The prospects for consumer ABS in 2016 are a bit mixed. Auto ABS – especially subprime – appear susceptible to the Federal Reserve’s promised raising of interest rates this year and beyond, but credit card ABS are strong and performing well. “Rising interest rates could pressure U.S. auto ABS transactions, especially first on subprime deals,” analysts at Fitch Ratings said in a recent client note. While they expect last month’s initial rate increase by the Fed to have only a marginal near-term impact on borrowers, they said the plan to raise rates gradually over four years could increase the monthly debt burden on auto loan borrowers. “Although the rate increases are expected to affect the entire market, Fitch believes...

FHA lenders funded $12.3 billion in new Home Equity Conversion Mortgage loans during the first nine months of 2015, up a hefty 22.2 percent from the same period in the prior year, according to Inside FHA/VA Lending’s analysis of agency data. Likewise, HECM endorsements increased 17.3 percent to $4.5 billion in the third quarter from $3.9 billion in the prior quarter. This was the highest HECM endorsements have been since the second quarter of 2013, when they totaled $4.1 billion. Purchase loans accounted for 85.8 percent of all HECM originations over the nine-month period. The majority of borrowers favored adjustable-rate HECMs over fixed-rate HECMs, which accounted for only 14.8 percent of HECM transactions. In addition, the initial principal amount at loan originations totaled $7.3 billion, up from $4.6 billion midway through 2015. The volume increase is attributable to program changes implemented ... [1 chart]

The CFPB recently brought an $8 million enforcement action against Clarity Services, a national credit reporting firm based in Clearwater, FL, and its owner, Tim Ranney, for allegedly obtaining consumer credit reports illegally and for failing to appropriately investigate consumer disputes. Clarity focuses on data reporting for the under-banked, near prime, and subprime consumer segments, and provides information that is not available from traditional reporting agencies. Instead, its reports are derived from a variety of financial service providers, including auto financers, check cashers, prepaid card issuers, short-term installment lenders, peer-to-peer micro lenders, small-dollar credit lenders, and online small-dollar credit lenders. “Credit reporting plays a critical role in consumers’ financial lives,” said CFPB Director Richard Cordray. “Clarity and its owner mishandled ...

The CFPB recently filed a $2.59 million federal complaint against EOS CCA, a debt collection firm based in Norwell, MA, accusing the company of reporting and collecting on old cellphone debt that consumers disputed and EOS did not verify. The company also allegedly provided inaccurate information to credit reporting companies about the debt and failed to correct reported information that it had determined was inaccurate. The bureau’s action appears to revolve around the firm’s handling of just one large portfolio. According to the CFPB, in 2012, EOS paid AT&T $35.4 million for a portfolio of more than three million cellphone accounts with a total face value of $2.3 billion. “Many of these debts were old accounts that had been previously ...

Early this month, the CFPB denied a petition made by UniRush, the program manager for RushCard, a prepaid debit card, to modify a civil investigative demand (CID) the firm had received from the bureau near the end of October. The CID seeks documents, written reports and answers to interrogatories in connection with the bureau’s investigation into whether prepaid debit card issuers, processors, card networks, service providers to prepaid debit card issuers, or other unnamed persons “have engaged in or are engaging in unlawful acts and practices in connection with the offering, operating or servicing of prepaid debit cards.” UniRush seemed to shoot itself in the foot, according to the bureau’s decision and order. The CFPB’s account of the chronology suggests ...

The more consumers complain to the CFPB about their financial services providers, the more likely those providers are to be fined, and the higher those fines are likely to be, new research suggests. For instance, lenders and other financial services providers face a 58 percent chance of being fined when complaints to the CFPB breach the 2,000 threshold for a company, according to an analysis by PerformLine, a “software-as-a-service” marketing compliance company based in Morristown, NJ. Among the other key findings were a 34 percent increase in the number of consumer complaints year-over-year since 2012, and average fines ranging from $134 million (for companies that received 2,000-10,000 complaints) to $758 million (for companies with 10,000+ complaints). Sliced another way, the ...

Standard & Poor’s rated some $84.64 billion of non-mortgage ABS issued in the U.S. during the first nine months of the year, making it the top rating service in the segment, according to a new ranking by Inside MBS & ABS. S&P was well represented in all the major ABS sectors, with its strongest showing in credit card ABS, where it rated 73.4 percent of 2015 issuance based on dollar volume. Fitch Ratings was...[Includes two data tables]

Industry analysts are generally optimistic that most of the large consumer ABS sectors will probably see a stable, positive year in 2016. However, they’re not very gung-ho about what kind of a year the government-backed student loan space is going to have. Analysts at Wells Fargo Securities think that consumer ABS should offer good relative value next year, based on solid credit fundamentals and robust structural protections. “We expect spreads to tighten in 2016 as the primary market recovers and the yield curve flattens along with Federal Reserve tightening,” they said in a recent outlook. “Spreads are likely to stay volatile and event-driven.” Further, “Weak demand and poor liquidity have been...

Search engine giant Google recently launched a new mortgage comparison tool that allows borrowers and lenders to search for the lowest rates, a development that will be carefully watched for the simple reason that, well, it’s Google. The mortgage tool is a part of Google Compare, a service that allows consumers to compare options for various products, such as credit cards and auto insurance. Though the effort is branded with Google’s name, the company has teamed up with Zillow and LendingTree to introduce this service. Compare allows...

The CFPB indicated in its recently released 2015 rulemaking agenda that it is continuing to finalize a proposal it published in December 2014 to amend certain aspects of the bureau’s 2013 mortgage servicing rules. The proposal addressed, among other things, enhanced loss mitigation requirements and compliance with certain rules when the borrower is a potential or confirmed successor in interest or is in bankruptcy. “We have been conducting testing of periodic statements for consumers in bankruptcy and are working to develop the final rule for issuance in mid-2016,” the CFPB said. The bureau also will continue working to support implementation of the multiple mortgage rules required by the Dodd-Frank Act, such as the Home Mortgage Disclosure Act rule, the integrated ...