Appeals court delivers big win to CFPB in Townstone redlining case
National Mortgage News
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A federal appeals court ruled that the Consumer Financial Protection Bureau has broad authority to discourage discrimination to combat redlining, delivering a major victory to the bureau in a contentious case, CFPB v. Townstone Financial, against a Chicago mortgage lender. A three-judge panel of the U.S. Court of Appeals for the 7th Circuit ruled that the Equal Credit Opportunity Act applies not just to credit applicants but also to prospective applicants. The CFPB filed a redlining lawsuit against Townstone Financial in 2020 alleging that the company's CEO Barry Sturner made disparaging remarks about Blacks on a talk-radio infomercial that discouraged minorities from applying for home loans.?
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Default servicing experts have been optimistic that affordability concerns will be mild this year, but they consider some of the pressures on homeowners more worrisome than others. When asked to distribute 100 points of risk among delinquency triggers, respondents to a recent Auction.com survey collectively assigned the greatest share of risk, at 37 points, to the "hidden" housing costs of property taxes and insurance. Home purchasers often are most focused on upfront price and financing costs when they buy, so they can sometimes overlook ongoing expenses like T&I. That's a concern for servicers, who often bear some responsibility for helping consumers manage these costs.
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The Appraisal Foundation has settled the "secretary-initiated" complaint with the Department of Housing and Urban Development over fair lending practices, including creating a $1.22 million scholarship fund. HUD's press release describes the conciliation agreement as historic, resolving a complaint "alleging discriminatory barriers preventing qualified Black people and other persons of color from entering the appraisal profession on the basis of race in violation of the Fair Housing Act." The Appraisal Foundation's announcement about the settlement emphasized that the investigation process started in December 2021 did not result in any findings.
While second quarter mortgage origination volume was higher than anticipated at the big three banks that reported earnings in mortgage, the gain on sale margins were worse than forecasted, said Keefe, Bruyette & Woods. "The volume growth was better than expected, but this was offset by the decline in GOS margins despite 2Q typically being a seasonally strong quarter," wrote Bose George in a flash note from KBW. "We are expecting 2Q GOS margins to be fairly flat [quarter-to-quarter] for the non-bank mortgage originators." The immediate impact of these results on publicly traded nonbank mortgage lenders should be muted.
The Federal Housing Finance Agency will introduce tenant protections on multifamily developments that receive capital funding from the government-sponsored enterprises. The move comes after consultation with various industry stakeholders and it is the first time tenant protections are included within multifamily finance policy, the agency said in an announcement Friday. Under the rules, owners of properties financed by Fannie Mae or Freddie Mac will be required to provide tenants 30 days written notice before any increase in rent or lease expiration. A five-day grace period for rent payments will also be mandated.?
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