Category Archives: Lending

MBA: Refinance share hits highest point since January

Mortgage applications dropped 2.3% from last week, according to data from the Mortgage Bankers Association’s Weekly Mortgage Applications Survey for the week ending December 8, 2017.

The Refinance Index decreased 3% from last week, continuing last week’s 8% drop. The Purchase Index reversed course and decreased 1% from last week.

The refinance share of mortgage activity increased to 52.4% of total applications, up from 51.6% the week before and its highest level since January 2017.

The adjustable-rate mortgage share of activity, however, decreased to 5.6% of total applications.

The Federal Housing Administration’s share of applications increased from 11.1% last week to 11.8% this week, but the Veterans Affair’s share of applications decreased to 10.3%, down from 10.7% last week.

The Department of Agriculture’s share of total applications decreased from 0.8% last week to 0.7%.

The MBA reported mortgage interest rates for 30-year fixed-rate mortgages with conforming loan balances ($424,100 or less) increased from last week’s 4.19% to 4.2%.

The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $424,100) decreased to 4.11% from 4.16% last week.

The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA increased to 4.13%, up from last week’s 4.11% to its highest level since April 2017.

The average contract interest rate for 15-year fixed-rate mortgages increased to 3.61% from 3.61%, the highest level since March.

Lastly, the average contract interest rate for 5/1 ARMs decreased to 3.42% from 3.48%.

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Part 2: Everything you need to know about entering the mortgage finance market

Ownership of Consumer Residential Mortgage Laws

Entities that solely own consumer residential mortgage loans and do not participate in the origination or servicing of those loans have more limited licensing requirements at the state level and are probably not subject to supervisory oversight by the CFPB. Additionally, provided the loans are not considered to be high-cost loans under federal or state laws and do not finance the purchase of retail goods or services, such as loans to purchase a new roof or siding sold by a dealer, the legal authority of a borrower to raise or pursue claims related to violations of law committed by the originator generally is limited.

A purchaser of residential mortgage loans is, however, directly subject to a limited number of federal consumer regulatory laws. For example, when a person becomes the owner of an existing mortgage loan by acquiring legal title to the debt obligation, that person must provide a written transfer of ownership notice to the borrower within 30 days of the date of transfer.  Purchasers of loans and owners of servicing rights are also subject to antidiscrimination laws and certain privacy and information security laws.

In contrast, the holder could be subject to certain state and federal consumer credit laws if it participated in the initial credit decision of the originator, such as loans purchased on a prior approval basis before the originator elects to make the loan, or provided the funds with which the originator made the loan. In these cases, the line between origination and purchase may be blurred, and, in some cases, the law treats the purchaser as an indirect lender. Many secondary market mortgage loan purchase programs are structured so that these laws are not triggered. 

An entity that purchases a non-defaulted residential mortgage loan in good faith without knowledge of the violation of law is not legally subject to claims and defenses that may be asserted against the originator. There are, however, a few exceptions to this rule.

For example, affirmative and defensive claims may be brought against an owner of a loan for certain violations of the Federal Truth in Lending Act committed by the originator that are apparent on the face of the documents being assigned to the purchaser. Purchasers generally protect themselves from this risk by performing due diligence on the mortgage loans they purchase. In addition, a holder could be subject to defensive claims by the borrower in a foreclosure action that the lender failed to satisfy the ability to repay or loan originator compensation requirements under TILA.

At the state level, there are also a limited number of broadly drafted consumer residential mortgage loan origination statutes that appear to also apply to the mere ownership of consumer residential mortgage loan. In these situations, it is prudent for an owner of consumer residential mortgage loans to either own those loans through a licensed entity or to use an alternative holding vehicle that is not subject to state licensing. That vehicle is commonly a trust where title to the mortgage loans is held by a national bank or federal savings bank trustee exempt from the underlying licensing statute because of its status as a federally chartered banking institution. 

This is why so many nonbank-sponsored secondary market buyers of consumer residential mortgage loans have opted to own their loans through trusts as opposed to other legal entities. In the highly developed RMBS market that existed prior to the credit crisis, securitization trusts holding consumer residential mortgage loans in the name of the trustee were the most common issuers of RMBS securities.

In addition to the risks noted above, a consumer residential mortgage loan purchaser should consider certain derivative legal risks. For example, under the Dodd-Frank Act, the CFPB may seek to hold a person liable for knowingly or recklessly providing substantial assistance to a covered person who engaged in unfair, deceptive or abusive acts or practices. This generally is analogous to aiding and abetting prohibitions under common law, which are discussed below, although there is no private right of action under the Dodd-Frank Act for such substantial assistance. 

Financing Consumer Residential Mortgage Loans

Financing pools of consumer residential mortgage loans is the least regulated of all the various activities from a consumer credit law perspective. Financing arrangements, whether a repurchase transaction or a regular-way loan agreement, sidestep most of the regulatory requirements mentioned above, because they are wholly commercial transactions. If appropriately structured, the regulation generally is not implicated, because the loan is extended against a pool of consumer residential mortgage loans. There are two caveats to this general principle. First, should the lender be so embedded in the approval process for the origination of consumer residential mortgage loans that ultimately will be financed through a lending arrangement, it is possible that the lender could be implicated as an aider and abettor in a regulatory violation brought by a state or federal regulator against the mortgage loan originator.  The Dodd-Frank Act includes a provision regarding aiding and abetting. However, aiding and abetting claims require knowingly or recklessly providing substantial assistance in the violation of law, and the facts and circumstances surrounding this type of extension of regulation would be at the extreme margins of ordinary consumer residential mortgage loan origination and finance activities and could easily be prevented by proper protocols established by a lender for funding a consumer residential mortgage loan origination program.

The second caveat is that the exercise of remedies by the lender may require the temporary ownership by the lender of consumer residential mortgage loans prior to arranging for the disposition of those loans.  In this situation, the regulations mentioned above relating to the origination, servicing and ownership of consumer residential mortgage loans could apply. If the lending entity is a bank, then the lender could easily own loans without further concern about the reach of state licensing statutes to its loan ownership activities. If the lending entity is not a bank, it could form a loan ownership trust with a national bank trustee similar to what we have described above in order to facilitate the disposition of repossessed mortgage loans. Mortgage loan servicing could be handled by a licensed third-party servicer to the extent that servicing on the repossessed loans was moved away from the original servicer.


There are significant differences between the regulations governing originating and servicing, owning and financing pools of consumer residential mortgage loans. This article offers a very simple and high-level overview of those differences. Nonbank financial participants considering an entry or reentry into the residential mortgage finance market should be mindful of these differences and how the varying regulatory frameworks will impact their activities.

Click here to read part one. 

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Is the next leader of the MBA likely to be female?

The Mortgage Bankers Association today announced that it has retained Spencer Stuart, a leading global executive search and leadership advisory firm, to assist with the search for the Association’s next President and CEO.  

Current President and CEO, David Stevens, announced his plans to retire this past October and he will remain in his position until September 30, 2018.

If memory serves, Spencer Stuart also helps with placing CEOs at the head of Fannie Mae and Freddie Mac. They’re a major player in the executive search space, so it’s no surprise the board went with them.

Here’s a thought bubble: Considering Spencer Stuart recently released a white paper vaunting the importance of female leadership, will we get to see a female at the head of our most important trade group?

Considering the title — Solving the Disappearing Women Problem — the answer seems like a “yes.”

The whitepaper provides quotes and research making the case for more women at the top. And progress is being made, women and minorities hold key positions at the MBA, so they can hardly be described as lacking in diversity. The HousingWire Women of Influence award continues to grow not just in number but in quality of applicants. And finally, we sponsored with visionary, key gender-sensitive mortgage conference coming in January, called NEXT, which will provide an even playing field to all participants.

However, providing a female as the head of the MBA — which has yet to happen, though females served as voluntary Chairpersons in the past — would help push this issue ahead even further.

As the Spencer Stuart authors, Janine Ames and Christina Coplen, note: “Despite ongoing attention to the issue of gender disparity in leadership, progress for women remains mixed.”

“With greater numbers of women “disappearing” at successively higher levels of many organizations, companies that want to increase the number of women in leadership roles need strong advocacy from the CEO, an assessment approach that minimizes bias and assumptions about culture fit, support for women hired from the outside and a willingness to take bold actions.”

It may be time for all major organizations in mortgage finance to take note: McKinsey found that companies in the top quartile for gender diversity were 15% more likely to have financial returns above their respective national industry medians, according to Ames and Coplen.

That’s a boost we should all be aiming for, we just need the right leader to show us the way forward.

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