Reports Show GSE Repurchase Activity Totaling $77.1 Billion and 2nd Quarterly Rise in 2016 Repurchase Activity at Banks and Thrifts

A recently published report by Inside Mortgage Finance shows that from 2009 through the second quarter of 2016, Fannie Mae and Freddie Mac (“GSEs”) have secured $77.1 billion in repurchases on loans sold into their mortgage-backed securities. During this timeframe, the GSEs made demands on nearly 4,200 sellers and originators of mortgage loans and secured repurchases from over 3,300 companies. While the majority of buybacks were for loans securitized before 2009, loans originated and securitized after the mortgage crisis have also resulted in significant repurchases. Repurchases for 2011 mortgage-backed securities reached $1.3 billion and repurchases for 2013 were reportedly even higher. However, according to Inside Mortgage Finance, “for most sellers, the picture brightens when it comes to withdrawn demands, which in most cases outstrip those that end in payment.” A separate report, also by Inside Mortgage Finance, states that mortgage repurchase activity by banks and thrifts took an unexpected turn higher during the second quarter of 2016, according to a new Inside Mortgage Trends analysis of call reports. Call reports show that banks and thrifts repurchased $804.1 million of single-family mortgages, or otherwise indemnified a buyer, during the second quarter of 2016. That was up $40.0 million or 5.2 percent from the first three months of the year and marked the second straight quarterly rise. Many sellers and originators of mortgage loans are learning their lessons from the past and working to put in place mechanisms to help combat buyback risk from the outset. In addition to strengthened lending guidelines and quality control processes, lenders are working to tighten the language of their governing loan purchase agreements and are... read more

Bankruptcy Judge in LBHI taken up on Appeal to U.S. District Court for Violating Due Process by Refusing to Hold Requisite Evidentiary Hearing

On September 9, 2016, an Indenture Trustee for Mortgage Backed Securities filed an appeal from a final order that disallowed and expunged certain claims filed by RMBS Trustees in Lehman Brothers Holdings, Inc.’s (“LBHI”) bankruptcy. The Court disallowed the claims for breaches of representations and warranties by LBHI without any opportunity to put evidence on at a hearing. The denial was based solely on a “protocol” that set certain deadlines for the Trustees to prove the claims. The issue was the protocol reserved the right to allow the RMBS Trustee to prove the claims through statistical sampling, but the Court read the protocol to say they had to be proven only on a loan-by-loan basis and not through sampling and by a certain deadline. As the Appellate Brief was just filed, there is no ruling yet from the U.S. District Court, but this case will be closely watched by AMLG as it has a significant impact on AMLG clients. If the Trustee succeeds in having their claims reconsidered, this will form the basis of “round three” claims LBHI will be able to bring against correspondents and brokers. Additionally, if the bankruptcy judge, Judge Chapman, is found to have violated the Trustee’s due process rights, this will give some leverage to AMLG clients to push similar issues in the future in the LBHI litigation. This represents the second appeal claiming that Judge Chapman was in error on evidentiary... read more

AMLG Releases HMDA Reporting Implementation Checklist

In an effort to better assist our clients prepare for the upcoming HMDA data reporting changes, AMLG has put together a HMDA Reporting Implementation Checklist. The Checklist is meant to help institutions affected by the changes identify key steps and tasks that must be undertaken on the road to implementation and to assist such institutions with their organization and planning. AMLG’s HMDA Reporting Implementation Checklist breaks down implementation of the amended Home Mortgage Disclosure Act (“HMDA”) reporting rule into 8 key steps and provides insight into the subtasks necessary for each step along the way. AMLG clients and newsletter readers may receive a complimentary copy of the Checklist by clicking here. As a mortgage banking focused law firm, AMLG continues to be closely involved with our clients’ implementation of the amended HMDA reporting requirements. If you need further assistance with HMDA-related issues, including deciphering the reporting requirements applicable to your organization, assistance with implementation, updates to your policies and procedures, and/or counsel regarding fair lending best practices, please contact AMLG by clicking... read more

Recent Silent Win for AMLG Clients on LBHI Successor Liability Claims

The American Mortgage Law Group (“AMLG”) has had a recent silent win on the issue of successor liability claims by Lehman Brothers Holdings, Inc. (“LBHI”) for several of our clients.  LBHI filed motions back in November 2015 and April 2016 and after much effort at providing proof that the claims were meritless, AMLG served a Rule 11 sanctions motion. The motion has a safe harbor period whereby it cannot be filed for 21 days after service. Virtually right after service of the Rule 11 sanctions motion on LBHI, LBHI reached out to discuss the claims. LBHI then agreed that if a sufficient declaration is provided in connection with successor liability issued by the client, LBHI will rescind such claims before the next successor liability hearing.  LBHI then withdrew several claims pre-hearing, which is a success because AMLG clients were able to save the costs and expense of going to a hearing in New York. LBHI is in the process of reviewing several successor liability claims we are assisting a number of our clients with. Although not part of the public record, this is an important win because it has saved a number of our clients the expense of attorney’s fees and travel to New York to argue the meritless claims at a... read more

CFPB Publishes Long-Awaited Proposed Amendments to TRID Rule

Since before TRID (also known as the TILA/RESPA Integrated Disclosure Rule and/or the Know Before You Owe Mortgage Disclosure Rule) went into effect on October 3, 2015, the industry has been grappling to understand the complexities and nuances of the extensive new rules and regulations. While many industry participants have been able to institute best practices to work towards compliance with the purpose and intent of the Rule, many gray areas still remain where the industry seeks additional guidance. Long-awaited by the industry, the CFPB recently released proposed updates to the TRID Rule on July 29, 2016 for public comment. According to the CFPB, “the proposed amendments are intended to formalize guidance in the rule, and provide greater clarity and certainty.” In addition to a number of clarifications that codify the Bureau’s previously informal guidance on various issues and other technical updates, the amendments address four substantive categories of proposed changes: Tolerances for the Total of Payments – Prior to the TRID Rule going into effect, the total of payments disclosure was determined using the finance charge as part of the calculation. The TRID Rule changed the total of payments calculation so that it did not specifically use the finance charge. The Bureau is now proposing to amend the Rule to include tolerance provisions for the total of payments that parallel existing tolerances for the finance charge and disclosures affected by the finance charge. According to the Bureau, this change would make the total of payments disclosure consistent with its previous treatment under Regulation Z, pre-TRID. Housing Assistance Lending – The Bureau is proposing to extend a partial exemption... read more

CFPB Updates Mortgage Servicing Rules

On August 4, 2016, the CFPB published a final rule that amends the Bureau’s Mortgage Servicing Rules, which went into effect in 2014. In addition to a number of technical corrections to servicing-related provisions of Regulations X and Y, the final rule updates the Mortgage Servicing Rules in the following substantive ways: Updates the requirements for servicers communicating with borrowers who have applied for loss mitigation; Requires servicers to give the protections of the loss mitigation rules to certain borrowers more than once during the life of their loan; Provides additional protections for successors in interest; Expands the definition of successor in interest; Requires servicers to provide information to potential successors in interest about the documentation needed to confirm their status; Ensures that confirmed successors in interest are given access to many of the same notices and documents that the original borrower would have received; Provides additional information to borrowers in bankruptcy; Provides borrowers in bankruptcy with periodic statements in certain circumstances, with specific information tailored for bankruptcy; Provides borrowers in bankruptcy with a modified early intervention notice to let them know about loss mitigation options; Provides flexibility for servicers to comply with certain force-placed insurance requirements; Finalizes a general definition of delinquency that applies to all of the servicing provisions of Regulation X and the provisions regarding periodic statements for mortgage loans in Regulation Z; Clarifies the treatment of periodic payments made by consumers who are performing under temporary loss mitigation programs or permanent loan modifications; Clarifies the early intervention live contact obligations of servicers; Clarifies various periodic statement disclosure requirements; and Clarifies the small servicer exemption. The... read more

CFPB Announces Annual Adjustments to TILA Thresholds

On June 27, 2016, the CFPB issued a final rule that sets forth the required annual threshold adjustments under Regulation Z, which implements the Truth in Lending Act (TILA).The final rule updates the dollar amounts of various thresholds that are required to be adjusted annually based on the annual percentage change in the Consumer Price Index, including thresholds that fall under the Home Ownership and Equity Protection Act of 1994 (HOEPA) and the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), such as those included in the Ability to Repay and Qualified Mortgage Rules.  The rule includes the following updated thresholds: CFPB Law/Regulation Type of Threshold Adjusted Threshold Amount Truth in Lending Act, Regulation Z, 12 C.F.R. § 1026.32(a)(1)(ii)(A) – Home Ownership and Equity Protection Act Total loan amount threshold for High-Cost Mortgages $20,579 Truth in Lending Act, Regulation Z, 12 C.F.R. § 1026.32(a)(1)(ii)(B) – Home Ownership and Equity Protection Act Points and fees dollar trigger for High-Cost Mortgages $1,029 Truth in Lending Act, Regulation Z, 12 C.F.R. § 1026.43(e)(3)(iii)(A) – Dodd-Frank Act Ability to Repay Rule – maximum threshold for total points and fees for Qualified Mortgages 3% of the total loan amount for a loan greater than or equal to $102,894 Truth in Lending Act, Regulation Z, 12 C.F.R. § 1026.43(e)(3)(iii)(B) – Dodd-Frank Act Ability to Repay Rule – maximum threshold for total points and fees for Qualified Mortgages $3,087 for a loan amount greater than or equal to $61,737 but less than $102,894   Truth in Lending Act, Regulation Z, 12 C.F.R. § 1026.43(e)(3)(iii)(C) – Dodd-Frank Act Ability to Repay Rule – maximum threshold... read more

DOL Issues Final Overtime Regulations Which May Affect Loan Officer Compensation

On May 23, 2016, the Department of Labor (DOL) published a final rule that revised overtime regulations under the Fair Labor Standards Act (FLSA). The affected regulations implement an exemption from minimum wage and overtime pay for certain categories of employees, including executive, administrative, professional, outside sales, and computer employees, as well as highly compensated employees. In order to qualify for such an exemption, the employee must meet certain minimum requirements related to their primary job duties and salary amounts. The final rule updates the salary levels affecting overtime eligibility. Previously, employees that earned $23,660 per year ($455 per week) or less were eligible for overtime at a rate of 1.5 times their hourly rate. The updated rule increases the threshold to make employees who earn $47,476 per year ($913 per week) or less eligible for overtime. The final rule also increases the threshold for highly compensated employees from an annual salary of $100,000 to $134,004. In addition, the final rule amends the salary basis test to allow employers to use nondiscretionary bonuses and incentive payments, including commissions, to satisfy up to 10 percent of the new standard salary level. Finally, the final rule provides for automatic updates to the stated salary and compensation levels every three years on a go-forward basis. The effective date of the final rule is December 1, 2016. The first automatic update to the salary and compensation levels will take place on January 1, 2020. If you are unsure of how the final rule and updated salary thresholds will affect your employer obligations and/or your loan officer compensation or branch manager agreements, please contact... read more

FHA Releases Property Assessed Clean Energy (PACE) Guidance

On July 19, 2016, FHA released Mortgagee Letter 2016-11, which provided the industry new guidance on Property Assessed Clean Energy (PACE) programs and the circumstances under which FHA will insure mortgages on properties that include PACE assessments. PACE programs offer alternative financing for energy related upgrades to residential properties, including increasing energy efficiency, renewable energy, and water conservation through improvements to lighting, heating and cooling systems, water pumps, insulation, and solar panels. Although the terms and conditions of PACE obligations vary by state and local governments, in most cases, the borrower’s PACE financing is repaid through an assessment added to the borrower’s property tax bill, rather than as a direct payment from the borrower to the entity providing the financing. Because the PACE obligation is secured in the same manner as a special assessment against the borrower’s property, in the event of a sale or foreclosure of the property, the obligation continues with the property and carries over to the new owner for the outstanding balance on any remaining PACE amount. Under FHA regulations, to be eligible for FHA insurance property must be free and clear of any liens other than the FHA-insured mortgage. Also under FHA regulations, any restrictions on conveyance must automatically terminate if title to the FHA-insured property is transferred by foreclosure or deed-in-lieu of foreclosure, or if the mortgage is assigned to the Secretary of HUD. Because of these requirements, properties with PACE financing were previously ineligible for FHA-insured mortgages. The updated guidance provided by FHA in July states that “properties which will remain encumbered with a PACE obligation may be eligible for FHA-insured mortgage... read more

CFPB Zeros in on Servicing Technology Failures and Process Breakdowns

In late June 2016, the CFPB released a special edition of its supervision report that focused specifically on mortgage servicers. Based on the CFPB’s numerous examinations of mortgage servicers, the report found that many servicers continue to use outdated and deficient technology that is harmful to consumers and that also potentially violates the Bureau’s new servicing rules. The report specifically highlighted issues dealing with late, incorrect, or deceptive information related to loan modifications and other forms of loss mitigation as the result of technological breakdowns or malfunctions, as well as issues created by loans being transferred among servicers with incompatible computer systems. While the Bureau noted that some servicers have made significant improvements to their technology and systems, many have not, resulting in a variety of consumer issues and frustrations. In connection with the report, CFPB Director Richard Cordray said, “Mortgage servicers can’t hide behind their bad computer systems or outdated technology. There are no excuses for not following federal rules . . . . Mortgage servicers and their service providers must step up and make the investments necessary to do their jobs properly and legally.” This special report highlights the importance of updated technology to servicer work flows and customer satisfaction. At a time when data security and customer privacy issues are at the forefront of industry hot topics, it is an important reminder to lenders and servicers alike that a focus on technology can not only improve your security and compliance regime, it can also result in increased customer satisfaction and efficiencies. To access the full supervision report, click... read more