The mortgage finance industry generally supports the final interagency statement on diversity policies and practices issued by the federal banking regulators, the Consumer Financial Protection Bureau and the Securities and Exchange Commission, but called for additional clarification on some of the data being sought in order to maximize its effectiveness – and to limit lender liability. The Mortgage Bankers Association said its members appreciate the flexibility of voluntary participation that is reflected in the final statement, but noted there remain some questions around how this voluntary information will be collected. Three key issues include how the information will be shared once it is collected, what examiners will expect to see, and how lenders should present the information to regulators. On the first question, the MBA raised...

The CFPB filed suit in federal district court late last month against NDG Enterprise, characterizing the offshore payday lender as a complex web of commonly controlled companies, and accusing the operation of collecting money consumers did not owe, in violation of the Dodd-Frank Act’s prohibition on unfair, deceptive, and abusive acts and practices. NDG Enterprise originates and collects payday loans over the Internet to consumers in all 50 states, including states such as New York where those loans are void because they violate state usury caps and licensing requirements, according to the bureau.“We are taking action against NDG Enterprise for collecting money it had no right to take from consumers,” said CFPB Director Richard Cordray. “Companies making loans within ...

The CFPB recently brought a $38.4 million enforcement action against Paymap Inc., a Colorado-based payment processing company, and a related action against LoanCare, LLC, a Virginia-based residential mortgage servicer, for allegedly deceiving consumers with advertisements for a mortgage payment program that promised tens of thousands of dollars in interest savings from more frequent mortgage payments. Specifically, the bureau determined that consumers were lured with deceptive promises of savings and misled them about when their payments would be applied. According to the bureau, the two companies together marketed and provided the “Equity Accelerator Program” – an electronic payment system that enables consumers to make automatic mortgage payments via electronic debits from their bank accounts. Consumers were usually charged a $295 enrollment fee ...

The CFPB brought a $1.6 million enforcement action against Residential Credit Solutions, Inc., a national mortgage servicing company for allegedly blocking consumers’ attempts to save their homes from foreclosure. The bureau accused the mortgage servicer of failing to honor modifications for loans transferred from other servicers, of treating consumers as if they were in default when they weren’t, of sending consumers escrow statements falsely claiming they were due a refund, and of forcing consumers to waive their rights in order to get a repayment plan. Residential Credit Solutions, based in Fort Worth, TX, has roughly $95 million in total assets. Since 2009, approximately 75,000 borrowers have had their loans transferred to the company, according to the CFPB. The company specializes ...

The U.S. Court of Appeals for the District Columbia recently issued a stay against a $109.2 million fine levied by the bureau against PHH Corp. related to the lender’s captive mortgage insurance activities. The bureau had initiated an administrative proceeding against the nonbank lender, accusing it of harming consumers through a mortgage insurance kickback scheme tied to a captive MI. A judge agreed and recommended a penalty of just $6.4 million, which the CFPB ignored and jacked up to $109.2 million, a figure the regulator argued represented all the MI premiums received after July 2008. What startled the industry was the CFPB’s decision to throw out previous guidance from the Department of Housing and Urban Development under which PHH and ...

M&T Bank is in talks with the federal government to resolve an investigation of a pre-crisis sale of FHA-insured and conforming mortgages to Fannie Mae and Freddie Mac that resulted in losses for the government-sponsored enterprises. The New York-based bank disclosed the settlement discussion in a second-quarter filing with the Securities and Exchange Commission and is cooperating with the investigation. The Department of Justice and the Department of Housing and Urban Development’s Inspector General are investigating whether M&T Bank complied with FHA’s underwriting guidelines as well as with guidelines for selling loans to Fannie and Freddie. It is unclear how much the FHA paid out in loss claims in this case but investigators said that, based upon their review of a sample of FHA loans for which a claim was paid, “some of the loans do not meet underwriting guidelines.” M&T Bank could be ...

A California federal district court’s recent decision to reject fair housing claims related to FHA loans brought by the City of Los Angeles against Wells Fargo relied heavily on the U.S. Supreme Court’s recent decision on disparate impact, according to legal experts. Specifically, the U.S. District Court for the Central District of California granted summary judgment for Wells Fargo in a Fair Housing Act case brought by the City of L.A. The suit alleged that the bank’s mortgage lending practices had a disparate impact on minority borrowers, which resulted in a disparate number of foreclosures in minority areas. Wells Fargo was accused of reverse redlining since at least 2004 by imposing different terms or conditions on minority borrowers. The suit further alleged that Wells Fargo originated eight types of “predatory” home loans targeted to minorities. These loans include “high-cost” loans, subprime loans, interest-only loans, ...

The CFPB last week finalized its earlier proposal to extend to Oct. 3, 2015, the effective date for its controversial integrated disclosure rule under the Truth in Lending Act and the Real Estate Settlement Procedures Act: the so-called TRID. “The bureau believes that moving the effective date may benefit both industry and consumers with a smoother transition to the new rule,” the CFPB said in announcing the finalization. “The bureau further believes that scheduling the effective date on a Saturday may facilitate implementation by giving industry time over the weekend to launch new systems configurations and to test systems.” Further, “A Saturday launch is also consistent with industry plans tied to the original effective date of Saturday, August 1.” The ...

The CFPB last week brought an $18.5 million enforcement action against Discover Bank and its student loan affiliates for engaging in allegedly illegal private student loan servicing practices. The bureau’s enforcement action “demonstrates how Discover failed at providing the most basic functions of adequate student loan servicing for a portion of the loans that were transferred from Citibank,” said the bureau. Thousands of consumers encountered problems as soon as their loans became due and Discover gave them account statements that overstated their minimum payment, the CFPB said. Also, “Discover denied consumers information that they would have needed to obtain tax benefits and called consumers’ mobile phones at inappropriate times to contact them about their debts.” The CFPB concluded that the ...

The CFPB and the Department of Justice resolved a $24 million enforcement action against American Honda Finance Corp. last week with a settlement that will put new measures in place to address discretionary auto loan pricing and compensation practices. The joint CFPB/DOJ investigation concluded that Honda’s policies resulted in minority borrowers paying higher dealer markups. “Honda violated the Equal Credit Opportunity Act by charging African-American, Hispanic, and Asian and Pacific Islander borrowers higher dealer markups for their auto loans than non-Hispanic white borrowers,” said the bureau. “These markups were without regard to the creditworthiness of the borrowers.” Honda’s policies also injured thousands of minority borrowers, according to the CFPB. “Honda’s discriminatory pricing and compensation structure meant thousands of minority borrowers ...