Posted by Anthony Demangone
A few of us were chatting around the office the other day, and the subject of mortgages came up. We quickly began shaking our heads. On one hand, many people are chewing out financial institutions for not making enough loans. And the government has spent the last few years doing what it can to prop up the U.S. housing market. All the while, credit unions and other mortgage lenders are getting pounded from every conceivable direction. Just think about the following.
Regulation Z. MDIA disclosures were put in place. Then there was the mortgage loan sale or transfer notice regulation.. In case that wasn't enough, along came a rule on mortgage loan originator compensation. Those MDIA disclosures? They were amended. Requirements regarding higher-priced mortgage loans were put in place. And then new HPML loan requirements for jumbo mortgages were announced. In that same announcement, the Fed issued a proposal that would amend the first set of HPML requirements. And don't tell me that they tweaked that MDIA disclosure again? Oh, and the entire system of disclosures for closed end mortgages and HELOCs are in the process of being amended. The CFPB will pick that process up sometime in the future.
SAFE Act. Need I say more?
RESPA. The GFE and HUD-1 were completely overhauled. And the CFPB announced that they want to rework the disclosures as soon as they gain their official powers.
Appraisals. First, a state Attorney General from New York manages to ink a deal with Fannie and Freddie that practically changed appraisal requirements for the entire country. Then regulators, including NCUA, issued their interagency appraisal and evaluation guidelines, which completely overhauled just about every aspect of the appraisal process. And the Fed has issued its appraisal regulation. All of these requirements have mortgage lenders jumping through hoops - many of which appear to complicate the process without ensuring any benefit to the housing system.
GSEs. The future of GSEs are on the line. Congress and the Obama administration are trying to craft solutions to deal with these entities, all the while, leaving a great deal of uncertainty for credit unions that need access to some sort of secondary market for liquidity and interest rate risk management.
Servicers. Add to all of this a recent development. State Attorney Generals crafted an agreement/settlement offer sheet for the largest mortgage lenders in America. While this on the surface doesn't directly affect credit unions, many of the agreement's requirements may find their way into regulations and guidance documents or become industry servicing standards. Some of those provisions are quite onerous, such as one that raises the issue of cram downs.
Dodd-Frank. Provisions in Dodd-Frank will likely increase downpayment requirements for many mortgage loans.
CFPB. As noted above, Elizabeth Warren has indicated that one of the CFPB's first priorities will be to overhaul mortgage disclosures. Combining TILA and RESPA disclosures is not necessarily a bad thing, but given everything we've gone through already, a break might be nice.
Market Forces. Oh, lest we forget. Mortgage values are down, there is talk about a partial elimination of the mortgage interest deduction, and mortgage rates will likely increase in the not too distant future.
So, if you work with mortgages and someone wants to know how "work is going," feel free to send them this post. The pace and amount of change in this area has been practically unmanageable. There is so much risk and uncertainty, I wonder if some lenders will simply decide to exit the mortgage market altogether. All of this uncertainty and change also creates another problem - it tends to favor large organizations who can throw oodles of compliance and legal resources at the problem. Smaller shops may eventually leave the market or merge themselves out of existence. Wasn't there a cry about ending "too big too fail?"
Oh, and feel free to share this with your Congressman if he or she wants an example of regulatory burdens faced by credit unions.
Speaking of the rapid pace of change, Kate and Briggs turned two today. Looking back on these two years, well, the words just escape me. It is hard to describe the effect they've had on my life.