MORTGAGE LOAN COMPLIANCE®

FDIC and Federal Reserve Watchful Again | Mortgage Loan Compliance

Last Friday Bank regulators closed two California banks, the Vineyard Bank in Rancho Cucamonga and Temecula Valley Bank in Temecula, the 56th and 57th U.S. banks to fail this year. The FDIC also announced the closings of two smaller banks, First Piedmont Bank of Winder, Georgia and BankFirst of Sioux Falls, South Dakota.

The number of bank failures has increased dramatically as the struggling economy has taken its toll on financial institutions. The failures have been draining the FDIC's deposit insurance fund already down to $13 billion, and the agency is carefully taking steps including an emergency assessment on banks to replenish the fund.

This week the Federal Reserve Board will consider amendments to the Truth in Lending Act placing new restrictions on mortgage broker compensation. "The proposal will include new rules governing mortgage originator compensation," Fed governor Elizabeth Duke said.

The proposed rule, which the Fed will take up on July 23, also includes "re-redesign, consumer tested disclosures and rule changes for closed-end mortgages and home-equity lines of credit," Ms. Duke told a congressional panel.

The Fed overlooked regulating broker compensation and yield-spread premiums last July when it approved a Home Ownership and Equity Protection Act rule to clamp down on abusive lending practices that led to the subprime meltdown. However, Fed chairman Ben Bernanke directed staff to continue their efforts to address the issue. Bernanke noted YSPs that brokers receive from lenders are based on the interest rate, which "on its face seems to be an incentive for steering borrowers into higher price loans."

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Mortgage Loan Compliance

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