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CFPB releases 2021 ombudsman report
On December 2, the CFPB Ombudsman’s Office published its annual report, which details inquiries handled by the office as well as its strategic plan goals for the next two years. As a new initiative going forward, following a pilot test at the request of the CFPB, the Ombudsman determined that it would begin conducting post-examination surveys of supervised entities, with a focus on three process areas: (i) supervision materials and resources; (ii) interpersonal communications with Bureau personnel; and (iii) end-of-examination topics, including clarity in expectations of closure and awareness of the appeals process. The Ombudsman will host virtual engagements with industry stakeholders in Q1 of FY2022 to further share information about the survey plan.
Relatedly, the Ombudsman closed its review of one topic from the previous year concerning the information provided to companies during examinations. The review was in response to concerns by industry stakeholders, who anticipated a more positive examination outcome based on communications with the examination team during the onsite portion of the examination. The report noted recent improvements made by the Bureau in this area, including revising certain job aids to assist examiners with both examination outcomes and the enforcement process, in addition to posting information about possible types of outcomes on its website. The report also highlighted: (i) examples on issues the Ombudsman handled during the previous year, including assisting on individual consumer inquiries about stimulus payments and offering feedback and suggestions on draft CFPB materials; (ii) an update on the virtual Ombudsman Forum, which facilitated discussions on topics such as racial and economic equity; (iii) an analysis of individual inquiries; and (iv) a release of frequently asked questions about the Ombudsman’s Office.
Finally, this year’s report also features a new section, the Ombudsman in Brief, which summarizes two topics where the Ombudsman did not engage in a systemic review: (i) assisting the Bureau divisions and offices with their processes related to complaints submitted by small business owners; and (ii) suggesting standardization of terminology within the Bureau when referring to various stakeholder communities.
FHA extends partial waiver of face-to-face borrower interviews
On December 2, FHA announced an extension to its temporary partial waiver of the face-to-face borrower interviews with borrowers as part of FHA’s early default intervention requirements under 24 C.F.R. § 203.604. The waiver was first published in March 2020 in response to the Covid-19 pandemic (covered by InfoBytes here). The temporary waiver, now effective through December 31, 2022, allows mortgagees to establish contact with borrowers by alternative methods, such as phone, email, or video calling services.
FHFA announces 2022 confirming loan limits
On November 30, FHFA announced that it will raise the maximum conforming loan limits (CLL) for mortgages purchased in 2022 by Fannie Mae and Freddie Mac from $548,250 to $647,200 (the 2021 CLL limits were covered previously by InfoBytes here). In most high-cost areas, the maximum loan limit for one-unit properties will be $970,800. According to FHFA, due to generally rising home values, “the CLLs will be higher in all but four U.S. counties or county equivalents.” A county-specific list of 2022 conforming loan limits for all counties and county-equivalent areas in the U.S. can be accessed here.
HUD issues 2022 mortgage and HECM limits
On November 30, HUD issued Mortgagee Letter 2021-28, which provides the 2022 nationwide forward mortgage limits. According to HUD, FHA calculates forward mortgage limits based on the median house prices in accordance with the National Housing Act (NHA). Additionally, FHA sets these limits at or between the low-cost area and high-cost area limits based on the median house prices for the area and publishes the updated limits each calendar year. Among other things, HUD noted that the FHA national low-cost area mortgage limits are set at 65 percent of the national conforming limit of $647,200 for a one-unit property, and, for high-cost area mortgage limits, the FHA national high-cost area mortgage limits are set at 150 percent of the national conforming limit of $647,200 for a one-unit property. Forward mortgage limits for 2022 are effective for case numbers assigned on or after January 1, 2022.
The same day, HUD issued Mortgagee Letter 2021-29, which provides the 2022 home equity conversion mortgage (HECM) limits. According to the letter, the HECM maximum claim amount limits for traditional HECM, HECM for purchase, and HECM-to-HECM refinances are governed by the maximum claim amount limitation in the NHA. For the period of January 1, 2022, to December 31, 2022, the maximum claim amount for FHA-insured HECMs is $970,800 (150 percent of Freddie Mac’s national conforming limit of $647,200).
Freddie says cryptocurrency can’t be used for mortgage qualification
On December 1, Freddie Mac released Bulletin 2021-36 to Freddie Mac sellers to provide guidance on selling updates. The bulletin provides guidance on, among other things: (i) 2022 conforming loan limits; (ii) extension of the guarantee fee obligation; (iii) affordable lending; (iv) credit underwriting; and (v) document custody. In order to address uncertainty regarding the treatment of cryptocurrency in mortgage underwriting, the bulletin specifically addresses requirements related to cryptocurrency’s use in the mortgage qualification process. These requirements include, among other things, that income paid to the borrower in cryptocurrency cannot be utilized to qualify for a mortgage and that “[c]ryptocurrency may not be included in the calculation of assets as a basis for repayment of [the] obligation.” Unless otherwise noted, the changes issues in the bulletin are effective immediately.
CFPB sets 2022 FCRA asset threshold
On November 29, the CFPB announced the annual adjustment to the maximum amount that consumer reporting agencies are permitted to charge consumers for making a file disclosure to a consumer under the FCRA. According to the rule, the ceiling on allowable charges under Section 612(f) of the FCRA will increase to $13.50, which is a $0.50 increase from the ceiling on allowable charges for 2021. The rule is effective on January 1, 2022.
CFPB releases draft strategic plan for FY 2022-26
On December 2, the CFPB released for public feedback its draft strategic plan for fiscal years 2022-2026, which outlines and communicates its mission, strategic goals, and objectives for the next five years.
External Factors Impacting the Bureau’s Strategic Goals and Objectives:
The Bureau identified four key external factors that may affect its strategic goals and objectives: (i) the continued effect of the Covid-19 pandemic on regulated markets; (ii) the increase of data security threats and resulting consumer harm as the role of data and technology in the consumer financial system continues to grow; (iii) rapid developments in the consumer financial marketplace technology; and (iv) executive, legislative, judicial, and state actions, including actions by other financial regulators, which may impact the financial regulatory environment and, in turn, the Bureau’s policy strategies.
Cross-Bureau Priorities:
With its “cross-functional, cross-Bureau approach,” the CFPB intends to address a number of outcomes for households and communities, “many of which reference the concept of equity.” To achieve the outcomes below, the Bureau will “embed a racial equity lens and focus [its] attention on these communities, recognizing that work to protect and empower underserved people benefits all people.”
- Equitable recovery from the COVID-19 pandemic: Continuing monitoring of pandemic recovery, with a focus on minority and traditionally underserved communities, including rising housing insecurity.
- Equitable access to and engagement with consumer finance infrastructure: Addressing obstacles that restrict access to credit or push consumers to higher cost products, in addition to “promoting transformation of financial marketplaces to serve all people.”
- Equitable wealth creation from home and small business ownership: Promoting equitable wealth creation in housing and small business markets, with a focus on minority and underserved communities. Specifically, the Bureau notes that (i) home ownership as a “key building block of wealth,” has become out of reach for young people and underserved communities due to record high home prices and tightened credit underwriting during the pandemic; and (ii) small businesses, especially women- and minority-owned, have faced more serve economic consequences from the pandemic.
- Fair, transparent, and competitive markets for consumer financial products and services: Promoting competition for the benefit of consumers and businesses, where “[t]he personal touch previously provided by local financial institutions has, in many instances, been replaced with institutions that take advantage of consumers without concern for their well-being.” The Bureau identified weakened competition in many markets as a contributing factor in the widening of racial, income, and wealth inequality, and noted that consolidations over the last several decades have “denied consumers the benefits of an open economy.”
- Privacy, access, and fairness in a new data-driven economy: Prioritizing its work to ensure consumer privacy and security remains at the forefront of the evolving data economy. The Bureau expressed specific concern with how consumer financial account data is accessed, transmitted, and stored, in addition to the potential racial equity impact from the increased use of algorithms in the decision-making process.
The Strategic Goals:
The Bureau identified four strategic goals, which are articulated by specific function within the agency:
- “Implement and enforce the law to ensure consumers have access to fair, transparent, and competitive markets that serve consumers’ needs and protect consumers from unfair, deceptive, and abusive practices, and from discrimination.” Objectives include issuing rules and guidance, supervising institutions, and enforcing federal consumer financial laws.
- “Empower consumers to live better financial lives, focusing on traditionally underserved people.” Objectives include engaging with consumers, creating and offering educational resources, handling complaints, and expanding relationships with stakeholders and government partners.
- “Inform public policy with data-driven analysis on consumers’ experiences with financial institutions, products, and services.” Objectives include monitoring markets and producing research reports.
- “Foster operational excellence and further commitment to workforce equity to advance the CFPB’s mission.” Objectives include cultivating a workforce aligned with the Bureau’s mission, implementing a forward-leaning workplace model, and utilizing innovative and optimized operational support.
The Bureau is requesting comments by January 3, 2022.
2nd Circuit reverses itself, finding no standing to sue for recording delays
On November 17, the U.S. Court of Appeals for the Second Circuit reversed its earlier determination that class members had standing to sue a national bank for allegedly violating New York’s mortgage-satisfaction-recording statutes, which require lenders to record borrowers’ repayments within 30 days. As previously covered by InfoBytes, the plaintiffs filed a class action suit alleging the bank’s recordation delay harmed their financial reputations, impaired their credit, and limited their borrowing capacity. While the bank did not dispute that the discharge was untimely filed, it argued that class members lacked Article III standing because they did not suffer actual damages and failed to plead a concrete harm under the U.S. Supreme Court’s decision in Spokeo Inc. v. Robins. At the time, the majority determined, among other things, that “state legislatures may create legally protected interests whose violation supports Article III standing, subject to certain federal limitations.” The alleged state law violations in this matter, the majority wrote, constituted “a concrete and particularized harm to the plaintiffs in the form of both reputational injury and limitations in borrowing capacity” during the recordation delay period. The majority further concluded that the bank’s alleged failure to report the plaintiffs’ mortgage discharge “posed a real risk of material harm” because the public record reflected an outstanding debt of over $50,000, which could “reasonably be inferred to have substantially restricted” the plaintiffs’ borrowing capacity.
In withdrawing its earlier opinion, the 2nd Circuit found that the Supreme Court’s June decision in TransUnion v. Ramirez (which clarified what constitutes a concrete injury for the purposes of Article III standing in order to recover statutory damages, and was covered by InfoBytes here) “bears directly on our analysis.” The parties filed supplemental briefs addressing the potential impacts of the TransUnion ruling on the 2nd Circuit’s previous decision. The bank argued that while “New York State Legislature may have implicitly recognized that delayed recording can create [certain] harms,” the plaintiffs cannot allege that they suffered these harms. Class members challenged that “the harms that the Legislature aimed to preclude need not have come to fruition for a plaintiff to have suffered a material risk of real harm sufficient to seek the statutory remedy afforded by the Legislature.” Citing the Supreme Court’s conclusion of “no concrete harm; no standing,” the appellate court concluded, among other things, that class members failed to allege that delayed recording caused a cloud on the property’s title, forced them to pay duplicate filing fees, or resulted in reputational harm. Moreover, while publishing false information can be actionable, the appellate court pointed out that the class “may have suffered a nebulous risk of future harm during the period of delayed recordation—i.e., a risk that someone (a creditor, in all likelihood) might access the record and act upon it—but that risk, which was not alleged to have materialized, cannot not form the basis of Article III standing.” The appellate court further stated that in any event class members may recover a statutory penalty in state court for reporting the bank’s delay in recording the mortgage satisfaction.
New York reaches $1.2 million settlement with debt collectors
On November 16, the New York attorney general announced a settlement with an illegal debt collection scheme operation and its operator (collectively, “respondents”) to resolve allegations that the respondents used illegal tactics to collect consumer debt, which included false threats of criminal action, wage garnishment, driver’s license suspension, and lawsuits. According to the AG, the operator started his debt collection career collecting debts with a network of New York-based debt collectors that settled with the CFPB and New York AG in 2019 to resolve allegations that the defendants engaged in improper debt collection tactics in violation of the CFPA, the FDCPA, and various New York laws. (Covered by InfoBytes here.) Using different names, the operator allegedly continued to use deceptive and illegal threats to collect on consumer debts. In addition, the AG claimed the operator was a debt broker, “selling debts to and placing debts for collection with other collectors that engaged in egregious violations of the law.”
Under the terms of the settlement agreement, the respondents, among other things, must pay $1.2 million to the office of the AG in restitution and penalties and must dissolve all of the associated debt collection companies. The respondents are also permanently banned from engaging in consumer debt collection, consumer debt brokering, consumer lending, debt settlement, credit repair services, and payment processing.
Agencies discuss crypto-asset next steps
On November 23, the FDIC, OCC, and Federal Reserve Board issued a joint statement summarizing a recent series of interagency “policy sprints” focused on crypto-assets. During the policy sprints, the agencies conducted preliminary analysis on issues related to banking organizations’ potential involvement in crypto-asset-related activities, and identified and assessed key risks related to safety and soundness, consumer protection and compliance. The agencies also, among other things, analyzed the applicability of existing regulations and guidance on this space and identified several areas where additional public clarity is needed. Throughout 2022, the agencies intend to provide greater clarity on whether certain crypto-asset-related activities conducted by banking organizations are legally permissible. The agencies also plan to expand upon their safety and soundness expectations related to: (i) crypto-asset safekeeping and traditional custody services; (ii) ancillary custody services; (iii) facilitation of customer purchases and the sale of crypto-assets; (iv) loans collateralized by crypto-assets; (v) issuance and distribution of “stablecoins”; and (vi) activities involving a bank’s holding of crypto-assets on its balance sheet. The joint statement, which does not alter any current regulations, also states that the agencies plan to “evaluate the application of bank capital and liquidity standards to crypto-assets for activities involving U.S. banking organizations” and that the agencies will continue to monitor developments in this space as the market evolves.