Category Archives: Mortgage Banking

Latest Developments on VA Loan Appraisals

The U.S. House of Representatives has passed HR 7735, Improving Access to the VA Home Loan Benefit Act of 2022, a measure that would direct the U.S. Department of Veterans Affairs (VA) to update their regulations on appraisals. They would be required to consider when an appraisal is not necessary, and when a desktop appraisal should be utilized.

Introduced by Rep. Mike Bost of Illinois, HR 7735 would enhance VA’s home loan program by streamlining the home buying process for veterans and their families. HR 7735 would ease the home buying process by allowing the nation’s veterans to use the same modern purchaser tools that non-veteran buyers already use.

The VA home loan program has afforded millions of servicemembers, veterans, and their families the opportunity to become homeowners, a benefit that has empowered U.S. veterans with the resources they need to purchase, retain, and adapt homes at a competitive interest rate, and helps to ease the transition from active duty to civilian life. While VA’s home loan program has historically performed well and assisted many nationwide in achieving homeownership, it has not kept pace with today’s homebuying practices in certain ways. Veterans using a VA home loan are required to have an in-person appraisal performed by a VA-approved appraiser prior to purchasing their home. However, there are often lengthy wait times for the relatively few VA-approved appraisers to become available to perform these appraisals, resulting in in veterans being forced to wait longer to complete the homebuying process, and move into their new home.

“The bill will encourage important reforms to the agency’s requirements regarding when an appraisal is necessary, how appraisals are conducted, and who is eligible to conduct an appraisal,” said Bob Broeksmit, CMB, President and CEO of the Mortgage Bankers Association (MBA). “This legislation is an important first step towards broad modernization of VA appraisal processes and could make veterans’ home purchase offers more viable in today’s competitive housing market.”

Now that HR 7735 has passed the house, its companion bill in the Senate, S4208, the Improving Access to the VA Home Loan Act of 2022, introduced in May 2022 by Sen. Dan Sullivan of Alaska awaits passage.

“VA home loans have given millions of veterans and their families the opportunity to purchase a home,” said Rep. Bost. “Yet, on average, veterans wait longer and pay more during the closing process due to VA’s out-of-date appraisal requirements. That’s why I am introducing the Improving Access to the VA Home Loan Act of 2022 with my friend, Senator Sullivan. This bill will make sure that veterans are not unfairly disadvantaged during the home buying process and allow for a modern, digital appraisal process, which will get them into their new home faster.”


Mortgage Rates Are Headed in Which Direction Now ?

Things Are About to Get Even More Interesting For Rates

It’s certainly already been an interesting year for financial markets–especially for housing and interest rates. But most of what’s happened over the past 8 months could be thought of as the more predictable phase of the post-pandemic market cycle. It’s what happens next that’ll be more interesting.

How could anyone say that the last 8 months have been predictable when rates have risen at the fastest pace in decades to the highest levels in more than 14 years? It’s true, the pace and the outright levels defied most predictions. But the predictable phenomenon was more of a general truth that we knew we’d contend with in late 2021. Here it is in a nutshell:

The Fed shifted gears on bond buying in late 2021, announcing a gradual wind-down of new bond purchases to be followed by a series of rate hikes. This shift from the Fed was always likely to coincide with rising rates and lower stock prices. The only uncertainty was the size, speed, and staying power of the shift as the Fed attempted to strike a balance between combatting inflation without crippling the economy.

See Rates from Lenders in Your Area

June’s reading of the Consumer Price Index (CPI, a key government inflation report) was the only major curve ball of the year–generally thought to be a byproduct of the Ukraine War’s effect on commodities prices.  It made for a rapid reassessment of the Fed’s rate hike outlook as seen in the chart below.

The blue line is the market’s expectation of the Fed Funds Rate after the September meeting.  Note the big leap in June.  To be fair, July’s inflation report caused another jump, but it fell back quickly to the previous 2.875% range and has been there ever since.  

Longer term rate expectations (for the December meeting as well as next June’s meeting) have had more ebbs and flows due to the shift in the economic outlook.  Weaker economy = lower long-term rates, all other things being equal.  These longer-term expectations share more similarities with longer-term rates like those for mortgages.

Rates recovered nicely in July as markets feared recession, but rebounded sharply in August as data suggested a much more resilient economy.  This was especially true of the jobs report in early August as well as the ISM Purchasing Managers Indices (PMIs) which are like more timely, more highly regarded versions of GDP broken out by manufacturing and non-manufacturing sectors.  

PMI data has been responsible for several noticeable jumps toward higher rates over the past month.  The same was true this week when the non-manufacturing (or simply “services”) version came out on Tuesday morning. The services PMI was expected to move DOWN to 55.1, but instead moved UP to 56.9, effectively keeping it in “strong” historical territory whereas the market thought it was trending back down to the “moderate” level.

That’s all just a fancy way of saying that, despite GDP numbers being in negative territory, and despite aggressive Fed rate hikes, other economic indicators suggest the economy continues to expand.  The PMI data helped push US rates higher at a faster pace than overseas rates as US traders returned from the 3-day weekend, but European rates took the lead on Thursday after the European Central Bank hiked rates and warned about upside risks to the inflation outlook.

While US economic data is certainly responsible for a good amount of upward pressure in rates recently, Europe and European Central Bank policies have been adding fuel to the fire.  This can be seen in the faster rise in EU bond yields. Incidentally, the initial jump in the blue line (US 10yr) in early August coincided with several strong economic reports in the US: ISM PMIs and the Jobs Report.

Long story short, rates have topped out twice and the market knows what it looks like to see high rates in conjunction with a strong economy.  The bigger question is the extent to which inflation is calming down.  After all, inflation is the reason the Fed continues to say it’s willing to attempt to restrain economic activity via rate hikes.  Looking at the year-over-year chart, it looks like we have a long way to go for the Fed to get core inflation back down to its target.

But year-over-year data is just that.  It includes the past 12 months–many of which contribute a massive amount to a total that will inevitably be much smaller even if the economy simply maintains the current monthly pace of inflation.  In fact, core inflation only needs to move down 0.1% in the next report to put year-over-year numbers on pace to hit the target range.  Once the Fed is reasonably sure that’s happening, it can begin to consider a friendlier shift in the monetary policy that has recently put so much upward pressure on rates.

And that brings us to why things are about to get interesting.  Summer is unofficially over.  School is back in session.  Traders are back at their desks.  And next week brings the next installment of the CPI data.  6 short business days later, we’ll get the next Fed policy announcement as well as an updated rate hike projection from each Fed member.

All of the above is made all the more interesting due to the fact that the Fed–by its own admission–has no idea how much it will hike rates in 2 weeks, and that it will only be able to decide after it sees economic data.  Given that CPI is by far and away the most relevant piece of economic data between now and then AND that the Fed has a policy of abstaining from public comment starting 11 days before a meeting (aka today was the last day of Fed comments until 9/21), the market’s reaction to next Tuesday’s CPI data could be tremendously interesting indeed. 


Mortgage Compliance – What You Need to Know About Redlining

Fair Lending compliance is a hot button issue, making it critically important that your institution has a clear sense of its fair lending risk exposure.

From the Office of the Comptroller of the Currency’s (OCC) supervisory priorities and speeches from officials at the National Credit Union Administration (NCUA) to the Consumer Financial Protection Bureau’s (CFPB) advisory on the Equal Credit Opportunity Act (ECOA) and the Justice Department’s fair lending initiative, all eyes are on fair lending.

While Fair Lending compliance can be complex, having a clearer sense of your risk exposure can make it simpler.

Uncovering fair lending risk to build a stronger fair lending program

The first thing to remember is that Fair Lending covers every stage of the crediting process — from marketing all the way to servicing.

Second, Fair Lending applies to all loans — not just HMDA loans.

And third, regardless of whether staff is officially responsible for compliance efforts, they are still responsible for supporting Fair Lending efforts and complying with Fair Lending laws and regulations.

Here are the seven primary Fair Lending risks.

Compliance Management Program Risk

Is your Fair Lending Compliance Management Program (CMP) able to effectively manage and mitigate your Fair Lending risk? The strength of your CMP needs to be commensurate with the inherent risk profile of your institution.

Redlining Risk

Redlining continues to be a major regulatory hot topic. But do you know your Redlining risk? In today’s regulatory environment, you need to.

Marketing Risk

Fair Lending extends to marketing. Financial institutions need to ensure they are marketing their services equally to similarly situated individuals. One question to consider as you assess your marketing risk is: Are we receiving applications consistent with our market demographics?

Steering Risk

As you assess steering risk, you will be looking to determine if similarly situated individuals are treated similarly. Any evaluation of steering risk will benefit from the insight provided by Fair Lending data analysis. One question to consider: Are we directing certain applicants to particular products? By analyzing your data, you’ll be able to identify any disparities.

Underwriting Risk

Underwriting risk is key area of Fair Lending risk. When analyzing your data, pay attention to the number and rate of originations and denials. As you assess your risk, look for any vague or subjective underwriting criteria or other potential for discretion in the process.

Pricing Risk

Are all similarly situated applicants receiving similar pricing? If not, you may have pricing risk exposure. As you analyze your data, you’ll be looking for incidence of rate spread, and disparities in the pricing charged. 

Servicing Risk

Consumer complaints are common during servicing, and consumer complaints can trigger regulatory attention. In analyzing your servicing risk, ensure that similarly situated individuals are being treated consistently. You’ll also want to pay attention to any disparities in loss mitigation servicing options, decision processing times, and collections processes. And be advised — even if your bank outsources servicing, you are still responsible for that third party vendor’s Fair Lending compliance.

Fair Lending is a top priority for regulators and regulatory scrutiny of Fair Lending will heighten. 

Are you aware of the Fair Lending risk in your financial institution?


Mortgage Fraud – Beware of This Bias

Underwriters are presented with 1,500 loans marked as “fraudulent” and they have to find the one that is genuinely fraudulent — a near impossible task.


a) Repetition bias happens when mortgage underwriters have to wade through thousands of applications that have been marked as fraudulent by automated machinery — most of which are not actually fraudulent.

b) Lenders typically flag 40% of loans that come in with at least one fraud flag to review, so underwriters are essentially left in charge of finding a needle in a haystack.

c) This issue will only become more exacerbated as we enter a tighter housing market in 2022; applicants are more likely to fudge their income or their credit score to get their loan approved.

d) As the mortgage industry consolidates and layoffs begin, there may be fewer underwriters and analysts in the industry to sift through all these loans marked as fraudulent.

In the housing bubble era, fraud was running rampant all across the mortgage industry and the entire economy suffered the consequences. 

In the run-up of the crisis, underwriters facilitated wide-scale fraud by knowingly misreporting key loan characteristics, according to Griffin’s analysis. Credit rating agencies inflated their ratings on both mortgage-backed securities and collateralized debt obligations (CDOs), while originators also engaged in mortgage fraud to increase market share, and appraisers would inflate appraisals in order to gain business. 

The industry changed drastically after the financial crisis and with the creation of the Dodd-Frank Act. Entities and mortgage professionals are concerned about protecting themselves from fraud. Today, many are wary of fraud and fraudulent applications, which could end up costing their companies a pretty penny. But the industry is still struggling to establish an efficient system for identifying fraudulent loans. 

Point Predictive Chief Strategist Frank McKenna said that while mortgage lenders have implemented additional tools to identify mortgage fraud, problems related to mortgage applications are increasing at an alarming rate due to “repetition bias”, often causing hundreds of thousands in losses.

Repetition bias happens when mortgage underwriters have to wade through thousands of applications that have been marked as fraudulent by automated machinery. In some cases, the rate is 1,000 non-fraudulent applications (marked as fraudulent) for one truly fraudulent application. Repetition Bias creeps in when underwriters are quickly scanning and approving applications that were marked as fraudulent and they miss that one genuinely fraudulent application. Even one fraudulent mortgage that is approved can cost lenders hundreds of thousands of dollars.

A fraudulent application occurs when a borrower lies about their credibility and financial status by either fudging their income, credit score, or anything that might make them look more trustworthy. Today’s lenders use various approaches for identifying these fraudulent loans, mainly with automated machinery, but most of these systems are not smart enough to accurately analyze applicants.

“Lenders flag 40% of loans with at least one fraud flag to review,” McKenna said, “and sometimes much more than that. So, underwriters are essentially left in charge of finding a needle in a haystack.” 

An overwhelming amount of loans are being flagged as fraudulent and these all need to be reviewed by underwriters or fraud analysts. After reviewing a hundred or so applicants and finding out they are all non fraudulent, it creates a false-positive bias. However, this makes underwriters and analysts more susceptible to missing genuinely fraudulent loans. 

For example, applications can be flagged as fraudulent because the listed social security number (SSN) is also associated with other names; yet, only 1 in every 750 applications flagged with this are genuinely fraudulent. Oftentimes, the SSN appears on other applications with different addresses, but only one out of every 1,000 is actually fraudulent. Even more often, the SSN is randomized issued after 2011, though, only one out of every 1,500 of these are fraudulent applications. 

“It has the exact opposite effect of what a lender would want,” McKenna said. “You think by presenting more flags means you’ll catch more fraud, but actually the reverse is true. You create a bias towards the fact there’s no fraud.”

The amount in losses lenders could potentially face from accepting fraudulent loans is going to vary based on the lender’s portfolio, and lenders don’t typically release their fraud loss numbers, whether they’re public or private. However, McKenna estimates that slightly less than 1% of all mortgage originations are fraudulent. 

“I think the estimates that are done by industry experts indicate that fraud probably runs about 80 basis points so if you were to take the mortgage originations…” McKenna said, trying to calculate a rough estimate in his head, “I think about 80 basis points is kind of the standard calculation, so if there’s $2.6 trillion in originations it’s a very big number.”

McKenna believes this issue will only become more exacerbated as we enter a tighter housing market in 2022 where refinances have dried out and purchase originations are in. As it becomes harder to purchase a home — with bidding wars, rising prices, low inventory, and higher rates — applicants are more likely to fudge their income or their credit score to get their loan approved.

“With refinances, you’ve been in the house and have been paying their mortgage,” McKenna explained. “In tighter markets, which are typically purchase markets, there is more risk involved — especially with first-time home buyers.”

“You have a lot more people in the industry who need to keep making money, [brokers, lenders, …etc] so they want to get creative on how to close deals,” McKenna continued. “So that also plays a huge factor in increasing the risk of fraud.” 

As the mortgage industry consolidates and layoffs begin, there may be fewer underwriters and analysts in the industry to sift through all these loans marked as fraudulent. However, McKenna presents an alternative mechanism that is more selective and precise when it comes to identifying fraud. 

Point Predictive’s Mortgage Pass reduces false positives by 65% or more over current solutions. Mortgage Pass is a machine-learning AI that’s taught much in the same way that a human learns, where it’s shown lots of examples of fraud and lots of examples of non-fraud to differentiate. 

“It’s able to differentiate when a pattern exists on a problem that doesn’t exist on a good loan,” McKenna said. “So it is a version of artificial intelligence because it’s being trained with lots of data.”

“I wouldn’t recommend lenders discard any processes they currently do,” McKenna added, “but they can layer this process over what they do.”

Currently, much of the burden and responsibility for identifying fraud falls on underwriters that are already understaffed. 

“Layoffs in the mortgage industry are going to happen,” McKenna said. “So mortgage lenders are gonna be looking at ways to reduce costs. They’re going to have to kind of look at reducing false positives as part of that cost reduction.” 


New Lending Rules on Condominiums Take Effect

Fannie and Freddie tighten condo-lending rules. Details vary, but they generally won’t back single-unit condo loans if a building has deferred maintenance issues.

ORLANDO, Fla. – In response to the Surfside tragedy, Freddie Mac announced last week that it would immediately start taking a closer look at a condo development’s maintenance issues before approving individual loans. The change follows a similar announcement made earlier by Fannie Mae. The two mortgage giants back over half of all U.S. loans.

The new requirements can be complex – Freddie Mac posted its announcement online – but they will generally deny condo and co-op unit loans if the building has deferred maintenance issues, special assessments to fix deferred issues or other problems.

All changes announced in Freddie Mac’s bulletin “will be effective for Mortgages with Settlement Dates on or after Feb. 28, 2022.” Fannie Mae’s earlier bulletin says its rules will be “effective for whole loans purchased on or after Jan. 1, 2022, and for loans delivered into MBS pools with issue dates on or after Jan. 1, 2022.”

Both policies “remain in effect until further notice.”

As part of the process, Fannie Mae lenders will send condo managers a five-page form that must be completely filled out. Under the section that covers insurance types and amounts, it even includes instructions, such as “Do NOT enter ‘contact agent.’” The regulations apply to all condominiums with five or more units, even if that complex is otherwise exempt from review.

While individual condo buyers may immediately face hurdles getting a loan approved, the tighter policies could have a longer-term impact on entire condominium complexes. Even condo associations without concerning maintenance issues could find that unit owners – without the backing of Fannie Mae and Freddie Mac – will have a harder time selling their property if the new paperwork isn’t filled out correctly and returned promptly.

“Loans secured by units in condo and co-op projects with significant deferred maintenance or in projects that have received a directive from a regulatory authority or inspection agency to make repairs due to unsafe conditions are not eligible for purchase,” Fannie Mae states in its Oct. 13 announcement. And those projects “will remain ineligible until the required repairs have been made and documented.”

Fannie Mae considers acceptable documentation to be “a satisfactory engineering or inspection report, certificate of occupancy, or other substantially similar documentation that shows the repairs have been completed in a manner that resolves the building’s safety, soundness, structural integrity, or habitability concerns.”

While Fannie Mae and Freddie Mac’s changes apply nationwide, Florida may feel a greater impact due to the number of condo buildings across the state.

In addition, condo complexes that have deferred maintenance issues or one of the other problems noted won’t be approved for Fannie Mae- or Freddie Mac-backed loans until those issues have been fixed.


Alert – 2022 Thresholds for Regulations Z, M, V

NCUA issued a Regulatory Alert (21-RA-11) with the 2022 annual adjustments for three exemption thresholds under the Truth in Lending Act (TILA or Regulation Z) and the Consumer Leasing Act (CLA or Regulation M). The thresholds exempt loans from special appraisal requirements for higher-priced mortgage loans and determine exempt consumer credit and lease transactions under Regulation Z and Regulation M.

The 2022 thresholds, effective on Jan. 1, 2022, are an increase from the 2021 thresholds.

The CFPB also issued an annual adjustment to the maximum amount credit bureaus may charge consumers for making a file disclosure to a consumer under the Fair Credit Reporting Act (FCRA or Regulation V). The 2022 ceiling, effective on Jan. 1, will increase from the 2021 ceiling.

1 ) The appraisals for higher-priced mortgage loans exemption threshold for 2022 will increase to $28,500 from $27,200 based on the annual increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) in effect as of June 1, 2021.

2) The consumer credit and consumer lease exemption threshold for 2022 will increase to $61,000 from $58,300 based on the annual percentage increase in the CPI-W in effect as of June 1, 2021.

3) The credit bureau consumer report fee maximum allowable charges for 2022 will increase to $13.50 from $13.00, based proportionally on changes in the Consumer Price Index for all urban consumers. The ceiling does not affect the amount a credit union may charge its members or potential members, directly or indirectly, for obtaining a credit report in the normal course of business. Such cost is expected to be accurately represented in all advertising, disclosures, or agreements, whether presented orally or in written form.


Latest Lender Regulatory Changes YOU Need to Know

This regular publication by DLA Piper lawyers focuses on helping clients navigate the ever-changing consumer finance regulatory landscape.

Enforcement actions


CFPB files complaint against debt buyers for debt-placement practices. The Consumer Financial Protection Bureau (CFPB) filed a complaint in the US District Court for the Western District of New York against a group of New York-based companies and their principals for unfair, deceptive or abusive acts or practices (UDAAP) and Fair Debt Collection Practices Act (FDCPA) violations in connection with buying and placing debts with third-party debt collectors. The CFPB alleged that the companies, which collectively managed more than $8 billion in debt, (i) intentionally disregarded red flags from compliance staff that their third-party collectors were engaged in deceptive and abusive debt-collection practices, such as making false threats of arrest, jail time or lawsuits if consumers did not pay and (ii) intentionally increased the amount of business with such companies.

CFPB announces inquiry into “buy now, pay later” credit providers. The CFPB has issued a series of orders to five companies offering “buy now, pay later” (BNPL) credit in an effort to gather information on the risks and benefits of this type of lending. The CFPB expressed concern that (i) this type of lending could lead to the accumulation of large amounts of debt by unqualified consumers with subprime credit histories, (ii) BNPL lenders may not be adequately applying consumer protection laws and (iii) it needed to better understand BNPL lenders’ data collection, behavioral targeting and data monetization practices. A sample copy of the CFPB’s order to BNPL lenders is available here.

FTC announces $675,000 settlement and permanent ban against merchant cash advance provider for deceptive marketing and abusive collection practices. The FTC announced a stipulated order with a New York-based merchant cash advance lender for alleged unfair and deceptive acts and practices (UDAP) and Gramm-Leach Bliley Act (GLBA) violations. The FTC alleged that the lender misrepresented the terms of loans issued to small businesses, made unauthorized withdrawals from customer accounts and engaged in unlawful collection practices, including the illegal use of confessions of judgment and threatening customers with physical violence.

FTC announces settlement with mortgage analytics firm for data security violations. The FTC announced a settlement with a Texas-based mortgage analytics firm for alleged violations of the GLBA Safeguards Rule. The FTC alleged that the firm hired an outside vendor to perform text recognition scanning on mortgage documents, most of which included sensitive consumer data. The vendor stored these documents on an unsecure server without any protections to block unauthorized access. The server was allegedly accessed in an unauthorized manner dozens of times. The settlement will require the firm to bolster its data security protections and oversight of vendors to ensure compliance with the Safeguards Rule.

FTC announces $12 million settlement and permanent ban against debt collectors for phantom debt collection. The FTC announced a settlement with several South Carolina-based debt collection companies and their principal for alleged Fair Debt Collection Practices Act (FDCPA) violations. The FTC alleged that the defendants used threats of imminent legal action to collect payments for consumer debts that were not real or that the companies had no right to collect. In addition to the monetary judgment, which is partially suspended due to inability to pay, the defendants are required to surrender numerous assets, including bank accounts, investment accounts and real estate owned by the companies or their principal.

FTC announces $500,000 settlement with payment processor for assisting in fraudulent student loan relief scheme. The FTC announced a stipulated order with a Washington-based payment processor for alleged violations of the Telemarketing Sales Rule (TSR). The FTC alleged that the payment processor knowingly processed approximately $31 million in payments for a student loan debt relief company that was charging illegal upfront fees from borrowers, during which the payment processor ignored multiple red flags including high return rates and multiple company name changes. The order also permanently bans the payment processor from processing any future payments relating to “Debt Relief Services,” including, but not limited to, the student loan-related debts.


California DFPI announces settlement with auto lender for loan marketing and servicing violations. The California DFPI announced a consent order with an auto lender for alleged violations of the California Fair Access to Credit Act’s interest rate cap of approximately 36 percent. The DFPI alleged that the lender was unlawfully partnering with an out-of-state bank in order to circumvent the interest rate cap. The consent order (i) prohibits the lender from marketing or servicing automobile title loans worth less than $10,000 with interest rates greater than 36 percent in the State of California over the next 21 months and (ii) prohibits the lender from making any loans available through a state-chartered bank partner until September 2023, unless there is an intervening change in the law or regulation that would otherwise permit it to do so.


2022 Mortgage Origiantion Outlook


1) The average rate on the popular 30-year fixed loan will rise to 4%, according to the Mortgage Bankers Association’s forecast.

2) Refinance originations will drop 62% in 2022 to $860 billion.

3) However, mortgage originations for the purpose of buying a home are forecast to rise 9% to a record of $1.73 trillion in 2022.

Rising interest rates will result in a sharp drop in refinance demand in 2022, meaning a lot less business for mortgage bankers, according to the Mortgage Bankers Association’s just-released annual forecast. It predicts total origination volume will drop 33% to $2.59 trillion.

The average rate on the popular 30-year fixed loan will rise to 4%, a full percentage point higher than it is now, MBA economists say.

That will result in a 62% drop in refinance originations to just $860 billion. It deepens the anticipated 14% decline in 2021 to $2.26 trillion

“The economy and labor market rebounded in 2021, but overall growth fell short of expectations because of stubborn supply chain issues that fueled faster inflation, slowed consumer spending, and presented challenges in filling the record number of job openings available,” said Michael Fratantoni, chief economist at the MBA. “With inflation elevated and the unemployment rate dropping fast, the Federal Reserve will begin to taper its asset purchases by the end of this year and will raise short-term rates by the end of 2022.”

Originations for the purpose of buying a home, however, are forecast to rise 9% to a record of $1.73 trillion in 2022.

Overall, this will mark a change from the record-high production profits of 2020, when interest rates fell to record lows and homebuyer demand soared due to the coronavirus pandemic. The drop will likely result in increased competition among lenders.

“Many lenders will rely more heavily on their servicing business to achieve financial goals,” said Marina Walsh, vice president of industry analysis at the MBA. “The servicing outlook is more complicated today, with the expiration of many COVID-19-related forbearances and the need to place borrowers into post-forbearance workouts.”

Walsh added that servicing costs may rise as servicers work to meet the needs and requirements of borrowers, investors and regulators.


Updates to Mortgage Debt Collection Rules that YOU NEED TO KNOW

WASHINGTON, D.C. – The Consumer Financial Protection Bureau (CFPB) today announced that two final rules issued under the Fair Debt Collection Practices Act (FDCPA) will take effect as planned, on November 30, 2021. The CFPB issued a proposal in April 2021 that, if finalized, would have extended the effective dates to January 29, 2022. The CFPB has now determined that such an extension is unnecessary. Following this announcement, the CFPB will publish a formal notice in the Federal Register withdrawing the April 2021 proposal.

The CFPB proposed extending the final rules’ effective date by 60 days to allow stakeholders affected by the COVID-19 pandemic additional time to review and implement the rules. The public comments generally did not support an extension. Most industry commenters stated that they would be prepared to comply with the final rules by November 30, 2021. Although consumer advocate commenters generally supported extending the effective date, they did not focus on whether additional time is needed to implement the rules. The alternative basis for an extension that many commenters urged, a reconsideration of the rules, was beyond the scope of the NPRM and could raise concerns under the Administrative Procedure Act. Nothing in this decision precludes the CFPB from reconsidering the debt collection rules at a later date.

Two final rules under the FDCPA will take effect in November. The first rule, issued in October 2020, focuses on debt collection communications and clarifies the FDCPA’s prohibitions on harassment and abuse, false or misleading representations, and unfair practices by debt collectors when collecting consumer debt. The second rule, issued in December 2020, clarifies disclosures debt collectors must provide to consumers at the beginning of collection communications. The second rule also prohibits debt collectors from suing or threatening to sue consumers on time-barred debt. Additionally, the second rule requires debt collectors to take specific steps to disclose the existence of a debt to consumers before reporting information about the debt to a consumer reporting agency.

The CFPB is committed to informing consumers about their rights and protections under the rules and assisting debt collectors in implementing them. Consumer education materials on debt collection and resources to help debt collectors understand, implement, and comply with the rules are available through

The CFPB will consider additional guidance for debt collectors, including those that service mortgage loans, as necessary. The CFPB recognizes that mortgage servicers are expected to receive a potentially historically high number of loss mitigation inquiries in the fall as large numbers of borrowers exit forbearance and that, as a result, mortgage servicers in particular may face capacity constraints. The CFPB will continue to work with all market participants to ensure a smooth and successful implementation.

The Consumer Financial Protection Bureau (CFPB) is a 21st century agency that helps consumer finance markets work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers to take more control over their economic lives. For more information, visit


Mortgage Lenders in Trouble for Shortcutting the Origination Process – Beware !

A former executive at Loan Depot dropped a bombshell on the mortgage industry late Wednesday, alleging in a lawsuit that the California-based nonbank lender, in a ploy to drum up money during the refi boom and in preparation for its initial public offering, closed thousands of loans without proper documentation.

The suit, filed by Tammy Richards, former chief operations officer, accuses loan Depot’s CEO, Anthony Hsieh, of ordering the sales team to “trust [their] borrowers” and close loans, disregarding proper underwriting etiquette. 

Richards claims that this demand was announced during a production meeting in August 2020, where Hsieh allegedly screamed, “I am Mello Clear, and we must immediately close loans regardless of documentation.” Top executives at Loan Depot allegedly didn’t bat an eye at Hsieh’s tactics.

After two months, the same point was made to Ms. Richards, with Hsieh allegedly announcing that the sales team needs to “close all loans…close without credit reports…close without documentation…close all loans.”

Closing loans without documentation violates federal laws, including the Dodd-Frank Act, which requires mortgage originators to follow minimum standards for all mortgage products. The landmark legislation also prohibits lenders from making loans unless they reasonably determine that the borrower can repay based on documentation that proves credit history, and current and expected income.

Officials from the Consumer Financial Protection Bureau, the Federal Housing Finance Agency and Fannie Mae and Freddie Mac did not immediately respond to requests for comment by HousingWire. 

Richards’ suit, filed in California Superior Court in Orange County, claims that her refusal to comply with Hsieh’s demands, specifically with closing loans without credit reports, resulted in her demotion in November.

Richards claims that after her demotion, executives at Loan Depot hatched a strategy dubbed “Project Alpha” in which Hsieh allegedly personally identified over 8,000 loans that were closed without proper documentation. Two-hundred processors were put in charge of closing these loans in exchange for extra bonuses at the end of the year, the lawsuit claims.

Richards accuses the CEO, who founded Loan Depot in 2009, of directing the company’s Chief Credit Officer, Brian Rugg, to refrain from auditing the 8,000 loans.

Richards, who at one point oversaw 4,000 employees, said she was eventually forced out of her job for refusing to break the rules. After a stint on medical leave, she resigned in March 2021.

The lawsuit filed by Richards also includes multiple allegations that male company executives created and enforced a “misogynistic frat house culture” that routinely led to women being harassed and demeaned. 

The nonbank mortgage lender disputed the claims made by Richards, who worked in senior roles at Wells FargoBank of AmericaCaliber Home Loans and Countrywide Financial (one of the bad actors in the subprime loan crisis) before joining Loan Depot. 

“Loan Depot is committed to operating at all times according to ethical, responsible and compliant business practices,” a statement from the company read.

“The claims in the lawsuit, which we take very seriously, were previously thoroughly investigated by independent third parties and found to be without merit,” Loan Depot said, without providing further information about who conducted these investigations and when they occurred. “We intend to defend ourselves vigorously against these outlandish allegations…”

Loan Depot, the nation’s second-largest nonbank retail mortgage lender, went public in February, selling 3.85 million shares at $14 and raising $54 million. The company filed reports that showed its revenues increased from $1.3 billion in 2019 to $4.3 billion in 2020, according to Securities and Exchange Commission filings. The company originated about $100.7 billion in loans in 2020.

Hsieh has been the biggest beneficiary of the IPO – as the largest shareholder, last year he took advantage of a one-time discretionary performance bonus of $42.5 million.

In recent months, the nonbank lender moved to appoint new faces to their board of directors, including Pamela Hughes Patenaude, a former deputy secretary of the U.S. Department of Housing and Urban Development and Mike Linton, marketing expert who currently serves as chief revenue officer at genomics firm Ancestry.

The company was trading at $6.98 late Thursday afternoon, with a valuation of $2.1 billion.


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