The CFPB recently issued much-sought but quite limited guidance to the mortgage industry on marketing services agreements, emphasizing the legal and regulatory risks for lenders. “We are deeply concerned about how marketing services agreements are undermining important consumer protections against kickbacks,” said CFPB Director Richard Cordray. “Companies do not seem to be recognizing the extent of the risks posed by implementing and monitoring these agreements within the bounds of the law.” The guidance, in the form of a five-page bulletin, explains that, while marketing services agreements are usually framed as payments for advertising or promotional services, “in some cases the payments are actually disguised compensation for referrals. Any agreement that entails exchanging a thing of value for referrals of settlement ...
The mortgage lending industry had a less-than-enthusiastic greeting for another rulemaking from the CFPB that goes on for hundreds of pages. The initial reaction from the American Bankers Association was muted. Frank Keating, president and CEO, said his organization is pleased that the bureau extended the compliance date and excluded the collection of data on most commercial transactions, something the ABA advocated. “However, we continue to be concerned about the privacy of bank customers’ data and ensuring that their information is properly protected. We look forward to commenting on these important issues,” he added. “The rule also imposes significantly expanded data reporting and collection requirements, so we remain concerned about the appropriate balancing of costs and benefits in order to ...
Financial institutions will be required to provide much more data to monitor fair lending compliance and access to credit under the Home Mortgage Disclosure Act, thanks to a new, 800-page, final rule the CFPB issued last week. Under the new rule, lenders must provide more information about mortgage loan underwriting and pricing, such as an applicant’s debt-to-income ratio, the interest rate of the loan, and the discount points charged. “This information will enhance the ability to screen for possible fair lending problems, helping both institutions and regulators focus their attention on the riskiest areas where fair lending problems are most likely to exist,” said the CFPB. “This information will also help the bureau and other stakeholders monitor developments in specific ...
“Had the proposal been implemented, it could have had a chilling effect on FHA lending, to the detriment of the borrowers served by the FHA program,” according to lawyers at K&L Gates.
Government Files False Claims Act Suit Against FHA Lenders, “Counseling Fund.” Three federal agencies filed a civil lawsuit against a purported charitable “counseling fund” and five FHA-approved mortgage lenders and their principals for running a mortgage scam that resulted in a huge loss for the FHA. The suit alleges that Rainy Day Foundation, a tax-exempt charitable institution in the District of Columbia, and five New York-based banks defrauded several federally insured banks resulting in millions of dollars of mortgage losses and costing the FHA $5.6 million in paid false claims. According to the complaint, the lenders originated FHA loans, which they later sold to the victimized banks. The loans went into early-payment default (EPD) at twice the average default rate of other lenders. The lenders allegedly conspired with the Rainy Day foundation to conceal their ...
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