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Inside the CFPB

December 12, 2016

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PHH, Solicitor General to Respond to CFPB Appeals Court Directive

PHH Corp. has until Dec. 22, 2016, to respond to an order by the District of Columbia Circuit Court of Appeals related to its battle with the CFPB over alleged violations of the Real Estate Settlement Procedures Act. The appeals court had directed the lender to reply to the bureau’s petition for an en banc rehearing of the recent ruling by a three-judge panel of the court. Back in October, the panel determined that two aspects of the CFPB’s structure – the dismissal of the director of the agency only for cause and the single directorship as opposed to a multi-member bipartisan commission – were unconstitutional. Additionally, the judges found in favor of the company’s arguments, among others, around the correct interpretations ... Read More

Democrat Lawmakers, Advocates File Briefs in Support of CFPB

Current and former Democrat members of Congress recently submitted a joint brief to the D.C. Circuit Court of Appeals in support of an en banc rehearing in the PHH Corp. v. CFPB case, including Dodd-Frank drafters and supporters, such as one of the bill’s namesakes, former Rep. Barney Frank, along with Sen. Elizabeth Warren, both from Massachusetts. The lawmakers argued that this case presents “a question of exceptional importance” and requires an en banc rehearing because the three-judge panel’s decision restructures the CFPB in a way that conflicts with Congress’s legislative plan. “By severing the for-cause removal provision, the panel decision fundamentally altered the CFPB’s structure in a way that is at odds with Congress’s design and will undermine the ... Read More

CFPB Fines Reverse Mortgage Firms for Deceptive Advertising

The CFPB last week fined three reverse mortgage lending companies for allegedly deceptive advertisements, including claiming that consumers could not lose their homes. The CFPB ordered American Advisors Group (Orange, CA), Reverse Mortgage Solutions (Houston), and Aegean Financial (El Segundo, CA) to cease their allegedly deceptive advertising practices, implement systems to ensure they are complying with all laws, and pay civil penalties. The bureau claimed that the companies ran ads that misrepresented that consumers could not lose their homes and that they would have the right to stay in their homes for the rest of their lives. The companies also were accused of falsely telling potential customers that they would have no monthly payments and that a reverse mortgage would ... Read More

CFPB Issues New Exam Procedures for Reverse Mortgage Servicing

The CFPB recently ditched the antiquated method for assessing compliance with reverse mortgage servicing rules in favor of new examination procedures. Depending on the scope, each reverse mortgage servicing exam will include one or more of eight modules. Subject areas represented by separate modules include servicing transfers, loan ownership transfers and escrow disclosures; account maintenance, payments and disclosures; consumer inquiries, complaints and error resolution procedures; and maintenance of escrow accounts or set-asides and insurance products. Other module segments address information sharing and privacy; events of default and death of borrower; foreclosures; and examiner conclusions and wrap-up. The revised guidance reminds CFPB personnel of their examination objectives, one of which is to identify acts or practices that materially increase the risk ... Read More

TRID 2.0: The Comments: Clarifying Proposal Doesn’t Address Secondary Market Anxieties

The TRID 2.0 clarifying rulemaking proposal fails to alleviate most of the concerns that investors in the secondary mortgage market have about their potential legal liability, according to Pacific Investment Management Company. In its recent comment letter to the CFPB, PIMCO noted, “In most cases, the errors that relate to the [TRID] disclosures are subtle and technical in nature and do not result in corresponding consumer harm or confusion. Nevertheless, because the … rules implement provisions of the Truth in Lending Act that may carry actual or statutory damages and assignee liability to purchasers, there are serious concerns among secondary purchasers due to the rules’ expansion of liabilities in mortgage origination and investing.” Moreover, asset managers and other loan purchasers ... Read More

TRID 2.0: The Comments: Urgent TRID Issues Still Must be Addressed, Trade Group Says

Although the CFPB said it was not going to revisit the TRID rule in its entirety when it issued its clarifying rulemaking earlier this year, a number of industry players were still disappointed that more problems were not dealt with. At the top of a list provided by the Community Mortgage Lenders of America of issues that still need to be addressed is loans submitted by mortgage brokers. “An issue that continues to vex the industry is how to treat loans from mortgage brokers that are submitted following rejection by another lender,” the trade group said. “As is typically the case, the submission of a loan to a wholesale lender by a mortgage broker, following rejection of the same loan ... Read More

Industry’s TRID Improvements Bring Loan Defects Down in Second Qtr.

TRID-related mortgage defects dropped slightly during the second quarter of 2016, the first decline since the rule kicked in Oct. 3, 2015, ARMCO, a risk management technology vendor, said in a new quality control analysis. “TRID-related defects continue to be the leading area of concern in post-closing reviews; however, corrective action planning taken by the lending community has produced positive results that can now be visualized in the 2Q data,” said Phil McCall, chief operating officer at the company. According to the report, the overall critical defect rate dropped to 1.63 percent for the period ending June 30, 2016, the most recent period for which relevant data were available, thus ending the upward swing that stretched back to 3Q15. The ... Read More

Mortgage Complaints Drop 8.2 Percent From Last Year

Consumer complaints to the CFPB about their mortgages fell by 8.2 percent in the August to October 2016 period compared to the same time frame a year ago, according to a new report from the CFPB. The bureau registered 11,587 borrower gripes about mortgages during the August-October 2015 period, the agency’s latest monthly consumer complaint report indicates. One year later, that total had fallen to 10,642. Criticisms about virtual currency dropped even more, by 66.7 percent, and those related to prepaid accounts plunged further by 67.2 percent. That being said, mortgage complaints are still among the top three topics the bureau receives gripes about, after debt collection and credit reports. (With one data graph and two data charts.) Read More

Short-Term Bank Statement Loans May Lead Lenders Astray of ATR

Mortgage programs that use less than 24 months of bank statements to verify a borrower’s ability to repay back a loan are riskier than more traditional mortgages and may be prone to running afoul of the CFPB’s ATR rule, according to a new report from Moody’s Investors Service. “Although longer-term bank statement programs would likely satisfy the CFPB’s ATR rule, short-term programs may not,” analysts at Moody’s said. “To fully understand cashflow patterns typical of the borrower’s line of work, the longer the track record, the better,” they added. “The fewer statements a program requires, the higher the likelihood for inconsistencies in the calculation of available income from loan-to-loan.” Under the ATR rule, as Moody’s noted, the originator is required ... Read More

Compliance Guidance Warns Lenders About Sales Incentives

In the wake of the Wells Fargo scandal involving the creation of unauthorized deposit and credit card accounts, the CFPB has issued a warning to lenders about the risks consumers face from improperly managed sales incentives. In CFPB Compliance Bulletin 2016-03, Detecting and Preventing Consumer Harm from Production Incentives, the bureau remarked, “The risks these incentives may pose to consumers are significant and both the intended and unintended effects of incentives can be complex, which makes this subject worthy of more careful attention by institutional leadership, compliance officers, and regulators alike.” For instance, “Such incentives may lead to outright violations of federal consumer financial law and other risks to the institution, such as public enforcement, supervisory actions, private litigation, reputational ... Read More

Other News in Brief

CFPB Issues Small Entity Compliance Guide for Its Mortgage Servicing Final Rule. The Consumer Financial Protection Bureau has published an updated version of its Small Entity Compliance Guide for its 2016 mortgage servicing final rule, incorporating amendments made to mortgage servicing provisions in Regulation X and Regulation Z. ... Bureau, Other Regulators, Hold Exemption Threshold for Appraisals for Higher-Priced Mortgage Loans Steady. The CFPB, the Federal Reserve and the Office of the Comptroller of the Currency decided to maintain at $25,500 the exemption threshold for appraisals for higher-priced mortgage loans under the Truth in Lending Act (Regulation Z). ... Read More

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