Five Regulatory Changes Coming to the Mortgage Market
October 16, 2013 10:02 AM
Confusion and panic. Those are the words most often used by lenders when faced with the onslaught of mortgage regulations and other rules going into effect in three months. Regulators have sought to defuse concerns partly by attending industry conferences, but they have also made it clear that several other big changes are on their way. Following is a guide to what's ahead.
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A Final Mortgage Disclosure Form Will Likely Be Delayed
The Consumer Financial Protection Bureau had been expected this month to release a final rule combining mortgage disclosure requirements of the Truth in Lending Act and the Real Estate Settlement Procedures Act. But the more than 2,800 comments received on the agency's most recent proposal, including its own model disclosure form, have made it difficult to release a final rule on time, according to Richard Horn, a senior counsel at the CFPB.
"We targeted October but we wanted to make sure we get it right. There's a lot of work to do so it could be later this year as well," said Horn at a Mortgage Bankers Association regulatory conference last week.
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Regulators Want Lenders to Turn Themselves In
Regulators are increasing pressure on banks and other lenders to self-report problems before examiners find an issue and take action. The Federal Housing Administration has begun encouraging lenders to identify and report underwriting issues with FHA mortgages after finding that only 88 lenders out of 3,500 self-reported to the FHA this year, according to Justin Burch, director of the quality assurance division at FHA. The agency will soon issue guidance on self-reporting.
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Bankers Will Face A Different QM Definition from FHA
The FHA's version of the qualified mortgage rule is likely to look different than the CFPB's definition. Under a proposal, the FHA says a loan's interest rate cannot exceed the average rate plus 115 basis points (in addition to the mortgage insurance premium.) But the CFPB's version has a 150 basis point threshold. The comment period for the FHA's version ends Oct. 31, with a final rule expected soon.
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CFPB Weighing New Guidance on Bankrupt Borrowers
CFPB officials said they are examining the potential for further guidance on how lenders should treat a bankrupt borrower while still complying with the new mortgage servicing rule that has strict timelines for when to send notices to a defaulted borrower.
"We are continuing to look at a handful of discrete issues ... one that we know has been significant concern is bankruptcy overlay with periodic statements in particular," said Kelly Cochran, the CFPB's assistant director of regulations, at the MBA conference. "We're looking at whether to provide guidance to provide ways to facilitate a process which has been consuming a lot of our resources and generating a lot of concerns."
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CFPB Will Clarify Its New Mortgage Servicing Rule
As lenders continue to prod the CFPB for more clarifications on its mortgage rules due to take effect in January, the agency announced that it will host a webinar on Oct. 16 for its mortgage servicing rule and on Oct. 17 for mortgage origination policies.
"We have been working hard to support implementation across all of the rules and providing a number of materials throughout that process," said Cochran. "We believe we've made significant improvements that will help both consumers and the industry as they work through this process."
