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  • Special Alert: Proposed Amendments to the TILA-RESPA Integrated Disclosure ("TRID") Rule, Transcript of CFPB Webinar on the Loan Estimate Form, and Introducing Buckley's TRID Resource Center

    Lending

    Buckley is pleased to announce our new TILA-RESPA Integrated Disclosure (“TRID”) Resource Center.  The TRID Resource Center is a one-stop shop for TRID issues, providing access to Buckley’s analysis of the TRID rule and the CFPB’s amendments, transcripts of CFPB webinars providing guidance on the rule, and other CFPB publications that will facilitate implementation of the rule.  In particular, the TRID Resource Center will address the following recent developments:

    • Proposed amendments. On October 10, 2014, the CFPB proposed amendments to the TRID rule that, if adopted, would: (1) allow creditors to provide a revised Loan Estimate on the business day after the date the interest rate is locked, instead of the current requirement to provide the revised Loan Estimate on the date the rate is locked; and (2) correct an oversight by creating room on the Loan Estimate form for the disclosure that must be provided on the initial Loan Estimate as a condition of issuing a revised estimate for construction loans where the creditor reasonably expects settlement to occur more than 60 days after the initial estimate is provided.  The proposal would also make a number of additional amendments, clarifications, and corrections, including:
      • Add the Loan Estimate and Closing Disclosure to the list of loan documents that must disclose the name and NMLSR ID number of the loan originator organization and individual loan originator under 12 C.F.R. § 1026.36(g);
      • Provide additional guidance related to the disclosure of escrow accounts, such as when an escrow account is established but escrow payments are not required with a particular periodic payment or range of payments; and
      • Clarify that, consistent with the requirement for the Loan Estimate, the addresses for all properties securing the loan must be provided on the Closing Disclosure, although an addendum may be used for this purpose.

      Comments on the proposal are due by November 10, 2014. For your convenience, we have updated our summary of the TRID rule to identify the most significant proposed changes.

    • Unofficial Transcript of the CFPB’s October 1 Webinar on the Loan Estimate Form.  As it has with past webinars where CFPB staff provide informal guidance, Buckley has prepared a transcript of the CFPB’s October 1, 2014 webinar (hosted by the Federal Reserve) addressing frequently asked questions regarding the Loan Estimate form.  The transcript is provided for informational purposes only and does not constitute legal opinions, interpretations, or advice by Buckley. The transcript was prepared from the audio recording arranged by the Federal Reserve and may have minor inaccuracies due to sound quality. In addition, the transcript has not been reviewed by the CFPB or the Federal Reserve for accuracy or completeness.

    Other items in the TRID Resource Center include:

     

    Questions regarding the matters discussed in this Alert may be directed to any of our lawyers listed below, or to any other Buckley attorney with whom you have consulted in the past.

     

    CFPB TILA RESPA Agency Rule-Making & Guidance

  • DOD Proposes Expanded Coverage Of Military Lending Act Protections

    Consumer Finance

    On September 29, a proposed amendment to the U.S. Department of Defense’s regulation that implements the Military Lending Act (MLA) was published in the Federal Register, with comments due by November 28. Most importantly, the amendment expands the protections of the MLA by defining “consumer credit” to be consistent with closed- and open-end credit products already regulated under TILA, which would include all forms of payday loans, vehicle title loans, refund anticipation loans, deposit advance loans, installment loans, unsecured open-end lines of credit, and credit cards. Currently, the MLA only applies to (i) closed-end payday loans up to $2,000 with a term of 91 days or fewer; (ii) closed-end auto title loans with a term of 181 days or fewer; and (iii) closed-end tax refund anticipation loans. However, the proposed regulation would continue to exclude residential mortgages and purchase-money loans for personal property from coverage, including motor vehicles. The MLA was passed in 2006 and provides active duty servicemembers and their dependents with, among other protections, a 36% interest rate cap, military-specific disclosures, and a prohibition on creditors against requiring the servicemember to submit to arbitration in the event of a dispute.

    TILA Military Lending Act

  • CFPB And Federal Reserve To Co-Host Third TILA-RESPA Disclosure Webinar

    Consumer Finance

    On October 1, the CFPB and the Federal Reserve will co-host a webinar on the TILA-RESPA Integrated Disclosures rule. By consolidating the existing mortgage disclosures required under TILA and RESPA, the integrated rule is intended to “make it easier for consumers to understand and locate key information,” while also integrating “the substantive and procedural requirements for providing these disclosures to consumers.” The webinar will address (i) questions regarding rule interpretation and implementation challenges that creditors, mortgage brokers, and others have raised to the Bureau; (ii) issues regarding how to complete the Loan Estimate; and (iii) portions of the Closing Disclosure. BuckleySandler provided a transcript of the second TILA-RESPA Disclosure webinar, which the CFPB hosted on August 26.

    CFPB TILA RESPA

  • Trade Groups Submit Brief in SCOTUS TILA Rescission Case

    Lending

    This week, six financial services trade associations submitted an amicus brief in Jesinoski v. Countrywide Home Loans, Inc., No. 13-684, a case pending before the U.S. Supreme Court that may resolve a circuit split over whether a borrower seeking to rescind a home mortgage loan under TILA must file suit within three years of consummating the loan, or if written notice within the three years of consummating the loan is sufficient to preserve a borrower’s right of rescission. The brief, submitted in support of Respondents, argues that the latter interpretation would harm not only creditors, but also borrowers and courts, by clouding title to properties, increasing litigation costs, and diverting delinquent borrowers from other productive means to save their homes. The majority of the circuit courts that have addressed the issue have agreed that a borrower must file suit within the three-year rescission period. The trade association brief was filed by BuckleySandler attorneys Jeff Naimon and Sasha Leonhardt.

    TILA

  • Unofficial Transcripts of the Joint CFPB/Federal Reserve TILA-RESPA Integrated Disclosures Webinar

    Lending

    To address frequently asked questions regarding the TILA-RESPA Integrated Disclosure Rules that take effect next August, CFPB staff provided non-binding, informal guidance in a webinar hosted by the Federal Reserve Board on August 26.

    BuckleySandler has prepared a transcript of the webinar that incorporates the CFPB’s slides. The transcript is provided for informational purposes only and does not constitute legal opinions, interpretations, or advice by BuckleySandler. The transcript was prepared from the audio recording arranged by the Federal Reserve and may have minor inaccuracies due to sound quality. In addition, the transcripts have not been reviewed by the CFPB or the Federal Reserve for accuracy or completeness.

    Click here to download the transcript.

    Questions regarding the matters discussed in the webinar or the rules themselves may be directed to any of our lawyers listed below, or to any other BuckleySandler attorney with whom you have consulted in the past.

     

    CFPB TILA RESPA

  • CFPB Updates TILA-RESPA Integrated Disclosure Rule Compliance Guide

    Consumer Finance

    On September 8, the CFPB released an updated Small Entity Compliance Guide for its TILA-RESPA Integrated Disclosure Rule, which becomes effective next August. The updates include information on where to find additional resources on the rule, additional clarification on questions relating to the Loan Estimate and 7 day waiting period, and additional clarification on questions relating to the timing for revisions to the Loan Estimate. The new guides follow a recent webinar hosted by the CFPB and the Federal Reserve Board to address rule implementation.

    CFPB TILA RESPA Federal Issues

  • Federal Reserve, CFPB Announce Increased Consumer Credit, Lease Transaction Thresholds

    Consumer Finance

    On September 9, the Federal Reserve Board and the CFPB announced an increase in the dollar thresholds in Regulation Z and Regulation M for exempt consumer credit and lease transactions. Transactions at or below the thresholds are subject to the protections of the regulations. Based on the annual percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers as of June 1, 2014, TILA and Consumer Leasing Act generally will apply to consumer credit transactions and consumer leases of $54,600 or less beginning January 1, 2015—an increase of $1,100 from 2014. Private education loans and loans secured by real property, used or expected to be used as a principal dwelling, remain subject to TILA regardless of the amount of the loan.

    CFPB TILA Federal Reserve

  • HUD Issues Final Rule To FHA ARM Rate Adjustment Regulations

    Lending

    On August 26, HUD issued its final rule to amend FHA’s single family adjustable rate mortgage (ARM) program regulations to align with the interest rate adjustment and notification periods required for ARMs under the CFPB’s new TILA mortgage servicing rules. The final rule is effective January 10, 2015 and adopted the proposed rule issued on May 8 without change. Under the final rule, interest rate adjustments resulting in a corresponding change to the mortgagor’s monthly payment for an ARM must be based on the most recent index value available 45 days before the date of the rate adjustment. FHA’s previous regulations provided for a 30-day look-back period. Further, the final rule mandates that mortgagees of FHA-insured ARMs comply with the disclosure and notification requirements of the CFPB’s TILA servicing rules, which require at least 60-days, but no more than 120-days advance notice of an adjustment to a mortgagor’s monthly payment. Previously, the regulations provided for only 25 days advance notice.

    CFPB TILA FHA

  • CFPB Fines Online Mortgage Company And Its Owner For Alleged Deceptive Rate Advertising

    Lending

    On August 12, the CFPB announced a consent order with a nonbank mortgage lender, its affiliated appraisal management company (AMC), and the individual owner of both companies to resolve allegations that the lender deceptively advertised mortgage rates to consumers, improperly charged fees before providing consumers with Good Faith Estimates (GFE), and failed to disclose its affiliation with the AMC while allowing the AMC to charge inflated fees.

    Allegations

    As explained in the consent order, the lender primarily conducts business online through its own website, and also advertises its mortgages through display ads on independent websites and the website of an unaffiliated third-party rate publisher. The CFPB asserts that, over a roughly two-year period, a “systemic problem” caused the lender to list on the rate publisher’s website lower rates for certain mortgages than the lender was willing to honor, and that the lender supplied other rates to the rate publisher that were unlikely to be locked for the majority of the lender’s borrowers. The CFPB claims that the lender failed to perform systematic due diligence or quality control to ensure the accuracy of listed rates, even though the lender was made aware through consumer complaints that certain rates were inaccurate.

    The CFPB also claims that, over a period of more than two years, the lender advertised in its display ads on independent websites rates that were based on (i) a consumer profile that included an 800 credit score, although most of the lender’s borrowers had scores below 800; and (ii) payment of high discount points, without adequate disclosure of the bases for the rates. In addition, the CFPB asserts that, over a nearly four-year period, the lender generated inaccurate personal loan quotes for certain consumers because the design of the lender’s website prevented those consumers from changing the model’s credit score from 800 to a more applicable lower score. The CFPB asserts these practices violated the Mortgage Advertising and Practices (MAP) Rule by misleading consumers.

    The CFPB also alleges that the lender violated RESPA and TILA by overcharging for credit reports and by requiring consumers to schedule and give payment authorization information for appraisals before providing a GFE and receiving indication that the consumers intended to proceed with a loan from the lender, thereby restricting consumers’ ability to shop for alternatives. In addition, the CFPB claims that the lender violated RESPA by failing to properly disclose its affiliate relationship with the AMC and making numerous deceptive statements that led consumers to believe that the lender had no relationship with the AMC and that the AMC’s fees were reasonable third-party fees, and violated the MAP Rule by inflating prices for certain of the AMC’s services, including “appraisal validations.”

    According to the CFPB, much of the alleged conduct was directed by, and provided a financial benefit to, the companies’ individual owner.

    Redress, Penalties, and Corrective Actions

    The consent order requires the lender to pay nearly $14.9 million to the CFPB, which will distribute the funds to consumers who: (i) viewed the lender’s misleading rates on the rate publisher’s website on or after July 21, 2011 and then took out a mortgage with the lender with higher than advertised rates; (ii) received misleading mortgage quotes on the lender’s website based on an inapplicable 800 FICO score on or after July 21, 2011 and then took out a mortgage with the lender at a rate higher than that quoted; (iii) on or after November 1, 2009 paid more than the actual costs of credit reports before the lender provided a GFE; (iv) paid an appraisal fee on or after January 1, 2011 without receiving a proper affiliated business disclosure; and (v) closed loans during or after December 2010 and paid for appraisal review fees.

    The order also: (i) requires the lender to pay a $4.5 million penalty; (ii) regulates the way the lender is permitted to advertise interest rates; (iii) mandates numerous other corrective actions related to the alleged activity; and (iv) requires the lender to hire an independent consultant to assess the lender’s advertising and disclosure practices and report to the CFPB’s Enforcement Director.

    Under the consent order, the individual owner is jointly and severally liable for the nearly $14.9 million redress judgment, and must pay a $1.5 million civil money penalty.

    CFPB TILA RESPA UDAAP Enforcement Mortgage Advertising Appraisal Management Companies

  • CFPB, State AGs Announce Joint Enforcement Action Against Military Consumer Lender

    Consumer Finance

    On July 29, the CFPB and 13 state Attorneys General announced a consent order that requires a consumer lender currently in Chapter 7 bankruptcy to provide $92 million in debt relief for about 17,000 U.S. servicemembers and other consumers harmed by the company’s alleged predatory lending scheme. The lender offered credit to consumers purchasing computers, videogame consoles, televisions, or other products, which typically were purchased at mall kiosks near military bases. In some cases the lender was the initial creditor, and in other cases, the lender provided indirect financing by agreeing to buy the financing contracts from merchants who sold the goods.

    Allegations

    The CFPB claims the lender “lured consumers with the promise of no money down and instant financing.” Then, according to the CFPB, the lender and its merchant partners artificially inflated the disclosed price of the consumer goods being sold to mask finance charges collected by the lender. The CFPB also asserts that the company withheld information on billing statements, failed to obtain required lending licenses, and illegally collected on loans that were void pursuant to state licensing and usury laws.

    Specifically, the CFPB alleges the lender violated TILA by (i) failing to accurately disclose the finance charge and annual percentage rate for financing agreements where they served as the creditor; and (ii) failing to disclose or accurately disclose in periodic billing statements for open-end financing agreements the annual percentage rate, the balance subject to interest rate, how that balance was determined, itemized interest charges, the closing date of the billing cycle, and the account balance on that date.

    In addition, the CFPB claims the lender violated the Consumer Financial Protection Act’s UDAAP provisions by purchasing deceptive financing agreements from merchants and thereby facilitating the merchant’s deceptive disclosures. The CFPB also asserts UDAAP violations for servicing and collecting on consumer financing agreements that state laws rendered void or limited the consumer's obligation to repay.

    Debt Relief

    The order requires that all efforts to collect on any outstanding financing agreements cease—approximately $60 million in contracts owed by about 12,000 consumers—and that the liquidating trust created as part of the company’s bankruptcy plan stop collections on approximately $32 million owed by more than 5,000 consumers. Servicemembers may keep the merchandise they purchased. In addition, the company must update credit reporting agencies and notify servicemembers and other consumers of debt status.

    Penalty & Redress

    The order also requires the company, through its bankruptcy trustee, to make a $1 penalty payment to the CFPB’s Civil Penalty Fund. The CFPB states that the bankruptcy prevents it from assessing a larger penalty, but the $1 payment may allow harmed consumers to be eligible for relief from the Civil Penalty Fund in the future, although that determination has not yet been made. The order also requires redress payments for excess finance charges. Due to the company’s inability to pay, the redress requirement will be suspended once the company complies with the debt relief provisions.

    CFPB TILA UDAAP Servicemembers Enforcement Predatory Lending State Attorney General

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