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Inside the CFPB

November 7, 2011

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Wells Fargo Gets Tagged on Multiple Fronts

Life isn’t getting any easier for mortgage lending giant Wells Fargo when it comes to litigation. The top-ranked mortgage lender through the first nine months of the year took a couple of high-profile shots in just the last two weeks or so. Last week, Illinois’s Cook County Judge Carolyn Quinn gave the green light to a suit filed by state Attorney General Lisa Madigan against Wells, which accuses the lender of offering financial incentives to employees to put minority borrowers who qualified for prime mortgages into subprime loans during the 2005-2007 time frame. Illinois has a similar axe to grind against Countrywide Financial Corp., which was acquired by Bank of America Corp. three years ago. Read More

Delaware AG Sues MERS, Alleges Deception

Despite its fairly impressive success rate in fending off hostile litigation, MERSCorp and its Mortgage Electronic Registration Systems remain popular targets. This time around, it’s Delaware Attorney General Beau Biden filing suit in Delaware Chancery Court against them, alleging repeated violations of the state’s Deceptive Trade Practices Act. “Since at least the 1600s, real property rights have been a cornerstone of our society,” said AG Biden. “MERS has raised serious questions about who owns what in America. A man or woman’s home is not just his or her largest investment, it’s their castle. Rules matter. A homeowner has the obligation to pay the mortgage on time, and lenders must follow the rules if they are seeking to take away someone’s house through foreclosure. The honor system won’t work.” Read More

Foreclosure Settlement Price Tag Reportedly Reaches $25 Billion

The nation’s five largest mortgage servicing companies now face a tab of $25 billion to bring to a conclusion the long-running negotiations with the state attorneys general over industry foreclosure practices, according to published reports of the latest behind-the-scenes developments. The deal with the big five servicers – Ally Financial Inc., Bank of America Corp., Citigroup Inc., JPMorgan Chase & Co. and Wells Fargo & Co. – is now said to include $5 billion in cash penalties, along with the requirement to produce $3 billion in mortgage refinances. Other aspects of the settlement are said to include principal reductions and other forms of aids to struggling homeowners. The top servicers would be released from certain claims having to do with loan servicing and origination, according to the reports – but to what extent exactly remains unclear. And there would be no release from claims related to mortgage securitization. Read More

Independent Foreclosure Review Process is Now Underway

Last week, the 14 mortgage servicers covered by the enforcement actions taken by the banking regulators in April 2011 began mailing letters to eligible borrowers that explain how to request a review of their case if they believe they suffered financial injury as a result of errors, misrepresentations or other deficiencies in foreclosure proceedings related to their primary residence between Jan. 1, 2009, and Dec. 31, 2010. Borrowers may also visit www.IndependentForeclosureReview.com for more information about the review and claim process. Assistance with requesting a review and answers to questions about the process are available. Requests for review by the servicers’ independent consultants must be received by April 30, 2012. As part of the enforcement actions taken by the Federal Reserve, the Office of the Comptroller of the Currency and the Office of Thrift Supervision, the servicers had to correct deficiencies in their servicing and foreclosure processes and to enlist independent firms to conduct a multi-faceted independent review of foreclosure actions taken during 2009 and 2010. Read More

HARP 2.0 Provides Lenders With More Non-Recourse Protection

The Federal Housing Finance Agency late last month announced a number of changes to the federal government’s Home Affordable Refinance Program for underwater borrowers with mortgages from Fannie Mae and Freddie Mac. But one important little detail that escaped the attention of many has to do with the borrower loss of non-recourse loan protections for borrowers who refinance. Millions of Americans live in states that have such protections that could keep them from being personally liable in the event of a default. But in many of these states, refinancing removes those protections – enabling a lender to pursue tens or hundreds of thousands of dollars more than they would legally have been entitled to without the refinance. Read More

CFPB to Begin Review of Inherited Regulations Later This Month

Treasury Special Advisor Raj Date, the acting head of the Consumer Financial Protection Bureau, told lawmakers last week that the bureau will begin a review later this month of the federal regulations it inherited that affect consumers and financial firms to identify those that may be “obsolete, unnecessary, redundant or counterproductive.” The goal is to update and streamline the regulations, Date told the House Financial Services’ Financial Institutions Subcommittee during a hearing on the first 100 days of the CFPB. “One of the bureau’s central responsibilities is to identify and address outdated, unnecessary or unduly burdensome regulations,” the agency chief said. “The bureau has a unique opportunity to streamline and simplify rules to ensure that they are truly making consumer financial markets work better.” Read More

CFPB Disclosure Prototypes Not in Step With Latest Tech, CMC Says

The prototype mortgage disclosure forms that the Consumer Financial Protection Bureau has been testing are getting generally positive responses for their content and overall design. But they aren’t well suited for the ways in which consumer shopping is adapting to modern technology, according to the Consumer Mortgage Coalition. “Recently, software available on mobile web access devices such as smartphones and tablets has streamlined the home and mortgage shopping process,” the CMC pointed out in its comments on round 5 of the CFPB’s integrated consumer mortgage disclosure project. “This technology is evolving rapidly ... [and] the amount of information available to consumers will continue to increase rapidly in the future.” Given this reality, it does not appear that the Loan Estimate disclosure will be used as a shopping tool because the consumer will have finished shopping by the time they apply for a loan. Read More

CFPB Seeks Comment on New Models, Forms, Disclosures, Etc.

Last week, the Consumer Financial Protection Bureau again asked for industry and public input – this time as it works to collect information for the development and testing of new and existing model forms, disclosures, tools and similar related materials. “The core objective of the data collection is to help identify, evaluate, and refine specific features of the content or design of the model forms, disclosures, tools, and other similar related materials to maximize communication effectiveness while minimizing compliance burden,” the bureau said in its notice in the Nov. 2, 2011, Federal Register. The CFPB plans to gather qualitative data through a variety of methods to inform its staff’s design, development and implementation of the model forms, using an iterative process to improve the draft forms Read More

State Roundup

California. The state Department of Real Estate has put into play new rules on disciplinary actions against real estate licensees, effective Oct. 26, 2011. The rules establish the authority by which the DRE can issue an order of suspension or debarment per the Business and Professions Code. They also make clear that an individual who receives a notice of intention to issue an order of suspension or debarment cannot engage in any real estate-related business activity that is regulated under the authority of Division 4 of the state BCP. Further, anyone debarred is prohibited from engaging in any real estate-related business activity of a finance lender or residential mortgage lender. The new rules also require real estate brokers to vet their employees and regular business associates who participate in real estate-related business to ensure they are not subject to an order of suspension or debarment. Read More

Federal Roundup

The Financial Crimes Enforcement Network.GSE anti-money laundering, SARs reporting proposed. The Financial Crimes Enforcement Network proposed regulations that would require Fannie Mae, Freddie Mac and the Federal Home Loan Banks to develop anti-money laundering programs and file suspicious activity reports with FinCEN. The government-sponsored enterprises currently file fraud reports with their regulator, the Federal Housing Finance Agency, which then files SARs with FinCEN when the facts in a particular fraud report warrant a SAR under FinCEN’s reporting standards. Read More

Worth Noting

A white paper put together by a researcher at the Federal Reserve looks into what determines whether federal and state supervisors examine state banks independently or together. The results suggest that supervisors coordinate examinations in order to support states with lower budgets and capabilities and more banks to supervise. “I find that states with larger budgets examine more banks independently, that they accommodate changes in the number of banks mostly through the number of examinations with a federal supervisor and that, when examining banks together, state banking departments that have earned quality accreditation are more likely to write conclusion reports separately from federal supervisors,” researcher Marcelo Rezende said. The results also indicate that regulation affects supervision by changing the characteristics of banks. “Independent examinations decrease with branch deregulation, which is consistent with the facts that this reform consolidated banks within fewer independent firms and that state and federal supervisors are more likely to examine large and complex institutions together,” said Rezende. Read More

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