Daily Archives: January 29, 2015

CFPB wants more mortgages in “underserved” areas

The Consumer Financial Protection Bureau is pushing for greater access to mortgage credit in rural and underserved areas by attempting to increase the number of financial institutions in the space.

Currently, there are few players in the rural lending space, which is something the CFPB would like to see changed with the proposed rulemaking.

If successful, the CFPB hopes this new expansion will help small creditors adjust their business practices to comply with the new rules.

The bureau made sure to emphasize the need to maintain responsible lending while still ensuring that consumers are protected.

“Responsible lending by community banks and credit unions did not cause the financial crisis, and our mortgage rules reflect the fact that small institutions play a vital role in many communities,” said CFPB Director Richard Cordray. “Today’s proposal will help consumers in rural or underserved areas access the mortgage credit they need, while still maintaining these important new consumer protections.”

Read on.

New FHA guidelines to delay reverse mortgage foreclosures

HECM spouses get to stay for longer

The U.S. Department of Housing and Urban Development and the Federal Housing Administrationannounced changes to its reverse mortgage program designed to keep non-borrowing spouses during the foreclosure process.

The FHA issued a new policy under its Home Equity Conversion Mortgage program, which allows FHA-approved lenders to delay foreclosure proceedings against non-borrowing spouses in the event of the death of the last surviving borrower.

The FHA’s new guidance will allow reverse mortgage lenders to assign eligible HECMs to HUD upon the death of the last surviving borrowing spouse, which would allow eligible surviving spouses the opportunity to remain in the home despite their non-borrowing status.

Read on.

Big Banks Back Away From Mortgages; Nonbank Lenders Pick Up Slack

NEW YORK (TheStreet) — Big banks are continuing to back away from offering mortgages, allowing nonbank lenders such as Freedom Mortgage and Quicken Loans to grab a bigger share of the market.

Although the big banks such as Bank of America (BACGet Report) , JPMorgan Chase (JPMGet Report) and Wells Fargo (WFC) are still happy to provide mortgages to wealthy borrowers with strong credit records, they are much more cautious about higher-risk loans, even ones that meet underwriting requirements of government agencies such as the Federal Housing Administration, Fannie Mae (FNMA) , Freddie Mac (FMCC) or Ginnie Mae.

That has created an opportunity for nonbank lenders such as Freedom Mortgage, a privately held lender based in Mount Laurel, N.J.

Although fewer mortgages were originated last year than in 2013, Freedom Mortgage actually increased its business, selling $22 billion worth of mortgages, according to Chief ExecutiveStanley C. Middleman.

He expects to originate more than $30 billion this year.

Read on.

Rent to Own: Wall Street’s Latest Housing Trick

At a conference on housing finance last month, a collection of investors described their innovative “rent-to-own” products.

Rent-to-own schemes have long exploited the poor. Naturally, marketers address that problem with euphemisms. Today, it’s called lease purchase. The arrangements work in myriad permutations, but the basic deal is that a person rents a home and pays for an option to buy it at a later date.

All the panelists hailed the product, calling it a “yield enhancer” that would increase profits. In a standard lease, one panelist explained, the owner covers costs like taxes, maintenance cost and insurance. With lease purchase, the renter pays those expenses. And it’s easier to evict because the occupant has only a rental agreement. It’s not a foreclosure proceeding against an owner, after all.

One went further. Eli Shaashua, of Red Granite Capital Partners,described it this way: “Basically, it’s an added fee to the rent. For us, it instills pride in homeownership for some tenants who cannot currently when they rent a house own their own home.”

Having pride in ownership means that the renter takes care of the property more carefully. So that’s a good thing — for the owner, that is.

Shaashua went on to explain that his options last generally for two years. A renter pays a bit extra for the right to buy the house at a predetermined price, one above the current value.

Then Shaashua delivered the kicker to the roomful of would-be investment managers: “Most times, given the reality, tenants do take it, but it’s hard for them to execute the option,” he said. “Our experience is that most stay until the end and then they say they cannot come up with the down payment or decide not to stay in the property.”

Read on.

Citibank Agrees to Change Screening Tool Use Amid NY AG Probe

(Bloomberg) — Citibank agreed to change how it uses a customer-screening tool in order to reduce barriers to low-income people getting bank accounts amid a probe by New York’s attorney general.

The Citigroup Inc. unit was among the banks being investigated by New York Attorney General Eric Schneiderman over their use of ChexSystems, a consumer reporting agency that screens people seeking to open checking or savings accounts.

Schneiderman announced the Citibank agreement Wednesday.

Earlier, Capital One Financial Corp. agreed to limit its use of the tool, which helps banks analyze customers’ financial histories for evidence of credit or fraud risk. The system has disproportionately affected lower-income customers by flagging them for relatively minor financial mistakes, Schneiderman said.

“No one should be denied access to a bank account because of a bounced check from years ago or because they were a victim of identity theft,” Schneiderman said. “I commend Citibank, following Capital One, for stepping up and working with us to help eliminate an unnecessary barrier to opening a checking or savings account.”

When barred from using banks, lower-income people are often forced to resort to check-cashing centers and other costly alternative financial services, Schneiderman said.

Read on.

Nomura fighting back against FHFA toxic mortgage lawsuit

From the Bloomberg report:

Nomura’s resistance is less about the size of a penalty, which one estimate says won’t exceed $300 million, than its belief that the U.S. unit sued by the Federal Housing Finance Agency did nothing wrong, said the people, who asked that they not be named because the negotiations are private. Nomura also asserts Fannie Mae and Freddie Mac might not suffer losses on the $2 billion of bonds it sold them, the people (familiar with the negotiations) said.

Nomura’s expected settlement amount pails in comparison to those paid out by Bank of America, which settled with the Department of Justice for $16.65 billion, JPMorgan Chase, which settled for $13 billion, and Citigroup, which settled for $7 billion.

But that apparently won’t stop Nomura from fighting back, because the bank reportedly claims that Fannie and Freddie may not lose money on the Nomura bonds.

Nomura also said it conducted extensive reviews of the underwriting on mortgages packaged into securities, accurately disclosed risks and invested in riskier portions of the same assets that were sold to Fannie Mae and Freddie Mac.

If the case goes to trial, Nomura will try to show that any misstatements didn’t cause losses, because that could reduce damages. According to the bank’s analysis, Fannie Mae and Freddie Mac have so far earned about $1.6 billion in payments on their $2 billion investment, said the people.

Source: Bloomberg