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CFPB announces 2021 HMDA-modified LAR availability
On March 23, the CFPB announced that the HMDA modified loan/application register (LAR) is available on the Federal Financial Institutions Examination Council’s HMDA Platform for approximately 4,316 HMDA filers. According to the announcement, the modified LARs provide each financial institution's loan-level HMDA data, as modified to protect applicant and borrower privacy in accordance with the CFPB’s final policy guidance on the disclosure of HMDA data. Additionally, the 2021 HMDA data will be available later this year in other forms to provide users insights into the data, which will include: (i) a nationwide loan-level dataset with all publicly available data for all HMDA reporters; (ii) aggregate and disclosure reports with summary information by geography and lender; and (iii) the HMDA Data Browser to allow users to customize datasets, reports, and data maps. Additionally, the FFIEC released an updated version of “A Guide To HMDA Reporting: Getting It Right!," which is designed to be an "easy-to-use summary of certain key requirements" of Regulation C.
CFPB reports cover mortgage challenges, emergency savings
On March 23, the CFPB released two reports, New Data on the Characteristics of Mortgage Borrowers During the COVID-19 Pandemic and Emergency Savings and Financial Security: Insights from the Making Ends Meet Survey and Consumer Credit Panel. As previously covered by InfoBytes, the CFPB first released Characteristics of Mortgage Borrowers During the COVID-19 Pandemic in May 2021, which analyzed mortgage borrowers’ challenges due to the ongoing Covid-19 pandemic. The recently released report explores the characteristics of borrowers who are delinquent or in forbearance based a sample of more than 2 million loans for owner-occupied properties. The report shows, among other things, that Black and Hispanic borrowers are more at risk of poor outcomes than others, as they comprised 31.2 percent of borrowers in forbearance while only constituting 18.2 percent of the overall sample of mortgage borrowers. The report also found that single borrower loans were approximately 1.6 times more likely to be in forbearance through January 2022, compared to loans with a co-borrower, which is an increase relative to March 2021, where single borrowers were only 1.4 times more likely to be in forbearance compared to co-borrowers.
The Emergency Savings and Financial Security Insights from the Making Ends Meet Survey and Consumer Credit Panel report examines how consumers’ financial profiles vary by levels of emergency savings. Using the Making Ends Meet survey and pairing it with credit bureau data from our Consumer Credit Panel, the report found that, among other things: (i) approximately 24 percent of consumers do not have savings set aside for emergencies, “while 39 percent have less than a month of income saved for emergencies and 37 percent have at least a month of income saved for emergencies,” and (ii) “41 percent of consumers with no more than a high school or vocational degree have no emergency savings, [while] the share is 6 percent for those with a college degree.”
OCC applies heightened risk governance standards to mortgage servicer
Recently, the OCC published Interpretive Letter #1180 addressing the application of heightened risk governance standards under 12 C.F.R. Part 30, Appendix D, OCC Guidelines Establishing Heightened Standards (Guidelines) to a supervised bank. Specifically, the OCC determined that the bank’s operations were highly complex and presented a heightened risk. This determination was based on information provided by the Supervisory Office, which concluded that the bank’s operations, including significant mortgage servicing activities, warranted application of the Guidelines to the bank. “The Guidelines provide that a covered institution should establish and adhere to a written risk governance framework to manage and control its risk-taking activities,” the OCC stated, adding that the Guidelines “also provide minimum standards for an institution’s board of directors to oversee the risk governance framework.” In the interpretive letter, the OCC stated that it had notified the bank last December that it was considering exercising its reservation of authority to apply the Guidelines; however, the bank responded that application of the Guidelines was not appropriate at that time. The bank is expected to comply with the Guidelines by February 29, 2024.
As previously covered by InfoBytes, last October the OCC issued a consent order against the bank for allegedly maintaining inadequate risk management controls related to its servicing and default servicing activities. The OCC asserted that the bank had previously been informed about the alleged risk management deficiencies and did not take timely corrective action. Under the terms of the consent order, the bank was required to take comprehensive corrective measures, including developing and implementing internal controls that are “commensurate with the types and complexity of risks associated with all transactions the [b]ank executes.”
Credit bureaus to eliminate 70% of medical debt tradelines
On March 18, three major credit bureaus released a statement announcing that they are eliminating nearly 70 percent of medical collection debt tradelines from consumer credit reports. According to the statement, beginning July 1, “paid medical collection debt will no longer be included on consumer credit reports. In addition, the time period before unpaid medical collection debt would appear on a consumer’s report will be increased from 6 months to one year, giving consumers more time to work with insurance and/or healthcare providers to address their debt before it is reported on their credit file.” Finally, starting in 2023, medical collection debt under $500 will no longer be included on credit reports issued by the three credit bureaus. The statement noted that the decision to remove medical tradelines from credit reports was taken “after months of industry research.”
The same day Senator Sherrod Brown (D-OH), Chairman of the Senate Committee on Banking, Housing, and Urban Affairs, issued a statement supporting the credit bureaus’ announcement regarding medical debt. Brown noted the changes followed a CFPB announcement that it would hold consumer reporting agencies accountable for inaccurate reports (covered by InfoBytes here). Brown expressed his view that the CFPB is taking “real action for consumers” and noted he intends to collaborate with the CFPB to “address the growing burden of medical debt, protect working families, and hold bad actors accountable.”
Earlier on March 16, the CFPB a released a data spotlight regarding senior adults (those age 65 and older) and medical debt. The survey used information from the 2018 “FINRA Foundation National Financial Capability Study,” which was administered online to a sample of 27,091 adults ages 18 and older. In total, there were 5,166 respondents ages 65 and older. The study found that 8.5 percent of adults over 65 carried medical debt. The Bureau suggested this outcome “is likely the result of older Americans having the highest health insurance coverage rates of all age groups due to their eligibility for coverage through Medicare,” but referenced Medicare coverage as “limited.” The data spotlight also pointed out that, “[m]edical debt is more common among older people of color, older adults with incomes near the poverty line, people who are uninsured, who are currently unmarried, and who don’t own a home,” specifically noting that “[n]on-White older adults and older adults who are not married more often report medical debt than their counterpart.” The Bureau observed that 76 percent of seniors with medical debt are retired, while 17 percent are still employed and nearly 7 percent are disabled, sick, or unable to work. The Bureau noted that a recent job loss, declining health, or the onset of a disability may explain this data. The survey also found that older adults who had medical debt were significantly more likely to report significant cost-related health care challenges and hardships than others in the same age group without medical debt. More than 33.8 percent of older adults with medical debt have skipped medical treatment or a doctor’s visit due to cost, but just 6 percent of seniors without medical debt skipped medical treatment or a doctor’s visit due to cost, according to the survey data.
CFPB releases compliance guidance on online consumer reviews
On March 22, the CFPB released a compliance bulletin regarding potentially illegal practices related to consumer reviews. The guidance highlights certain business practices related to consumer reviews that are generally unlawful under the CFPA, which include, among other things: (i) deceiving consumers by using purported contractual restrictions that are unenforceable; (ii) unfairly depriving consumers of information using restrictions on consumer reviews; and (iii) deceiving consumers who read consumer reviews about the nature of those reviews. According to the CFPB, the effort is related to the FTC’s work to counter fake reviews and connected fraud in the digital economy. (Covered by InfoBytes here).
Biden urges private-sector businesses to strengthen cyber defenses
On March 21, President Biden issued a fact sheet warning private-sector businesses of potential retaliatory Russian cyberattacks. Biden reiterated previous “warnings based on evolving intelligence that the Russian Government is exploring options for potential cyberattacks” against the U.S. in “response to the unprecedented economic costs [] imposed on Russia alongside our allies and partners.” The fact sheet urges companies to execute specific measures to strengthen their cyber defenses such as (i) mandating multi-factor authentication to make it harder for attackers to access systems; (ii) deploying modern security tools on computers and devices to continuously look for and mitigate threats; (iii) patching and protecting systems against known vulnerabilities and changing passwords so previously stolen credentials cannot be used by malicious actors; (iv) backing up and encrypting data so it cannot be used if stolen; (v) educating employees on common tactics used by attackers and encouraging the reporting of “unusual behavior”; and (vi) engaging proactively with the FBI or the Department of Homeland Security’s Cybersecurity and Infrastructure Security Agency (CISA) “to establish relationships in advance of any cyber incidents” (see CISA’s “Shields Up” guidance here). “I urge our private-sector partners to harden your cyber defenses immediately by implementing the best practices we have developed together over the last year,” Biden stated. “You have the power, the capacity, and the responsibility to strengthen the cybersecurity and resilience of the critical services and technologies on which Americans rely.”
PAVE task force delivers plan on appraisal bias
On March 23, HUD delivered the Interagency Task Force on Property Appraisal and Valuation Equity (PAVE) Action Plan to President Biden. Created in June 2021 to address racial bias in home lending and appraisals and establish actions to root out inequity, PAVE Task Force members include HUD Secretary Marcia L. Fudge and White House Domestic Policy Advisor Susan Rice, the U.S. Attorney General, the Secretaries of Agriculture, Labor, and Veterans Affairs, the Comptroller of the Currency, the Chairmen of the Federal Reserve Board, FDIC, NCUA, Directors of the CFPB and FHFA, and the Executive Director of the Appraisal Subcommittee of the FFIEC.
According to the announcement, the Action Plan to Advance Property Appraisal and Valuation Equity (the Plan) will represent “the most wide-ranging set of reforms ever put forward to advance equity in the home appraisal process.” According to the Task Force’s executive summary, “[o]n average, homes in majority-Black neighborhoods are valued at less than half of those in neighborhoods with few or no Black residents.” The summary also reports that the impact of undervaluation on homebuyers, sellers, and communities can sometimes result in higher down payments for home buyers, often causing sales to fall through, while low valuations in a refinance transaction can reduce the cash-out available and sometimes affect the refinance interest rate and mortgage insurance premiums paid by the homeowner. The Task Force further notes that since the Fair Housing Act was passed more than 50 years ago, “the racial wealth gap is wider than ever: in 2021, the Black homeownership rate reached only 44 percent, while the white homeownership rate reached 74 percent.”
The Plan will focus primarily on actions to substantially reduce racial bias in home appraisals, as well as steps federal agencies can “take using their existing authorities to enhance oversight and accountability of the appraisal industry and empower homeowners and homebuyers to take action when they receive a valuation that is lower than expected.” Among other things, the Plan states that Task Force members will exercise broad oversight and compliance authority to strengthen “guardrails against unlawful discrimination in all stages of residential valuation.” Agencies will also issue guidance on FHA and ECOA’s application to the appraisal industry and update appraisal-specific policies to “ensure that appraisers or regulated institutions’ use of appraisals are directly included in supervisory [FHA] and ECOA compliance requirements, and are considered in every review of relevant existing and future policies and guidance.” Relevant agencies have also committed to addressing potential bias in the use of technology-based valuation tools through a rulemaking related to automated valuation models (AVMs), including the addition of a nondiscrimination quality control standard in the proposed rule. In consultation with Congress, Task Force members will also pursue legislation to modernize the governance structure of the appraisal industry.
In the coming months, the Task Force will assess: (i) the “expanded use of alternatives to traditional appraisals as a means of reducing the prevalence and impact of appraisal bias”; (ii) the use of “range-of-value estimates instead of point estimates as a means of reducing the impact of racial or ethnic bias in appraisals”; (iii) the “potential use of alternatives and modifications to the sales comparison approach that may yield more accurate and equitable home valuation”; and (iv) “public sharing of a subset of historical appraisal data to foster development of unbiased valuation methods.”
CFPB Director Rohit Chopra stated that the Bureau will take an active leadership role in the Appraisal Subcommittee and will work “to implement a dormant authority in federal law to ensure that algorithmic valuations are fair and accurate.”
Acting Comptroller of the Currency Michael J. Hsu also announced that the OCC plans to enhance its supervisory methods for identifying discrimination in property valuations and will take steps to ensure consumers are aware of their rights regarding appraisals. The agency also intends to “support research that may lead to new ways to address the undervaluation of housing in communities of color caused by decades of discrimination.”
Additionally, acting FDIC Chairman Martin J. Gruenberg noted that the agency is committed to taking several concrete actions, including collaborating with Task Force members to exercise authorities “to support a more equitable state appraisal certification and licensing system.”
OCC releases 2021 4Q mortgage performance results
On March 22, the OCC announced the release of the OCC Mortgage Metrics Report, Fourth Quarter 2021, its quarterly report of the performance of seven national bank mortgage servicers representing 22 percent of all outstanding residential mortgages. As explained in the report, servicers initiated 1,294 new foreclosures in the fourth quarter of 2021—a 39.9 percent increase from the previous quarter and a 64 percent increase from a year ago. The impact of Covid-19, including foreclosure moratoriums, significantly affected these metrics, the OCC stated. Servicers also completed 47,488 mortgage modifications in the fourth quarter, up 40.8 percent from the previous quarter. Of these modifications, “70.5 percent reduced borrowers’ monthly payments, and 46,475, or 97.9 percent, were ‘combination modifications’—modifications that included multiple actions affecting the affordability and sustainability of the loan, such as an interest rate reduction and a term extension,” the OCC reported.
Agencies seek to update administrative enforcement proceedings
On March 22, the Federal Reserve Board, OCC, FDIC, and NCUA issued an interagency proposal to update policies and procedures governing administrative proceedings for supervised financial institutions. According to the proposal, the amendments are necessary to account for the routine use of electronic presentations in hearings and for use of technology in administrative proceedings, and to account for relevant legal developments since the rules were last updated, including the abolishment of the Office of Thrift Supervision, and the grant of new authorities to the agencies. Additionally, according to the proposal, the Fed “proposes to codify and clarify its long-standing practices concerning the conduct of formal administrative investigations and promulgate rules governing all formal investigations of organizations and individuals within the Board’s jurisdiction.” Finally, the FDIC proposes to amend its rules of administrative proceeding to permit greater use of depositions in the course of administrative proceedings.
FTC, DOJ halt deceptive credit repair operation
On March 21, the FTC and DOJ announced that the U.S. District Court for the Southern District of Texas entered a permanent injunction against a credit repair organization accused of allegedly defrauding consumers out of millions of dollars by promising to remove negative information from their credit reports, while actually filing fake identity theft reports to explain the negative items. (Press releases linked here and here.) According to the complaint, filed by the DOJ on behalf of the FTC, the defendants allegedly claimed their “two-step process” could remove negative items from consumers’ credit histories or credit reports through “advance disputing” of negative information and help boost credit scores by adding “credit building products” to consumers’ credit reports. However, according to the FTC, defendants failed to follow through on their credit repair promises, and instead filed identity theft reports even when consumers had not actually been victims of identity theft. The FTC claimed many consumers actually saw their credit scores decrease because the defendants’ “unsupported challenges rarely if ever cause[d] credit reporting agencies to delete or change any consumer’s credit information.” Company representatives also allegedly informed consumers that the process could boost consumers’ credit scores by 50-200 points within 90 days—a violation of the Credit Repair Organizations Act and the Telemarketing Sales Rule. Additionally, the FTC claimed that the defendants illegally required consumers to pay upfront fees up to $1,500, and failed to include disclosures detailing cancellation policies or provide consumers with copies of the contracts they were required to sign in order to obtain the defendants’ services. The permanent injunction imposes financial restrictions on the defendants and halts their operations.