Lenders Have Adjusted to New Mortgage Rules: CFPB

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WASHINGTON — The Consumer Financial Protection Bureau appears pleased with the progress banks and nonbank mortgage lenders have made to comply with new rules governing the mortgage sector.

Speaking at a conference on Monday, Peggy Twohig, the CFPB's assistant director of supervision policy, said the agency "is finding that both banks and nonbanks have generally adjusted their business models and practices to comply with the new mortgage origination rules."

"Our supervisory work has generally found adequate compliance systems and compliance with the ability to repay and the loan origination compensation rules," she told the Mortgage Bankers Association conference. "And with some exceptions we have not found any violations involving unfair and deceptive practice in mortgage origination examinations."

She said that CFPB expects servicers to have adequate compliance management systems that provide ongoing monitoring to detect problems and to take corrective action, such as "providing consumers remuneration when appropriate," Twohig said.

"We now have the regulatory structure and oversight in place that will be better for consumers and the mortgage industry in the long run," she said.

MBA President and Chief Executive David Stevens said that a lot of the CFPB rules required by the Dodd-Frank Act have been implemented. "They are working well. Homeownership is expanding," he said.

However, he drew attention during the conference to a different topic. He stressed that the Department of Housing and Urban Development needs to provide more clarity around its underwriting standards so that Federal Housing Administration lenders aren't hit with massive damages under the False Claims Act.

"I think HUD has gone part way to try to give us some clarity. I don't think it has gone far enough," Stevens said. "We going to go back to HUD to talk about that."

Since the housing bust, Justice has been very aggressive in pursuing settlements with lenders for allegedly violating FHA underwriting rules.

Regions Financial Corp. in Birmingham, Ala., recently agreed to pay $52.4 million to settle allegations that it violated the False Claims Act by originating and underwriting mortgages that did not meet Federal Housing Administration requirements.

Many banks and nonbanks lenders have abandoned the FHA program because of the hefty fines. FHA officials have tried to provide more certainty around its underwriting standards, including new certifications that allow lenders to attest that they adhered to FHA's handbook in originating loans.

But a top FHA official, who spoke at the MBA conference, threw cold water on the idea of issuing new guidance.

Robert Mulderig, FHA acting deputy assistant secretary, indicated that the agency is standing pat when it comes to the way it deals with False Claims Act issues.

He noted the FHA has an advisory role. But the Justice Department makes the final decision regarding False Claim cases. To issue new guidance would only "raise more questions," Mulderig said.

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