Compliance & Regulation

Thanks to the Dodd-Frank Wall Street Reform and Consumer Protection Acts, the federal government is making it virtually impossible to be a mortgage broker. By extending the application of the Truth in Lending Act to include mortgage brokers (formerly limited to "creditors") and clearly defining, and otherwise limiting, how brokers can be compensated (YSP is dead), the act is forcing brokers to rethink the way that they do business. For mortgage brokers to survive, they need access to wholesale lenders and must establish relationships with select retail lenders. For lenders to survive, they need to meet strict quality and delivery guidelines that insulate mortgage securitization issuers from the act's risk retention requirements. These guidelines include, but are not limited to, increased underwriting obligations, changes to the HOEPA thresholds, additional disclosure requirements and asset verification and validation requirements. These strict quality guidelines are necessary to insure that the assets that are purchased by mortgage securitization issuers adhere to the risk retention safe harbor requirements, and in return, the issuer can confidently provide liquidity to the lender, that is necessary to keep funding loans that the brokers are selling.

Industry trade groups are urging Senate leaders to pass a stand-alone Federal Housing Administration reform bill (H.R. 5072) before they adjourn on August 7 for a month-long recess.

Although there has been a lot printed and the act itself will not really take effect for six-to-18 months when the regulations are due to be published, here is a further summary. The more you read about it, the more you will absorb and be comfortable with.

Contributing to more general concerns about "the government changing the rules" that persist in the capital markets is uncertainty surrounding the government-sponsored enterprises, according to one expert.

The Treasury Department, which has pumped $145 billion into Fannie Mae and Freddie Mac thus far, will hold a public forum on the future of the GSEs and the nation's housing finance system in mid-August in Washington.

New Jersey mortgage bankers and brokers don't seem to be in much of a hurry to get their licensing paperwork in through the National Mortgage Licensing System and Registry, according to a recent tally done by the state Department of Banking, Insurance and Regulation.

Maverick Funding Corp. of New Jersey has hired counsel and expects to give a complete response to Connecticut regulators on Thursday concerning reports that it did not disclose litigation against its founders — as required — when it filed for a lending application in the state.

A fight is brewing between regulators and Congress over how to develop a covered bond market, with the latest salvo expected to be fired as soon as Tuesday, when the House Financial Services Committee could begin voting on a bill tackling the issue.

House and Senate committees have approved Department of Housing and Urban Development appropriation bills that extend the $729,750 loan limit through September 2011.

Credit union leaders told Credit Union Journal they fear already burdensome regulatory and compliance demands will become overwhelming in the next few years, and will only add new expenses at the same time interchange income is declining.