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Volume 28 - Number 4

February 13, 2017

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CHOICE Act 2.0 Would Retain, Restructure CFPB, Gut its Power

House Financial Services Committee Chairman Jeb Hensarling, R-TX, is looking to retain the CFPB, restructure key parts of the agency, and drastically limit its authority, Inside the CFPB has learned. According to a draft memorandum of the major changes to Hensarling’s Financial CHOICE Act, now dubbed CHOICE Act 2.0, the bureau “is to be retained and restructured as a civil law enforcement agency similar to the Federal Trade Commission, with additional restrictions on its authority,” as follows: Sole director, removable by the president at will. Rule-making authority limited to enumerated statutes. Unfair, deceptive acts or practices authority repealed in full. Supervision repealed. Consumer complaint database repealed.• Market monitoring authority repealed. Enforcement powers limited to cease-and-desist and civil investigative demand/subpoena powers....

Trump Goes After Dodd-Frank Regulations, CFPB Impact Unclear

President Donald Trump has put the Dodd-Frank Act in his crosshairs, issuing an executive order earlier this month that directs the Treasury secretary to work with the members of the Financial Stability Oversight Council to review the current regulatory regime and evaluate it according to a handful of “core principles” Trump believes should shape the regulation of the U.S. financial system. The principles include fostering informed consumer choices, preventing bailouts, promoting economic growth, tailoring regulations and ensuring regulatory accountability. Industry observers and Republicans and Democrats alike on Capitol Hill saw the order as the beginning of an attack on Dodd-Frank and perhaps even a shot across the bow of the CFPB, with negative implications for the agency’s mortgage lending and ...

Lawmaker Seeks Clarity on CFPB Compliance With ‘Freeze’ Memo

Rep. Tom Graves, R-GA, chairman of the House Appropriations Financial Services Subcommittee, recently wrote to CFPB Director Richard Cordray seeking official clarification regarding the agency’s compliance with a memorandum entitled, “Regulatory Freeze Pending Review.” The memo was sent by White House Chief of Staff Reince Priebus, on behalf of President Donald Trump, to the heads of all executive departments and agencies late last month. The departments and agencies were generally directed to “send no regulation to the Office of the Federal Register until a department or agency head appointed or designated by the president … reviews and approves the regulation.” Further, regulations that have been sent to the OFR but not published in the Federal Register are to be immediately...

Trump Still Fishing for Cordray Replacement, But is it Smart?

President Trump has been in office nearly a month and CFPB Director Richard Cordray is still on the job, despite some early developments that suggested his days as head of the bureau are numbered under the new administration. The most recent headhunting expedition reportedly involved Brian Brooks, currently general counsel at Fannie Mae, who reportedly has close ties to Steve Mnuchin, Trump’s nominee for Treasury secretary, CNBC reported last week. Up on Capitol Hill, Republicans such as House Financial Services Chairman Jeb Hensarling, R-TX, and Sen. Ben Sasse, R-NE, a member of the Senate Banking, Housing and Urban Affairs Committee, both recently called on Trump to sack Cordray. “The bureau’s mission to prohibit ‘abusive practices’ sounds great. But all that ...

CFPB Back in RESPA Enforcement Game With Standard Interpretation

The CFPB recently brought a more traditional interpretation to its enforcement of the Real Estate Settlement Procedures Act in an action against Prospect Mortgage, two real estate brokers and a mortgage servicer that focuses on alleged kickbacks for referrals of mortgage business. Among the lender’s alleged violations of RESPA was the use of lead agreements to pay brokers for referrals. According to the CFPB’s consent order, Prospect entered into such agreements with more than 200 different counterparties, most of which were real estate brokers. Under these arrangements, Prospect paid the counterparty for each lead it received. However, these counterparties went “well beyond simply transferring information about prospective buyers,” the CFPB alleged. They also referred prospective buyers to Prospect’s loan officers....

Brokers, Servicer Also Sanctioned By CFPB in Prospect RESPA Case

In addition to bringing an enforcement action against Prospect Mortgage for alleged violations of the Real Estate Settlement Procedures Act, the CFPB also acted against ReMax Gold Coast and Keller Williams Mid-Willamette, two real estate brokers, and Planet Home Lending, a mortgage servicer – all of whom it accused of taking illegal kickbacks from the lender. Specifically, the CFPB accused both brokers of participating in “certain lead agreements and desk license agreements” with Prospect Mortgage, and of accepting payments from the lender in exchange for referrals in violation of RESPA and its implementing regulation, Regulation X. The bureau also said RGC’s agents “required hundreds of consumers wishing to place an offer on one of their properties offered for sale to pre-qualify ...

Latest RESPA Case Reveals New Things About CFPB Enforcement

An analysis by the Mortgage Bankers Association of the CFPB’s latest foray back into the enforcement of the Real Estate Settlement Procedures Act noted that some of the allegations in the consent orders would have been troubling under the enforcement regime of the Department of Housing and Urban Development. However, the orders also highlight several new points in the way the bureau is enforcing Section 8 of RESPA, the MBA said. “These include that the arrangements steer consumers, exclude other competitors, and were arrived at based on internal analyses of business and that click-throughs to lenders in joint marketing arrangements somehow amount to compensated referrals,” the trade group said. Further, the consent order addressing Planet Home Lending also clarifies that ...

PHH Succeeds in Fending Off Intervenors in Dispute with CFPB

PHH Corp. won another round against some new antagonists in its dispute with the CFPB over alleged violations of the Real Estate Settlement Procedures Act. Earlier this month, a three-judge panel of the U.S. District Court of Appeals for the District of Columbia Circuit agreed with the lender and refused to allow three separate efforts to intervene in the case. In a simple, single-page order, the three judges “ordered that the motions be denied.” The ruling affects an effort by Sen. Sherrod Brown, D-OH, and Rep. Maxine Waters, D-CA, to insert themselves in the case on behalf of the CFPB. The lawmakers had warned the appeals court that if their effort to intervene was denied, they would seek recourse from ...

John Doe Co. Action Another Test of CFPB’s Investigative Authority

The unusual recent case of an unidentified finance company filing suit to prevent the CFPB from disclosing its investigation of the firm, and from bringing any action against it unless and until the agency is restructured in line with the U.S. Constitution, is “yet another challenge to the CFPB’s vast investigative and enforcement authority,” according to two attorneys with the Hudson Cook law firm. “This is a new front in the battle against CFPB overreach,” the pair said in a client note. The stakes here can be high. “Companies facing a CFPB investigation often confront a difficult choice of complying with the investigative demand or fighting the CFPB’s authority,” said the attorneys. “But challenging the CFPB is an uphill battle ...

Consumers Still Complaining About Mortgage Servicing Practices

Mortgage borrowers still have plenty to complain to the CFPB about, especially on the mortgage servicing front, the latest monthly consumer complaint report from the bureau suggests. “The most common issues identified by consumers are problems when they are unable to pay (loan modification, collection, foreclosure),” which were cited by 49 percent, according to the CFPB, followed by issues making payments (loan servicing, payments, escrow accounts), identified by 33 percent. Other homeowners brought up problems having to do with applying for a loan (application, originator, mortgage broker), which was noted by 9 percent, followed by signing the agreement (settlement process and costs), which was highlighted by 5 percent, and receiving a credit offer (credit decision, underwriting [With Two Data Charts]....

Other News in Brief

Hensarling Threatens to Use Budget Reconciliation Process to Push Through CHOICE Act 2.0. Rep. Jeb Hensarling, R-TX, chairman of the House Financial Services Committee, raised some industry eyebrows last week when details of his new, more aggressive Financial CHOICE Act got leaked to the press, and he indicated he might use the budget reconciliation process to push the bill through Congress.... CFPB Brings Legal Action Against Debt Relief Law Firms, Attorneys. The CFPB recently sued Howard Law PC, Williamson Law Firm LLC, and Williamson & Howard LLP, as well as attorneys Vincent Howard and Lawrence Williamson, in federal court, accusing them of collaborating to charge illegal fees to consumers looking for debt relief....

Poll

With rates higher this year, there has been talk of lenders liberalizing their underwriting standards in an effort to increase volume and make up for lower refis.

Do you think your shop will loosen standards over the coming three months?

Yes, but not by much.
Yes, by a lot.
Yes and, heck, we may even do non-QM lending.
No, not at all.
No and we may even tighten credit.

vote to see results