The legal doctrine of disparate impact is a powerful arrow in the enforcement quiver the CFPB can bring to bear across a number of sectors in the broad financial services industry – and it may get a big boost if the Supreme Court of the United States says it is legal. Last week, the SCOTUS heard oral arguments in Texas Department of Housing and Community Affairs, Et Al., v. The Inclusive Communities Project Inc. (No. 13-1371). The crux of this case is whether disparate impact claims are cognizable under the Fair Housing Act of 1968, where a plaintiff alleges discrimination based on the disparate impact that a defendant’s “facially neutral” practice has on members of a demographic group of society, the ...

When it comes to legal cases at the Supreme Court of the United States, score one for the CFPB. Earlier this month, in Jesinoski v. Countrywide, the SCOTUS essentially upheld the bureau’s position on borrower rescission of a mortgage under the Truth in Lending Act. Specifically, the high court unanimously ruled that TILA only requires written notice to a mortgage lender within three years in lieu of requiring a borrower to formally file a lawsuit within that time span. Under TILA, a borrower may rescind a mortgage within the first three days of consummation of the transaction or the delivery of the mandated disclosures required. However, if a lender fails to make the disclosures demanded under TILA, this right is ...

As part of the growing attention the CFPB is paying these days to the marketing relationships between financial institutions and colleges and universities, the CFPB released for public comment a draft Safe Student Account Scorecard that offers information to institutions of higher learning when soliciting agreements from financial institutions to market safe and affordable financial accounts for their students.“The scorecard builds on prior work by the Federal Deposit Insurance Corp. and is designed to help colleges evaluate the costs and benefits to students of a financial product based on information about its features and how it is marketed,” said CFPB Director Richard Cordray. The bureau is seeking public input on the scorecard, which highlights four areas for schools to ...

Obama Vows Vetoes to Dodd-Frank Changes. President Barack Obama touted the Dodd-Frank Act during his recent State of the Union speech as well as the growth of the CFPB, and threatened a veto should the Republican-controlled Congress pass any additional fixes to Dodd-Frank. “Today, we have new tools to stop taxpayer-funded bailouts, and a new consumer watchdog to protect us from predatory lending and abusive credit card practices,” Obama said. “We can’t put the security of families at risk by taking away their health insurance, or unraveling the new rules on Wall Street, or refighting past battles on immigration when we’ve got a system to fix. And if a bill comes to my desk that tries to do any of ...

A total of $185.32 billion of non-mortgage ABS were issued in 2014, the highest annual production level for the market since 2007, according to a new Inside MBS & ABS analysis and ranking. ABS issuance was up 12.0 percent from the prior year, with solid gains in three of the market’s key sectors: auto finance, credit cards and business loans. The weakest link was the student loan ABS market, where annual production fell 25.4 percent from 2013 and slipped to its lowest level since 1999. Vehicle finance deals were...[Includes two data charts]

Real estate investment trusts focused on the residential mortgage market had a stellar year in 2014, returning 19.4 percent to investors, a nice comeback from the year before when performance was measured at negative 12.7 percent. According to figures compiled by the National Association of Real Estate Investment Trusts, commercial financing REITs fared a bit worse, returning 14.5 percent compared to a mouth-watering yield of 41.8 percent in 2013. But now both sectors face...

Issuers of auto ABS are loosening underwriting standards and delinquencies on subprime auto loans are increasing, but industry analysts suggest that there is little cause for concern. Performance remains much stronger than the delinquencies seen during the financial crisis and issuers are unlikely to loosen underwriting to the extent seen in the run-up to 2008. For independent finance companies, 60+ delinquencies increased by 13.7 percent in the past year, from 1.82 percent in the third quarter of 2013 to 2.07 percent in the third quarter of 2014, according to the latest data from Experian Automotive. Independent finance companies focus primarily on lending to subprime borrowers, and their delinquency trends outpaced any increase in delinquencies for other types of lenders that lend primarily to prime borrowers. Peter McNally, a vice president and senior analyst at Moody’s Investors Service, said...

Last week, the U.S. Supreme Court unanimously ruled that the Truth in Lending Act only compels a borrower to file a written notice within three years of consummation in order to rescind a mortgage if the lender fails to provide the required disclosure, instead of formally filing a lawsuit within that period. This could spell bad news for the non-agency RMBS space, according to an amicus brief the Structured Finance Industry Group filed with the high court in the case, Jesinoski v. Countrywide Home Loans, Inc. The first problem SFIG noted with the position that the SCOTUS eventually upheld is that it will have a chilling effect on non-agency MBS. “A determination that mere notice is sufficient to effect a rescission would reverberate through all segments of the RMBS market, creating significant hurdles for originators, issuers, ratings agencies, servicers, and trustees alike, while breeding doubt among investors regarding the value of future and already-issued private-label RMBS,” said the trade group. That’s...

The Federal Deposit Insurance Corp. took an action this week aimed at reducing confusion regarding the interplay between the banking regulator’s securitization safe harbor and risk-retention requirements recently set by federal regulators. Under the FDIC’s securitization safe harbor, if certain requirements are met, the FDIC, in its capacity as receiver or conservator of an insured depository institution, won’t recover or reclaim securitized assets when exercising its authority to repudiate contracts. In 2010, the FDIC added a risk-retention requirement to the safe harbor. For securitized assets to qualify for the FDIC’s safe harbor, sponsors of deals issued in 2011 and beyond must retain...

FHA lenders are gearing up to meet an anticipated increase in demand for purchase and refinance loans with mortgage rates falling to near-historic lows coupled by a 50 basis point cut in FHA’s annual insurance premium. Lenders hope the combination of lower mortgage rates and the revised FHA pricing structure will create sufficient incentive for more borrowers to purchase a home or refinance an existing mortgage. For example, Freedom Mortgage, 32nd in Inside FHA Lending’s 2014 ranking of FHA lenders, is looking to hire as many as 500 new employees to handle the anticipated surge following the FHA action. Stanley Middleman, chief executive officer of Freedom Mortgage, expects a robust FHA refinance market during the first half of 2015, tapering off in the second half. “Lower rates, coupled with premium reduction, put a lot of FHA borrowers in a position to get their ...