Consumer Financial Protection Bureau Law Blog

Get Out the Popcorn (and an Energy Drink): The CFPB Releases Videos On New Mortgage Rules

 The CFPB has just released a series of video presentations on the new mortgage rules issued by CFPB earlier this year. In his opening remarks, Director Cordray explains that these videos are part of “a broader effort on [the CFPB’s] part  to help you comply with the Dodd-Frank Act’s mortgage reforms and [the CFPB] rules.” These videos, cover:

• Ability-to-Repay and Qualified Mortgage Rule
• 2013 HOEPA Rule
• ECOA Valuations and TILA Higher-Priced Mortgage Loans Appraisal Rules
• Loan Originator Compensation Rule
• Mortgage Servicing Rules
• TILA Escrow Rule

The CFPB issued these videos “to provide an overview of the rules in a plain language format that makes the content more accessible and consumable for a broad array of industry constituents, especially smaller businesses with limited legal and compliance staff.” Those of you hoping for action sequences involving Director Cordray will be disappointed. The videos are a series PowerPoint presentations by members of the CFPB staff. Each of the videos warns that these are just “staff guidance and not any official interpretation of the Bureau or legal advice.” This guidance is important because the videos are just overviews of the requirements and do not cover all aspects of the rules or the obligations that financial institutions face under these rules.

CFPB Proposes Delay in Implementing Rule Against Financing of Certain Credit Insurance on Mortgage Loans

As our readers will recall, the CFPB proposed back in January 2013 to limit the ability of mortgage lenders to finance credit insurance premiums. These prohibitions were to go into effect on June 1, 2013, several months before the required implementation date of most regulations issued at that time. On May 8, 2013, however, the CFPB switched course, proposing to delay implementation of the rule while the CFPB decides whether to make the rule applicable to transactions other than those in which a lump-sum premium is added to the loan amount at closing. Back in January, the CFPB issued a number of final rules concerning mortgage lending, in accordance with requirements of the Dodd-Frank Act, including Loan Originator Compensation Requirements under the Truth in Lending Act (Regulation Z) (the "LO Compensation Rule"). The LO Compensation Rule deals not only with compensation, but also with loan originator qualifications and registration, as well as compliance procedures for banks, prohibitions on mandatory arbitration, and (relevant here), prohibitions on the financing of single-premium credit insurance.  Read More ›

FHFA Limits Fannie and Freddie to “Qualified Loans”: Another Strike Against Non-Qualified Loans and the Consumers Who Rely on Them

In January, the CFPB issued its final Qualified Mortgage Rule (QMR) creating a safe harbor for lenders from liability for loans that meet its criteria for a “qualified mortgage.” The Federal Housing Finance Authority (FHFA) has endorsed this Rule by barring Fannie Mae and Freddie Mac from purchasing non-qualified mortgages. This means that, beginning in January 2014 when the QRM takes effect, Fannie and Freddie will no longer be permitted to purchase: (i) loans with terms over 30 years, (ii) interest-only loans; (iii) negative amortization or ballooning principal loans; or (iv) loans with points and fees exceeding the thresholds set by the CFPB. The one exception the FHFA made is for loans that meet Fannie’s and Freddie’s underwriting and delivery standards. According to the FHFA, the “[a]doption of these new limitations by Fannie Mae and Freddie Mac is in keeping with FHFA’s goal of gradually contracting their market footprint and protecting borrowers and taxpayers.” These limitations also add to the growing number of disincentives for lenders to offer non-qualifying loans, which could constrict access to credit for those who may need it the most. 

CFPB Hosting Student Loan Hearing: New Rules On The Way???

On May 8, 2013, the CFPB is hosting a field hearing at Miami Dade College in Florida "on student loan borrowers." The CFPB holds field meetings on a regular basis without much fanfare, but what makes this hearing different is that the "event will feature remarks from [Director Cordray]." Cordrary's attendance at a "field hearing" is traditionally coupled with a "major announcement" from the CFPB , e.g. the release of data/information from the CFPB's compliant database, issuance of recommended procedures, or the publication of new rules. Student loans have been a special focus of attention for the CFPB, and it would suprise us in the least if Director Cordray used this forum to make a "major announcement" regarding student loans. Stay tuned to the CFPB-Lawblog, as we follow this developing story.

Legislation Seeks to Limit CFPB’s Authority Over Community Banks, Credit Unions and Small Servicers

Rep. Blaine Luetkemeyer (R-Mo.) has introduced legislation would limit the CFPB’s authority over and provide regulatory relief to community banks, credit unions, small servicers. Luetkemeyer’s legislation, H.R. 1750The Community Lending Enhancement and Regulatory Relief Act, would exempt institutions with less than $10 billion in assets from federal requirements on mortgage escrows and “qualified mortgage” standards (the latter only applies to loans keep on an institution's books for least three years),which which should benefit community banks and credit unions. The legislation would also increase the “small servicer” exemption in mortgage servicing rules from 5,000 mortgages to 20,000 mortgages annually. The Missouri Credit Union Association President/CEO Don Cohenour remarked that there “are several provisions in this bill that are valuable to credit unions and their members.” Stay tuned to the CFPB-lawblog as we follow this legislation.  

CFPB Eases Limits On Credit Card Fees to Avoid Court Battle: Afraid of the Fight or Evidence that It Is Listening Industry Stakeholders?

The 2011 suit by First Premier Bank challenging certain credit card fee rules issued by the Federal Reserve under TILA and the Credit Card Act has been dismissed upon agreement by First Premier and the CFPB. In its complaint, First Premier argued that the rules, which attempted to regulate fees paid prior to the opening of a credit card account, exceeded the Federal Reserve’s statutory authority to regulate fees paid “in the first year during which the account is opened.” 15 U.S.C. § 1637(n); 5 U.S.C. § 706(2)(A) & (C). In July 2011, the CFPB assumed the rule making authority under TILA from the Federal Reserve and became the plaintiff in the matter. The Court enjoined the rules from taking effect and, inFebruary 2012, the CFPB advised the court that it was preparing to amended the rules so that they did not apply to fees paid prior to an “account opening.” In the amendment, which became effective on March 28, 2013, the CFPB acknowledges that the change was “necessary to resolve the uncertainty created by the South Dakota litigation.”   

Payday Lending in the Crosshairs? CFPB Issues Opening Salvo In Efforts to Restrict Payday Lending Market

Yesterday (4/24/2013), the CFPB issued a 43-page white paper—in advance of a full report due later this spring—on payday and deposit advance loans, concluding these loans “raise substantial consumer protection concerns.” During its year-long investigation, the CFPB reviewed approximately 15 million loans from lenders in 33 states.  While Director Cordray acknowledged that the study found that payday loans “can be helpful” and “may work for some consumers for whom an expense needs to be deferred for a short period of time,” the study concluded that these loans and advances “may become harmful for consumers when they are used to make up for chronic cash flow shortages” and that “the high cost of the loan or advance may itself contribute to the chronic difficulty such consumers face in retiring the debt.” What is most remarkable about the report is not what says, but what it does not say: The report is devoid of any findings, much less a suggestion, that any payday lenders actually engaged in any improper practices. Read More ›

CFPB Issues Clarifications and Proposes Amendments to Ability to Repay and Mortgage Servicing Rules

On April 19, 2013, the Consumer Financial Protection Bureau (“CFPB”) issued proposed amendments and clarifications to its recently issued Ability to Repay Rule and Qualified Mortgage Rule and the Mortgage Servicing Rule.  As readers of the CFPB-Lawblog recall, these rules were issued just days before Dodd-Frank Act’s January 21 deadline, so it is no surprise that CFPB is releasing these clarifications and amendments to clean up issues related to meeting that deadline. The purpose of these amendment and clarifications is, according to the CFPB, to “address purpose of these updates is to address important questions raised by industry, consumer groups, or other agencies” regarding these Rules.

 These amendments and clarifications address: (1) the determination of qualified mortgages under the Ability to Repay rule through the purchase, guarantee or insurance of mortgages by GSEs or Federal agencies; (2) the calculation of a borrower’s debt-to-income ratio (“DTI”) for purposes of originating qualified mortgages under the Ability to Repay rule; (3) Regulation X preemption of state law concerning mortgage servicing; and (4) the scope and application of the small servicers exemption for the requirements under Regulation X.  The CFPB also advised that is plans on issuing similar amendments and clarifications to other rules related to mortgages and mortgage servicing in the next few months. The CFPB claims that it is issuing these amendments and clarifications because of its “responsibility not just to write a rule, but to see that it is implemented effectively." Read More ›

CFPB Issues Guidance to Small Businesses on Ability-to-Repay and QM: A Primer Not Just for Small Business Consumption

As our readers well know, the CFPB adopted rules in 2013 implementing the Ability to Repay/Qualified Mortgage (ATR/QM) provisions of the Dodd-Frank Act. By January 2014, these rules will apply to everyone.  However, on April 10, the CFPB published a small entity guide to ATR/QM that contains useful information for any entity that may be required to comply.  Written in a plain English FAQ format, the guide is packed with detailed information about the rules and is a worthwhile desk reference for those looking for the requisite detail, without the bulk associated with both the rule and the official staff interpretations.  For those more comfortable with charts, the CFPB has likewise published a summary comparison of the ability-to-repay, qualified mortgage, GSE qualified mortgage and balloon-payments QM’s.  Stay tuned.

ATM Fee Disclosures: Bureau Amends Regulation E Removing ATM Sticker Requirement

Readers will remember that, before December 2012, the Electronic Fund Transfer Act required ATM’s to include fee notices on the machines themselves.  Congress eliminated that requirement after banks faced repeated nuisance litigation arising out of the physical removal of these notices.  In many cases, the notices were likely removed by the very people who filed suit.  With the signage requirement gone, the CFPB has amended Regulation E to reflect the change while reiterating that ATM customers still receive either an on-screen or paper fee disclosure.  The revised provision, at 12 C.F.R. 1005.16, requires: (1) that the ATM operator “provide a notice that a fee will be imposed for providing electronic fund transfer services or a balance inquiry that discloses the amount of the fee”;  (2) that the notice either be shown “on the screen of the [ATM] or by providing it on paper, before the consumer is committed to paying a fee”; and (3) that the fee be imposed only if the “consumer elects to continue the transaction or inquiry after receiving such notice.”