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  • Special Alert: CFPB Finalizes Amendments to Mortgage Servicing Rules

    Lending

    On Thursday, the CFPB issued its long-awaited final amendments to the mortgage servicing provisions of Regulations X and Z. The Bureau had sought comment on the proposed rule in December 2014, more than 18 months ago. Spanning 900 pages, the final rule makes significant changes that will impact servicers even as it clarifies several points of confusion with the existing regulations. Most significantly, the amendments extend existing protections to successors in interest and borrowers who have previously been evaluated for loss mitigation under the rules, brought their loans current, and then experienced new delinquencies. The amendments also require servicers to provide modified periodic statements to borrowers in bankruptcy. In coordination with the final amendments, the Bureau published an interpretive rule under the Fair Debt Collections Practices Act (FDCPA) to address industry concerns about conflicts with the servicing rules.

    A summary of the key amendments is provided below. Unless otherwise stated below, the amendments take effect 12 months from the date of publication of the rule in the Federal Register, which has not yet occurred. If recent experience is any guide, we anticipate that publication in the Federal Register may be delayed for as long as a month, given the length of the final rule, commentary, and preamble.

     

    Click here to view the full Special Alert.

     

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    Questions regarding the matters discussed in this Alert 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 Mortgage Servicing Force-placed Insurance Regulation Z Loss Mitigation

  • CFPB Seeks Comments on Changes to Complaint Database

    Consumer Finance

    On August 1, the CFPB published a Notice and Request for Comment on its new information collection, “Consumer Response Company Response Survey” in the Federal Register. According to the Federal Register notice, the “purpose of [the] information collection is to incorporate a short survey into the complaint closing process.” The survey would replace the current “dispute” option, and is designed to give consumers an opportunity to provide feedback on how a company responded to and handled their complaints. Consumers would have the opportunity to rate the company on a scale of one to five, and provide a narrative description in support of the rating. The CFPB has released a survey mock up, which includes an opt-in option for consumers to consent to the CFPB publishing their feedback on the agency website. The CFPB intends to share survey results with the companies. Written responses to the CFPB’s Request for Comment are due by September 30, 2016.

    CFPB Consumer Complaints

  • CFPB Issues Principles for the Future of Loss Mitigation

    Lending

    On August 2, the CFPB released consumer protection principles for mortgage servicers to use as they develop new foreclosure relief solutions in anticipation of Treasury’s Home Affordable Modification Program’s (HAMP) upcoming expiration date (CFPB Principles). The CFPB Principles echo those summarized in FHFA’s, HUD’s, and Treasury’s recently published white paper, “Guiding Principles for the Future of Loss Mitigation: How the Lessons Learned from the Financial Crisis Can Influence the Path Forward.” As previously covered in InfoBytes, the white paper recommends that future loss mitigation programs promote accessibility, affordability, sustainability, transparency, and accountability. The CFPB Principles address accessibility, affordability, sustainability, and transparency, and cite to separate CFPB mortgage servicing rules for standards concerning accountability. In its press release, the CFPB notes that the four principles “do not establish binding legal requirements but instead are intended to complement ongoing discussions among industry, consumer, groups, and policymakers.”

    CFPB Foreclosure Mortgage Servicing HUD FHFA Department of Treasury HAMP Loss Mitigation

  • Special Alert: CFPB Proposes Amendments to Know Before You Owe/TRID Rule

    Lending

    On Friday, the CFPB issued its much anticipated proposal to amend the KBYO/TRID rule. The CFPB crowded dozens of proposed changes into the almost 300 page proposal, most of which are highly technical and require careful examination. As the Bureau has signaled since its intention to issue amendments was first announced, the proposal is not intended “to revisit major policy decisions” because “[t]he Bureau is reluctant to entertain major changes that could involve substantial reprogramming of systems so soon after the October 2015 effective date or to otherwise distract from industry’s intense and very productive efforts to resolve outstanding implementation issues.” However, it has “proposed a handful of substantive changes where it has identified a potential discrete solution to a specific implementation challenge.”

    If finalized, the amendments should resolve a number of significant ambiguities that have generated concerns about the liability of lenders and purchasers of mortgage loans and hampered loan sales, particularly the so-called “Black Hole” that can arise when closing is unexpectedly delayed. However, because it is unclear in most cases whether the Bureau intends the amendments to apply only prospectively and because the amendments would not alter the provisions for “curing” errors, these liability concerns will remain for loans originated prior to the effective date of the amendments. Furthermore, because the industry has been forced to make loans since October 2015 despite these ambiguities, it will be necessary in many cases to revise existing systems and practices to comply with the amended rule. Finally, in some cases, the Bureau seems to have gone beyond resolving ambiguities and is instead seeking to make targeted policy changes to the rule.

    Although the proposed amendments are too voluminous and technical to be summarized comprehensively, we have highlighted a number of the more significant proposed changes below. Note that the CFPB specifically requested feedback on a number of the issues addressed in the proposal. Comments are due on or before October 18, 2016.

     

    Click here to view the full Special Alert.

     

    * * *

     

    Questions regarding the matters discussed in this Alert 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 TRID

  • Special Alert: CFPB Releases Outline of Proposed Rule for Third Party Debt Collectors

    Consumer Finance

    On July 28, the CFPB announced that it is considering proposing a rule to “overhaul the debt collection market by capping collector contact attempts and by helping to ensure that companies collect the correct debt.” The CFPB released several related documents, including a report on third-party debt collection operations and an outline of the proposal (the “Outline”) that will be presented to a panel of small businesses pursuant to the Small Business Regulatory Enforcement Fairness Act (SBREFA). Under the SBREFA process, the CFPB first seeks input from a panel of small businesses that likely will be subject to the forthcoming rule. A report regarding the input of those reviewers is then created and considered by the CFPB before issuing its proposed rule.

    While the CFPB’s earlier Advanced Notice of Proposed Rulemaking posed questions regarding collections by creditors and first party collectors, the Outline only addresses proposals for third party collectors (i.e., collectors operating in their own name when collecting on behalf of others including debt buyers and collection law firms). Based on remarks by Director Cordray, the CFPB is expected to address first party collections separately. That said, in practical terms the outline in effect would impose certain new compliance obligations on creditors.

    The Outline’s proposals for third party collections notably include (i) requirements to obtain and review information substantiating consumer debts to be collected; (ii) requirements regarding the transfer of information when consumer debts are transferred; (iii) revisions and additions to the debt validation notice; (iv) required disclosures when collection communications are made in connection with time-barred debt (as well as a prohibition on filing suit in connection with time-barred debt); and (v) limits to the contacts and contact attempts made in connection with a debt. These and other requirements proposed in the Outline are discussed further below.

     

    Click here to view the full Special Alert.

     

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    Questions regarding the matters discussed in this Alert 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 Debt Collection Small Business Regulatory Enforcement Fairness Act

  • CFPB Monthly Complaint Snapshot Highlights Credit Card Issues

    Consumer Finance

    On July 26, the CFPB released its most recent monthly complaint report, which provides a high-level snapshot of consumer complaint trends. The current report highlights credit card complaints. According to the report, between July 21, 2011 and July 1, 2016, the CFPB handled approximately 97,100 credit card-related complaints, making credit cards the fourth most complained about product. The report identifies billing disputes, identity theft/fraud/embezzlement, and “other” complaints as the three most common types of credit card-related complaints. The report states that, with respect to complaints related to credit decisions, consumers frequently complain about difficulty in understanding initial application decisions and servicing changes (such as interest rate adjustments and credit limit reductions). Credit card complaints described in the report also include (i) confusion over payment allocation relating to promotional and deferred interest balances; (ii) frustration with late fees and additional costs; and (iii) difficulty understanding the terms and conditions of rewards and obtaining benefits.

    With respect to consumer complaints generally, the report’s “Geographic spotlight” section focuses on Washington and the Seattle metro area. The report notes that, as of July 1, Washington consumers have submitted 18,900 complaints, with approximately 11,000 of those from Seattle consumers. At 29%, mortgage loans are the most-complained-about product in Washington, with debt collection and credit reporting trailing at 27% and 15%, respectively. Across all products and throughout the nation, the CFPB has handled approximately 930,800 complaints.

    Credit Cards CFPB Consumer Complaints

  • GAO Releases Report on Mortgage Servicing

    Lending

    On July 25, the GAO released a report titled “Mortgage Servicing: Community Lenders Remain Active under New Rules, but CFPB Needs More Complete Plans for Reviewing Rules.” At the request of the House Committee on Financial Services, the GAO report outlines and analyzes the effect of the CFPB’s 2013 mortgage-servicing rules and the banking regulators’ implementation of the Basel III framework on credit unions and community banks’ (collectively, community lenders) mortgage servicing activities. Specifically, the GAO report examines (i) community lenders’ participation in the mortgage servicing market, as well as the potential effect of the new mortgage servicing rules on them; (ii) the potential impact that the Basel III framework could have on community lenders’ decisions to hold or sell Mortgage Servicing Rights (MSR); and (iii) regulators’ processes for estimating the impact of the new regulations. 

    Overall, the GAO report suggests that community lenders’ decisions to sell or hold MSRs likely will not be affected by the new capital treatment of MSRs under the Basel III framework because their concentration of MSRs is limited: “Most representatives of community banks said that regulatory changes to the capital treatment of MSRs did not require them to sell MSRs or raise additional capital.” Although officials from two community banks with larger concentrations of MSRs suggested that “the rules would prevent the bank from growing as much as it would like,” the GAO concludes that community lenders’ participation in MSR sales is based on several factors other than MSR capital treatment, including volatility in the value of MSRs, compliance risk, and interest rates and prepayments.

    According to the report, the new mortgage servicing regulations increased compliance costs for community lenders, but have yet to affect adversely their participation in the mortgage servicing market. In fact, the GAO found that, between 2008 and 2015, the share of mortgages serviced by community lenders doubled. The report states that community lenders continue to service mortgage loans held in portfolio or hold MSRs, despite the increase in regulatory requirements and compliance costs, because such activities generate income and help them to maintain strong customer relationships. Regarding profitability, representatives from one credit union noted that “servicing mortgages provides it with the opportunity to develop borrowers into full members with checking and savings accounts and car loans.” Community lenders further highlighted the significance of working directly with customers encountering errors or difficulty during the loss mitigation process: “Representatives at several industry associations and community lenders [told the GAO] that community banks and credit unions preferred to retain MSRs even if they sold the mortgages in the secondary market because they were able to maintain close customer contact should issues arise.” The report recognizes that, for community lenders servicing 5,000 or fewer mortgages, the CFPB’s exemptions for small servicers and creditors were helpful to their businesses and customers. Still, some community lenders reported having to adjust their business practices to manage increased compliance costs, highlighting increases in fees and interest rates, as well as changes to product offerings.

    Pursuant to the Dodd-Frank Act, the CFPB must retrospectively review the effectiveness of its mortgage servicing rules by January 2019. According to the report, as of April 2016, the CFPB’s plans for retrospective review are incomplete because agency officials determined that, among other things, it was “too soon to identify the relevant data and because the agency wanted the flexibility to design the most effective method to analyze the rules.” The report states that, without having finalized a review plan, including outlining its proposed methodologies for seeking public input, the CFPB risks not having sufficient time to complete an effective review. As such, the GAO recommends that the CFPB “complete a plan to identify the outcomes [it] will examine to measure the effects of the regulations, including the specific metrics, baselines, and analytical methods to be used.”

    CFPB Mortgage Servicing Community Banks Basel GAO Loss Mitigation

  • Federal Reserve and CFPB Propose Method for Adjusting TILA and Consumer Leasing Act Exemption Thresholds

    Consumer Finance

    On July 22, the CFPB and the Federal Reserve released  proposed rules detailing the method for adjusting the dollar thresholds in Regulation Z (TILA) and Regulation M (Consumer Leasing Act/CLA) for exempt consumer credit and lease transactions. Pursuant to the Dodd-Frank Act, the exemption thresholds in TILA and the CLA are adjusted annually based on the percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). The recently released proposals seek to clarify, among other things, that in the years following a year in which there is no annual percentage increase in the CPI-W, the CFPB and Federal Reserve will not adjust the exemption thresholds. Comments on the proposals are due within 30 days of publication in the Federal Register.

    CFPB TILA Federal Reserve Consumer Leasing Act

  • Agencies Propose Method for Adjusting Small-Loan-Exemption Threshold under HPML Appraisal Rules

    Lending

    On July 22, the CFPB, the Federal Reserve, and the OCC issued a joint proposal “detailing the method that will be used to make annual inflation adjustments to the threshold for exempting small loans from higher-priced mortgage loan appraisal requirements.” The Dodd-Frank Act amended TILA to establish special appraisal requirements for higher-priced mortgage loans (HPMLs). To implement these requirements, the OCC, NCUA, CFPB, Federal Reserve, FDIC, and FHFA issued final rules that became effective on January 18, 2014. The rules exempt transactions of $25,000 or less and require that the $25,000 threshold be adjusted annually to reflect any percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). The recently-issued joint proposal would memorialize the calculation method for determining such adjustments and further clarify that, if there is no annual percentage increase in the CPI-W, the exemption threshold from the prior year will not be adjusted. Comments on the proposal are due within 30 days of publication in the Federal Register.

    CFPB TILA Dodd-Frank Federal Reserve OCC

  • CFPB Announces Staff Changes

    Consumer Finance

    On July 20, the CFPB announced various senior leadership changes. Chris D’Angelo will now serve as Associate Director for Supervision, Enforcement and Fair Lending. D’Angelo joined the CFPB in June 2011 from the U.S. Treasury Department and has held a number of roles at the CFPB, the most recent of which was senior advisor to Director Cordray. Additional leadership changes include Richard Lepley serving as the CFPB’s Principal Deputy General Counsel in the Office of the General Counsel in the Legal Division, and Nellisha Ramdass serving as the Deputy Chief Operating Officer.

    CFPB Fair Lending Enforcement

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