The CFPB recently ordered ACE Cash Express of Irving, TX, one of the largest payday lenders in the United States, to pay a $10 million fine for allegedly using illegal debt-collection tactics – including harassment and false threats of lawsuits or criminal prosecution – to pressure consumers into debt traps they couldn’t afford and couldn’t get out of. The bureau said it found that ACE used these illegal debt-collection tactics to create a false sense of urgency to lure overdue borrowers into payday debt traps. “ACE would encourage overdue borrowers to temporarily pay off their loans and then quickly re- borrow from ACE,” the CFPB said. Even after consumers explained to ACE that they could not afford to repay the loan, the ...

The CFPB is now collecting consumer complaints about seven different segments of the financial services sector, and its latest cumulative report on the subject indicates the Dodd-Frank Act’s cop on the beat is only going to continue to expand its dragnet. So far, the CFPB is accepting complaints about credit cards (as of July 21, 2011), mortgages (Dec. 1, 2011), bank accounts and services (March 1, 2012), credit reporting (Oct. 22, 2012), money transfers (April 4, 2013), debt collection (July 10, 2013), and payday loans (Nov. 6, 2013). “The CFPB continues to work toward expanding its complaint handling to include other products and services under its authority, such as prepaid cards. Consumers may also contact the CFPB about other products ...

Bureau Moves to Ensure Equal Treatment for Same-Sex Marrieds. The CFPB is synchronizing its internal policies with the U.S. Supreme Court decision in United States v. Windsor, striking down as unconstitutional Section 3 of the Defense of Marriage Act, which holds that the word ‘marriage’ means only a legal union between one man and one woman. According to a staff memorandum from CFPB Director Richard Cordray, the CFPB will regard a person who is married under the laws of any jurisdiction to be married nationwide for purposes of the federal statutes and regulations under the bureau’s jurisdiction regardless of the person’s place of residency. However, consistent with other federal regulatory agencies, the bureau will not regard persons who are joined ...

The line of companies rolling out new loan menus for non-qualified mortgages is growing longer each week, but it remains to be seen which firm will be the first to issue a non-agency MBS. Citadel Servicing Corp., Irvine, CA, is working on a bond, but has been noncommittal about when it might come to market – and whether its first deal will be public or private. The privately-held nonbank is now funding more than $15 million a month in non-QM/nonprime products. Meanwhile, Impac Mortgage Holdings – an Alt A lender of yesteryear – has just entered...

The Department of Justice this week announced a $7 billion settlement with Citigroup to resolve federal and state civil claims related to legacy residential MBS. Industry attorneys are warning that such gargantuan settlements might cause lenders to pull back further, making credit far less available to borrowers and causing economic recovery to falter further. The settlement includes...

The Consumer Financial Protection Bureau’s request for comments on whether to allow for a right to cure on debt-to-income ratio issues for qualified mortgages prompted the typical divisions between lenders and consumer advocates. Lenders suggest that borrowers would benefit from the adjustment to QM standards, while consumer advocates warn that the change would weaken QM protections and encourage sloppy underwriting. The 43 percent DTI ratio standard for ...

While originations of loans outside of standards for qualified mortgages appear limited thus far, lenders continue to flood into the non-QM market. And industry analysts suggest that the sector has plenty of room to grow, particularly if the government-sponsored enterprises exit conservatorship. W.J. Bradley announced this week that it’s offering a number of new non-agency mortgage products, including non-QMs for prime borrowers. “We have recognized ...

If an FHA borrower runs out of options for loss mitigation and home retention, a lender must first consider a pre-foreclosure or short sale, with deed-in-lieu (DIL) of foreclosure as a second option, according to new FHA guidance. Mortgagee Letter 2014-5 states that the lender must first determine whether the borrower facing default or at risk of default qualifies for a pre-foreclosure sale (PFS). The FHA allows pre-foreclosure sales to be processed as either a “standard PFS” or a “streamline PFS.” The former is available only to owner-occupants while the latter is for both owner- and non-owner-occupied single-family properties. In determining standard PFS eligibility, the lender must use a “deficit income test” to determine whether the borrower is experiencing hardship and is able to sustain his or her mortgage. A DIT resulting in a negative amount would likely qualify the borrower for a ...

New FHA guidance regarding voluntary termination of FHA mortgage insurance does not affect separate guidance requiring borrowers to continue payment of their annual insurance premium regardless of the loan’s amortization terms. The FHA made the clarification in relation to Mortgagee Letter 2014-13, which requires written consents by the lender and the borrower in all voluntary terminations of FHA mortgage insurance. The requirement becomes effective on Oct. 1st this year. Specifically, the guidance requires FHA lenders to document that they have obtained the borrower’s informed consent to terminate FHA insurance on the mortgage. The change ensures that the lender would incur no liability and that the borrower understands the terms of the voluntary termination. Under current rules, the FHA may terminate mortgage insurance at the request of the borrower and the lender. The lender may cancel the insurance endorsement upon notification by the FHA commissioner that the insurance contract is terminated.

Representatives of the various segments of the mortgage banking world are mostly receptive to a hypothetical “right to cure” an otherwise qualified mortgage loan that inadvertently breeches the QM 43 percent debt-to-income threshold – despite the complexity associated with putting it into play. Most supporters of such a corrective mechanism agreed with the Consumer Financial Protection Bureau that utilizing it could be complicated. “We agree that creditors’ use of any DTI cure provision would be limited. Nevertheless, we do not believe the idea should be dismissed simply because it may be complicated,” the Consumer Mortgage Coalition said in its public comment letter to the agency. The Housing Policy Council of the Financial Services Roundtable also acknowledged...