By Rod Alba
The mortgage industry has seen continuous legal and regulatory change for the past decade. Do not expect 2019 to be any different. The industry should anticipate continued developments and more reforms. Here are the top issues that mortgage professionals should expect in 2019.
- Ability-to-repay. The ability to repay/Qualified Mortgage rules have transformed residential mortgage underwriting and risk considerations for all institutions. We predict substantial movements on the ATR regulatory scheme in 2019. The Bureau has undertaken a thorough review of these regulations, and lenders should expect that this assessment will lead to proposals to rectify and improve the law. We anticipate a focus on improving legal certainty and finding ways to replace the lapsing “GSE QM” provision, the safe harbor that sustains most mortgage lending in residential markets. Stay attentive to policy discussions and formal proposals in 2019.
- HMDA reforms. Legislative amendments to HMDA were implemented by regulation in 2015 and are now effective for reporting applicable to 2018 mortgage data. CFPB will publicly release the new and greatly expanded 2018 HMDA data by April. First, this means that all lenders should expect stronger public and governmental scrutiny of their data and should intensify their focus on fair lending exposure generally. Second, the Bureau announced more rulemaking by May 2019, which will refocus on the types of data that is publicly released and other rule improvements. Covered institutions should therefore be prepared for additional changes by year’s end. Expect movements in 2019, as well as Congressional and regulatory debates on HMDA reporting requirements.
- Fair lending. With the recent changes in Congress, expect increased focus on affordable housing, fair lending and redlining in the coming months. More importantly, regulators are revisiting standards in light of recent Supreme Court ruling that recalibrates disparate impact laws and guidelines under the Fair Housing Act. HUD will likely issue proposed revisions to their Fair Housing regulations before the summer. Other agencies—mostly Treasury and CFPB—have called attention to the need to reexamine disparate impact standards under the Equal Credit Opportunity Act. Expect movement in the coming months.
- Mortgage servicing regulations. In 2013, the CFPB issued comprehensive new servicing regulations, along with amendments and revisions that became effective in 2018. The Bureau is expected to release an assessment of significant portions of these regulations in coming weeks. We anticipate this review to result in proposed rulemakings in the months to come.
- Digital developments and fintech. The digital transformation of financial services advances unabated, so everything set forth above must now be analyzed through a “fintech” perspective. Expect Congress and regulators to pay increasing attention to problems and opportunities posed by digital advances, including such issues as the effects of digitized lending on credit accessibility, data standardization in mortgage servicing, use of artificial intelligence, fair lending considerations, and online remote notarization and acceptance of e-notes.
Rod is Senior Vice President and Senior Counsel for mortgage markets at the American Bankers Association. His role includes management of legal and regulatory issues relating to mortgage banking, and compliance issues generally.