CFPB Report April 25, 2014

CFPB Releases Mortgage Closing Report

In a report released on Wednesday, April 23, 2014, the CFPB found many consumers feel pressured by lenders to rush through the closing process and sign documents even when they did not fully understand the terms. The Bureau listed three major “pain points” for consumers during the closing process, which included: 

  • Not enough time to review: Consumers were frustrated by the short timeframe in which they were asked to review closing documents. In many cases, they did not see the paperwork until arriving at the closing table. Consumers reported feeling pressured to rush through the paperwork and sign it—even when they did not understand the terms.
  • Overwhelming stack of paperwork: When consumers closed on a home, they often faced stacks of paperwork. While some of the forms are intended to help consumers better understand the costs and risks of their mortgages, others are included by lenders as a result of their legal risk assessments. Remaining forms may fulfill federal, state, and local government requirements. The volume of paperwork varies from lender to lender.
  • Complexity of documents and errors: Most closing documents are full of legalese and technical language. The terms and acronyms are unknown to most consumers. In addition to having little time to read through and understand a large stack of paperwork, consumers often complained they had little help from the others in the room. Consumers also mentioned they found errors in their closing documents. Those errors often led to delays as closing agents had to redo the entire closing package.

Also on Wednesday, the CFPB held a forum in Washington, D.C. on the mortgage closing process, indicating the next phase of its “Know Before You Owe” initiative will identify ways to improve the closing process. The Bureau also released guidelines for an upcoming eClosing pilot project, aimed at assessing the benefits of electronic closings for consumers as they navigate the mortgage closing process.


“Mortgage closings are often fraught with anxiety,” CFPB Director Richard Cordray said in his remarks at the forum. “We have taken action to address some of the problems consumers face, but more needs to be done. Our eClosing pilot project will provide valuable insight into how to improve the closing experience for consumers.”


CFPB Reports Finds Accelerated Default for Private Student Loans with Cosigners

On Tuesday, March 22, 2014, the CFPB published a mid-year update of private student loan complaints. The report, which reviews data from October 2013 through March 2014, discussed 2,300 complaints regarding private student loans and 1,300 debt collection complaints related to student loans. The report focused on cosigning, and described incidents of loans being automatically defaulted when a co-signer died. However, the Bureau did not provide any details as to how many loans were involved. While such language may be standard in some loan agreements, it does not appear to be a common practice for the banking industry.


“Students often rely on parents or grandparents to co-sign their private student loans to achieve the dream of higher education. When tragedy triggers an automatic default, responsible borrowers are thrown into financial distress with demands of immediate repayment,” said CFPB Director Richard Cordray said in a news release. “Lenders should have clear and accessible processes in place to enable borrowers to release co-signers from loans. A borrower should not have to go through an obstacle course.”


In conjunction with the report, the Bureau published a Consumer Advisory to educate individuals on how to work with their lenders and servicers to release a cosigner. The advisory also includes sample letters for how a borrower can release a cosigner and how a cosigner can seek to be released.


CFPB Proposes Consumer Financial Product Research

According to a recent Federal Register notice posted Monday, April 14, 2014, the CFPB is proposing to undertake research studies on the consumer financial product markets, including mortgages; auto, student, installment, and small dollar loans; and credit, debit and prepaid cards.


In its submission to the Office of Management and Budget (OMB), the Bureau states “The purpose of research conducted under the expected [OMB] clearance will not be making regulatory decisions or developing or evaluating specific policies.” The Bureau further explains, “The CFPB envisions that the research covered under this generic clearance will be basic research about consumer credit markets and household finance.”

Regulators Approve Interagency CRA Exam Procedures

On Friday, April 18, 2014, the Federal Reserve, the FDIC, and the OCC approved the interagency Large Institution Community Reinvestment Act (CRA) examination procedures, which explain how community development activities will be considered when evaluating an institution's CRA performance, assigning ratings, and developing public performance evaluations. The updates reflect the changes to the Interagency Questions and Answers Regarding Community Reinvestment, which were published in the Federal Register on November 20, 2013.