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Inside the CFPB

December 16, 2013

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QM Status Alone Not a Safety-and- Soundness or CRA Issue, Feds Say

Whether a given mortgage meets the criteria of a qualified mortgage under the CFPB’s ability-to-repay rule, in and of itself, will not be considered a safety- and-soundness issue, according to joint supervisory guidance issued late last week by federal financial regulators. Nor will QM status – or the lack thereof – be a make-or-break issue in terms of Community Reinvestment Act compliance, the feds added, echoing similar guidance issued back in October. “From a safety-and-soundness perspective, the agencies... Read More

Small Banks’ Mortgages Held In Portfolio Should Be QM, CSBS Says

The Conference of State Bank Supervisors called upon Congress to confer small creditor “qualified mortgage” status upon all mortgages held in portfolio by community banks, as part of a larger call to “right-size” federal regulations that disproportionately focus on the risks to huge institutions, at the expense of smaller institutions.One of the primary examples of regulatory relief for smaller institutions has come from the CFPB’s Small Creditor QM rule, the organization said in a white paper released last week. The small... Read More

Documentation Is Critical for QM Compliance, Legal Pro Advises

A mortgage lender’s documentation of compliance with the CFPB’s ability-to-repay qualified mortgage rule is just about as essential as compliance itself, a top industry attorney advised participants in a webinar sponsored by Inside Mortgage Finance Publications last week. And Joseph Reilly, a partner with the BuckleySandler law firm, reached into Zen lore to make his point. “If a tree falls in the forest and no one hears it, does it make a sound?” he asked. Similarly, “Starting in 2014: If a lender complies with ATR/QM but... Read More

Calling Smaller Lenders: Are You Sure You’re Ready for QM Lending?

Officials from the CFPB and the Federal Reserve held a webinar earlier this month to help small creditors understand qualified mortgage lending under the bureau’s ability-to-repay rule. To begin with, there are two special categories of QMs for small lenders, portfolio QMs and balloon QMs. Also note that the ATR rule provides additional flexibility to small lenders in that the safe harbor has been expanded to 3.5 percent over the average prime offer rate. The first step to determine eligibility – of both the lender... Read More

As Sallie Mae Seeks a Spin Off, Bureau Issues Cease and Desist

Student loan giant Sallie Mae’s plans to spin off its education loan management and consumer banking units into separate companies appear to be progressing, but could get sidetracked or shut down entirely by the CFPB, which recently slapped the firm with a cease-and-desist order. In September 2013, Sallie Mae Inc. “received a cease-and-desist order from the CFPB as part of its separate investigation regarding SMI’s payment allocation practices and procedures,” parent SLM Corp. said in a filing with the Securities and Exchange... Read More

CFPB Expands Turf With Nonbank Student Loan Servicer Rule

Last week, the CFPB issued a rule that allows the bureau to supervise for the first time the nonbank servicers of private and federal student loans that qualify as “larger participants” in the student loan servicing market. The bureau’s new rule defines as “larger participants” servicers with an “account volume” in excess of one million loans, thereby subjecting any nonbank student loan servicer that handles more than one million borrower accounts to the agency’s supervisory authority. Under the new rule, CFPB supervision... Read More

Payday Lender Petition Indicates CFPB Investigating Industry

Payday lender Checksmart Financial Company recently petitioned the CFPB to modify or set aside a civil investigative demand it received from the bureau. According to a copy of the petition, the CFPB “has commenced a nonpublic investigation ‘to determine whether payday lenders, check cashers, their affiliates, or other unnamed persons have been or are engaging in unlawful acts or practices in connection with the origination of payday loans and the cashing of payday loan proceed checks ... and whether bureau action is warranted.’”... Read More

GE CareCredit Ordered to Pay $34 Million Over Deceptive Enrollments

Last week, the CFPB ordered GE Capital Retail Bank and its subsidiary, CareCredit, to refund up to $34.1 million to potentially more than one million consumers who the bureau said were victims of deceptive credit card enrollment tactics. At doctors’ and dentists’ offices around the country, consumers were signed up for CareCredit credit cards they thought were interest free, but were actually accruing interest that kicked in if the full balance was not paid at the end of a promotional period, according to the CFPB... Read More

Preliminary Arbitration Study Faults Banks for Blocking Consumers

Last week, the CFPB released preliminary research on the use of arbitration clauses in connection with consumer financial products and services, finding that roughly nine out of 10 of such clauses in credit card and checking account agreements allow banks to prevent consumers from participating in class actions. The bureau said its research also shows that while tens of millions of consumers are subject to arbitration clauses in the markets the CFPB studied, on average, consumers filed 300 disputes in these markets each year... Read More

CFPB, In a First, Sues CashCall For Illegal Online Loan Servicing

On Monday, as Inside the CFPB was going to press, the CFPB took its first action against an online loan servicer, CashCall Inc., its owner, its subsidiary, and its affiliate, for collecting money the bureau said consumers did not owe. The CFPB alleges that the defendants engaged in unfair, deceptive and abusive practices, including illegally debiting consumer checking accounts for loans that were void. California-based CashCall, its subsidiary, WS Funding LLC, and its affiliate, Delbert Services Corp., a Nevada collection... Read More

Here’s How to Exclude Affiliate Fees from QM’s 3 Percent Cap

The Mortgage Bankers Association has put together some guidance, drawn from conversations with CFPB staff, on how to exclude affiliate fees in the points-and-fees calculation for qualified mortgages under the agency’s ability-to-repay rule, which takes effect in just a few weeks. The bureau’s ATR and Home Ownership and Equity Protection Act rules contain a cap or limit on points and fees to qualify as a QM loan and a specific points-and-fees threshold triggering HOEPA coverage. The calculation of points and fees under both of these... Read More

Agencies Finalize Exemptions to HPML Appraisal Requirements

The CFPB and five other federal financial regulatory agencies issued a supplemental final rule last week that creates exemptions from certain appraisal requirements for a subset of higher-priced, higher-risk mortgage loans. The final rule provides that loans of $25,000 or less and certain “streamlined” refinancings are exempt from the Dodd-Frank Act appraisal requirements, which go into effect on Jan. 18, 2014. In addition, the final rule contains special provisions for manufactured homes, which can present unique issues in... Read More

Worth Noting/Looking Ahead

Bureau Updates its Mortgage Rules Readiness Guide. Last week, the CFPB released updates to its Mortgage Rules Readiness Guide in connection with the new mortgage regulations issued in January 2013 and amended through Oct. 15, 2013. The update offers financial institutions and other industry participants guidance on how to evaluate their readiness for complying with the 2013 mortgage rule changes. The updated guide incorporates changes made to Regulation Z, the implementing regulation for the Truth in Lending Act, and to... Read More

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