InfoBytes Blog
Filter
Subscribe to our InfoBytes Blog weekly newsletter and other publications for news affecting the financial services industry.
CFPB releases TRID FAQs
On January 25, the CFPB released FAQs to assist with TILA-RESPA Integrated Disclosure Rule (TRID) compliance. Three of the four FAQs relate to corrected closing disclosures and the three business-day waiting period, while the fourth FAQ relates to the use of model forms. Highlights of the FAQs include:
- Under TRID, a creditor must ensure that a consumer received a corrected Closing Disclosure at least three business days before consummation of the transaction (i) for certain APR changes; (ii) if the loan product information changes; or (iii) if a prepayment penalty has been added to the loan. Any of these changes would trigger a new three business-day waiting period.
- A corrected Closing Disclosure is required under TRID if the APR changes, including if it decreases. If the change in the APR is within applicable tolerances under Regulation Z, the creditor may provide the new Closing Disclosure without triggering a new three business-day waiting period. If the change in the APR is outside applicable tolerances, the creditor must wait three business days before consummation.
- Section 109(a) of the Economic Growth, Regulatory Relief, and Consumer Protection Act did not change the timing for consummating transactions if a creditor is required to provide a corrected Closing Disclosure under TRID.
- A creditor is deemed in compliance with the disclosure requirements of TRID if it uses the appropriate model forms provided by the Bureau and properly completes them with accurate content.
CFPB releases complaint snapshot on mortgages
On January 29, the CFPB released a report on mortgage complaints, and a corresponding blog post, which provide a high-level overview of the mortgage complaints received by the Bureau during the last 24 months. According to the report, mortgage complaints accounted for 11 percent, or approximately 71,000 complaints, of the total complaints the Bureau received from November 2016 through October 2018. An analysis of the complaints indicated that 42 percent of them had to do with issues concerning the payment process, while 36 percent had to do with difficulties in paying off the mortgage. Consumer complaints regarding payment process problems describe a variety of issues, including misapplied payments and escrow analysis inaccuracies. The CFPB notes that complaints from consumers struggling to pay their mortgages often state they have difficulty receiving assistance after a financial hardship, illness, or a natural disaster.
Additional highlights of the report include: (i) the number of mortgage complaints received between August 2018 and October 2018 was 15 percent lower than the number of mortgage complaints received during the same time period in 2017; (iii) 50 percent of mortgage complaints relate to conventional mortgages; and (iii) adjusted for population, the largest mortgage complaint volumes came from the District of Columbia, Maryland and New Jersey.
Delaware law provides financial relief to federal employees impacted by shutdown
On January 23, the Delaware Governor signed HB 2, effective immediately, to provide federal workers residing in the state a “temporary suspension of judicial and administrative proceedings in Delaware” if the worker’s ability to pay certain obligations are affected by a government shutdown. Under the act, furloughed federal workers may apply to a court or administrative agency “for a temporary stay, postponement, or suspension regarding any payment of rent, mortgage, tax, fine, penalty, insurance premium, judgment, or other civil obligation or liability.” The length of the temporary stay may be for the covered period (defined as the period that begins on the date the shutdown started and ends on the date 30 days after the date on which the shutdown ended) and 90 days thereafter, or for any part of that period. The court may also set installment payment terms and amounts “as is considered reasonable.”
Among other things, HB 2 also (i) prohibits the lapse, termination or forfeiture of the health, life, disability, or motor vehicle insurance policy of a federal worker without a court order; (ii) places limits on the maximum interest rate that can be imposed on debts incurred before the shutdown to six percent, and states that the interest rate limit applies to debts related to “a mortgage, trust deed, or other security in the nature of a mortgage” during the covered period and 90 days thereafter, but only applies during the covered period for all other obligations or liabilities; and (iii) provides the Attorney General with the power to enforce the act’s provisions, and allows courts to impose civil penalties of up to $10,000 per violation, with wilful violations to be assessed daily.
District Court approves $30 million settlement for post-payment interest charges on FHA mortgages
On January 25, the U.S. District Court for the Northern District of California granted final approval of a $30 million settlement resolving allegations that a national bank improperly collected post-payment interest on FHA-insured mortgages but did not use the FHA-approved form to provide the appropriate disclosures to consumers before doing so. The settlement covers a nationwide class of borrowers who, between June 1996 and January 2015, obtained an FHA-insured mortgage loan. Participating class members are expected to receive between $25 and $33 each. The court also approved a $7.5 million award for class counsel attorneys’ fees, of which $7,500 and $5,000 will be awarded to the named plaintiffs.
FDIC fines banks for flood insurance violations, releases December enforcement actions
On January 25, the FDIC announced a list of administrative enforcement actions taken against banks and individuals in December. The 15 orders include “two Section 19 orders; one civil money penalty; three removal and prohibition orders; four consent orders; one prompt corrective order; three terminations of consent orders; and one notice.” The FDIC assessed a civil money penalty against an Illinois-based bank for alleged violations of the Flood Disaster Protection Act (FDPA) and the National Flood Insurance Act (NFIA) including failing to (i) obtain flood insurance coverage on loans at origination; (ii) maintain flood insurance; and (iii) “properly force place flood insurance.”
A second civil money penalty was assessed against a Wisconsin-based bank for allegedly engaging in a pattern of violating the FDPA and the NFIA, including failing to (i) follow force placed flood insurance procedures, including notifying a borrower of a lapse in flood insurance coverage and force placing the necessary insurance in a timely fashion; (ii) obtain adequate flood insurance coverage on a loan at origination; and (iii) provide notice to a borrower concerning whether flood insurance under the NFIA was available for the collateral securing a loan.
There are no administrative hearings scheduled for February 2019. The FDIC database containing all 15 enforcement decisions and orders may be accessed here.
CFPB releases annual report on servicemember complaint issues
On January 24, the CFPB’s Office of Servicemember Affairs (OSA) released an annual report, which highlights issues facing military consumers based on complaints submitted by servicemembers, veterans, and their families (collectively “servicemembers”). The OSA report covers the period between April 1, 2017 and August 31, 2018, during which the Bureau received approximately 48,800 military complaints. Some key takeaways from the OSA report are as follows:
- The largest category of servicemember complaints focused on credit reporting, with 37 percent of total servicemember complaints in this area. The report notes that the Department of Defense’s new security clearance process increases the likelihood that a servicemember’s poor credit score could result in losing a security clearance, and by extension being separated from the military.
- After credit reporting, debt collection was the next most complained about issue. Most servicemembers’ debt collection complaints alleged that the servicemember did not owe the debt or that the debt collector failed to respond to written requests for information. In particular, the report states that some debt collectors have inappropriately contacted servicemembers’ chains of command in an attempt to obtain payment.
- For mortgage debt, the largest category of complaints arose from challenges in the payment process—in particular issues related to loan modifications, collections, communicating with the servicemember’s “single point of contact,” escrow, and servicing transfers. These process-focused complaints were closely followed by overall difficulties in being able to afford mortgage payments.
- For credit cards, the greatest concentration of complaints were around problems with purchases on statements (i.e. fraudulent/unauthorized charges, billing frustrations, and difficulties in challenging charges directly with the credit card issuer). Notably, while the report acknowledges the October 2017 Military Lending Act compliance date for credit card issuers, it does not specifically break out MLA-related complaints; rather, the report notes that the Bureau has received “some complaints from servicemembers demonstrating confusion with respect to how and when creditors are applying the MLA’s protections to credit card accounts.”
- For auto lending, the leading category of complaints arose from managing the loan or lease, including application of payments and late fees. Unique to servicemembers, the report highlights that products like GAP can become void if a servicemember takes a car overseas (for example, to use while on deployment).
- For student lending, two-thirds of complaints arose from challenges in making payments and enrolling in payment plans, in particular issues with enrolling and recertifying eligibility for income-driven repayment.
- Finally, in the payday loan space, since 2016 servicemember complaints have decreased drastically and are now equal with non-servicemember complaints (as a percentage of total complaint volume); previously, servicemembers were almost twice as likely to complain about payday loan products.
Freddie Mac, Fannie Mae issue updated selling guidance addressing government shutdown
On January 16, Freddie Mac and Fannie Mae, in consultation with the FHFA, issued additional temporary guidance on selling policies that may be impacted during the government shutdown.
Freddie Mac Bulletin 2019-3 provides revisions to temporary guidance previously announced in Bulletin 2019-1 (see previous InfoBytes coverage here), and notifies sellers of temporary changes to certain Guide requirements to further assist impacted borrowers. Due to the length of the shutdown, Freddie Mac has added a minimum reserves requirement in order to offset the risk associated with a borrower’s interruption of income. Sellers must document the greater of two months reserves or the minimum reserves as required by the Loan Product Advisory and the Guide, for impacted mortgages with application received dates of January 16, 2019 or after. In addition, Freddie Mac will allow flexibility in circumstances where a seller is unable to meet the 10-day pre-closing verification of income and employment requirements for impacted mortgages regardless of the application received date. Freddie Mac also directs sellers of government funded, guaranteed, or insured mortgages sold to Freddie Mac to review government agency requirements.
Fannie Mae Lender Letter LL-2019-2 also provides additional temporary guidance on selling policies that may be impacted during the continued shutdown, and builds upon guidance issued last December. (See LL-2018-06 covered by InfoBytes here.) The additional guidance imposes a minimum liquid financial reserves requirement to offset risk and is applicable to loans with application dates on or after January 16, 2019. The new reserves requirement does not apply to high LTV refinances. Finally, Fannie Mae will provide additional flexibility with regard to verbal verification of employment and paystub age requirements.
Regulators encourage financial institutions to work with borrowers impacted by government shutdown; FHA also issues shutdown guidance
On January 11, the Federal Reserve Board, CSBS, CFPB, FDIC, NCUA, and OCC (together, the “Agencies”) released a joint statement (see also FDIC FIL-1-2019) to encourage financial institutions to work with consumers impacted by the federal government shutdown. According to the Agencies, borrowers may face temporary hardships when making payments on mortgages, student loans, auto loans, business loans, or credit cards. FDIC FIL-1-2019 states that prudent workout arrangements, such as extending new credit, waiving fees, easing limits on credit cards, allowing deferred or skipped payments, modifying existing loan terms, and delaying delinquency notice submissions to credit bureaus, will not be subject to examiner criticism provided the efforts are “consistent with safe-and-sound lending practices.”
Separately, on January 8, Federal Housing Administration (FHA) Commissioner Brian Montgomery issued a letter regarding the shutdown reminding FHA-approved lenders and mortgagees of their ongoing obligation to offer special forbearance to borrowers experiencing loss of income and to evaluate borrowers for available loss mitigation options to prevent foreclosures. In addition, FHA also encourages mortgagees and lenders to waive late fees and suspend credit reporting on affected borrowers.
Agencies issue origination and servicing guidance addressing government shutdown
On January 11, Freddie Mac and Fannie Mae issued guidance regarding credit reporting during the government shutdown (see Bulletin 2019-2 and Lender Letter 2019-01). The guidance clarifies that servicers have flexibility when reporting the status of a mortgage loan to credit reporting agencies for a borrower affected by the shutdown, and are permitting, but not requiring, servicers to suppress credit reporting in these instances entirely.
On January 8, the Department of Veterans Affairs (VA) issued Circular 26-19-1, which encourages holders of VA-guaranteed loans to extend forbearance to borrowers in distress as a result of the government shut down. It also encourages servicers to waive late charges on loans where borrowers suffered income loss due the shutdown or who may have been affected due to the ripple effect of the shutdown and suspend credit reporting on the affected accounts. The VA also issued Circular 26-19-2, which clarifies that loans for borrowers directly impacted by the government shutdown are still eligible for guarantee by the VA, so long as the lender has obtained all the required documentation and the loan is current. The VA emphasizes that the furlough period should not be considered a break in employment for underwriting purposes provided the borrower returned to work in the same status and provides their furlough letter. Additionally, the VA reminds originators that, even though the IRS Form 4506-T is mentioned in the VA Lender’s Handbook as a condition of the Automated Underwriting Cases feedback certificate, that condition is an investor or lender overlay and the form is not actually required by VA guidelines. Lastly, if the Federal Emergency Management Administration (FEMA) is unavailable for routine certifications or correspondence regarding flood insurance, the VA reminds lenders that non-federal flood insurance policies are acceptable.
Ohio mortgage servicers now required to register
On December 19, 2018, the Ohio Governor signed Substitute House Bill 489 (HB 489), which amends the Ohio Residential Mortgage Lending Act (RMLA) to, among other things, require a person acting as mortgage servicer to obtain a Residential Mortgage Lending Act Certificate of Registration in the state, unless exempt from the RMLA. The amendments define a “mortgage servicer” as an entity that holds mortgage servicing rights, records mortgage payments on its books, or carries out other responsibilities under the mortgage agreement.
HB 489 also revises the laws governing financial institution regulations and consumer protections. Specifically, it includes amendments which (i) provide some regulatory relief to state banks and credit unions concerning the frequency of examinations that meet certain conditions; (ii) enable requests for data analytics to be conducted on publicly available information regarding regulated state banks, credit unions, and consumer finance companies; and (iii) require that a specified notice be given to a debtor for certain collections related to defaulted debt secured by junior liens on residential properties.
The amendments take effect 91 days after the bill is filed with the Ohio Secretary of State.