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” – (    


Is It the End for Marketing Services Agreements?

businessman-562572_640If you are uncertain about the CFPB’s position regarding marketing services agreements in the residential real estate industry, you are not alone. It has definitely been a “hot button” of late, with opinions (and CFPB rulings) running the gamut. But it seems we have reached a point where conclusions can be drawn and wise choices can be made.

As we all know, prior to “Dodd-Frank,” marketing services agreements were commonplace. Pete Mills, Senior Vice President for Residential Policy at the Mortgage Bankers Association, broke it down simply, “[T]his has not been hidden in the dark. There’s a section of RESPA that talks about payment of bona fide compensation for goods and services actually provided being exempt from RESPA referral fee prohibitions, and a whole body of industry practice backed up by regulatory counsel opinion on MSAs.”

But Mills notes that changes began when CFPB took the regulatory reigns from HUD. “The [CFPB] has taken a very different view from HUD of the permissibility of these arrangements. This is not a case of something that’s been unenforced for decades. Everyone knows about these.” Indeed, since taking over enforcement of these agreements from HUD in 2011, the CFPB has steadily taken a more aggressive stance against them. And recently, it has taken aim at ridding the industry of them altogether.

Clearly, all agree that MSAs that involve kickbacks are illegal. Slowly but surely, however, the CFPB has been taking the position that all marketing services agreements have at least an element of a “kickback” notion to them. When Wells Fargo recently announced it was doing away with all marketing services agreements, Samuel Gifford, CFPB spokesman, noted, “Wells Fargo’s decision to exit all marketing services agreements is an important step for the mortgage industry towards ensuring compliance with the RESPA statute and freeing up more choices for consumers.”

While the new CFPB position may be aggressive, it has its supporters. Gary Acosta, co-founder and CEO of the National Association of Hispanic Real Estate Professionals and a member of the CFPB advisory board, puts it plain and simple, “These arrangements [MSAs] have been common between lenders and referral sources . . . for years. . . . There has always been a fine line between legal MSA arrangements and the payment of referral fees or ‘kickbacks.’ . . . . Where that line actually resides is a matter of interpretation of RESPA’s guidelines, but common sense makes it clear that compensation paid directly to a referral source is a form of kickback no matter how we dress it up with more flattering terms.”

So there we have it. Acosta states unequivocally CFPB’s current position with respect to MSAs. All lenders should take note of this. And any lender that continues the practice of using marketing services agreements does so at the risk of having the CFPB knocking at its door.

Sources: 1) Garrison, Trey. “CFPB to mortgage industry: Get out of MSAs” – July 30, 2015 – HousingWire (

               2) Acosta, Gary. “No Doubt About It, MSAs Must Go” – August 12, 2015 – National Mortgage News (


CFPB: Protector or Predator?

800px-Red-tailed_Hawk_(Audubon)“The hawk with talent hides its talons.” – Author Unknown

*  *  *  *  *  *

We have just passed the fifth anniversary of the creation of the federal Consumer Financial Protection Bureau. Passed as part of the Dodd-Frank bill in July 2010, the Bureau was set in motion to protect consumers from unscrupulous and predatory lending practices. At the time, it sounded fair enough. Who wouldn’t want to be protected from such conduct?

But since its creation, many argue that it is the Bureau that has become the predator. Indeed, some would liken it to the ubiquitous red-tailed hawk – its presence can be seen and felt virtually everywhere in the United States, it sets its sights near and far, and has the ability to strike at any time. And most troublesome to some is its sheer speed and power. With the development of its consumer-complaint service, the CFPB has developed powers no one could foresee.

Many argue that it is the CFPB’s power that is out of control. Notes Richard Hunt of the Consumer Bankers Association, “CFPB is the most powerful agency we have seen in Washington since J. Edgar Hoover ran the FBI.” Adds Sheila Bair, former chair of the FDIC, “The financial institutions understand there’s somebody looking over their shoulder now. There’s a cop on the beat.”

A cop is on the beat indeed. Since the creation of the consumer-complaint division, the CFPB has received approximately 650,000 complaints against lenders. To date, it has issued hundreds of millions of dollars in penalties and generated more than $11 billion in relief for roughly 25 million consumers. And it appears it has no intention of letting up. Richard Cordray, CFPB Director, makes no apologies, stating that its broad power, “gives us the ability to shape an industry toward being consumer-friendly. If that sounds like that’s a major change in the markets, so be it.”

So what does all this mean for real estate lenders? Honestly, it depends upon one’s perspective. It certainly will keep everyone on his or her toes, and this is not necessarily a bad thing. On the other hand, as history has taught time and again, too much unchecked power can wreak havoc even for individuals and institutions with the best intentions.

For now, lenders and those who work for them should definitely stay ahead of the curve. This perhaps can be best accomplished by striving to mirror the goals of CFPB, as well as keeping abreast of all CFPB rules and regulations. In accomplishing this, you will know you are at least doing your best to comply with the spirit of the CFPB. And, in the end, this surely can’t help but work to your advantage.

Source: TIME – Calabresi, Massimo – August 13, 2015 – ( – Appearing in August 24, 2015 Print Edition


Dialogue Key to Learning TRID

meeting-106591_640In a recent article, National Mortgage News reported that many real estate agents and homebuilders remain in the dark about TRID. On the one hand, this is quite incredible. (This blog alone has devoted most of the summer’s posts to the topic.) On the other hand, when you stop to consider why this may be, it perhaps is not so surprising after all.

In the August 3 article, “Realty Agents, Builders Still Clueless About TRID,” Brad Finkelstein notes that the main reason is straightforward. Stated Finkelstein, “Some of the lenders they [realtors and builders] rely on to advise them are poorly informed, too, and prone to spread bad information about the TILA-Respa Integrated Disclosures that take effect in two months.” Again, given the significance of the changes TRID will bring about, the fact that lenders do not understand TRID is perhaps mind-boggling. But if this is true with respect to a significant percentage of lenders, it is no wonder that little information has trickled down to realtors and builders.

Despite what some may believe, TRID will impact everyone in the residential real estate industry, not just those involved in the loan process. For example, given the new (and more stringent) timing issues surrounding required disclosures – and ultimately getting to closing – agents and builders can provide valuable assistance to their clients by simply informing them of the importance of preparing early for the loan application process. Obviously, a key component to smooth sailing in the “post-TRID world” will be that all in the industry understand its requirements.

It is therefore incumbent upon all who are “in the know” to start a dialogue with those who are not. Noted Drayton Saunders, president of Michael Saunders and Co. in Sarasota, Florida, “You can never be too prepared, and it is very hard to prepare somebody until they know it is really going to affect their business.” Again, if agents and builders knew of the impact they could have, they would be more likely to educate themselves.

And the fact is, while TRID will bring broad changes, they really are changes for the better, and not very difficult to understand. Perhaps Ron Turner, president of TRI Pointe Connect of Scottsdale, Arizona sums it up best, stating “[TRID] is no different than any other change that the industry will go through. So, it’s my belief that those that embrace it sooner will manage through it without having any negative impact on their business.” Adding to Turner’s thoughts is Michael Deery, president of Citiwide Financial, a San Diego, California mortgage lender, ”We are in an ever-changing mortgage world, and extra compliance is just part of the landscape these days. Those who adapt quickly will prosper, those who don’t will be left behind.”

Indeed, as a loan originator, you simply cannot afford for anyone in your network to be uninformed about TRID. There is still time – but it is now of the essence. Make it a point to start a TRID dialogue with everyone you can.

Source: Finklestein, Brad. “Realty Agents, Builders Still Clueless About TRID” – August 3, 2015 – National Mortgage News (


House Bills Address TRID Enforcement and Revised QM

us-capitol-building-826993_640Last week, the House Financial Services Committee took two major steps relating to residential realty. One, a call for a delay in TRID enforcement, likely will be cheered unanimously as it seeks to provide the industry with a bit of breathing room. As for the other, reviews are likely to be a mixed bag.

As noted in previous posts, the new TRID requirements are broad in scope. Implementation of the new documentation into the closing process will likely take more time than originally anticipated. Taking note of this reality, the House committee, while sticking to a start date of October 3, voted to delay enforcement of its provisions until February 1, 2016 as long as lenders make a “good faith effort” to comply. Rep. Brad Sherman of California noted that, “This bill does not delay for one minute the new form. It simply says that, for a period of a few months [120 days], if you do everything possible to implement the new policy, and you screw up this way or that way, you are not going to be faced with the lawsuits or the enforcement actions.”

The committee also passed a measure to relax the Consumer Financial Protection Bureau (“CFPB”) rules regarding a qualified mortgage (“QM”). The bill would create a “safe harbor” that would exempt a bank from QM requirements as long as that same bank holds the loan in its portfolio, thereby assuming 100% of the risk of loan default. The bill’s author, Rep. Andy Barr of Kentucky, noted that the proposal would expand the availability of mortgage lending, while at the same time ensuring a bank would take every step possible to make certain that a borrower would repay the loan.

The “safe harbor” bill is not without its opponents, however. No one has forgotten the real estate mortgage disasters brought to a head in 2008 due to benign enforcement of regulations. At this point, it seems the bill will become law only through more engaged negotiation and perhaps “guardrails” being put in place, such as the types of mortgages allowed and sizes of banks to which the proposed safe harbors would apply. Stay tuned on this one!

Source: Helman, John, “House Committee Passes Bills to Delay TRID Enforcement, Revise QM” – July 29, 2015 – National Mortgage News


Using TRID as Catalyst for Overhauling Entire Closing Process

monitor-734567_640It is quite the understatement that the new TRID requirements will result in significant changes to the home mortgage closing process. Replacing the important and long-standing Good Faith Estimates, HUD-1 Settlement Statements, and the Truth-in-Lending Disclosures will require substantial commitments of time and other resources. Indeed, studies have shown that, in preparing for TRID, 67% of lenders have increased in-house staffing or outsourcing of labor, and 82% are spending more on technology in 2015 than in 2014.

While major changes are almost always difficult, often times they can result in positives we do not see at the outset. And hopefully, such will be the case with TRID. Obviously it remains to be seen what will result from TRID and resultant changes. But undoubtedly, the transition to TRID will be most successful for those who understand fully all the changes it will effect, and also make the most informed and cost-effective moves in moving to the post-TRID world.

Whatever your specific role in the residential real estate industry – realtor, lender, loan originator, mortgage broker, underwriter, loan processor, or closing agent – you will be best served by acting with the utmost care and diligence. First, educate yourself as to TRID’s requirements and how they will impact the entire lending process – from the mortgage application to closing. Next, ask yourself what will be required to implement all changes as accurately and efficiently as possible. And finally, invest wisely to ensure the best practices for implementing all required changes.

Whatever your role in our industry, you should use this time of change to look at the entire scope of your operation. Be able to answer the questions of what roles need to be handled by individuals, and how many are needed for each. Also, understand what can be handled most efficiently by technology, and commit to an investment that can handle the present and also be adaptable for the future. When it is all said and done, you should feel comfortable that you are addressing all changes resulting from TRID, and in the process, creating a system for years to come.

As we all know, nothing is as constant as change. And this is especially true in the case of residential real estate. Perhaps now more than ever, we will find the truth of the notion that “failing to plan” is indeed tantamount to “planning to fail.” But by taking the appropriate steps now, you will place yourself ahead of the curve and in the best posture for the success you envision.

Source: Moving Beyond TRID: How to Automate TRID Compliance – And Your Entire Mortgage Workflow – Capsilon Corporation (


TRID To Extend Contract And Rate Lock Timing?

speed-32302_640-2By now, presumably everyone is gearing up for the implementation of TRID and its new disclosure forms, the Loan Estimate and the Closing Disclosure. The new regimen is set to take effect October 3 – just weeks away! And most in the residential mortgage industry believe TRID will meet the overall goals of providing home buyers with clearer “know before you owe” information, and do so in a more timely fashion than with current disclosures.

But experts are warning that the new requirements may prove costly – in both time and money. They cite three main reasons for their concerns: 1) the “learning curve” involved in becoming familiar with the new disclosures; 2) the development of software systems to effect a “best practices” implementation; and 3) the requirement that the Closing Disclosure must be provided to borrowers no later than three business days prior to closing. (The last one, while straightforward enough, may prove to be of greater consequence than some realize. A literal reading of the new rules would no longer allow for last-minute changes at closing. Under TRID, any adjustment to the Closing Disclosure would trigger a new three-day waiting period.)

Due to these inevitable delays, many believe that the typical 30-day contracts and 30-day rate locks will result (at least temporarily) in 45-day contracts and rate locks. (And some experts suggest TRID may result in even longer periods – up to 60 days.) This could prove to be a sore spot for all concerned. Many borrowers, after signing a purchase contract, already find themselves becoming impatient waiting for all steps to be completed before getting to the closing table. Moreover, lenders undoubtedly will be skittish about extending rate locks. Undoubtedly, they will charge a premium for longer lock times. Some estimate that extended time periods could cost borrowers billions of dollars annually.

Truth is, no one can predict the future. The key is to be prepared for a good measure of uncertainty regarding the closing process for the last quarter of 2015. Thus far, lenders have kept quiet about any definite plans regarding the whole matter, with most opting to take a “wait and see” approach. Given that the industry is entering unchartered waters, this is most likely a wise path. Perhaps the implementation of TRID calls for everyone to take an oxymoronic approach – rigid flexibility.

Source: Collins, Brian. “TRID May Force Lenders to Mothball 30-Day Rate Locks” July 10, 2015 – National Mortgage News