CFPB Report - October 16, 2015

CFPB Student Loan Ombudsman Issues Annual Report
On October 14, 2015, Acting CFPB Student Loan Ombudsman Seth Frotman issued the Student Loan Ombudsman Annual Report, which included an analysis of student lending related complaints submitted between October 1, 2014 and September 30, 2015. The report focused on the repayment rates of private loans guaranteed by the federal government through the Federal Family Education Loan Program (FFELP) and highlights consumer complaints related to the servicing of these loans.
 
In his blog post accompanying the report's release, Seth Frotman noted, "Today's report found that federal student loans made by private lenders may have a greater rate of borrowers in default and delinquency than the broader student loan market. This raises concerns about whether distressed borrowers with these loans are getting adequate information on repayment options from their servicers."
 
The report and blog post cited the collection of 6,400 private student loan complaints, 2,300 debt collection complaints, 30,000 "stories about student debt stress," comments from the CFPB's recent request for information on student loan servicing, and responses to a voluntary request for information from certain market participants. Because of these data sources and sample sizes, the CFPB acknowledged the "report does not suggest the prevalence of the issues described as they related to the entire student loan market" nor does it draw conclusions that can be supported by statistically significant analysis. Nonetheless, the report concluded that 30 percent of FFELP borrowers are delinquent or in default, and only six percent of FFELP borrowers are enrolled in income based repayment—one-third the rate of direct loan borrowers. As a result, the report recommended "policymakers pursue industry-wide standards for student loan servicers," such as loan performance based servicing fees, and expand public access to servicer-level performance data, including the utilization of income-driven repayment plans.
 
CFPB Finalizes HMDA Rule
On Thursday, October 15, 2015, the CFPB released the anticipated final rule on the Home Mortgage Disclosure Act (HMDA) with accompanying summary and rule implementation website. Highlights include:
 
Reporting Timeline: New data must be collected starting January 1, 2018 and reported March 1, 2019. Institutions with a combined 60,000 applications in the previous year must report quarterly beginning with the first submission due May 30, 2020.
 
Reporting Loans: The final rule adopted a dwelling secured standard for all loans or lines of credit for personal, family, or household purposes. Specifically:

  • Consumer-purpose transactions are reported, including closed-end home equity loans, open-end home equity lines of credit, and reverse mortgages;
  • Commercial-purpose transactions are not reported, unless the purpose of the loan is for a home purchase, home improvement, or refinancing;
  • Home improvement loans are only reported if they are secured by a dwelling; and
  • Agricultural-purpose loans and lines of credit are not reported even if secured by a dwelling.

Data Fields: New data fields to be reported include applicant or borrower age; credit score; automated underwriting system information; unique loan identifier; property value; application channel; points and fees; borrower-paid origination charges; discount points; lender credits; loan term; prepayment penalty; non-amortizing loan features; interest rate; and loan originator identifier.
 
Proposed fields that were not adopted include QM flag; initial draw amount of credit line; MSA; and pre-discounted, risk-adjusted interest rate.
 
Changes to Ethnicity, Race, and Gender Collection: Must report the method of collection (visual observation or surname) and ethnicity subcategories added, which may only be used if the borrower is self-identifying.
 
Requested Public Disclosure Requirement Eliminated: Institutions are no longer required to provide a disclosure statement or a modified Loan Application Register (LAR) to the public upon request. Instead, in response to a request, a covered institution will provide a notice that its disclosure statement and modified LAR are available on the Bureau's website.
 
At a later date, the Bureau is planning to request feedback on which fields should be disclosed on the modified LAR. The CFPB is using a balancing test to determine the information to be disclosed, weighing the privacy interests against the purpose of HMDA.
 
CBA is planning a member call on this issue and will send additional details via email shortly.

Fed Approves Synchrony Separation from GE
On Wednesday, October 14, 2015, the Federal Reserve Board announced the approval of Synchrony Financial's application to operate as a publicly owned savings and loan holding company (SLC). The order stipulates Synchrony will operate as a stand-alone SLC and no longer be a subsidiary of General Electric Company. According to the order, "Synchrony Financial, with consolidated assets of approximately $75.8 billion, controls Synchrony Bank and is the 36th largest insured depository organization in the United States, controlling approximately $37.8 billion in deposits." The proposal and request for comments were initially published in the Federal Register on May 7, 2015.
 

FFIEC Issues Spanish Version of BSA/AML Manual
On Thursday, October 15, 2015, the Federal Financial Institutions Examination Council (FFIEC) issued a Spanish translation of its Bank Secrecy Act/Anti-Money Laundering (BSA/AML) Examination Manual. The revisions to the manual also incorporate feedback from the banking industry and staff from the FFIEC agencies.