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Inside the CFPB

May 14, 2012

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CFPB Taking on Origination Points and Fees

Mortgage originator compensation has moved clearly into the crosshairs of the Consumer Financial Protection Bureau as part of a broader proposed rule expected soon that will also address originator qualifications as well as the paying of discount points and fees. Senior CFPB officials briefed the press last week on their plans, which will be shared in greater detail sometime next week with a group of small businesses related to the mortgage lending industry per the Small Business Regulatory Enforcement Fairness Act. The act requires the bureau to convene a small business panel... Read More

Industry Challenges CFPB on TILA Case

Three mortgage lending industry groups have challenged the position of the Consumer Financial Protection Bureau in a key Truth in Lending Act case by asserting that borrowers must file a lawsuit within three years of a mortgage loan’s signing in order to exercise their right of rescission. As far as the industry is concerned, the crux of the dispute in Rosenfield v. HSBC Bank, No. 10-1442, currently before the 10th District Court of Appeals, is whether borrowers who notify lenders of their intent to rescind must also sue their lenders within three years. TILA gives certain... Read More

Top Mortgage Servicer Disputes CFPB Position in FDCPA Lawsuit

The Consumer Financial Protection Bureau has sided with borrowers in an appeals case being brought under the Fair Debt Collection Practices Act, Birster v. American Home Mortgage Servicing, Inc., which is currently before the 11th Circuit Court of Appeals. The FDCPA prohibits debt collectors from using certain means to collect debts and from engaging in certain conduct in connection with the collection of a debt. In order for a plaintiff to successfully sue under the act, he or so must show two things: that the defendant is in fact a debt collector under the law, and the behavior... Read More

Appeals Court Rules Servicer Can Be Sued as a Debt Collector

In Bridge v. Ocwen Federal Bank, FSB, the U.S. Court of Appeals for the Sixth Circuit recently ruled that a pro se plaintiff stated a Fair Debt Collection Practices Act claim against a mortgage servicer where the mortgage was not actually in default, reversing the district court’s dismissal. The court came to the conclusion that the mortgage servicer and the purchaser of the mortgage came under the scope of the FDCPA because the mortgage servicer treated the mortgage as if it were in default and tried to collect on it as a debt that was in default. In Bridge, the homeowner... Read More

Borrower Only Needs to Notify Lender of Intent to Rescind

In Gilbert v. Residential Funding LLC, the U.S. Court of Appeals for the 4th Circuit became the first federal appellate court to rule that a borrower only needs to send notice of rescission within the three-year period to exercise a valid right to rescind. In this case, the borrowers are appealing a district court’s dismissal of their claim that Deutsche Bank Trust Company Americas, as trustee for Residential Accredit Loans, Inc., Residential Funding LLC and GMAC Mortgage LLC, violated various consumer protection laws in connection with a refinance mortgage the borrowers secured... Read More

Concerns About Dodd-Frank and Federal Preemption Overblown

Industry and legal concerns that enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act made substantial changes to the federal preemption landscape are “much ado about nothing,” according to two legal scholars at the law firm Barnett Sivon & Natter PC in Washington, DC. In a scholarly work scheduled for publication in the Virginia Law and Business Review this fall, the pair addresses the view of some commentators that the Dodd-Frank Act changed the standard used to determine if a state law is preempted. Some have felt that state law is only preempted if the law... Read More

Industry Makes Fresh Push to Change Point, Fee Calculation

Mortgage bankers and brokers are making a fresh push to support H.R. 4323, the Consumer Mortgage Choice Act, legislation that would change the way points and fees are calculated under the Qualified Mortgage definition in the Dodd-Frank Act. Trade groups representing these segments of the industry have made new appeals to their members recently to reach out to their respective lawmakers and garner their support for the legislation. The Consumer Mortgage Choice Act would spell out that affiliate title fees, certain loan originator compensation, and escrow payments are not included... Read More

House GOP Members Press Cordray for CFPB Budget Details

Three Republicans on the House Committee on Financial Services again pressed Consumer Financial Protection Bureau Director Richard Cordray for additional information regarding the agency’s budget, even though Congress does not control the bureau’s purse strings. The Republicans’ justification in pressing the issue is that the bureau’s budget affects the national debt while that of the other non-appropriated federal banking regulators do not. Noting the rising of the federal government’s budget deficit and the fact that the CFPB is funded by the Federal Reserve, the lawmakers... Read More

State Roundup

Kansas. Judge Robert Berger of the U.S. Bankruptcy Court for the District of Kansas ruled in three decisions late last month that a mortgage naming Mortgage Electronic Registration Systems, Inc., as mortgagee is valid and enforceable, upholding MERS’ role as agent for its members. Judge Berger’s rulings in In re Van Nostrand, In re Huerter and In re Wilkinson found that there was no splitting of the mortgage and note because MERS held the mortgage on behalf of the note owner. “The MERS system has been scrutinized and analyzed by other courts, and, provided MERS can produce a complete... Read More

Federal Roundup

Consumer Financial Protection Bureau.Director Acknowledges There Is Doubt About His Appointment. Richard Cordray, President Obamafs choice as director of the Consumer Financial Protection Bureau, acknowledged in a memo to staff earlier this year that there was some doubt about the validity of his recess appointment, Inside Regulatory Strategies has learned. gThere is a chance (a minor chance in my view, though everyone is entitled to his or her own opinion) that the appointment would be invalidated by a court,h Cordray said in a Feb. 6, 2012, gdear colleagueh... Read More

Worth Noting

Law firm Davis Polkfs latest progress report on the Dodd-Frank Wall Street Reform and Consumer Protection Act shows that a total of 221 Dodd]Frank rulemaking requirement deadlines (55.5 percent) have come and gone, with 148 (67 percent) having been missed and 73 (33 percent) having been met with finalized rules, as of May 1. Regulators have yet to issue proposals for 21 of the 148 missed rules. gOf the 398 total rulemaking requirements, 108 (27.1 percent) have been met with finalized rules, and rules have been proposed that would meet 146 (36.7 percent) more, the report went... Read More

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