Monthly Archives: September 2015

CFPB Issues Supervision and Exam Manual

books-466084_640Better late than never, right? The Consumer Financial Protection Bureau (CFPB) has finally issued its updated Supervision and Examination Manual (, which includes guidance relating to TRID. With exactly nine days until TRID takes effect, many are scrambling to peruse it as quickly as possible. While the overall view is that it is a helpful tool, many feel that it leaves important questions unanswered.

“The content wasn’t surprising, I was thankful,” noted Rick Roque, Managing Director of Retail Lending at Michigan Mutual, a national lender based in Port Huron Michigan. He summed it up as “a good thorough background of what to expect in the event of an audit.” But like a lot of others, he lamented the fact that the TRID portions were issued so close to its effective date.

The main complaints thus far have been two-fold. First, many are surprised by the amount of resources that must be expended for compliance. Roque noted that for a family-owned, mid-tier lender and servicer like his own company, the cost of compliance has been substantial. He estimates his company has spent in excess of $1 million on TRID preparation. Any additional changes required by the manual could also prove costly.

The second most prevalent complaint is that the manual does not address many questions that lenders will inevitably face. For example, how is a lender to address strict adherence to disclosure regulations (with their holding/wait time periods) when borrowers inevitably seek last-minute delays in a closing date? Thus far, CFPB has not addressed this basic issue. Nor has it responded to a host of inquiries about other issues common in the industry.

Lenders are left with being hopeful that the fact that the release of the manual’s exam procedures came so late is an indication that the CFPB itself needs more time to understand compliance. Still others, however, are concerned that the bureau’s promise to be “sensitive” to lenders who make “good faith” efforts at compliance is no guarantee of a delay in early enforcement action. The truth is, only time will tell.

For now, lenders really have no choice but to simply do everything they can to be TRID ready – and now. The time has arrived. Lenders would be well served to adopt a “whatever it takes” mode of operation. And, as always, strive to keep abreast of any news from Congress or CFPB. The acts of preparation and absorbing all the latest information are a lender’s best hopes for both the successful implementation of TRID and passing a TRID audit.

Sources: 1) CFPB Supervision and Examination Manual (   2) Sinnock, Bonnie – September 18, 2015 – “TRID Exam Guidance Leaves the Big Questions Unanswered” (


CFPB Urges eClosings

laptop-900646_640The Consumer Financial Protection Bureau (CFPB) is making a strong push to move to electronic closings. During an August CFPB forum, the announcement came as part of its disclosure of the results of a four-month pilot program. The CFPB noted that the program was a success and revealed that consumers favored eClosings over “in-person” closings.

Richard Cordray, CFPB Director, noted that eClosings result in higher positive feedback from consumers, especially as it relates to their understanding of the closing process. “We think the advantages for the industry, the efficiencies and accuracy that this kind of process will create can also incorporate some really consumer-friendly aspects, consumer education and the like. And on the whole, [it] can be a win-win on both sides of the closing table.”

Fannie Mae and Freddie Mac are comfortable with moving to eClosings as well. Melvin Watt, Director of the Federal Housing Financing Agency, also reluctantly urged the new process. He cautioned, however, that some would be hesitant to make an overall swift change and urged a hybrid system whereby individuals wishing to use the traditional paper process be allowed to do so. “We can’t abandon the regular paper process but a pilot that smooths out a lot of these issues and doesn’t apply to everybody, and doesn’t apply to a one-size-fits-all to every consumer and borrower, is critically important in moving in that direction.”

Many lenders have already instituted eClosings with overall favorable results. It appears that the industry will start to see more eClosings within the next year. Again, this is due in part to borrowers’ responses to the CFPB pilot program. With eClosings, borrowers noted they felt less “pushed” during the closing process and felt a sense of having more time to make more in-depth reviews of the closing documents than when documents are signed during a traditional in-person closing.

To Mr. Watts’s point, however, not all borrower comments from the pilot program were favorable. There were concerns surrounding privacy of consumer information, as well as the electronic signing process. Noting that substantial change is never easy, Patricia McClung, the Assistant Director of CFPB’s Office of Mortgage Markets, acknowledged that eClosings would be a process. “So I think we have a lot to all learn and that’s why we’re advocating for more research to be done . . . to better figure out ways to make it stick and figure out ways to make it land really well.”

Most definitely, eClosings are here and will grow into a larger segment of residential closings. As with all change, those who inform and equip themselves most quickly will reap the most rewards. All in the industry, obviously including loan originators, will be best served to educate themselves regarding eClosings and the myriad of changes they will produce.

Source: Witkowski, Rachel – August 5, 2015 – “CFPB Urges Industry to Quickly Adopt Electronic Closings” (


HECM/FHA Reverse Mortgage Or HELOC?

old-people-616718_640Non-traditional mortgage products are being used now more than ever, it seems. And this is especially true when it comes to senior citizens. Striving to make ends meet with Social Security and an ever-changing retirement fund landscape, elders are seeking ways to use the equity in their homes to provide extra income.

The question becomes which mortgage product works best? Obviously the answer depends upon the unique circumstances of the borrower(s). There is much debate as to whether a Home Equity Conversion Mortgage (“HECM” or “FHA Reverse Mortgages”) or a HELOC is a better solution. Again, there are arguments for and against both, but a recent article in National Mortgage News suggests the HECM be given a fresh look.

In “4 Advantages FHA Reverse Mortgages Have Over HELOCs,” Jeff Taylor makes the case for the HECM. He cites what he considers four strategic advantages of the HECM over a HELOC. And part of his argument is based upon new federal regulations of which mortgage originators should be aware.

The first issue for consideration is repayment terms. Taylor reminds that most HELOCs contain monthly payment obligations, and argues that most require repayment within as little as ten years or the borrower faces substantially higher rate resets. On the other hand, HECMs have no fixed repayment date and rate resets affect only outstanding balances.

Second is the new financial assessment rules for HECMs. Beginning just this year, HUD now requires that lenders calculate borrowers’ ability to remain current with taxes and insurance. In fact, a portion of HECM funds must be set aside for these expenses, which may better protect against default.

The third issue is of utmost importance. With an HECM, a non-borrowing spouse may stay in the home even after the death of the borrower. Under HUD Mortgagee Letter 2015-15, lenders may avail themselves of a Mortgagee Optional Election (allowing the surviving spouse to remain in the home) rather than pursue foreclosure. Conversely, with a HELOC, a lender may cancel the mortgage upon a spouse’s death under the theory that the initial loan determination included income from a now deceased borrower.

Finally, HECMs provide financial incentives that HELOCs do not. Moreover, an HECM that includes refinancing an existing mortgage nets originators an average of $5,000. In the alternative, commissions on HELOCs are low, and a substantial number of mortgage bankers apparently avoid them.

The debate between HECMs and HELOCs will continue. To reiterate, there is no “one-size-fits-all” solution, for sure. But in advising borrowers regarding options, it is advisable to study each product in depth. This will ultimately prove fruitful for lenders and borrowers alike.

Source: Taylor, Jeff – 09/04/15 – “4 Advantages FHA Reverse Mortgages Have Over HELOCs” – National Mortgage News (


Fannie Mae Announces HomeReady Mortgage

family-home-475883_640Just last week, Fannie Mae announced that it is readying a new lending option aimed at assisting borrowers in lower and moderate income brackets reach the dream of home ownership. Known as the HomeReady mortgage, it will also allow lenders to use its Desktop Underwriter program to assist in identifying eligible borrowers with greater certainty and efficiency. The HomeReady program will replace Fannie Mae’s MyCommunityMortgage.

HomeReady will hopefully prove to be a major step toward providing more options in the home purchasing process. Under new guidelines, HomeReady borrowers will be required to complete an online education course (named “Framework”) designed to prepare them for the home buying process and will also be provided post-purchase support. Moreover, HomeReady will – for the first time ever – allow income from a non-borrower household member to be included in determining debt-to-income ratio for a loan. (This allowance acknowledges an increase in multi-generational and extended household arrangements across the United States. Fannie Mae research reveals such arrangements have as stable – or even more stable – income than other households with similar income levels.)

HomeReady also allows income from non-occupant borrowers (such as parents) and rental payments to be included in borrowers’ income accounting. And first time (as well as repeat) homebuyers can purchase a home using the program with as little as a 3% down payment. Again, these features are designed to provide home ownership for those who previously have only had rental arrangements available to them.

Fannie Mae is hoping for a “win-win” between lenders and prospective homebuyers. “HomeReady will help qualified borrowers access the benefits of home ownership with competitive pricing and sustainable monthly payments,” notes Jonathan Lawless, Vice President for Underwriting and Pricing Analytics at Fannie Mae. “We are also confident this mortgage option will create business opportunities for lenders serving the changing demographics and borrower needs seen in today’s market.”

Fannie Mae will be providing lenders with more details of the HomeReady program in the coming weeks. And Desktop Underwriting will be available for use by the time the program is set in motion late this year. For more information, please visit the Fannie Mae website (

Source: Wilson, Andrew – August 25, 2015 – “Fannie Mae Announces Improved Affordable Lending Product” – (