The CFPB’s proposal to reduce regulatory uncertainty for financial innovation through the selective use of “no-action” letters is based on a good idea but is likely to fail to meet its objective unless important changes are made, according to three industry trade groups. For instance, when it comes to submitting requests for a “no-action” letter, the set of products and services to which the bureau’s proposal may apply is difficult to identify, the American Bankers Association, the American Bankers Insurance Association and the Consumer Bankers Association said in a joint comment letter to the regulator. “On the one hand, the proposal requires that the product must not be well established; on the other, it may not cover ‘hypothetical products that ...

The CFPB’s second report to the appropriations committees of both the U.S. Senate and the House of Representatives suggests the bureau has a full plate when it comes to enforcement-related probes of financial services providers. For instance, “Investigations currently underway span the full breadth of the bureau’s enforcement jurisdiction,” the report stated. “Further detail about ongoing investigations will not generally be made public by the bureau until a public enforcement action is filed.” Elsewhere, the report reminded lawmakers that the bureau was a party in 41 public enforcement actions from Oct. 1, 2013, through Sept. 30, 2014, the period covered by the report, and it proceeded to highlight all of them.However, not all of them have been settled, such ...

Despite reduced guaranty limits in more than 80 counties, recent changes to the VA mortgage limits in 2015 will have no material impact on veteran borrowers or hurt credit availability, according to industry analysts. In enacting the omnibus spending bill, Congress reduced the maximum size of mortgages guaranteed by the VA, matching it to the $625,500 high-cost loan limits for Fannie Mae, Freddie Mac and FHA. The change took effect on Jan. 1, 2015, affecting 82 counties, some seeing as much as a 40 percent reduction in the VA loan limit. For example, loan limits in the New York area fell by 36.1 percent and in the Washington, DC, area, lenders saw a 9.7 percent decline, according to estimates by the Urban Institute. The VA home loan program does not require a downpayment and the guaranty is limited to 25 percent of the loan amount. In certain cases, the program allows a veteran to ...

The FHA rarely talks about its lender and loan review process in detail but in the latest issue of Lender Insight the agency discusses how it is done and how it selects targets for each review. FHA’s overall counterparty quality-control efforts are divided into lender-monitoring reviews, nonperforming loan reviews, post-endorsement technical reviews of performing loans, post-endorsement technical reviews of early payment defaults (EPD), early cohort claim reviews and lender self-reports. For lender-monitoring reviews, the FHA uses a targeting methodology that takes into account loan volume, default/claim rates, participation in specific FHA loan programs, servicer loss-mitigation performance and certain other factors. Loans are selected to determine compliance with FHA requirements. The Quality Assurance Division (QAD) in the Department of Housing and Urban Development’s Single-Family ...

The FHA has temporarily suspended publication of its Quarterly Loan Review Findings Report, which contains the results of all post-endorsement technical reviews (PETRs) conducted by the FHA during a particular quarter. The suspension will give the FHA sufficient time to “recalibrate how the report is run” as well as improve the report, the agency explained. The report is currently published in Lender Insight, a quarterly publication that contains information from the FHA’s Office of Lender Activities and Program Compliance. Specifically, the report contains charts that divide PETRs findings into five main categories. Each chart lists the top five underwriting errors in each category for each review period. The FHA said it is working to display the results in a more user-friendly, actionable manner. It did not say when the quarterly report will be ...

In another example of multi-agency, multi-jurisdictional legal action, the CFPB and Florida’s Attorney General Office brought an enforcement against two student debt-relief companies accused of tricking borrowers into paying upfront fees for federal loan benefits. “We allege that both companies exploited vulnerable student loan borrowers, made false promises about their debt-relief services, and charged illegal upfront fees,” said CFPB Student Loan Ombudsman Rohit Chopra. The bureau and the Florida AG shut down Tampa-based student loan debt-relief company College Education Services, and its owners, Marcia Elena Vargas and Frank Liz, for allegedly scamming students into paying upfront fees for student loan debt consolidation, loan forgiveness, and relief from garnishments, services that were never provided or not performed as promised, according to ...

The CFPB sued a Dallas-based company, Union Workers Credit Services, for allegedly deceiving consumers into paying fees to sign up for what it advertises to be a general-use credit card that actually can only be used to buy products from the company. “The business model for Union Workers Credit Services is built on duping consumers into signing up for a sham credit card,” said CFPB Director Richard Cordray. “Hundreds of thousands of people, including a great many union members who were specially targeted, have been tricked into spending millions of dollars for a so-called credit card that can really only be used to buy the company’s own products, ” he added. “From the misleading photos of nurses and firemen on ...

Different segments of the financial services industry are split on the CFPB’s proposal to implement a limited “no-action letter” policy to reduce the regulatory uncertainty that may exist for certain emerging products or services which stand to benefit consumers. The proposed policy would allow bureau staff to send a no-action letter to a company informing it that the CFPB isn’t planning to recommend initiation of supervisory or enforcement action in connection with a firm’s offering or provision of a new product. As innocuous as that sounds, at least one firm, International Bancshares Corp. of Laredo, TX, said it had serious concerns with the bureau’s proposal, which the company characterized as very narrow.Among the company’s complaints is that the bureau’s ...

The Mortgage Bankers Association this week declined to participate in a panel discussion on FHA hosted by the American Enterprise Institute because the trade group did not believe the discussion would be balanced and though it would favor only a certain point of view. The topic was “FHA from 1934 to 1938: Lessons for Wealth Building,” with Ed Pinto, a resident fellow at AEI, and Dave Stevens, MBA president, as presenters. Stevens, however, decided to pull out of the event when he saw the format. In a letter to the AEI organizers, Stevens said he agreed to be a presenter thinking the debate “would be a balanced approach.” “When I first agreed to do this, I did not expect that the format would be 45 minutes of [Ed Pinto] and then no more than 12 minutes for me to respond,” he wrote. “That’s an extremely lopsided approach that did not appear to be ...

Toyota Motor Credit Corp., the captive finance arm of Toyota, recently revealed that it has received a letter from the CFPB and the Justice Department alleging that certain practices related to discretionary dealer markup resulted in discriminatory lending aimed at minorities and low-income borrowers. In a recent Form 8-K filing with the Securities and Exchange Commission, TMCC said the agencies have requested certain information about the company’s purchases of auto finance contracts from dealers as well as related discretionary pricing practices. “On Nov. 25, 2014, we received from the agencies a letter alleging that such practices resulted in discriminatory pricing of loans to certain borrowers in contravention of applicable laws, and informing us that they are prepared to initiate an ...