaders and regulators from all over the country carefully considered the demands of the new Consumer Financial Protection Bureau rules implementing Dodd-Frank’s mortgage provisions.

Participants also received updates on other agencies’ rules, as well as the latest trends in litigation, supervision and enforcement. MBA appreciated the attendance of a significant number of expert CFPB and government personnel which allowed for a full, frank and particularly valuable discussion for participants.

House Subcommittee Holds Hearing on ATR/QM Impact

On May 22, the House Financial Services subcommittee on Housing and Insurance held a hearing, Qualified Mortgages: Examining the impact of the Ability to Repay Rule. Witnesses for the single-paneled hearing included two assistant directors from the Consumer Financial Protection Bureau: Peter Carroll, assistant director for mortgage markets; and Kelly Cochran, assistant director for regulations.

The hearing centered on the effect that the Qualified Mortgage rule will have on the mortgage markets and the availability of credit. Although the focus was to be on the Ability to Repay rule, much of the discussion surrounded the 3 percent points and fees definition and the Consumer Mortgage Choice Act, H.R. 1077.  Moreover, several subcommittee members addressed their concerns with the affiliated title issue and voiced support for H.R. 1077 and its goals. The CFPB also insisted that they cannot make certain changes to the rule without Congress acting on them first.

 CFPB Takes RESPA Enforcement Action

According to a recent Consumer Financial Protection Bureau press release on May 17 it ordered a Texas home builder to surrender more than $100,000 in kickbacks stemming from improper referrals under the Real Estate Settlement Procedures Act. The CFPB also banned the homebuilder from engaging in future real estate settlement services.

Following the Dodd-Frank Act’s signature into law, authority for enforcement of RESPA was transferred to the CFPB. For more information on this action, please see the CFPB’s Consent Order.

Fair Housing’s Disparate Impact

By Scott M. Drucker, Esq., General Counsel, Arizona Association of REALTORS®

Source: Arizona REALTOR® Magazine – April 2013, ©Arizona Association of REALTORS®

“As we’ve learned over the years, housing discrimination comes in many forms. Discrimination doesn’t have to be intentional in order to have a damaging effect.” Those were the words Department of Housing and Urban Development (HUD) Secretary Shaun Donovan uttered shortly following HUD’s February 8, 2013 issuance of a final rule intended to formalize the national standard for determining how and when housing practices violate the Fair Housing Act (FHA) as a result of discriminatory effect.

Addressing “disparate impact” or unintended discriminatory effects claims, the final rule enacted by HUD provides guidance as to how a housing provider that engages in a facially neutral (unbiased) practice can nonetheless violate fair housing laws. The rule, therefore, better enables plaintiffs and governmental agencies to challenge housing or lending practices that have a disparate impact – even under circumstances in which the practice is facially non-discriminatory and not motivated by bias or prejudice. According to the rule, impact of this nature results when a neutral practice actually or predictably: (1) results in a disparate impact on a group of persons on the basis of race, color, religion, sex, handicap, familial status, or national origin; or (2) has the effect of creating, perpetrating, or increasing segregated housing patterns on the basis of race, color, religion, sex, handicap, familial status or national origin.

In its final rule, which can be found here, HUD created a three-step burden-shifting system to determine liability under the FHA. First, HUD or the private plaintiff must establish that the housing practice caused or predictably will cause a discriminatory effect on a protected class. Once a disparate impact of this nature is proven, the burden shifts to the defendant to show that the practice is necessary to achieve a substantial, legitimate, nondiscriminatory interest. Any such justification must be supported by actual evidence and not be hypothetical or speculative. HUD defines a “substantial” interest as “a core interest of the organization that has a direct relationship to the function of that organization.” Finally, if such an interest is established by the defendant, HUD or the private plaintiff must prove that those same interests cannot be served by another practice that has a less discriminatory effect. If the complaining party is ultimately able to establish a practice that achieves the same interests in a less prejudicial manner, a defendant may be guilty of fair housing violations even though there is no evidence of discriminatory intent.

EXAMPLE: A lending institution maintains a policy by which it does not extend loans for single family residences for less than $60,000. The policy has been in place for eight years and does not take race, color, religion, sex, handicap, familial status or national origin into account. While the policy is therefore neutral on its face, it has been found that the policy disproportionately excludes minority applicants from consideration because of the home values in certain areas in which the minority applicants predominantly live. After discovering this disparate impact, the new rule will require the lender to prove that its lending policy is justified by a substantial business necessity. Factors relevant to the lender’s justification may include cost and profitability. If the lender is able to establish a substantial, legitimate, nondiscriminatory interest in its policy, a fair housing violation may still be found if the complaining party is able to establish that an alternative lending practice could serve the same purpose with a less discriminatory effect.

The final rule became effective on March 18. It applies to a broad range of housing activity including, but not limited to, the approval of loan applications, the provision of information regarding the availability of loans and housing options, the servicing of loans, and the approval and provision of homeowners insurance. So when a practice results in the denial of a housing related service (i.e. refusal to rent an apartment or approve a mortgage loan) or unfavorable terms and conditions under which that service is available to members of protected classes, it will violate the FHA unless the practice serves a substantial, legitimate, and nondiscriminatory interest that cannot be similarly served by a less discriminatory practice.

With the new rule in place, it is expected that private individuals, HUD and other fair housing enforcement agencies will be able to more effectively realize the objectives of the FHA by eliminating housing discrimination and creating strong, sustainable, inclusive communities and quality affordable homes for all. To the extent that this rule helps clarify objective, and non-discriminatory policies and practices, it should prove widely beneficial.

MBA President and CEO David Stevens traveled to Capitol Hill last week to testify before the Senate Banking Committee hearing on the Federal Housing Administration’s financial condition in the wake of the recent actuarial report that found the agency’s single-family programs in the red.

The hearing presented an opportunity to have a robust discussion about the steps being taken to stabilize the mutual mortgage insurance fund, protect taxpayers and preserve the agency’s mission in the single-family housing market.

Attention in Washington, D.C. has also centered on the budget sequester, which went into effect on Friday night, with the White House directing agencies to begin implementing across-the-board spending reductions. Those cuts will impact agencies such as HUD and will likely lead to staff furloughs at FHA.

Key MBA Actions

MBA Submits QM Concurrent Comment Letter

On February 25 MBA submitted a comment letter on the Consumer Financial Protection Bureau’s concurrent proposal–released simultaneously with the Final Rule–and amending this final ability to repay/qualified mortgage rule.

The comment letter calls for the removal of all individual and mortgage broker compensation from the 3 percent points and fees limit by applauding the CFPB’s netting approach that would address these issues, but then calling for a complete exclusion in order to solve the problems raised by their inclusion. MBA used the opportunity provided by the CFPB to raise other concerns with the final QM rule in the hopes that they would consider these issues to provide solutions and guidance early in the implementation process.

MBA’s comments supported the amendments that would exempt from the ability to repay requirements to certain government refinance programs and community development programs, as well as certain charitable creditors–provided these exemptions are clearly articulated and delineated. Finally, MBA expressed approval for the expansion of the safe harbor for smaller creditors that hold loans in portfolio and called for an expanded safe harbor for all loans in order to remedy issues with the average prime offer rate that unintentionally undermine the protections.

MBA Testifies Before Senate Banking Committee
On February 28, MBA President and CEO David Stevens testified before the Senate Banking Committee at a hearing, Addressing FHA’s Financial Condition and Program Challenges, Part II.

The hearing offered an occasion to have a concentrated dialogue on the Federal Housing Administration’s 2012 actuarial report, as well as the actions being employed to guard taxpayer interests, secure the mutual mortgage insurance fund and protect FHA’s housing market objectives.

To view Stevens’ full written testimony, click here.

MBA Presses for Uniformity in State Loan Officer Licensing

Last week, during the annual Nationwide Mortgage Licensing System and Registry User Conference, MBA staff spoke in support of uniformity in mortgage loan originator licensing among states. More than 58 state mortgage banking regulators–representing 49 states, the District of Columbia, Puerto Rico and the Virgin Islands–attended this year’s event in San Antonio.

MBA thanked regulators for progress made through adoption of “approved-inactive” statuses by 24 states/agencies, as well as the future rollout of the new Uniform State Test by 20 states/agencies on April 1 and an additional four states/agencies on July 1. MBA also appealed to non-adopting states to discuss with MBA the legislative or regulatory obstacles that may currently prevent them from embracing both important initiatives and to work with MBA and their state MBAs, to remove them.

Additionally, MBA made clear that state regulators need to do more to address the inconsistencies that exist among states in the requirements for the licensing of servicing personnel. MBA expressed that it is inappropriate to require staff that assist consumer access to federal programs such as HAMP or HARP, or who perform loan modifications rather than originate a loan, to meet the licensing requirements of MLOs.

MBA Requests CFPB to Publicly Support UST

On February 25, MBA wrote a letter to the Consumer Financial Protection Bureau to express its support for the Uniform State Test for mortgage loan originators, as well as to request that CFPB indicate in writing that a state’s adoption of the UST will not violate the Secure and Fair Enforcement for Mortgage Licensing Act of 2008.

The UST is a clear example of how the real estate finance industry and regulators are cooperating to meet consumer protection needs, while alleviating many of the unintended economic and employment constraints created by the SAFE Act. In its letter, MBA noted that many current non-adopting states/agencies have expressed their desire for CFPB’s public approval, in order to consider joining the current list of 24 adopting states/agencies.

Update on Sequestration

The Budget Control Act of 2011 institutes mandatory discretionary spending cuts–known as sequestration–across many government programs, including the Federal Housing Administration. As the Obama administration and Congress could not reach an agreement by the Mar. 1 deadline, sequestration went into effect late Friday night.

Guidance disseminated by FHA indicates that its staff will be subject to furloughs, which have the potential to impact endorsement and claims processing times. Information received from the Department of Veterans Affairs and the Department of Agriculture indicates that their loan guaranty operations are exempt from sequestration, and that they will be operating as normal. MBA will provide more information on the impact of the sequestration as it becomes available.

Fed Chairman Bernanke Testifies, Addresses Basel III, QRM

On February 26, Federal Reserve Board Chairman Ben Bernanke testified before the Senate Banking Committee and addressed Basel III and the risk retention rule’s qualified residential mortgage definition.

Bernanke told the Committee (click here to watch the video) that the final Basel III capital rules will be published in the middle of this year and that the implementation date would also be in 2013 (noted at the hearing’s 1:15:00 mark). He also commented that the QRM definition is being developed and that he and his colleagues at the Fed are sensitive to the mortgage industry’s concerns about aligning the QRM definition with the qualified mortgage definition in the ability to repay rule.

MBA Urges Congress to Preserve Access to Rural Housing Programs

On February 25, MBA joined other trade associations in urging congressional leadership in the House and Senate to address a looming lapse in access to certain Department of Agriculture Rural Housing Service programs. Click here to read the letter sent to House leadership, and here to read the letter sent to Senate leadership.

On Wednesday, March 27, the USDA will revise its list of communities that qualify as “rural,” based on data from the 2010 Census. As a result, more than 900 communities across the nation are expected to lose access to these vital programs.

MBA is seeking a short-term extension that preserves eligibility for these communities while Congress considers broader legislation that would update the definition of “rural community.”

MBA 2013 National Fraud Issues Conference Coming in April

This year’s MBA National Fraud Issues Conference will take place April 14-17 in Hollywood-Fort Lauderdale, Fla.

The Conference will bring together mortgage fraud executives, managers, investigators, attorneys and industry venders, as well as government officials from the federal and state levels to discuss prevention, detection and investigation efforts in pre-closing and closing and during the life of the loan. Panelists will also address the current and evolving environment of mortgage fraud in the context of limited credit availability, repurchase investigations and greater regulatory scrutiny.

For more information, please contact Andrew Szalay, (202) 557-2941 aszalay@mortgagebankers.org; or Joe Gormley, (202) 557-2870 jgormley@mortgagebankers.org.

MBA 2013 National Advocacy Conference Coming in April

The MBA 2013 National Advocacy Conference will take place April 24-25, in Washington, D.C. To register for the conference, click here. For more information, please contact Kelley Williams, (202) 557-2777 kwilliams@mortgagebankers.org.

Enroll or Re-Enroll in the Mortgage Action Alliance

Whether you are already a MAA member or this newsletter was forwarded to you by one, MAA is stronger when you choose to participate. All MAA members must voluntarily enroll every 365 days to remain active, so please take a moment to begin or renew your membership by clicking here and filling out the brief form. The larger the group, the louder the voice.

National Mortgage News

by Ted Cornwell

MAR 4, 2013

WE’RE HEARING…If you want to see what a housing recovery looks like on the ground, it’s time to visit Phoenix, as I did recently for the first time in a couple of years.

Gone are the rows of “for sale” signs that cluttered many streets two years ago. Instead, observers of the Phoenix market today say the metropolitan area faces a different problem: too few homes for sale.

Mark Stapp, director of the real estate development program for the W.P. Carey School of Business at Arizona State University, told me the Phoenix metropolitan area is experiencing “a full-fledged recovery” in housing. And the data support his optimism. The single-family delinquency rate in Arizona in the fourth quarter of last year was 6.02%, down 42 basis points from one year earlier, according to the Mortgage Bankers Association. That’s actually more than a full percent below the national average delinquency rate. Just 2.02% of Arizona mortgages were in foreclosure status, down 49 basis points from a year earlier.

In January, lender-owned properties accounted for 12% of metro Phoenix home sales. Short sales accounted for 18% of the market, according to the Wilcox Report on local real estate conditions, which is produced by Fletcher Wilcox of the Grand Canyon Title Agency.

“One of the things that has happened in this market is the sale of previously owned homes has been so strong that right now, the problem is an inventory shortage,” Stapp said.

He said one of the reasons Arizona—among the states hardest hit by the foreclosure crisis—has been able to recovery so quickly is that it’s a nonjudicial foreclosure state, which allows servicers to repossess homes quickly when a borrower defaults. That has limited the backlog or shadow inventory of foreclosed homes on the market and allowed the state to work through its defaulted loans faster than in states with a slower foreclosure process. The banks also got help from distressed real estate investors, who came into the market buying REO in bulk from lenders. Many distressed homes have been converted into rental properties.

At the nadir of the market, existing homes were selling well below replacement value, a factor that attracted investment capital to the Phoenix housing market, Stapp said.

“A lot of this recovery has initially been driven on the backs of investors,” Stapp said.

In addition, the recovering housing market has led banks to change their default management strategy. Rather than foreclosing, banks are encouraging troubled borrowers to sell their homes through a short sale.

The Arizona economy also has helped the housing market recover. The population continues to grow and Arizona ranks third in job growth nationally.

While the double digit gains in housing prices look impressive, Stapp said you have to consider how far the market had fallen when considering the increase.

“We are getting back to what a normal market may be, however we are not there yet.”

Still, the inventory shortage is doing more than just helping investors and servicers work through their distressed portfolios. It is also rejuvenating Arizona’s home building industry, which had drifted into dormancy in the wake of the housing crisis.

Now, developers are gobbling up lots that were finished but never built upon during the crisis. Those finished lots have been mostly absorbed and some developers are starting to look at land development again, Stapp said.

One risk, Stapp believes, is overconfidence. With so many people jumping back into the housing market so quickly, the market could get ahead of real demand.

“The market feels very positive right now. But we need to be careful we don’t overdo it until we get real solid employment growth.”

The recovery is also being felt on the loan origination side of the business. Kelly Powers, vice president for advocacy at the Arizona Mortgage Lenders Association and national production manager for AmeriFirst Financial, said the housing recovery is fueling a resurgence of correspondent lending. That’s good news for people working at companies like AmeriFirst.

“We aren’t all sitting around looking at each other anymore. We are all working again,” she told me.

The correspondent market, which some had thought was left for dead, is now attracting new investors willing to buy closed loans without establishing a “sticks and bricks” presence in markets like Phoenix. That means correspondent originators have more options to offer to their customers, Powers noted.

For me, the confirmation that Phoenix is in the midst of a housing revival came after a drive past my late grandmother’s 1950s era house on Mulberry Drive in the Arcadia neighborhood of Phoenix. It’s a neighborhood of older, mostly brick and concrete ramblers not too far from Camelback Mountain. It’s a neighborhood that fell out of favor at one time but is very much back in vogue now.

After my visit, I got a call from my mom who had seen a notice about the recent sale of the house in a local newspaper. My uninformed guess as to the price was $175,000. Turns out, the two bedroom with a den home sold for $350,000.

Now, if we could just share a little of Phoenix’s good fortune with Detroit and Miami, we might be able to say the housing crisis has officially ended. In Florida, more than 12% of mortgages remain in the foreclosure process, a factor that is putting a drag on the state’s ability to pull out of the housing mess.

Ted Cornwell has covered the mortgage markets since 1990. He is a former editor of both Mortgage Servicing News and Mortgage Technology.

HUD Publishes Disparate Impact Rule in the Federal Register
On Friday, February 15, 2013, the Department of Housing and Urban Development (HUD) published its final disparate impact rule in the Federal Register. The rule has an effective date of 30 days from this date, or March 18, 2013. The rule formalizes HUD’s interpretation that disparate impact is a valid cause of action under the Fair Housing Act and introduces a burden-shifting framework to govern litigation. Please see MBA’s attached early summary of the rule.

MBA Hosts Successful Webinar on CFPB’s National Servicing Standards

On Thursday, February 14, 2013, MBA hosted a successful webinar, providing members with an overview of the Consumer Financial Protection Bureau’s (CFPB) final mortgage servicing rules. It was a sold out event — more than 400 MBA members participated in the webinar. The final rules not only implement the Dodd-Frank Act, but also add a variety of new RESPA (Regulation X) and TILA (Regulation Z) provisions that are far-reaching for both performing and delinquent servicing. The webinar addressed key provisions of the final rule so that servicers may begin adjusting their practices and procedures in anticipation of the January 10, 2014 effective date. An email will be sent next week to all MBA members regarding instructions on how to access the recording and presentation from this webinar.
MBA Hosts Meeting With Other Financial Trade Associations on Basel III

On Wednesday, February 13, 2013, MBA hosted a meeting with other financial industry trade associations to discuss next advocacy steps on Basel III. From comments made by representatives of the Federal Reserve System recently, it appears that the Department of the Treasury, the Office of the Comptroller of the Currency, the Federal Insurance Deposit Corporation and the Board of Governors of the Federal Reserve System (the Regulators) are trying to finalize the rule this Spring. MBA is also hearing that the Regulators are reluctant to change the adverse treatment of mortgage servicing rights in the proposed rule. The group decided during the meeting to put together a joint letter requesting that the Regulators hold a series of roundtable discussions and that the Regulators go through another notice and comment regime.

MBA’s 2013 National Fraud Issues Conference Coming in April

This year’s MBA National Fraud Issues Conference will be held from April 14-17, 2013, in Hollywood-Fort Lauderdale, Florida.  The Conference will bring together mortgage fraud executives, managers, investigators, attorneys and industry venders, as well as government officials from the federal and state levels to discuss prevention, detection and investigation efforts in pre-closing and closing and during the life of the loan. Panelists will also address the current and evolving environment of mortgage fraud in the context of limited credit availability, repurchase investigations and greater regulatory scrutiny. Please register by March 1, 2013, before rates go up.

MBA’s 2013 National Advocacy Conference Coming in April
MBA’s 2013 National Advocacy Conference will take place April 24-25, 2013, in Washington, DC. To register for the Conference, please click here. For more information, please contact Kelley Williams, (202) 557-2777 or Annie Gawkowski, (202) 557-2816. To enroll in the Mortgage Action Alliance (MAA), please click here.

Senate Banking Committee Holds Oversight Hearing on the Dodd-Frank Act
On Thursday, February 14, 2013, the Senate Banking Committee held an oversight hearing on the Dodd-Frank Act.  Notably, the hearing’s witnesses included Mary Miller, Undersecretary for Domestic Finance, U.S. Department of the Treasury; Daniel Tarullo, Governor of the Federal Reserve System; Martin Gruenberg, Chairman, Federal Deposit Insurance Corporation; Tom Curry, Comptroller of the Currency; Richard Cordray, Director, Consumer Financial Protection Bureau; Elisse Walter, Chairman, U.S. Securities and Exchange Commission; and Gary Gensler, Chairman, U.S. Commodity Futures Trading Commission. While the hearing focused on a number of Dodd-Frank related issues, there were several key exchanges of importance for MBA’s members.  During his questioning, Chairman Tim Johnson (D-SD) asked the witnesses if there was anything in the law that prohibited the Qualified Residential Mortgage (QRM) from being defined the same as the Qualified Mortgage (QM). The witnesses all agreed there was no bar to defining QM and QRM the same.

Additionally, Governor Tarullo and Comptroller Curry both stated that the QRM should be defined in a way that does not restrict credit for lower and middle class borrowers, and that an aligning of the two rules should be a consideration. Ranking Member Mike Crapo (R-ID) also expressed concern about the cumulative impact of Dodd-Frank and Basel III on the financial markets, including the mortgage markets. Ranking Member Crapo was specifically concerned that the interaction between QM, QRM and the Basel III risk-weighting will reduce mortgage credit for otherwise qualified borrowers. Mr. Crapo asked that the regulator witnesses perform meaningful cost-benefit analysis to better understand how these rules will affect the economy as a whole, how the rules interact with one other, and how the rules impact our global competitiveness. Finally, Senator Kay Hagan (D-NC) asked the witnesses what the timetable was for the release of the final risk retention rule, to which they said they hoped to release the rule in the first half of this year.

FHA Commissioner Galante Testifies Before Financial Services Committee
On Wednesday, February 13, 2013, the full House Financial Services Committee held a hearing entitled “Bailout, Bust, or Much Ado About Nothing?: A Look At The Federal Housing Administration’s 2012 Actuarial Report.” The sole witness on the panel was Federal Housing Administration (FHA) Commissioner/Assistant Secretary for Housing Carol Galante. The overriding GOP message was that the FHA’s lending practices are inconsistent with their original mission, and that its financial viability is very much in question. Republicans on the Committee are committed to widespread reforms of FHA while Democrats have pointed to a number of administrative actions that FHA has taken recently to address the health of the Mutual Mortgage Insurance Fund (MMIF). This hearing is the second in a series on the topic of FHA reform.
CFPB Issues Guidance for Servicing Transfers
On Monday, February 11, 2013, the Consumer Financial Protection Bureau (CFPB) issued guidance to residential mortgage servicers and sub-servicers to address potential risks to consumers that may arise in connection with transfers of servicing. Servicers engaged in significant servicing transfers should expect that the CFPB will, in appropriate cases, require them to prepare and submit informational plans describing how they will be managing the related risks to consumers. The guidance also indicates that examiners will focus on compliance with Regulation X, the Fair Debt Collection Practices Act, the Fair Credit Reporting Act, and other appropriate laws in connection with servicing transfers.