The 2008-10 Great Recession and global financial crisis was caused, at core, by the failure to adhere to well-established lending standards and proper due diligence. Federal policy for the previous dozen years had been focused on making it easier to “get people into homes.” Permissive policies, over time, created incentives for both sub-optimal lending decisions and outright fraud. When this house of cards collapsed, the U.S. economy went with it. 

It was therefore unsettling to see Fannie Mae, in its selling guide announcement, released on April 6, announce that it would be accepting written opinion letters from attorneys in lieu of a title insurance policy “in limited circumstances.” 

Yes, one could reasonably argue that attorney opinion letters will not in and of themselves take down the U.S. housing market, or that the guidance only applies to lender title insurance for properties in “limited circumstances”

Real Clear Policy Article

The Upshot:

• Pursuant to the Dodd-Frank Act, the CFPB receives its funding through requests made by the CFPB Director to the Federal Reserve, rather than through the Congressional appropriations process—an arrangement the Fifth Circuit ruled violates the Constitution.
• Given the enormous potential implications of the ruling in Community Financial Services Association of America, Limited v. Consumer Financial Protection Bureau, we expect the CFPB to seek to overturn the ruling by either petitioning the Fifth Circuit for a rehearing en banc or proceeding directly to the U.S. Supreme Court with a certiorari petition.
• Beyond the CFPB, the decision has potential implications for other federal agencies that are funded outside of the congressional appropriations process. In addition to the Federal Reserve, these include the OCC, FDIC, NCUA, and FHFA.

The Bottom Line:

The ruling has potential impact on all rules and guidance that the CFPB has issued, as well as on any other actions the CFPB has taken based on its Unfair, Deceptive, or Abusive Acts or Practices (UDAAP) or other authority, both ultimately if the decision becomes final in its present form and during the pendency of the rehearing/certiorari petition process. Those actions include existing enforcement orders, particularly ones with ongoing reporting and related requirements.

Ballard Spahr Alert

A first-time homebuyer is an individual who has not held an ownership interest in another property in the three years prior to the case number assignment. An individual who is divorced or legally separated and had no ownership interest in a principal residence, other than a joint ownership interest with a spouse, during the three years prior to the case number assignment is considered a first-time homebuyer. A positive rental history is on time payment by a borrower of all rental payments in the previous 12 months, with rental payments being made in the month in which they were due being considered on time.

Rich Andreano Post

The key allegations in the DOJ’s complaint are the following:

• During the relevant time period (2015-2021), the Newark, New Jersey-Pennsylvania Metro Division (Newark MD) as delineated in 2015 included Essex, Somerset, Union, Sussex, and Morris counties in New Jersey (Newark Lending Area).

• As of 2021, Lakeland’s Community Reinvestment Act (CRA) assessment area included majority-white areas of Essex, Somerset, and Union counties and excluded the portions of those counties that contain majority-Black and Hispanic neighborhoods. None of the majority-Black and Hispanic census tracts in Somerset and Union Counties were included in Lakeland’s assessment area, and only a small fraction of the majority-Black and Hispanic tracts in Essex County were included.

• All of Lakeland’s full-service branches in the Newark Lending Area during the relevant time period were located in majority-white census tracts and none of the loan officers at those branches were assigned to target customers within majority-Black and Hispanic neighborhoods...

Ballard Spahr Article

“The mortgage market has not provided products that allow all households to save money by refinancing at a lower interest rate,” said CFPB Director Rohit Chopra. “We are eager for input on ways that borrowers taking out loans today can refinance to lower rates in the future.”

Mortgage payments are often a household’s single largest expenditure, so the terms of a mortgage greatly impact a household’s financial stability. When interest rates decline, many borrowers benefit from the lower rates by refinancing their loans. For example, researchers at the Federal Reserve Bank of Boston found that total consumer savings from mortgage refinancing from January 2020 to October 2020, during the refinancing boom, was $5.3 billion annually. The typical consumer saved nearly $300 a month ($279) from refinancing during that period. The savings from refinancing a mortgage at a lower rate can translate into increased wealth and equity for borrowers. However, mortgage refinancing can be harder to access for borrowers with smaller loan balances. Black and Hispanic borrowers, who on average have smaller loans, have not participated in recent refinance booms at the same rate as white borrowers.

CFPB Release

The three-quarter percentage point hikes in June, July and September — the most aggressive series of increases since 1994 — underscore just how serious Fed officials are about tackling the inflation crisis after a string of alarming economic reports. Policymakers voted unanimously to approve the latest super-sized hike.

The move puts the key benchmark federal funds rate at a range of 3% to 3.25%, the highest since before the 2008 financial crisis. It marks the fifth consecutive rate increase this year.

In addition to the large rate hike, Fed officials laid out an aggressive path of rate increases for the remainder of the year. New economic projections released after the two-day meeting show policymakers expect interest rates to hit 4.4% by the end of the year, suggesting that another three-quarter percentage point increase is on the table. 

FoxBusiness Article

Fed Statement

Dinner at the historic Mayflower Hotel in Washington, D.C.

As guests gathered in our nation’s capital, RISMedia and CEO & Leadership Exchange attendees cheered on honorees and applauded the new group of Hall of Famers. The 2022 Real Estate Newsmakers class included the following categories: Achievers, Crusaders, Futurists, Influencers, Luminaries, Motivators, Trailblazers and Trendsetters, as well as our 10 exemplary Hall of Fame inductees

RISMedia Release

RESPRO® President and Executive Director, Ken Trepeta addressed the RisMedia CEO and Leadership Exchange at the Mayflower Hotel in Washington D.C. yesterday.  Trepeta has addressed the group in the past including just prior to the 2016 election where he spoke of the real chance of a Trump victory.  

This year, Trepeta focused on House and Senate races in the midterm elections. He noted that early voting was beginning in Pennsylvania on September 19 and in several other key states in early to mid-October. Trepeta noted the likelihood Republicans would retake the House was still strong despite losing a couple of special elections in New York and Alaska. Democrats have a stronger position in the Senate with much friendlier ground. The Senate is key because it is the gatekeeper on federal appointments, including judicial appointments. The 6-3 moderate/conservative majority on the Supreme is the result of Republican control of the Senate at the end of President Obama's term and throughout President Trump's term.