MBA’s Stevens Departs to Head SunTrust Mortgage

MBA’s Stevens Departs to Head SunTrust Mortgage

By Donna Borak and Jeff Horwitz

MAY 30, 2012 11:38am ET

WASHINGTON – David Stevens, the president and chief executive officer of the Mortgage Bankers Association, will leave the trade group at the end of the month to become president of SunTrust Mortgage.

Stevens, 55, was at the helm of the MBA for a just a little over a year after leaving his position as assistant secretary for housing and commissioner of the Federal Housing Administration at the U.S. Department of Housing and Urban Development.

“Although we are sorry to see him leave so soon, he leaves us well-positioned for the future,” said Michael Young, MBA’s chairman, in a press release. “Dave delivered on his pledge to enhance MBA’s position as the industry’s leading voice.”

Marcia Davies, Stevens chief of staff at the MBA and his former deputy at HUD for industry relations, will serve as interim head of the association. A search for a permanent replacement is already underway.

Stevens arrived at the MBA last May at a point when the organization was struggling to fill a credibility gap. As a former booster for many of the excesses of the housing boom, the organization’s public policy positions faced great skepticism. In perhaps the most notorious incident, the MBA entered into a short sale and renegotiated its debt on its Washington D.C. headquarters even as Stevens’ predecessor, John Courson, argued that borrowers had a moral responsibility to pay their debts.

The MBA shifted course by bringing in Stevens, then an Obama administration appointee who had spent two years working to prevent the Federal Housing Administration’s reserves from being overwhelmed by losses.

When a series in American Banker examined emails suggesting Stevens and his deputies had maintained cozy ties with the industry while at HUD, Stevens said it his was job to mediate between mortgage lenders and Washington, describing his work at the MBA as an extension of his public service.

“Everybody was surprised that I didn’t go back to the industry,” he said then. “This was a chance to help. I thought there needed to be a voice of reason with integrity and responsibility on the mortgage bankers’ side.”

During his year-long tenure, Stevens repositioned the MBA to focus on shaping a slew of new consumer protection rules and regulations intended to reduce risky lending. He framed many of the MBA’s concerns as housing access issues.

“[P]resent proposals go too far,” he announced of risk retention rules in a speech this January. “We cannot allow disparities in homeownership. We must eliminate hardwired down payment and debt-to-income requirements.”

At SunTrust, Stevens will assume responsibility for the day-to-day operations of the business, including sales, production, fulfillment, and mortgage capital markets beginning July 16. He will report to Jerome Lienhard, CEO of the bank’s home lending unit.

He will be based in Washington, D.C. and keep offices in both Washington and Richmond, Va., where SunTrust Mortgage has a large corporate presence.

Small Biz ‘Fairness’ Law Revolutionizing Consumer Regulatory Landscape

Small Biz ‘Fairness’ Law Revolutionizing Consumer Regulatory Landscape

By Kate Davidson

MAY 25, 2012 12:38pm ET

WASHINGTON – A statute long relegated to the environmental regulatory landscape is transforming the way consumer financial regulations are implemented.

For years, the Small Business Regulatory Enforcement Fairness Act had applied only to the Environmental Protection Agency and, more recently, to the Occupational Safety and Health Administration, or OSHA.

The Dodd-Frank Act extended the law to the Consumer Financial Protection Bureau, requiring for the first time that a financial regulator meet with small institutions before proposing any rule that would significantly impact them.

“It’s a revolutionary way, certainly in this space, for regulations to be developed,” said Richard Eckman, a consumer financial lawyer with the law firm Pepper Hamilton. “The main attraction and the reason SBREFA is special is it gives the small business a unique opportunity to interact with an agency at an early stage of its thinking and help shape the rule.”

“So by the time it’s proposed, it already has embedded in it the best input the agency can get in how to tailor the rule to minimize the impact on small business.”

Still, the process remains a bit of a mystery to many in the financial industry who are waiting to see the extent to which SBREFA influences the fledgling agency’s rules. Some industry observers have raised concerns that CFPB is rushing the process to meet deadlines, while consumer advocates say the bureau’s critics are trying to drag out the implementation of important rules.

“It’s fairly clear that the financial interests behind these complaints don’t support CFPB’s efforts to put strong consumer protection rules on the books,” said Travis Plunkett, legislative director for the Consumer Federation of America. “So in a situation like that, the goal is delay, delay, delay.”

Under the SBREFA statute, CFPB must convene a panel with representatives from the Small Business Administration’s chief counsel for advocacy and the Office of Management and Budget’s Office of Information and Regulatory Affairs when it believes a rule will have a significant impact on small businesses.

The three agencies select about 15 to 20 small businesses – mostly banks and financial services providers – representing the industries that might be impacted. The bureau provides an outline of the proposal it is considering, and a list of questions it is specifically interested in addressing with the participants.

The group is invited to meet with the panel in Washington, and each is allowed to bring a lawyer or advocate from a trade association, although that person is not allowed to speak during the meeting.

The agency has held three such meetings – lasting about eight hours each – with three different groups of small businesses: one on a proposal to merge the disclosures under the Truth in Lending Act and Real Estate Settlement Procedures Act, one on mortgage servicing rules, and one on mortgage loan originator compensation.

So far, the feedback has been largely positive.

“I think overall it went very well,” said Randy McElwee of the $183 million-asset Security Savings Bank in Monmonth, Ill. “I was impressed with the high level of attendees from the CFPB, all the way up to [CFPB Director] Richard Cordray being there in the morning.”

“I felt that there was a good effort on their part to show that they truly were interested in listening and learning to allow them to make better decisions about where they go from here.”

The meetings are conducted largely in question-and-answer format, with questions hewing closely to the topics outlined in the advance materials.

After each meeting, the panel – including representatives from CFPB, SBA and OMB – has 60 days to prepare a report outlining the feedback it received. During that time, participants also have seven to 10 days to submit additional written comments.

The report, which is published as part of the formal proposed rule, will also explain the panel’s findings and recommendations for tailoring the rule to minimize the impact on small businesses.

Both sides are anxious to see the extent to which the agency incorporates the small business feedback into its final proposal.

“People can judge by the reports, and I think what they will find is that the reports reflect a great degree of diligence on the panel’s part . to get as much feedback as we reasonably can,” Dan Sokolov, CFPB’s deputy associate director for research, markets and regulation, said in an interview last week. “And people can also judge – and I think they will judge favorably, but we’ll see – that we are responsive to those reports and the recommendations in them, and the feedback that they contain.”

Sokolov said the bureau can’t promise to include every recommendation from the panel, but “you will see us often following those recommendations.”

In some ways, the process is remarkably open, said Richard Riese, a senior vice president at the American Bankers Association and head of the ABA’s Center for Regulatory Compliance. The bureau has provided details aplenty about the rules it is considering, and to a greater extent than EPA or OSHA has previously done.

But in other ways the agency is more guarded, for example, only notifying the small business participants a few weeks before the panel meets, Riese said.

Ron Haynie, executive vice president of mortgage services for the Independent Community Bankers of America, said the preparation required in such a short amount of time makes it difficult for some small entities to participate, even if they wanted to.

“When people can participate by teleconference, it’s not the same because the dynamic that’s there when people are in the room just makes it a better experience for everyone.”

Riese noted that the agency also keeps the names of participants private, even from each other and from the trade groups that recommended them.

“It makes it difficult to have much of an interactive process because you meet once and that appears to be it,” he said. “It’s certainly not the kind of interactive approach that has characterized the use of the SBREFA process in the EPA rulemaking situation, where there tends to be a longer ramp up ahead of the panel meeting.”

Indeed, the bureau is forging its own path when it comes to complying with the statute, said Jane Luxton, Eckman’s partner at Pepper Hamilton and an environmental lawyer who has studied the SBREFA process since it began in 1996.

Luxton said a typical EPA panel will prepare for anywhere from two to eight months before meeting with small business representatives, and its guidelines call for creating a dialogue with participants before the panel meets.

The EPA also puts out its initial thinking on a proposal, gets feedback from the participants, meets with the SBA and OMB, then sends out a second document to be discussed at the meeting.

“All of those earlier steps were skipped in the CFPB process, so they’re really only giving them one bite at the apple for materials that only were prepared by CFPB,” Luxton said. “So that too is another way this is all being rushed.”

Complaints that the process is rushed don’t come as any surprise to consumer advocates.

When lawmakers first proposed an amendment to add the bureau to SBREFA, the industry openly referred to it as the “speed bump amendment,” intended to slow down the rulemaking process.

Plunkett said the bureau’s supporters view the statute as an unnecessary impediment to consumer protection – Dodd-Frank already requires the agency to carefully consider the impact of pending regulations – that would delay the rulemaking process by up to nine months.

“It would give the financial services industry even more time than they already have to kill strong regulatory proposals,” Plunkett said.

Sokolov said much of the timing depends on the statutory requirements the bureau faces in implementing several important rules. The TILA/RESPA proposal must be finalized by July 21, while a handful of other proposals are scheduled to take effect in January.

If the bureau were to delay the formal rulemaking process, its goal of providing guidance before a statute takes effect would be put in jeopardy, Sokolov said.

“What we’re providing is as much time as we can for this pre-proposal input for small financial services providers panel, consistent with meting that goal,” he said. “It’s important to remember that after we issue the proposal, there’s a whole other round of input . through formal comments on the record.”

He also said the bureau intends to review the SBREFA process and consider possible changes after it tackles the slew of mortgage-related rules set to take effect next year.

In the meantime, the bureau will make small adjustments as it goes.

“As an agency we have a culture of doing lessons learned, looking back and seeing how we can do better,” he said. “That’s kind of wired into us.”

Boomers and Refis A Warning

To Boomers and Refis: A Warning

By Ken Harney 5/25/2012 6:36 PM

WASHINGTON – It’s a mortgage problem that is likely to intensify as homeowning baby boomers by the millions shift into retirement: Though they may have significant financial assets tucked away in retirement accounts, their diminished monthly incomes may not be sufficient to meet some lenders’ hyper-strict underwriting rules.

Jim Eberle of McLean, Va., found this out the hard way when he applied to refinance his mortgage. After spending much of his career working for banking industry trade associations in Washington, Eberle, 68, decided to take advantage of this spring’s unprecedented low interest rates with a 2.89 percent adjustable-rate 30-year loan offered by a large Midwestern bank.

To his utter shock, Eberle was rejected – the first time in 45 years of homeownership and eight different home loans. The reason for the turndown: insufficient income. “To get rejected was incredible,” Eberle said in an interview, because based on the extensive documentation he provided the bank, he looked highly qualified. He had substantial checking, savings and 401(k) holdings and a net worth he describes as “in seven figures.” The appraisal the bank did on his house showed it to be worth $664,700 – more than double the $322,000 refi he was seeking. His credit score, according to TransUnion, was 826, indicating minimal risk of default.

Yet the bank “told me it could not make the loan because, even though I have sufficient (liquid) assets and a high credit score,” his monthly Social Security payments, bank deposits, checking accounts and 401(k) plan “were not enough.”

How commonplace is Eberle’s experience? Conversations with mortgage lenders and analysts suggest it is happening more frequently, thanks to some large banks ratcheting up their underwriting standards so tightly that the old joke – they’ll only lend to people who don’t really need the money – is beginning to resemble reality for some borrowers.

Eberle says he was willing to pull out funds from his checking and banking deposits and set them aside to make up any perceived monthly income shortfalls. “I was willing to do whatever it took,” he said. But the bank still said no.

Mortgage market experts, such as Dennis C. Smith, co-owner of Stratis Financial in Huntington Beach, Calif., are not surprised at Eberle’s experience. Smith had a recent client – a physician seeking a $350,000 loan with $2.5 million in bank accounts – who was rejected by one lender because the deposits, which were proceeds from an inheritance, had been in his account for just eight months. This was too short a time period to satisfy the bank’s pristine and unyielding standard.

Part of the problem here, according to Smith, appears to be overcorrections by some banks to the lax underwriting that characterized the years leading up to the housing bust – especially see-no-evil practices such as “stated income,” where the loan officer accepted the monthly income number provided by the applicant with no verification. But another factor, says Bruce Calabrese, president and co-founder of Equitable Mortgage in Columbus, Ohio, is that some loan officers aren’t aware of techniques available for qualifying retirees who are asset-rich but income-deficient.

For example, Calabrese’s firm employs “annuitization” procedures acceptable to Fannie Mae to help borrowers over 59 1/2 qualify on income tests using their IRA and other retirement account balances. “We take 70 percent of the total value of the funds and then spread them out over 360 months if the loan is a 30-year fixed and 180 months if the loan is a 15-year fixed. We also gross up their Social Security by 1.25 percent. So if they get $1,000 per month in Social Security income, we give them credit for $1,250 as long as they don’t have to pay income tax” on that income.

Jeff Lipes, vice president of Rockville Bank outside Hartford, Conn., uses similar income-qualification procedures sanctioned by Freddie Mac. Say you’re a senior with $1 million in a brokerage account. To help qualify you for a refi, Lipes would “discount the value by 30 percent to $700,000 and use a conservative rate of return – say 2 percent – and that would give the person (an extra) $14,000 a year in income.”

Some of the computations can get complex, but the message here is clear: Just because a homeowner’s post-retirement income is below what it used to be, this doesn’t mean he or she can’t refinance, get a new mortgage or buy a house, provided they have sufficient retirement assets. You just need to shop around and deal with experienced loan officers who know the ropes and are willing to work with you for your business.

a warning

To Boomers and Refis: A Warning

By Ken Harney 5/25/2012 6:36 PM

WASHINGTON – It’s a mortgage problem that is likely to intensify as homeowning baby boomers by the millions shift into retirement: Though they may have significant financial assets tucked away in retirement accounts, their diminished monthly incomes may not be sufficient to meet some lenders’ hyper-strict underwriting rules.

Jim Eberle of McLean, Va., found this out the hard way when he applied to refinance his mortgage. After spending much of his career working for banking industry trade associations in Washington, Eberle, 68, decided to take advantage of this spring’s unprecedented low interest rates with a 2.89 percent adjustable-rate 30-year loan offered by a large Midwestern bank.

To his utter shock, Eberle was rejected – the first time in 45 years of homeownership and eight different home loans. The reason for the turndown: insufficient income. “To get rejected was incredible,” Eberle said in an interview, because based on the extensive documentation he provided the bank, he looked highly qualified. He had substantial checking, savings and 401(k) holdings and a net worth he describes as “in seven figures.” The appraisal the bank did on his house showed it to be worth $664,700 – more than double the $322,000 refi he was seeking. His credit score, according to TransUnion, was 826, indicating minimal risk of default.

Yet the bank “told me it could not make the loan because, even though I have sufficient (liquid) assets and a high credit score,” his monthly Social Security payments, bank deposits, checking accounts and 401(k) plan “were not enough.”

How commonplace is Eberle’s experience? Conversations with mortgage lenders and analysts suggest it is happening more frequently, thanks to some large banks ratcheting up their underwriting standards so tightly that the old joke – they’ll only lend to people who don’t really need the money – is beginning to resemble reality for some borrowers.

Eberle says he was willing to pull out funds from his checking and banking deposits and set them aside to make up any perceived monthly income shortfalls. “I was willing to do whatever it took,” he said. But the bank still said no.

Mortgage market experts, such as Dennis C. Smith, co-owner of Stratis Financial in Huntington Beach, Calif., are not surprised at Eberle’s experience. Smith had a recent client – a physician seeking a $350,000 loan with $2.5 million in bank accounts – who was rejected by one lender because the deposits, which were proceeds from an inheritance, had been in his account for just eight months. This was too short a time period to satisfy the bank’s pristine and unyielding standard.

Part of the problem here, according to Smith, appears to be overcorrections by some banks to the lax underwriting that characterized the years leading up to the housing bust – especially see-no-evil practices such as “stated income,” where the loan officer accepted the monthly income number provided by the applicant with no verification. But another factor, says Bruce Calabrese, president and co-founder of Equitable Mortgage in Columbus, Ohio, is that some loan officers aren’t aware of techniques available for qualifying retirees who are asset-rich but income-deficient.

For example, Calabrese’s firm employs “annuitization” procedures acceptable to Fannie Mae to help borrowers over 59 1/2 qualify on income tests using their IRA and other retirement account balances. “We take 70 percent of the total value of the funds and then spread them out over 360 months if the loan is a 30-year fixed and 180 months if the loan is a 15-year fixed. We also gross up their Social Security by 1.25 percent. So if they get $1,000 per month in Social Security income, we give them credit for $1,250 as long as they don’t have to pay income tax” on that income.

Jeff Lipes, vice president of Rockville Bank outside Hartford, Conn., uses similar income-qualification procedures sanctioned by Freddie Mac. Say you’re a senior with $1 million in a brokerage account. To help qualify you for a refi, Lipes would “discount the value by 30 percent to $700,000 and use a conservative rate of return – say 2 percent – and that would give the person (an extra) $14,000 a year in income.”

Some of the computations can get complex, but the message here is clear: Just because a homeowner’s post-retirement income is below what it used to be, this doesn’t mean he or she can’t refinance, get a new mortgage or buy a house, provided they have sufficient retirement assets. You just need to shop around and deal with experienced loan officers who know the ropes and are willing to work with you for your business.

Senate Hearing Points Path to Bipartisan Compromise on Refi Bill

Senate Hearing Points Path to Bipartisan Compromise on Refi Bill

By Kevin Wack MAY 24, 2012 5:15pm ET

WASHINGTON – Key senators signaled guarded optimism Thursday about the chances of finding a bipartisan compromise on mortgage refinancing legislation, though the bill still faces an uphill fight in the House.

At a Senate Banking Committee hearing, GOP Sen. Bob Corker outlined four changes he is seeking to a bill sponsored by Democratic Sen. Robert Menendez.

Minutes later, Corker sounded a positive note about a conversation that he and Menendez had Thursday about the proposed changes. “I think there is a desire to look at some of the things that we’ve brought forth,” Corker told American Banker, “so we’ll just have to see.”

Menendez, also speaking after the hearing, said: “We’re certainly open to consider reasonable requests as long as we get to the ultimate goal. Time is of the essence if we’re going to actually get 3 million or more homeowners the opportunity to refinance.”

Corker’s stamp of approval would allow the bill to pass the Banking Committee with bipartisan support. That would help the measure garner the 60 votes – including the votes of at least seven Republicans – that are routinely necessary to pass legislation in the Senate.

During Thursday’s hearing, Corker laid out his requested changes in a series of questions to witnesses who were testifying about the bill. The legislation, which is being co-sponsored by Democratic Sen. Barbara Boxer, would make refinancing easier for millions of homeowners with Fannie Mae and Freddie Mac mortgages.

Corker, R-Tenn., suggested that he wants a change to prevent homeowners from refinancing under its terms more than once. He would also like to retain the ability of Fannie and Freddie to put back refinanced mortgages to their originators.

In addition, Corker would change the bill’s provisions on data collection. And lastly, while the bill currently states that homeowners must have a mortgage originated prior to June 2010 in order to qualify, Corker would push that date back to June 2009.

Democrats on the Banking Committee have not ruled out the possibility of bypassing a committee vote and taking the Menendez-Boxer bill directly to a vote on the Senate floor. Republicans, on the other hand, have been pushing for a committee vote.

“I think the Senate hasn’t been functioning properly because we’ve been airdropping things in,” Corker said during the hearing, “and yet I notice when we pass things out of committee in a bipartisan way they actually seem to happen. ”

Menendez, D-N.J., estimated that his bill will help roughly 3 million homeowners who are current on their mortgages by expanding access to the Obama administration’s flagship refinancing program. That program – the Home Affordable Refinancing Program, or Harp – was already expanded once after its initial terms yielded disappointing results.

The Menendez-Boxer legislation aims to increase competition between lenders by removing some of the requirements that apply to new originators, but do not apply to existing ones. It would also allow homeowners who have more than 20% equity in their homes to qualify for the program, now known as Harp 2.0.

“Any homeowner with a Fannie or Freddie loan should be able to get a pre-approved package in the mail from the lender, sign on the bottom line and be automatically put into a refinance loan that saves them hundreds of dollars a month,” Menendez said at Thursday’s hearing.

“No more lending bureaucracy, no more red tape. It should be simple for any homeowner to do this.”

Testifying on behalf of the bill Thursday were Moe Veissi, president of the National Association of Realtors, and Bill Emerson, the chief executive officer of Quicken Loans.

Emerson argued that the terms of Harp 2.0 put lenders like Quicken Loans at a disadvantage to the largest banks.

“Notwithstanding the good intentions of the large servicers, they will simply not be able to help enough HARP 2.0-eligible borrowers,” Emerson said. “They simply can’t wrap up their platforms and hire and train people fast enough to help the millions of homeowners.”

“Because HARP 2.0 is being utilized by a small number of firms, the demand for HARP 2.0 originations is dramatically exceeding the supply of firms who fully offer the program,” he added.

Many of the legislation’s proposals for expanding Harp could be enacted unilaterally by the Federal Housing Finance Agency. But in a statement Thursday, the FHFA suggested that it is not likely to enact the changes on its own, and the agency also expressed opposition to Congress imposing the changes through legislation.

“HARP 2.0 has been fully available only since mid-March, and the early results are dramatic,” a spokeswoman for the agency said in a written statement. “HARP refinances have almost doubled since HARP 2.0 was rolled out in January, jumping from approximately 93,000 loans in the fourth quarter of 2011 to approximately 180,000 in the first quarter of 2012.”

“The initial results on the enhanced HARP program show that it is working,” the spokeswoman added, “and new legislation at this time would slow down that progress.”

In order for legislation to pass Congress, analysts see a bipartisan compromise in the Senate as a necessary step before an uphill fight in the Republican-led House.

“A compromise would ensure the bill gets out of the Senate,” Jaret Seiberg of Guggenheim Securities’ Washington Research Group wrote in a research note Thursday.

Brian Gardner of Keefe Bruyette & Woods, Inc., predicted that the legislation has about a 25% chance of passage.

“Even if the Menendez bill passes the Senate, we see very little chance that the House will take up the bill,” he wrote in a research note.