CFPB Report September 20, 2013

CFPB Finalizes Additional Changes to Mortgage Rules

On Friday, September 13, 2013, the CFPB finalized several amendments to the mortgage lending and servicing rules released earlier this year. The Bureau announced the proposed amendments in June in response to questions and suggestions from industry participants. The rules go into effect in January of 2014. 

The amendments are as follows:

  • Clarifies what servicer activities are prohibited in the first 120 days of delinquency: The ruling prohibiting servicers from certain activities during the first 120 days of a delinquency is amended to allow sending borrowers certain early delinquency notices required under state law that may provide beneficial information about legal aid, counseling, or other resources.
  • Outlines of procedures for obtaining follow-up information on loss-mitigation applications: Procedures are outlined for servicers to follow when they fail to identify or inform a borrower about missing information from loss mitigation applications.
  • Facilitates servicers’ offering of short-term forbearance plans: Modifies procedures to simplify the offer of short-term forbearance plans to borrowers suffering only temporary hardships.
  • Clarifies best practices for informing borrowers about the address for error resolution documents.
  • Facilitates lending in rural or underserved areas by exempting all small creditors until the agency can re-examine the definitions of rural and underserved over the next two years.
  • Makes clarifications about financing of credit insurance premiums: The definition of "financing" of credit insurance premiums isclarified to note that these premiums are "financed" when the creditor allows the consumer to defer payment of the premium past the month in which it is due.
  • Clarifies the definition of a loan originator to state the circumstances under which tellers or other administrative staff may act as loan originators.
  • Clarifies the points and fees thresholds and loan originator compensation rules for manufactured housing employees.
  • Revises effective dates of many loan originator compensation rule provisions from January 10, 2014, to January 1, 2014.

In a press release from the CFPB, Director Cordray said, "Our mortgage rules were designed to eliminate irresponsible practices and foster a thriving, more sustainable marketplace. Today's rule amends and clarifies parts of our mortgage rules to ensure a smoother implementation process, which is helpful to both businesses and consumers.” 

CFPB Announces Online Mortgage Trends Tool

On Wednesday, September 18, 2013, the CFPB launched an online tool that gathers information under the Home Mortgage Disclosure Act (HMDA). The tool allows users to search HMDA data and filter findings by geographic region, income level, race and other borrower descriptors as well as identify findings under specific lenders. 

Information shown by the tool includes:

  • A heat map showing mortgage applications and originations are up.
  • An interactive graph showing mortgage volume has increased, due to refinancing.
  • An interactive graph on loan type showing the prevalence of FHA and VA lending.

In conjunction with the release of the database, Director Cordray addressed the Consumer Advisory Board at Mississippi Valley State University where he focused his remarks on helping consumers grasp a greater understanding of the mortgage market. “Just as the real estate motto ‘location, location, location’ was true before the recent financial crisis, it was true for the crisis. Every community was affected differently,” said Director Cordray. “Our tool puts valuable information into the hands of the public in an accessible way, so they can understand what is happening in their local mortgage markets. A more transparent mortgage market will lead to a better marketplace and better outcomes for consumers.” 

CFPB Releases Examination Guidelines for MLA

On Tuesday, September 17, 2013, the CFPB released examination guidelines on how to identify consumer harm and risks related to violations of the Military Lending Act (MLA) when supervising payday lenders. The agency will be examining lenders to ensure they follow MLA requirements when making loans to servicemembers and their dependents. Specifically, lenders must follow the requirements of the law for all closed-end loans of $2,000 or less and with terms of 91 days or less.

The requirements include:

  • Annual percentage rate capped at 36 percent
  • No rolling over of loans
  • No signing away of servicemember rights
  • No requiring allotments to repay

“Protecting servicemembers is a priority for the CFPB,” said Director Cordray in a press release from the CFPB. “We will use the authority Congress gave us to enforce the Military Lending Act and to safeguard our men and women in uniform from illegal payday loans.”  

CFPB Announces Chicago Field Hearing

On Monday, September 16, 2013, the CFPB announced it will hold a field hearing in Chicago concerning credit cards. The hearing coincides with the expected release of the agency’s second annual report on the effects of the CARD Act on consumers. The hearing will take place on Wednesday, October 2, 2013 at 11 a.m. CDT. Any parties interested in attending can RSVP to the CFPB.

Judge Grants Stay Pending Appeal on Interchange

In the case of NACS v. Board of Governors of the Federal Reserve System regarding debit interchange, District Court Judge Richard Leon issued an order yesterday, September 19, 2013, granting the parties’ request to stay his July 31, 2013 decision pending an appeal before the D.C. Circuit Court. His original decision vacated the current debit interchange rule under Regulation II. As such, the current rule will remain in effect pending the conclusion of the appellate review. 

Also yesterday, the Court of Appeals for the D.C. Circuit granted the parties’ joint motion for an expedited appeal and established the briefing schedule for parties and amici. The Board’s brief is due October 21, 2013, and the supporting amici brief also will be filed at that time. The merchants and their supporting amici will file on November 20, 2013. The Board’s reply brief is due December 4, 2013. No date for oral argument has been set. Under this timetable, the appellate process could conclude as early as the spring of 2014.

“Judge Leon’s stay means some level of certainty for the marketplace until this matter is settled. His ruling had left consumers in limbo, all while the retailers continue to scheme to pocket interchange rate reductions without passing along any savings,” said Richard Hunt, President and CEO of CBA.

CBA will continue to remain involved and will keep you informed as developments occur.

President Obama on the Fiver Year Anniversary of the Crisis

On Monday, September 16, 2013, President Obama spoke on the five year anniversary of the worst financial crisis the country has seen since the Great Depression. The president discussed the economy and the unprecedented steps taken by the Administration, Federal Reserve, Congress and Regulatory Agencies to thwart a systemic meltdown. During his speech, President Obama urged regulatory agencies to complete the rules and regulations set forth by the Dodd-Frank Act and asked these agencies to complete their rulemaking by years end. During the final stages of his remarks, the president suggested long-term fixes to politically sensitive issues, such as the debt limit and passing a budget.

Richard Hunt, CBA’s President and CEO, issued the following statement upon President’s remarks: 


"Five years removed from the start of the financial crisis, the retail banking industry is stronger and sounder. Key indicators as published by the FDIC including the lowest level of loan losses since 2007 and eight consecutive quarters with no new banks added to the FDIC’s ‘problem’ list illustrate an industry on the mend. While no one can guarantee there will not be another financial crisis, the retail banking industry, thanks to capitalization requirements, improved products and business measures, are much less likely to be a contributor to that crisis and is better prepared if one may come.

“The industry learned tough lessons from the financial crisis and has acted on them. We have recommitted ourselves to our customers. While reforms are being implemented, now is not the time to be searching for additional regulation which could bring down an industry key to our nation’s economy.”

Congressmen Pen Letter on Privacy to CFPB

On Friday, September 13, 2013, Congressmen Blaine Luetkemeyer (R-MO) and Brad Sherman (D-CA) wrote a letter to Director Cordray on privacy notices the day after he appeared before the House Financial Services Committee. Both members wrote about legislation introduced in the House and Senate regarding the annual privacy notice requirements under the Gramm-Leach-Bliley Act and the burdensome and wasteful nature of these notices. Both members thanked Director Cordray for his support to remove the annual notices and to only provide such notices to consumers when an institution's privacy policy changes. CBA supports this legislation and will continue to lobby members in the House and Senate. 

CBA Submits Letter On Flood Insurance

On Wednesday, September 18, 2013, the Senate Banking Subcommittee on Economic Policy held a hearing entitled, “Implementation of the Biggert-Waters Flood Insurance Act of 2012: One Year After Enactment,” to discuss the impacts of the legislation. The first panel witnesses included Senators Landrieu (D-LA) and Vitter (R-LA) who requested a delay of the legislation until revisions are made to certain costs associated with floodplain mapping. Later, panel witnesses also requested revisions to the bill, with some suggesting their hands are tied due to the crafting of the bill’s language. 

CBA sent a letter to urge senators to continually examine the impacts of the legislation.