Echoing an assessment that has become all too common across the housing and mortgage markets, CFPB Director Richard Cordray said excessive student loan debt is keeping many young people from buying a house and taking on a mortgage. “The consumers we hear from tell us how their debt burden has stopped them from buying a home, opening a small business, or starting a family,” Cordray said in a speech last week. With student-loan debt now having reached $1.2 trillion, the CFPB estimates that more than 7 million Americans are in default on a student loan. “For those who default early in their lives, the negative consequences for their credit report can make it more difficult to pass employment background checks...

The fourth edition of the CFPB’s Supervisory Highlights report, released last week, reveals that recent “nonpublic supervisory actions” and self-reported violations in a number of program areas have resulted in more than $70 million in remediation for approximately 775,000 consumers. The report also highlighted what the bureau characterized as illegal actions uncovered by the agency’s supervision of the payday, debt collection and consumer-reporting markets – which are now being supervised on a federal level for the first time due to the authority conferred upon the CFPB by the Dodd-Frank Wall Street Reform and Consumer Protection Act. “For the first time at the federal level, nonbank financial institutions are subject to supervisory oversight that holds them accountable for how they treat consumers,"...

Providers of consumer financial services products, be forewarned: If the CFPB has not gotten around to regulating you yet, don’t rest too easy. It definitely plans to do so. The latest edition of the CFPB’s Supervisory Highlights report indicated larger indirect nonbank auto lenders are next on its to-do list. But if past is prologue, the odds are strong that sector won’t be the last to feel the bureau’s expanding scrutiny.As per the Dodd-Frank Wall Street Reform and Consumer Protection Act, the CFPB has authority to supervise certain nonbanks, including mortgage companies, private student lenders, and payday lenders, as well as nonbanks the bureau defines through rulemaking as “larger participants.” To date, the agency has issued rules to supervise...

Ford Credit priced a $1.08 billion deal earlier this month backed by prime auto-loan receivables that included a noteworthy twist, according to John McElravey, director of consumer ABS research at Wells Fargo Securities. The deal will revolve for five years before paying principal with a soft-bullet maturity. “In our opinion, this deal adds an interesting new dimension to prime auto-loan ABS,” McElravey said in a recent report. “We would not be surprised if other prime lenders eventually adopted similar structures based on market pricing and the pace of investor acceptance. Upon reflection, it is somewhat surprising that more prime auto-loan ABS have not been structured in this way.” Moody’s Investors Service explained...

Standard & Poor’s ranked as the top rating service in the non-mortgage ABS market and also claimed the top spot in the sputtering non-agency MBS sphere, according to a new Inside MBS & ABS ranking of first-quarter activity. S&P rated seven of the 11 non-agency MBS issued in the first three months of 2014, or 78.0 percent based on dollar volume. Once the perennial leader in non-agency MBS ratings, S&P’s market share has been around 40.0 percent in recent years. DBRS ranked...[Includes two data charts]

Standard & Poor’s is seeking comments on a proposal for assessing operational risk posed by key transaction parties such as servicers in structured finance transactions. The request for comments follows a similar request from S&P in 2011. “We made a number of changes to the previous request for comment in view of the responses we received and our desire to enhance the risk considerations under the proposed operational risk framework,” said Joseph Sheridan, S&P’s criteria officer. “We also expanded the proposal’s scope. Where we believe operational risk could lead to credit instability and a ratings impact, the proposal would call for rating caps that limit the securitization’s maximum potential rating.” The rating service is proposing...

Legislation introduced earlier this month by Sen. Elizabeth Warren, D-MA, to facilitate refinance options for struggling student loan borrowers could negatively affect existing student loan ABS trusts while benefitting certain kinds of bonds at the expense of others, according to Wall Street analysts that closely follow the space. Overall, it’s considered a negative. The good news is, the legislation isn’t expected to be enacted this year. The bad news is, other similar measures are expected to emerge after the November elections. Introduced May 6, 2014, S. 2292, the “Bank on Students Emergency Loan Refinancing Act,” would permit...

ITT Educational Services, the target in the CFPB’s first enforcement action against a for-profit education company over allegations of predatory lending, has asked a court to throw out the bureau’s complaint, arguing that the CFPB’s lawsuit is unconstitutional on two key grounds. In its brief in support of its motion to dismiss, filed late last month before the U.S. District Court for the Southern District of Indiana, Indianapolis Division, ITT argues that the CFPB is an unconstitutional entity, first, because it has “no presidential oversight” and because there is “no Congressional control of funding” of the agency.Attorney John Culhane, a partner in the Philadelphia office of the Ballard Spahr law firm, pointed out in a client note about the...

The members of one lender trade group support the CFPB’s proposed survey of consumer experiences with debt collection, but think the bureau is likely going to miss a good opportunity to obtain useful data that can be relied on for policymaking.“Considering the range of issues presented and the fact that the bureau’s policy choices will be felt across the U.S. economy, it is critical that the bureau develop a complete and robust factual record to inform its policy choices,” said Virginia O’Neill, assistant chief compliance counsel for the American Bankers Association, in a recent comment letter to the CFPB. As the ABA sees it, a carefully designed and executed consumer survey can be one valuable element of such a...

FSOC Suggests State Regulators Work With CFPB on Nonbank Servicer Issues. The Financial Stability Oversight Council – of which the CFPB is a member – recommended last week that state regulators collaborate on prudential and corporate governance standards to strengthen nonbank servicers. The FSOC said state regulators should work on the standards with the CFPB and the Federal Housing Finance Agency when appropriate. The CFPB and state regulators have some authority over these companies, FSOC noted, but many of them are not currently subject to prudential standards such as capital, liquidity or risk management oversight. Additionally, in a number of cases, mortgage investors’ ability to collect on mortgages is dependent on a single mortgage servicing company, where failure could have significant negative...