In a pre-emptive strike against Republican critics on Capitol Hill, the CFPB announced last week that it was scrapping its performance-management system that produced some disparate-impact blowback, and was instituting a plan to compensate agency staff estimated to cost upwards of $5 million. The new report digs deeper than the bureau’s 2013 internal report that was released after allegations of discrimination and allegation at the bureau came to light back in March. “[W]e have determined that there were broad-based disparities in the way performance ratings were assigned across our employee base in both 2012 and 2013,” CFPB Director Richard Cordray said in an email to bureau staff. “These differences indicate a systemic disadvantage to various categories of employees that persisted...

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,"...

Given the expanding reach of the CFPB’s regulatory oversight wingspan, many types of entities beyond a traditional financial services company could find themselves subjected to unanticipated and unwanted scrutiny in the form of a civil investigative demand from the bureau. Attorneys at the Latham & Watkins law firm in Washington, DC, recently detailed how affected companies should plan and respond to such a demand. First, upon receipt of a CID, a company should immediately begin to develop a response plan, including an analysis of the company’s ability to respond in a timely manner. “Important response deadlines come up in a matter of days after service of a CID, so delays can impair a company’s ability to effectively respond in a ...

The Department of Housing and Urban Development is planning to auction $4.8 billion of nonperforming single-family mortgage loans in two offerings under the FHA Single Family Loan Sale (SFLS) initiative. The auction – HUD SFLS 2014-2 – will be next month. A national offering of roughly 23,200 loans totaling $4 billion in unpaid principal balance is scheduled for a bid on June 11. The second part of the auction is an offering of 4,800 loans totaling $800 million in UPB in designated geographic areas that are aimed at a neighborhood stabilization outcome or “NSO-targeted” loan pools. Bidding will be on June 25. The eight NSO regions for the June offering are Atlanta, Chicago, Detroit, Miami, Philadelphia, San Antonio, San Bernardino County, CA, and Cumberland County., NJ. SEBA Professional Services, a woman-owned contracting firm, has ...

The CFPB and the state attorneys general are well-positioned to work together and are continuing to do so, even though they have not completed efforts to strike a formal memorandum of understanding explicitly spelling out the terms of their cooperative relationship, one legal expert said recently. One of the areas in which such cooperation is continuing is in issues that affect U.S. military service members, according to attorney Clarine Nardi Riddle, who chairs the government affairs practice of the Kasowitz, Benson, Torres & Friedman law firm in Washington, DC. Riddle served from 1989 to 1991 as the first female state attorney general of Connecticut after a stint as the deputy AG in the preceding three years. “There’s a natural sweet ...

ResCap Liquidating Trust filed lawsuits last week against a number of Residential Funding’s correspondent lenders regarding alleged breaches of representations and warranties on mortgages included in non-agency MBS. The lawsuits relate to business completed before RFC’s parent company Residential Capital entered bankruptcy. RLT, which was established to liquidate and distribute the assets of the debtors in the ResCap bankruptcy case, filed 12 similar lawsuits last week seeking buybacks from Bank of America and First Republic Bank (as successors of Old First Republic), PHH Mortgage, RBC Mortgage and a number of smaller lenders. The correspondent lenders sold more than $1.52 billion in mortgages to RFC, according to the lawsuits. RLT claims...

A New York state appeals court last week shut down Morgan Stanley’s attempt to undo a lower court finding that Allstate Insurance Co.’s lawsuit over $100 million in allegedly overrated MBS had been timely filed. A five-judge panel of the New York Supreme Court Appellate Division, First Department, was not swayed by Morgan Stanley’s argument that the trial judge had erred in holding that Allstate must have had actual notice of its claims of misrepresentation by the investment bank in order for the suit to be time-barred. Allstate sued...

The mortgage lending industry caught a break recently when the CFPB proposed a much-sought “right to cure” a mortgage that would otherwise be considered a qualified mortgage under the bureau’s ability-to-repay rule, except for an inadvertent deviation from the 3 percent points-and-fees cap. The points and fees charged to a consumer on a QM loan generally cannot exceed 3 percent of the loan principal, with higher thresholds specified for various categories of loans below $100,000. If a lender believes, in good faith, that it has offered a QM but afterwards discovers that it has exceeded the 3 percent cap, the proposed rule issued by the CFPB lays out limited circumstances under which the excess can be refunded and still have...

In its first government referral, the Online Interest-Based Advertising Accountability Program last week referred SunTrust Bank Inc. to the CFPB after SunTrust allegedly refused to participate in the advertising industry’s self-regulatory process. The Accountability Program said it uses this “cooperative inquiry process” to help companies understand and comply with the cross-industry Self-Regulatory Principles for Online Behavioral Advertising. "As part of its ongoing monitoring and enforcement processes regarding website operators’ duty to provide consumers with transparency and control of OBA,” the Accountability Program said it sent a letter of inquiry to SunTrust after examining the bank’s website and observing “third parties known to be engaged in collecting consumers’ web browsing activity in order to serve them interest-based ads.” Citing the OBA...

Officials at Walter Investment Management revealed that the nonbank servicer is in talks with the CFPB and the Federal Trade Commission to settle a potential enforcement action by the federal regulators likely involving Green Tree Servicing LLC, its wholly owned subsidiary. The disclosure was made in the company’s Form 10-Q filing with the Securities and Exchange Commission late last week. Here’s the background: In response to a civil investigative demand from the FTC issued in November 2010 and a CID from the CFPB in September 2012, Green Tree Servicing produced “documents and other information concerning a wide range of its loan servicing operations,” Walter said. On Oct. 7, 2013, the CFPB notified Green Tree Servicing that bureau staff was considering...