HUD Finalizes Changes on FHA-Insured ARMs, Prepayments August 27, 2014
The Department of Housing and Urban Development is finalizing changes in how Federal Housing Administration-insured adjustable-rate mortgages are adjusted and eliminated post-payment interest charges on single-family FHA-insured mortgages. The changes are intended to align the FHA’s lender requirements with Consumer Financial Protection Bureau rules.
The ARM rule requires a 45-day “look-back” period -- that is, the gap between an ARM index calculation and the date the rate adjusts -- up from the current 30-day look-back. It also provides for a 60-120 day notice period prior to ARM adjustments, up from the 25 days FHA currently requires. It takes effect for FHA-insured ARMs originated after Jan. 10, 2015.
The second rule, governing prepayments, would allow lenders to charge interest only through the date a mortgage is paid in any given month. It takes effect on Jan. 21, 2015. In a joint comment letter on the proposal, ABA called for further coordination among the FHA, the CFPB and Ginnie Mae to ensure greater consistency in servicing policy.
Read the ARM Rule here
and read the prepayment rule here.
Fannie Mae Survey: Most Lenders Making Only QM Loans August 15, 2014
Eighty percent of lenders said they are making only Qualified Mortgage loans or waiting to see before entering the non-QM market, according to a Fannie Mae survey released yesterday. On balance, lenders expected to tighten credit standards. Thirty-six percent said the QM rule would induce them to tighten, while only 6 percent said they expected to ease standards.
The CFPB’s mortgage rules are also raising costs, the survey showed. Nearly three-quarters of lenders reported higher operational expenses due to the QM rule, and 85 percent said their spending on quality control has risen in the previous year.
Fannie’s survey results correspond to the results of ABA’s Real Estate Lending Survey this spring, which found that more than 80 percent of bankers expect that CFPB’s mortgage rules to constrict mortgage credit and that 64 percent expected to restrict their mortgage lending to QMs or to non-QM loans in targeted markets only. View Fannie Mae's survey results. View ABA's Survey results.
ABA to Bankers: Urge House to Pass TRIA August 14, 2014
ABA is urging bankers to ask their representatives to pass S. 2244, the bipartisan, Senate-approved Terrorism Risk Insurance Act reauthorization bill. S. 2244 would extend TRIA for seven years while increasing the amount the private sector would be required to cover after a terrorist attack.
The House currently has its own version of the bill, which offers a shorter renewal period with less favorable terms on deductibles, the damage threshold and when the legislation is triggered. ABA’s grassroots alert offers talking points to help bankers persuade their House members to adopt the Senate’s version instead. Bankers are also encouraged to discuss this issue with their representatives during in-person visits for the remainder of the August recess.
Write your members of Congress now and be sure to use the American Bankers Associations talking points they have provided on their website. You can also view congressional recess resources on Amplify.
Crapo Challenges Education Department Rulemaking August 14, 2014
Senate Banking Committee Ranking Member Mike Crapo (R-ID) sent a letter on Tuesday to Secretary Arne Duncan of the Department of Education, criticizing DOE’s proposed rulemaking on student loan disbursement, which ABA has said goes beyond student aid to regulate deposit accounts offered to college students.
Crapo cited several concerns with the rulemaking and noted that “if not addressed, these concerns would result in a rule that creates a backdoor and burdensome regulation on traditional banking products, which ultimately may force financial institutions to exit campus markets leading to diminished student choice, restricted convenience, and more unbanked young people.”
Read the letter Crapo wrote to Duncan.
ABA to Fed: Limit Stress Test Disclosures for Mid-Sized Banks August 13, 2014
In related news, the Federal Reserve should report mid-sized banks’ stress test results in the aggregate, limiting disclosures of individual banks’ results, ABA said Monday. Differing regions and business models of banks in the $10-50 billion asset range could mean that banks perform dramatically differently depending on the Fed’s stress scenarios. “The different stress assumptions applied by one bank could make it look, inaccurately, to be in better or worse condition than its peers,” ABA said.
Instead, the Fed should report an aggregate summary of results for all mid-sized banks, ABA said -- which would meet the Dodd-Frank Act’s requirement for disclosure of “a summary of results.” ABA also asked the Fed to provide a floating submission date to allow banks flexibility in when they allocate internal resources to the stress tests. Read the letter.
Small Business Optimism Up in July August 13, 2014
The National Federation of Independent Business’ Small Business Optimism Index increased 0.7 percent in July to 95.7. Six of the index’s 10 components saw slight improvements, three components fell slightly and one component -- earning trends -- saw no change.
The availability of financing remains the least-cited concern of business owners. Taxes and government regulations led the list of concerns at 22 percent each. Read more at Banks and The Economy.
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