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CFPB publishes TRID rule questions index

Posted in Mortgages

The CFPB has posted on its website an index to the various questions regarding the TILA/RESPA Integrated Disclosure (TRID) rule that were addressed during the five webinars on the rule conducted by CFPB staff.

The index includes a link to the CFPB webpage that has links to the recordings of the five webinars.  Also, the reference date of the applicable webinar that addresses each question is a link to the Table of Contents for that webinar.

Two of the questions in the index were answered by the CFPB in the August 26, 2014 webinar, and the TRID rule was later amended to address the issues presented by the questions:

  • “Are creditors required to provide revised Loan Estimates on the same business day that a consumer or loan officer requests a rate lock?”
  • “Where on the Loan Estimate form is the creditor supposed to provide the language described in 1026.19(e)(3)(iv)(F) for construction loans where settlement may be delayed?”

At the time, the TRID rule provided for the issuance of a revised Loan Estimate on the same date that the creditor locked the interest rate.  In January 2015, the TRID rule was amended to provide for the issuance of a Loan Estimate no later than three business days after the rate is locked.

The second question addressed situations in which a new home is under construction, or will be constructed, and as a result the closing of the loan will occur more than 60 days after the initial Loan Estimate is provided.  In such a situation, the TRID rule allows the creditor to reserve the right to issue a revised Loan Estimate no later than 60 days before closing without regard to the standard restrictions on fee increases, as long as the creditor provides a statement to this effect in the initial Loan Estimate.

In a transaction subject to both TILA and RESPA, the Loan Estimate is a standard disclosure and may not be modified except as provided in the TRID rule.  However, the original TRID rule did not address where the statement could be included in the Loan Estimate and, as a result, a creditor was not authorized to include the applicable statement in the Loan Estimate.  In January 2015, the TRID rule was also amended to provide for the inclusion of the following statement in the “Other Considerations” section on page three of the Loan Estimate:  “You may receive a revised Loan Estimate at any time prior to 60 days before consummation.”

For future reference, parties may want to annotate these questions in the index to note the applicable amendments that were made to the TRID rule.

Former CFPB Deputy Director joins Eastern Bank

Posted in CFPB People

The American Banker reported earlier this week that Steven Antonakes, the former CFPB Deputy Director, has joined Eastern Bank in Boston as a senior vice president and chief compliance officer.  According to the article, the bank has $9.6 billion in assets.  As a result, the bank does not currently meet the asset threshold for CFPB supervision, which is more than $10 billion in assets.

The CFPB announced that Meredith Fuchs, who also serves as the CFPB’s General Counsel, has been named Acting Deputy Director.  According to the CFPB, although Ms. Fuchs has announced her intention to step down as General Counsel, she will continue to serve as General Counsel and Acting Deputy Director until a permanent replacement is selected for each position.


ABA seeks supervisory and enforcement standards consistent with Inclusive Communities

Posted in Fair Credit

The American Bankers Association has sent a letter to the DOJ, Fed, OCC, FDIC, HUD and CFPB requesting confirmation “in interagency guidance, updated exam procedures, and where appropriate amended regulations that the Agencies’ consideration of disparate impact claims in both the supervisory and enforcement context will be governed by standards consistent with the [Supreme] Court’s framework [in Inclusive Communities.]”  The ABA also urges HUD to review and re-propose its FHA rule to incorporate the Inclusive Communities framework.

In Inclusive Communities, a sharply divided U.S. Supreme Court held that disparate impact claims are cognizable under the FHA but described a framework containing limitations on disparate impact liability that “are necessary to protect potential defendants against abusive disparate impact claims.”  The decision did not resolve the question of whether disparate impact claims are cognizable under the ECOA.

Although the CFPB is one of the agencies to whom the ABA’s letter was sent, the CFPB does not have FHA enforcement authority.  However, in its ECOA examination procedures, the CFPB notes, that “[i]n addition to potential ECOA violations, [a CFPB] examiner may identify potential violations of the [FHA] through the course of an examination. … The CFPB cooperates with [HUD] to further the purposes of the [FHA].  If a potential [FHA] violation is identified, the examiner must consult with [CFPB] Headquarters to determine whether a referral to HUD or [DOJ] and, if applicable, the creditor’s prudential regulator is appropriate.”

In the letter, the ABA also urges the agencies “to address on an interagency basis standards for referrals to DOJ consistent with the [Supreme] Court’s framework.”  According to the ABA, “there should be consensus and transparency regarding what constitutes a ‘pattern or practice’ of discrimination based on a theory of disparate impact liability, consistent with the decision of the Court, that warrants a referral from one of the banking agencies or HUD to DOJ.  Moreover, the standards should require facts establishing a prima facie case as a predicate to referral.”



CFPB denies lead generation company’s petition to modify or set aside CID

Posted in CFPB Enforcement

The CFPB has denied the petition of a lead generation company and its employee to modify or set aside a civil investigative demand (CID).  As we reported, among the petitioners’ arguments for why the CID should be set aside was that the company is neither a “service provider” nor “covered person.”  They argued that the company is not a “covered person” because it does not offer or provide a “financial product or service” as defined in Dodd-Frank.  They also argued that the company is not a “service provider” as defined in Dodd-Frank.

In its decision denying the petition, the CFPB stated that, as an initial matter, the petitioners waived these arguments by not raising them with the CFPB’s enforcement counsel during the meet-and-confer process.  The CFPB ruled that the objection also failed on its merits because it is “essentially a substantive defense to claims the Bureau has yet to assert.”  The CFPB stated that “such fact-based arguments about whether an entity is subject to or complied with a law’s substantive provisions are not defenses to the enforcement of a CID.” According to the CFPB, its position is supported by case law involving the FTC and Equal Employment Opportunity Commission indicating that an agency’s rejection of such defenses is appropriate because “the responses to a CID may be highly relevant to determining the merits of the agency’s potential claims and the parties’ defenses.”  (The CFPB also cites to its own previous decision rejecting a similar objection to a CID.)

Among the petitioners’ other arguments rejected by the CFPB was their argument that the CID’s notification of purpose was insufficiently specific and thus failed to comply with the requirement that a CID state “the nature of the conduct constituting the alleged violation which is under investigation and the provision of law applicable to such violation.”  The CID indicated that the CFPB was investigating “whether lead generators or other unnamed person have engaged or are engaging in unlawful acts and practices in connection with the marketing, selling, or collection of payday loans” and identified various statutes, including Sections 1031 and 1036 of Dodd-Frank, the ECOA, FCRA and GLBA.  According to the CFPB, this information “adequately informed Petitioners of the conduct of interest to the Bureau and the potentially applicable provisions of law.”

CFPB Issues Compliance Bulletin on PMI Cancellation and Termination

Posted in CFPB General, CFPB Rulemaking, Mortgages

The CFPB recently issued Compliance Bulletin 2015-03, addressing the cancellation and termination requirements for private mortgage insurance (PMI) under the Homeowners Protection Act of 1998 (HPA). We note that this Bulletin does not provide much in the way of novel interpretation or expected best practices. Instead, the Bulletin outlines the basics of these requirements, and cites examples of servicing practices that have misapplied or confused the plain language of the HPA. The Bulletin covers the following topics: (1) borrower-requested cancellation of PMI; (2) automatic termination of PMI; (3) final, mid-amortization termination of PMI; (4) PMI refunds; (5) annual PMI disclosures; and (6) investor guidelines.

On the topic of borrower-requested cancellation, the Bulletin emphasizes that the 80% loan-to-value (LTV) threshold must be based on the original value of the property. Thus, while a valuation may be required to ensure that the current property value has not declined below the original value (as a separate condition for cancellation) the LTV calculation is still based on the original value of the property. With respect to automatic termination of PMI, the Bulletin emphasizes that, unlike borrower-requested cancellation: (1) the current value of the property is not a factor, and so servicers may not require a property valuation as a condition of termination, and (2) borrowers cannot advance the termination date by making extra payments to lower the principal balance.

The Bulletin also addresses the final termination requirements under the HPA. Those provisions prohibit requiring PMI coverage, beyond the midpoint of the amortization period, provided the borrower is current. The Bulletin points out that because the HPA applies only to residential mortgage loans consummated on or after July, 29, 1999, the final termination requirements began to impact standard 30-year loans in August 2014. Accordingly, servicers are reminded to ensure that appropriate policies and procedures are in place to comply with the final termination requirements.

On the subject of PMI refunds, the Bulletin notes certain violations observed in examinations, such as improperly collecting premiums after the time frames imposed under the HPA and failing to remit unearned PMI premiums to borrowers in a timely manner. The Bulletin also notes that the CFPB observed failures to provide the annual PMI notice required under the HPA.

Finally, the Bulletin addresses the issue of investor guidelines for cancellation of PMI that are inconsistent with the requirements under the HPA. The Bulletin emphasizes that investor guidelines cannot restrict the PMI cancellation and termination rights provided under the HPA. The Bulletin notes certain examples of these issues, such as investor guidelines that base the LTV calculations on the current market value, as opposed to the original value as required by the HPA.

Overall, this Bulletin is a reminder to the industry of the plain language requirements under the HPA. It is clear that the CFPB views this as an area for which the industry seems to have lost focus, and topics addressed in the Bulletin likely will be points of emphasis for examinations.

CFPB updates TILA-RESPA implementation materials

Posted in CFPB Rulemaking, TILA / RESPA
The CFPB has updated the TILA-RESPA implementation materials and resources to make them consistent with the new October 3 effective date for the TILA-RESPA final rule. Specifically, updates have been made to the TILA-RESPA Integrated Disclosures Guide to the Loan Estimate and Closing Disclosure forms, the TILA-RESPA Integrated Disclosure Small Entity Compliance Guide, and the TILA-RESPA Integrated Disclosures timeline example. The TILA-RESPA implementation materials may be found on the CFPB’s website here.

CFPB to participate in Dallas FTC debt collection program

Posted in Debt Collection, FTC

The CFPB will be participating in the FTC’s second “Debt Collection Dialogue” to be held in Dallas, Texas on September 29, 2015.  Gregory Nodler, CFPB Senior Counsel for Enforcement Policy and Strategy, is scheduled to be a panelist.  The program will include a discussion of enforcement actions, consumer complaints, compliance issues, industry best practices, and how regulatory enforcement actions are investigated and pursued.  Mr. Nolder also represented the CFPB at the FTC’s first such program that was held on June 15, 2015 in Buffalo, New York.

Other scheduled panelists at the Dallas program include Christopher Koegel, Assistant Director of the FTC’s Division of Financial Practices, and Jessica Lesser, Managing Attorney of the Dallas Regional Office of the Texas Attorney General, Consumer Protection Division.  The program is free and open to the public.  Pre-registration is encouraged.

A third “Debt Collection Dialogue” is scheduled to held in Atlanta, Georgia  on November 18, 2015.

CFPB eClosing project update

Posted in Mortgages

On August 5, 2015, the CFPB issued a report on its study of the CFPB’s mortgage loan eClosing project and held a public forum addressing the study results.  As we reported, the CFPB launched the eClosing project to determine if the mortgage closing process could be improved for consumers through the use of technology.

The participants in the pilot project included seven lenders, four technology companies, many settlement agents and real estate professionals and consumers with over 3,292 loans.  Certain consumers received traditional paper documents and certain consumers received either all electronic documents or a hybrid of electronic and paper documents.  The borrowers who participated in the project were invited to complete a follow-up survey, and 1,254 surveys were completed.

The CFPB focused on three specific areas—consumer understanding and empowerment, and the efficiency of the closing process.  The CFPB advised that the study showed:

  • A 7 percent positive difference in perceived understanding for borrowers using eClosing as compared to borrowers using paper documents.
  • A 15 percent positive difference in the scores on consumer empowerment—or a feeling of control over the process—for eClosing borrowers as compared to borrowers using paper documents.
  • A 17 percent positive difference in scores on efficiency for eClosing borrowers as compared to borrowers using paper documents.

The CFPB cited the earlier receipt of documents by consumers using the eClosing process as a benefit, and the early receipt apparently contributed significantly to positive scores regarding consumer understanding and empowerment and the efficiency of the process.  However, at the forum, the CFPB did not focus on whether the earlier receipt of documents, whether paper or electronic, or the use of electronic documents was the driving factor.  Certain industry participants in the forum noted the earlier receipt of documents, whether paper or electronic, was most important.

The TILA/RESPA Integrated Disclosure (TRID) rule, which becomes effective October 3, 2015, will require that consumers have the Closing Disclosure in hand not less than three business days before consummation, and the disclosure can be delivered in paper form or, with consumer consent, electronically.  Certain borrowers in the pilot project not only received disclosures electronically before closing but also received the entire closing package electronically.  The TRID rule will not require early delivery of the entire closing package.  A consumer advocate at the forum stated that providing the entire closing package earlier would be an improvement.  One particular benefit of electronic documents touted by many forum participants is the ability to include links to CFPB educational materials that provide helpful information on matters addressed in the documents.

During the forum an industry participant advocated, at least initially, the use of the hybrid approach that was included in the pilot project.  With that approach, consumers received documents electronically in advance and signed paper documents at the closing.  The participant noted as important factors that there are investors that will not accept, and many recording offices are not able to accept, electronic documents.  The CFPB study also noted challenges to the use of electronic documents that are presented by notarization requirements.

Although the CPFB touted, at the forum, that the use of electronic documents provides for earlier receipt of documents and overall efficiency, it did not address an aspect of the TRID rule that frustrates these goals.  Currently under the E-Sign Act, a creditor can deliver documents to obtain consumer consent to electronic disclosures along with the electronic disclosures. However, the TRID rule requires that the creditor first complete the consent process under the E-Sign Act and then deliver the electronic disclosures.  Although in adopting the TRID rule the CFPB asserted that it did not believe that this extra step would pose a burden on the industry, industry members have found the extra step does creates a burden in the implementation of the TRID rule and the loan process.

The CFPB noted in the study that it is encouraged by the results of the pilot project and remains interested in further evaluating and encouraging more consumer-friendly closing processes, particularly after the marketplace has implemented the TRID rule.  At the forum, a consumer advocate that supported moving to an eClosing process cautioned that some consumers do not have ready access to technology and that they also should be able to experience an efficient closing process.

OIG finds CFPB headquarters renovation costs reasonable

Posted in CFPB General

The Office of Inspector General for the Fed and CFPB (OIG) has issued a report on the results of its audit of the construction costs for the CFPB’s Washington, D.C. headquarters renovation.  The renovation costs have been the subject of criticism by some lawmakers.

The OIG found that the costs “appear reasonable based on comparisons to an independent cost estimate and the costs of two comparable building renovations identified by the U.S. General Services Administration.”  The OIG also found that potential renovation costs are less than the amount previously budgeted and obligated for the renovation.  While the OIG found that current controls for approving, managing and documenting renovation costs and project decisions are designed appropriately, it did not have the opportunity to test such controls because most construction cost-management control activities had not yet begun.

In June 2014, the OIG issued a letter reporting on the results of its evaluation of the CFPB’s renovation budget.  The letter indicated that the CFPB’s approval processes require major investments to be reviewed by the CFPB’s Investment Review Board (IRB) and while IRB approval was not necessary for the CFPB to include a major investment in its budget, such approval was needed for budgeted funds to be available for expenditure.  To obtain IRB approval, a CFPB program office must complete an IRB “business case” which, according to the CFPB’s internal guidance for making a “sound business case,” requires consideration of alternatives, including a comparison of the costs and benefits of alternatives and the rationale for the investment.  It also requires a return on investment to be shown and stresses the importance of a quantitative analysis.  The OIG found that that CFPB did not follow all of its internal guidance when completing the business case for the renovation.

In its audit report, the OIG indicated that the construction contract awarded in December 2014 includes two options that would result in additional costs to the CFPB if exercised.  One option is for a facilities operations and maintenance services contract and the other is for the construction of a childcare center that would require the CFPB to incurs costs for a retail tenant buyout.  The OIG recommended that the CFPB prepare and submit a complete business case to IRB for the optional investments before obligating funds and the CFPB has agreed to do so.

CFPB files lawsuit against Internet payday loan companies

Posted in CFPB Enforcement, Payday Lending

The CFPB has filed a complaint in federal district court in New York against a group of commonly-controlled companies for allegedly engaging in unlawful conduct in connection with making payday loans over the Internet.  With the exception of two defendants that are alleged to be incorporated in Malta, the defendants are alleged to be Canadian corporations.  In its press release (but not in the complaint), the CFPB describes the action as a suit against an “offshore payday lender.”

According to the complaint, the defendants performed different functions such as purchasing leads from lead generation companies, brokering loans, originating loans, and collecting loans.  The complaint alleges that the defendants made payday loans to residents of states in which the loans were void under state law because the defendants charged interest rates that exceeded state usury limits or the defendants failed to acquire required licenses.

The CFPB claims that the defendants violated the Dodd-Frank/Consumer Protection Act prohibition on unfair, deceptive, and abusive acts and practices by actions that included: (1) misrepresenting that consumers were obligated to pay debts that were void under state law and that the loans were not subject to U.S. federal or state law, (2) forcing consumers to pay illegal amounts they did not owe; and (3) misrepresenting that the defendants would sue consumers who did not pay or take other actions they did not intend to take.  The complaint also alleges that the defendants violated the Credit Practices Rule by conditioning the loans on irrevocable wage assignments.

The relief sought by the CFPB includes restitution and refund of money paid by consumers on the allegedly void loans.

The new lawsuit is similar to the CFPB’s groundbreaking December 2013 lawsuit filed in Massachusetts federal court against CashCall, several related companies and their principal.  The companies allegedly funded, purchased, serviced and collected online payday loans made by a tribally-affiliated lender the CFPB did not sue.  The defendants were charged with engaging in unfair, deceptive and abusive acts and practices in seeking to collect loans that were purportedly void in whole or in part under state law because the lender charged excessive interest and/or failed to obtain a required license