Posts Tagged ‘ldquo’

Just in case you've missed any of these developments or just needed a refresher, here is the latest on originator compensation reform.

On Friday, April 1st, the US Court of Appeals granted a stay on Fed's LO Compensation rule. This delayed the implementation of the rule until the Court was given time to hear additional responses from the Fed and NAMB/NAIHP. Here is an excerpt from the court order:

"Upon consideration of the emergency motion for expedited relief and the emergency motion to stay implementation of final rule pending appeal, it is ORDERED that the implementation of the rule under review in these consolidated cases, 12 C.F.R. § 226.36(a), (d), and (e), be stayed pending further order of the court. The purpose of this administrative stay is to give the court sufficient opportunity to consider the merits of the motions for emergency relief and should not be construed in any way as a ruling on the merits of those motions. See D.C. Circuit Handbook of Practice and Internal Procedures 32 (2010).  It is FURTHER ORDERED, on the court’s own motion, that the government file a combined response to both motions by 12:00 noon, Monday, April 4, 2011, not to exceed 20 pages. Appellants may file a joint reply to the government’s response by 10:00 a.m., Tuesday, April 5, 2011, not to exceed 10 pages. The parties are directed to hand-deliver the paper copies of their submissions to the court by the time and date due."

The Fed offered their response on April 4th. Here are a few excerpts from the Fed's appeal...

"The Board promulgated the Rule under authority granted in section 129(l)(2) of TILA, 15 U.S.C. § 1639(l)(2), to “prohibit acts or practices in connection with mortgage loans that the Board finds to be unfair, deceptive, or designed to evade the provisions” of section 1639. 75 Fed. Reg. at 58513. Appellants err in arguing that section 1639(l)(2) does not authorize the Rule. Their claims that the subsection relates only to high-cost loans defined in 15 U.S.C. § 1602(aa), and permits regulation only of “creditors” and only by disclosures, not substantive limitations, are inconsistent with both the plain statutory language and with the Board’s interpretation of TILA.

Section 1639 was added to TILA as part of the Home Ownership and Equity Protection Act of 1994, Pub. L. 90-321, 108 Stat. 2191 (“HOEPA”).In addition to authorizing the Board to prohibit unfair or deceptive practices in connection with mortgage transactions, section 1639 required special disclosures and limitations on the terms of certain high-cost mortgage loans. The statutory provision is carefully drafted: in each of the substantive provisions requiring specific disclosures or prohibiting substantive terms, the statute refers explicitly to “a mortgage referred to in section 1602(aa) of this title [defining high-cost loans].” See 15 U.S.C. § 1639(a), (c)-(i). Subsection 1639(l)(2) is distinctly different. It authorizes the Board to prohibit, by regulation or order, “acts or practices in connection with – (A) mortgage loans that the Board finds to be unfair [or] deceptive ….” Nothing in the language of the subsection refers to “a mortgage referred to in section 1602(aa)” or limits the Board’s authority to creditors or to disclosure. The general purposes or structure of TILA or HOEPA as a whole cannot override the express exclusion in subsection 1639(l)(2) of the limits appellants seek to impose. Thus, there is no reason even to go to the second step of the Chevron analysis because the “the intent of Congress is clear, [so] that is the end of the matter.” Chevron USA, Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 842 (1984).4 Moreover, to whatever extent the language of section 1639(l)(2) could be said to be ambiguous, the Board’s interpretation, as expressed in the preamble to the Rule, 75 Fed. Reg. at 58513, is entitled to reference from this Court. Ford Motor Credit v. Milhollin, 444 U.S. 555, 565 (1980) (“deference is especially appropriate in the process of interpreting the Truth in Lending Act …. Unless demonstrably irrational, Federal Reserve Board staff opinions construing the Act or Regulation should be dispositive”). Appellants thus have failed to show a likelihood of success on this argument.

AND....

"A plaintiff must show that his injury is “certain, great and actual” – not “theoretical” – and “of such imminence that there is a ‘clear and present need’” for extraordinary equitable relief to prevent harm." ....... "It must be noted at the outset that appellant NAIHP failed, in the district court, to show irreparable harm stemming from the Rule as a whole."

AND...

"It is certainly the case that the public interest favors allowing the Rule to take effect to put a stop to practices that the Board has found to be “unfair.” As the Board found, the current system causes “consumers [to] suffer substantial injury by incurring greater costs for mortgage credit than they would otherwise be required to pay.” 75 Fed. Reg. at 58515. Each day that the Rule’s effective date is postponed is another day consumers will suffer this harm, and their injury, too, is irreparable."

NAMB/NAIHP filed their response to the Fed's appeal today. Here are a few excerpts....

The Board Lacks Requisite Authority Under HOEPA: The Board claims that reference to ancillary rulemaking authority contained at the end of Section 151 subsection (d) (creating Section 129, 15 U.S.C. § 1639) contains no limit on the Board.s authority to constrain any ..acts or practices in connection with . (A) mortgage loans that the Board finds to be unfair [or] deceptive... Board Br. at 7-8. In attempting to manufacture this rulemaking authority, the Board asks this Court to ignore general purpose and structure of HOEPA and TILA and to reach an interpretation that would grant the Board nearly limitless authority to regulate the entire real estate industry, both creditors and non-creditors, as well as any aspect of any industry where a federally-related mortgage loan is involved

AND...

The Board supported its rule by stating that .[y]ield spread premiums present a significant risk of economic injury to consumers.. 75 Fed. Reg. at 58,515. However, as the Board itself stated, the creditor generally controls the yield spread premium funds.. Board's Br. at 6 (emphasis added). As NAIHP's motion already explained (at 9-13), the Board'ss decision to regulate mortgage brokers, while effectively exempting creditors that control 90% of the mortgage origination market was arbitrary and capricious. The district court and the Board also concede that NAIHP and NAMB members provide consumers with disclosures that make clear that they are independent contractors, are not the consumers agents, and .cannot guarantee the lowest price or best terms available in the market.

AND...

The Board Failed To Meaningfully Conduct the Regulatory Flexibility Act Analysis: With respect to the Section of the Rule challenged by NAMB, the Board cannot escape its responsibilities under the RFA by referring to the Challenged Section of the Rule as an .insignificant consequence. and the Board.s failure to meaningfully examine the effect, as well as any alternatives to the Challenged Section of the Rule is fatal to the Board.s claim that they complied with the RFA.  Board Br. at 16. The Board's insignificant consequence characterization is contradicted by the real, catastrophic, and irreparable harm that the Challenged Section of the Rule has been found to cause NAMB.s members, as well as the Board's own admission which acknowledges that entirely new business models would result.

With both the Fed's appeal and NAMB/NAIHP's response in the hands of the Court, we are now stuck in a waiting game. The Court has five days to announce new orders, until then,  originator compensation reform is still delayed.   It is MND's opinion that originator compensation reform should be delayed at least until the Consumer Financial Protection Bureau is fully up and running in July.

Here are the latest updates from NAMB...

April 5, 2011 3:38pm

April 5, 2011 12:06pm

 

...(read more)

After a steady rally pushed the stock market up more than 2% yesterday, investors are nervous about extending those gains today. Concerns from Europe are back on the table as Spain may apparently need to tap into a credit facility to avoid turmoil. The Financial Times called the country “the next potential crisis in the eurozone bond markets.” “This week the Spanish government and BBVA, Spain’s second biggest bank, admitted what investors have known for weeks: the country’s banks are on the brink of a funding crisis because their access to international markets is virtually closed,” the UK newspaper reported. Economists at BMO noted that “Spanish 10-year yields are at a near two-year high, while the spread vs. German bunds is flirting with a record...(read more)

Equity futures are sharply lower this morning ahead of several key data points for the U.S. “The whiff of uncertainty is still in the air on this Friday morning, ahead of a handful of U.S. economic data,” said economists at BMO. “Indeed, with the slew of data from Europe and China now out of the way this week, the focus returns squarely on North America and, in particular, the U.S.” Ninety minutes before the opening bell, Dow futures are off 64 points to 10,709 and S&P 500 futures are down 11.50 points to 1,145.25. The 2 year Treasury note is 2.5 basis points lower at 0.81% and the benchmark 10 year Treasury note is 3.6 basis points lower at 3.502%. The Fannie Mae 4.5 MBS coupon is +0-04 at 101-11. Meantime, the euro fell to as low as $1.2433USD overnight, its worst...(read more)

The global stock market is relatively benign this morning, and domestic stocks look to open firmer, after Euro zone Q1 GDP rose 0.2% in the quarter, slightly faster than expected and following the prior quarter's flat reading. Annual GDP was up 0.5%, in line with forecasts, and following a 2.2% pullback in Q4. “Debt concerns were allayed somewhat by news of better-than-expected Q1 GDP growth in the Euro area and by Spain’s announcement to slash public sector spending and wages,” said economists from BMO in a morning note. “Even the wobbly Chinese stock market had a rare up day.” An hour before the opening bell, Dow futures are up 44 points to 10,753 and S&P 500 futures are up 5.10 points to 1,157.30. Light crude oil is up 0.20% to $76.52, and Spot Gold...(read more)

After an insane day in the stock market yesterday, which saw the Dow fall by nearly 1,000 points, or 9.2%, before rebounding and closing with a loss of 3.20% ― all because of a trader’s typing error, perhaps? ― stock futures are on their way to stabilizing. “It is not clear exactly what sparked the 10 minutes of utter chaos in the markets yesterday afternoon, but the underlining story is undoubtedly fear that the Greek nightmare will spread to the much bigger economies of Spain and Italy, driving the Euro Zone into a deep new recession and wreaking havoc in the banking system,” said Ian Shepherdson of High Frequency Economics.” “Financial contagion, round two, is the fear, but the twist in the tale is that the debt risk is sovereign rather than private, and it...(read more)

Equity futures are modestly higher this morning as investors anticipate the latest developments from Greece as well as three key domestic data releases. “Optimism that a new bailout for Greece is near is providing a modest boost to equity markets and weighing on the US$ index,” said economists from BMO Capital Markets. “The package is rumored to include a further €24 billion in austerity measures (about 10% of Greek GDP).” Key Events Today: 8:30 ― The National Bureau of Economic Research refused to say recently whether the economy had exited the recession, but it should be broadly agreed upon once GDP advances for the third straight quarter, as it is expected to do in this report. First-quarter growth is anticipated to rise 3.4% following the 5.6% gain in the fourth...(read more)

US equities have been rising for the past six trading days, but even though first-quarter earnings continue to roll in with positive results, the futures market is looking soft as the week comes to an end. “Earnings at GE, the bellwether of the U.S. economy, beat expectations in the latest quarter,” noted economists from BMO. “BoA also exceeded estimates, hitting the high bar set earlier this week by JPM and Wells Fargo.” Even so, Dow futures are down 15 points to 11,081 and S&P 500 futures are off 2.25 points to 1,206.25. The 2 year Treasury note is +0-01 at 100-00 yielding 0.996% and the 10 year Treasury note is +0-05 at 98-14 yielding 3.817%. Meantime, NYMEX crude oil is down 77 cents to $84.74, and Spot Gold is trading $3.85 lower at $1,155.40. Key data on housing...(read more)

Speculation that China may have to tighten its economic policy is pulling investor sentiment lower this morning. Amid positive data on industrial production and retail sales, Chinese CPI climbed 2.7% in February, indicating that the central bank may have to take a more serious approach to slow down spending. “China is aiming for 3% inflation for all of 2010,” said Benjamin Reitzes from BMO. “Continued acceleration would make that target tough to hit and markets are concerned that this latest jump in inflation could cause Chinese officials to tighten policy further.” Reitzes called the CPI figure “somewhat troubling,” adding that it’s too early to a definitive statement that prices are about to take off. “However, with the economic numbers showing...(read more)

Equity futures are firmly higher this morning ahead of February employment numbers. Payrolls are expected to continue declining but investors are reacting positively to news that the Bank of Japan could initiate measures to protect the economy from deflation. Overseas markets have been positive across the board, including a 2.20% gain in Japan, a 1.03% gain in Hong Kong, and gains of around 1% in Europe. “The Nikkei posted its strongest week of the year as the yen weakened amid speculation that the BoJ will undertake further easing,” noted analysts from BMO. “Meantime, a successful 10-year bond sale by Greece (which raised €5 bln), and stronger-than-expected factory data, are giving Europe a lift, though the euro is little changed.” Two hours before the opening...(read more)

Since Monday the benchmark S&P 500 has tumbled 0.56% but with fresh data on housing, growth, manufacturing, and consumer sentiment all before Noon, the trend could reverse course quickly. 90 minutes before the open, Dow futures are down 4 points to 10,312 and S&P 500 futures are trading 0.20 points higher at 1,102.50. In recent FedSpeak, St. Louis Fed president James Bullard said inflation is a medium-term risk that will be watched closely. He said rising expectations would be “a major concern” to the recovery which is otherwise “not completely established” but “reasonably good.” Meantime, Fed Governor Elizabeth Duke called lending conditions “strained,” adding that a full recovery in the banking system will take time. Key Events Today...(read more)