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Inside the CFPB

November 16, 2015

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CFPB Fleshes Out its Arguments Against PHH in Brief to Court

With the mortgage lending industry’s use of marketing services agreements under the Real Estate Settlement Procedures Act likely hanging in the balance, the CFPB detailed its anti-kickback legal arguments against PHH Corp. and its mortgage units in its “reply” brief with the U.S. Court of Appeals for the District of Columbia, filed earlier this month. In PHH Corp., et al., v. CFPB, the first main argument the bureau made is that PHH violated RESPA Section 8(a) because it entered into agreements with mortgage insurers so that whenever an insurer received a referral from PHH, the insurer paid PHH a kickback in the form of premiums for mortgage reinsurance. “PHH thus committed a separate violation every time it accepted a kickback ... Read More

OCC to Begin Examining for TRID Compliance Shortly

The Office of the Comptroller of the Currency informed lenders recently it will soon start examining banks for their compliance with the Truth in Lending Act and Real Estate Settlement Procedures Act Integrated Disclosure rule, and issued some updated guidance to help institutions get ready. In OCC Bulletin 2015-42, the agency said during initial examinations for compliance with the rule, OCC examiners will be evaluating a bank’s compliance management system and overall efforts to come into compliance, “recognizing the scope and scale of changes necessary for each bank to achieve effective compliance.”Further, the OCC said, “Examiners expect banks to make good faith efforts to comply with the rule’s requirements in a timely manner. Specifically, examiners are considering the bank’s ... Read More

CFPB Sees More Problems With Originations, Servicing Improves

The CFPB continues to see a host of noncompliance issues with mortgage lenders – but some notable improvement on the servicing side of the industry too. According to the CFPB’s latest supervisory highlights report, the bureau cited a range of problems lenders are having originating mortgages. For instance, regulators saw evidence of failing to fully comply with the requirement that charges at settlement not exceed amounts on the good faith estimate by more than specified tolerances. Some lenders also are failing to fully comply with requirements for completion of HUD-1 settlement statements, to provide homeownership counseling disclosures, or to provide accurate loan servicing disclosure statements. Other lenders are not complying with consumer financial information privacy requirements, the report indicated. In other ... Read More

Bureau Plan for Overdraft Survey Evades Transparency, ABA Says

The CFPB’s proposed plan to study overdraft protection services for ATM/debit cards suffers from a process that is “defective and opaque,” according to the American Bankers Association, which urged the bureau to re-submit its proposed plan with a draft survey. Back in September, the CFPB solicited public comment as it seeks authorization from the White House Office of Management and Budget to carry out a national online survey of 8,000 individuals as part of its review and analysis of ATM/debit card overdraft disclosure forms. “ABA fully supports the bureau’s interest in conducting a quantitative survey of consumers to understand their use of overdraft services, as well as on their comprehension and decision-making regarding overdraft disclosure forms,” said the trade group ... Read More

CFPB Ban on Arbitration Clauses Poses Risks for Lenders: Moody’s

The recent anti-arbitration announcement from the CFPB would create risks for consumer lenders and related asset-backed securities, according to a report from Moody’s Investors Service. Specifically, the bureau indicated it is contemplating instituting a ban on provisions in financial contracts that prohibit consumers from participating in class-action litigation. The agency is also considering whether to mandate that companies that include such arbitration clauses regularly submit to the CFPB information related to arbitration proceedings, possibly for release to the public. Such changes could end up driving more class-action litigation against lenders and servicers, a number of which play essential roles in the securitization process, analysts at Moody’s said. “The proposals, if adopted, would affect financial products including credit cards, automobile loans, ... Read More

Bureau Again Rejects Auto Dealer Industry FOIA Request for Docs

For the second time in four months, the CFPB has rejected a Freedom of Information Act request from the auto dealer industry to make public a number of leaked agency documents that are said to undermine the bureau’s assertions that it is not trying to regulate auto dealers. The CFPB’s latest rejection came in response to a FOIA request filed last month by the National Automobile Dealers Association, asking the CFPB to release internal documents leaked to the news media apparently acknowledging that the agency intended to regulate the auto finance market through enforcement action. Further, the documents are said to have revealed that the bureau eschewed evidence that its methods for estimating disparate impact in the auto finance sector ... Read More

District Court Rules in Favor of Anonymity in Challenging a CID

Industry recipients of a civil investigative demand (CID) from the CFPB may have been given a new way to cope, thanks to a recent decision from the District Court for the District of Columbia. In John Doe Company No. 1 v. CFPB, the target of a CFPB investigation brought an injunctive action against the agency seeking a temporary restraining order and a motion to seal the case. John Doe Company No. 1 asserted that sealing the case was justified on two grounds, the first of which is that bureau investigations are usually conducted confidentially. Further, sealing would protect the company from the harm that would result from the negative publicity if the CFPB’s ongoing investigation was made public. In coming ... Read More

Five OIG Reviews of CFPB Slated For Completion in First Quarter

The CFPB Office of Inspector General plans to complete one audit, two evaluations and two reviews of the bureau during the first quarter of 2016, according to the OIG’s latest work plan, released early this week. First on the list is an audit of the CFPB’s space-planning activities, largely in response to the bureau’s renovation of its headquarters building. “We will determine whether the CFPB has established adequate controls to properly manage its space needs and whether the CFPB is complying with applicable requirements,” the OIG said. Next is an evaluation of the CFPB’s coordination with external organizations to implement targeted consumer education. “We are assessing the effectiveness of the CFPB’s coordination with external organizations to implement consumer education efforts ... Read More

Consumer Complaints About Debt Collection Fall in 3Q15

Consumer complaints about debt collectors appear to be improving somewhat, according to the latest analysis by Inside the CFPB of data submitted to the bureau. Gripes were down 9.4 percent during the third quarter, but off a barely perceptible 0.3 percent at the nine-month mark versus a year ago. Many of the top 50 companies ranked by number of complaints saw drops of double digits during the period ending Sept. 30, 2015, whereas a handful of companies saw consumer grumbling rise by triple digits year over year. In some instances, however, both dynamics occurred at the same company, the data show.Complaints about collection attempts were the leading consumer criticism, followed by disclosure verification and communication tactics. Supervisory Illustrations On... Read More

In Brief: Life Under TRID/Also Worth Noting

Buyer Agents Report Delays in Closing, Thanks to TRID. One month into the CFPB’s Truth in Lending Act/Real Estate Settlement Procedures Act Integrated Disclosure (TRID) rule, some real estate closings are already being affected, according to a recent survey conducted by the National Association of Exclusive Buyer Agents. The survey went out to brokers across the U.S. and nearly 20 percent said they are already seeing issues, mostly delays in closing. According to one respondent, “Lenders are almost all asking for 45 days to closing versus the previous 30 days.” Another respondent stated, “We’ve been advised to prepare for further delays until everyone has more experience with the new CFPB/TRID regulations.” “At NAEBA, we applaud the CFPB for its efforts ... Read More

Other News In Brief

Are Home Builders Next on the CFPB’s MSA Hit List? Lender anxiety tied to the CFPB’s crackdown on marketing services agreements is reaching a new fever pitch these days, while spreading to other sectors of the housing finance industry, namely home builders and Realtors. Industry officials interviewed by Inside Mortgage Finance, an affiliated newsletter, recently said title insurance affiliates owned by Realtors and home builders are a particular area of concern – namely pushing customers into using service providers in which they have an ownership stake. “I’ll tell you where the RESPA [Real Estate Settlement Procedures Act] violation is – it’s pressing customers into using their title company,” said one trade group executive. “The idea is that the consumer gets to pick ... Read More

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