As we count down the hours to 2014, MPA takes a look back at the stories that shaped this year in the mortgage industry
FHA drastically reduces waiting times for foreclosures, bankruptcies
In August this year, the Federal Housing Administration lent a hand to beleaguered homeowners. The FHA announced in a letter to mortgagees that it would reduce the time homebuyers must wait after a bankruptcy, foreclosure or short sale before qualifying for an FHA-backed mortgage. The period had previously been two years following a bankruptcy, and three years following a foreclosure or short sale. The agency reduced the waiting period to one year.
"FHA recognizes the hardships faced by these borrowers, and realizes that their credit histories may not fully reflect their true ability or propensity to repay a mortgage," FHA Commissioner Carol Galante said in the letter.
Shock as lender shuts down new lending, axes jobs
Mortgage Investors Corp., a major refinacer of home loans for veterans, made a shock announcement in October that it would stop making new home loans. The company said it would also cut 476 jobs.
"It's been a hard day, one of the hardest days of my life quite frankly. It's not a pretty day," the company's chairman, Bill Edwards, told the Tampa Bay Times following the announcement.
Edwards blamed the move on Dodd-Frank lending regulations, claiming that MIC would not have the technological capacity to comply.
But the company had been beset by problems arising from allegations that it violated regulations. In July, the Federal Trade Commission announced it had reached a $7.5m settlement with Mortgage Investors after filing a complaint accusing the company of calling 5.4 million numbers on the Federal Do Not Call registry to offer mortgage refinancing.
CFPB accuses Castle & Cooke of illegal bonus scheme
Originator opinion was divided when the CFPB announced it had filed a complaint in federal district court against Utah-based Castle & Cooke Mortgage LLC and two of its officers, alleging the company handed out bonuses to loan officers who steered borrowers into mortgages with higher interest rates.
The CFPB alleged that Castle & Cooke, through its president Matthew Pineda and senior vice president of capital markets Buck Hawkins, ran a quarterly bonus program which paid more than 150 of the company's loan officers higher bonuses when they persuaded borrowers to take on pricier mortgages, while loan officers who didn't charge consumers higher rates did not receive bonuses.
FBI arrest eight in broker fraud case
In August, federal and local authorities in Ventura, Calif., arrested eight people linked to a fraudulent mortgage brokerage that targeted low-income borrowers and cost some of the nation's biggest lenders millions.
The FBI alleged that Oxnard-based New Concepts Home Loans, led by real estate broker Jose Garcia, targeted lower-income, primarily Spanish-speaking home buyers, falsifying borrowers' income, employment and assets to obtain loans from lenders such as Washington Mutual, Wells Fargo, Countrywide, IndyMac, SunTrust, World Savings and JPMorgan Chase.
"The defendants in these cases generated huge commissions and fees through the mortgage application process—typically at least $10,000 per mortgage," the FBI said.
The indictement alleged that Garcia's wife and others involved in the scheme obtained bogus CPA letters that falsely stated that mortgage applicants were engaged in a particular business.
Death knell for brokers if points and fees cap doesn't change
The National Association of Mortgage Professionals in November appealed to the CFPB via a letter sent to assistant director Dan Smith. In the letter, NAMB President Donald Frommeyer and Government Affairs Chairman Richard Bettencourt suggested that Qualified Mortgage (QM) and Ability to Repay (ATR) rules could see brokers driven out of business.
"As currently written, the QM/ATR rule's unintended consequences will force a majority of the brokers to go out of business, become a creditor, or join a larger non-depository lender," the letter said.
The NAMB in particular took issue with the Creditor to Broker Compensation rule under the cap.
"Consumer credits are generated when creditor compensation, less broker compensation, yields a credit which is then credited back to the consumer in the form of a lender credit. These credits are real money that consumers utilize in mitigating the upfront costs associated with a real estate transaction."
The NAMB told Smith that "numerous conversations" with members indicated they provided a consumer credit "98% of the time". The group pointed out disparity between brokers and lenders, saying that brokers were required to provide mandatory credits to the consumer, while depositories and non-depository lenders had no such requirement.
The NAMB proposed to the CFPB either the elimination of Creditor to Broker Compensation from the 3% points and fees cap, or raising the cap to 5%.
