June 27th, 2014

San Diego Legal Issues and Regulatory Conference Highlights

MQMR is committed to process improvement and educating clientele.  MQMR recognizes there are opportunities to acquire knowledge and expertise from industry leaders that may not be easily accessible to our industry partners. As such, MQMR has created a high-level summary, which is the sole opinion of MQMR, of topics and information learned during the Legal Issues and Regulatory Conference for your perusal.


From May 4th to May 7th MQMR traveled to San Diego, California to participate in the Mortgage Banking Association’s Mortgage Legal issues and Regulatory Conference. At the conference MQMR heard from speakers such as Alfred Pollard, the General Counsel of the FHFA, Kathleen Ryan, the Deputy Assistant Director of the CFPB, Bill Emerson, CEO of Quicken Loans, as well as many other speakers.

Major Topics at the Conference

Fair Lending

Throughout the Conference, the CFPB stated that they would be focusing on Fair Lending enforcement including Overt Discrimination, Disparate Impact, and pricing disparities. The CFPB stated any and all “players” are subject to scrutiny regardless of size or market share. The CFPB intends to enforce “Fair Servicing” just as aggressively as they enforce Fair Lending. However, as of now there are no direct requirements.

CFPB Oversight over Additional Areas

The CFPB has unrivaled authority to enforce federal financial regulation. The CFPB stated that they intend to enforce financial regulations. In the coming year, the CFPB is expected to focus on and enforce Loan Officer Compensation, RESPA, Servicing, TILA, Vendor Management, and HMDA Submissions. The overarching theme is that companies will be responsible for their vendors, and all risk is carried forward. A company should ensure they have authority to charge a fee, and should carefully consider if the fee is excessive, if it violates GSE allowable amounts, or if the fee does not compare to the fair market price for the fee.

The QM Rule

Kathleen Ryan, Deputy Assistant Director of the CFPB, gave a speech in which she stated that the CFPB believes that non-QM loans can be done responsibly and a market will open for that product. The CFPB is working on a proposal to allow for a cure if the 3% points and fees rules has been exceeded. The proposed cure is to allow a refund to occur within 121 days from the date the loan closed. There isn’t a proposed DTI cure yet; however, the CFPB is waiting on feedback from the mortgage community.

Vendor Management

Vendor Management is anticipated to be an area of increased focus by the regulatory agencies. Vendor service providers include Appraisers, Document Vendors, Website Vendors, Payment Processing Vendors, Contract Underwriters, and Attorneys, to name a few. Additionally, this will expand to ‘marketing partners’ that are not true vendors such as sellers of ancillary insurance products as well as previous vendors that are no longer being used. Each service provider carries various risks; compliance, reputational, strategic, transactional, and credit risk. Because of these layered risk factors, the CFPB has issued guidance on vendor oversight. The CFPB’s guidance expects lenders to continuously monitor, report and document their vendors. Failure to do so may cause enforcement action or civil penalties. The CFPB maintains a very strong focus on harm to the consumer.  As such, lenders should target vendor oversight on vendors that can cause the most harm to consumers including vendors that are critical to the daily operations that indirectly could negatively impact the consumer.   Calvin Hagins of the CFPB realizes that he does not expect companies to follow the CFPB and other regulatory guidance to the “t,” but that companies must identify key vendors and oversee them accordingly.  Contingency planning must also be considered.

Loan Officer Compensation

Lenders are be able to adjust LO compensation levels by using historical default rates such as EPDs or other performance metrics such as EPOs on loans originated by each LO to determine their compensation; however, the compensation cannot be adjusted retroactively—panelists were in agreement that “clawback” clauses violate many Fair Labor laws and suggested “progressively” adjusting compensation based on historical performance, if the lender wanted to pay based on quality. LO Commissions can be structured around specific BPS amounts. The CFPB will not allow LO compensation to be based upon anything that can be described as “steering.” A lender should look to perform a proxy test on various scenarios to determine if the LO has influence to steer a borrower into a transaction in order to be paid more. Scenarios failing that test should not be allowed.


The Legal Issues and Regulatory Conference provided MQMR with clarification on some highly technical regulatory laws. Clarification on the Fair Lending, the CFPB, the QM rule, Servicing guideline changes, Vendor Management and LO Compensation rules and laws is important because these topics will be an area of focus now and in the near future.We value our clients and vendor partnerships.  Please contact us if you have any questions on our opinions from this summary.

San Diego Legal Issues and Regulatory Conference Highlights