CFPB Report October 3, 2014

CFPB Issues Report on Loans for Manufactured Housing

On Tuesday, September 30, 2014, the CFPB issued a report on the manufactured housing market, owner demographic, and loan terms. The Bureau found the median age of manufactured-home owners to be 53, with most living in rural areas and possessing a low net worth. Borrowers of manufactured home loans pay a higher interest rate than borrowers whose homes are built onsite.

 

The report discussed challenges with manufactured home financing, and the option for owners to title their homes as either real estate property, or personal property, often through chattel loans.

 

According to the CFPB, consumers with mortgages fared better than those with personal property loans. The report indicated two out of three manufactured home owners eligible for mortgages financed with personal property loans, which typically have higher interest rates. Despite lower origination costs, personal property loans also have fewer consumer protections since they are not covered by the Real Estate Settlement Procedures Act.

 

"These consumers may be more financially vulnerable and benefit from strong consumer protections. The Bureau is committed to ensuring that consumers have access to responsible credit in the manufactured housing market," said CFPB Director Richard Cordray in a press statement.

 

OIG Finds CFPB Compliant with Small Business Cost of Credit Requirements

On Monday, September 29, 2014, the Office of Inspector General (OIG) for the Board of Governors of the Federal Reserve System and the CFPB issued a report on the Bureau's compliance with section 1100G of the Dodd-Frank Act. Dodd-Frank requires the Bureau to assess the impact of any proposed rule on the cost of credit for small businesses. The Bureau is required to conduct regulatory flexibility analyses and convene panels of small business entities for input in advance of issuing certain rules.

 

The OIG found the Bureau complied with section 1100G, but found two interim policies and procedures issued by the CFPB's Division of Research, Markets, and Regulations (RMR) have not been updated or finalized since being issued two years ago. The OIG also found RMR is afforded "significant discretion in their 1100G rulemaking approach to regulatory analysis." During the period in which the OIG's report was drafted, the Bureau's RMR division updated and finalized the two policies and procedures documents.

 

CFPB Enters Announces Consent Order on Mortgage Servicing

On Monday, September 29, 2014, the CFPB announced consent orders against Flagstar Bank for alleged violations of the Bureau's new mortgage servicing rules by failing at "at every step of the foreclosure relief process." The CFPB ordered the bank to pay $27.5 million to 6,500 victims, as well as a $10 million fine to the Civil Penalty Fund. Flagstar was also required to end loss mitigation mortgage servicing violations, cease acquisition of default servicing rights from third parties, and help impacted borrowers stay in their homes.

 

According to the Bureau, Flagstar, based in Troy, MI, did not devote sufficient resources to the loss mitigation programs for struggling homeowners. The Bureau also claims Flagstar:

  • Closed borrower applications due to its own excessive delays;
  • Delayed approving or denying borrower applications;
  • Failed to alert borrowers about incomplete applications;
  • Miscalculated incomes;
  • Denied applications for unspecified reasons;
  • Misinformed borrowers about their appeal rights; and
  • Put borrowers in "trial period purgatory" by prolonging loan modifications trial periods, causing some modified loan amounts to increase and, in some cases, adversely affecting permanent loan modification.

Appeals Court Denies Injunction for Online Tribal Lenders

On Wednesday, October 1, 2014, the U.S. Court of Appeals for the Second Circuit denied a request by two American Indian tribes to stop New York State's Department of Financial Services from pursuing online tribal lending businesses. This decision upholds a previous decision from the Federal District Court in Manhattan which denied a request for preliminary injunction last year. In that decision, the State of New York suggested once tribal businesses go online to attract consumers, many of whom live far beyond the borders of their reservations, they lose their rights to operate as sovereign nations.



Democrats Call for Hearing on NY Federal Reserve

On Tuesday, September 30, 2014, House Financial Services Committee (HFSC) Ranking Member Maxine Waters (D-CA) wrote Committee Chairman Jeb Hensarling (R-TX), and Government and Oversight Subcommittee Chair Patrick McHenry (R-NC) to investigate the most recent allegations of mismanagement at the Federal Reserve Bank of New York (FRBNY). Recent taped recordings of meetings suggested FRBNY was not fulfilling their supervisory oversight of Wall Street banks. The recordings were included in a September 26, 2014 Wall Street Journal article. The recordings, released by a former FRBNY employee, suggested less scrutiny had been applied to Goldman Sachs. Ranking Member Waters suggested the Government and Oversight Subcommittee hold a hearing in the same manner it reviewed mismanagement allegations at the CFPB and OCC.