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Inside the CFPB

February 25, 2013

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Final Battle Lines Drawn Over Cordray Nomination, Again

Fifty-four of the 55 Senators of the Democratic caucus in the U.S. Congress have signed a letter by Majority Leader Harry Reid of Nevada and Banking Committee Chairman Tim Johnson of South Dakota to President Obama in support of the re-nomination of Richard Cordray to lead the CFPB and to express opposition to any structural changes to the bureau. “Under the leadership of Director Cordray, the CFPB has gotten high marks from consumer advocates and industry alike for its balanced and prudent approach to rulemaking and enforcement,”... Read More

CFPB Enforcement Target Strikes Back With Cordray Challenge

A law firm and related parties that were sued last year by the CFPB for allegedly deceiving consumers via their mortgage loan modification operations have renewed their legal challenge to the appointment of Richard Cordray as director of the bureau, citing the recent ruling that President Obama’s recess appointments to the National Labor Relations Board were unconstitutional. The defendants in CFPB v. Chance Edward Gordon asserted last week that Cordray was appointed on the same day and in the same manner in which the... Read More

QM Could Survive Ruling That Overturns Cordray Appointment

Critics of the CFPB and industry opponents of its new ability-to-repay/“qualified mortgage” rulemaking quickly got excited when the Court of Appeals for the District of Columbia ruled recently in Noel Canning v. National Labor Relations Board that President Obama’s recess appointments of three officials to the NLRB were unconstitutional. Their hope was that the president’s appointment of Richard Cordray as director of the CFPB might similarly be invalidated. And perhaps more to the point, they hoped the... Read More

CFPB to Roll Out Mortgage Rule Implementation Program

The CFPB will implement a plan over the next year that focuses on the mortgage industry’s compliance with new consumer protections that are slated to take effect in January 2014, including the new qualified mortgage/ability‐to‐repay rule and the mortgage servicing rules, the bureau announced recently. “Our plan is to work with the mortgage industry to ensure that the CFPB’s new rules are implemented accurately and expeditiously,” said CFPB Director Richard Cordray. “Both consumers and the industry will win when the new rules are... Read More

Bureau Warns Mortgage Servicers Of Servicing Transfer Protections

The CFPB recently issued guidance to mortgage servicers reminding them of their legal obligations to protect borrowers during the transfer of mortgage servicing between firms. “Consumers should not be collateral damage in the mortgage servicing transfer process,” said CFPB Director Richard Cordray. “This guidance directs all mortgage servicers, both banks and nonbanks, to follow the laws protecting borrowers from the risks of such transfers and makes clear that we will be monitoring them for compliance.” In CFPB... Read More

Servicers to Face More Litigation, Enforcement Actions From CFPB

The CFPB’s new mortgage servicing rule might bring clarity and consistency to the industry – but at a cost of increased litigation and enforcement actions, a top attorney said recently. “There has been and will continue to be a focus on the fact that the rule grants borrowers a private right of action associated specifically with loss mitigation and early intervention provisions,” said Michael Waldron, a practice leader in the mortgage banking group at Ballard Spahr. However, the reality is, the risk here is much broader. “The rules... Read More

Cordray Highlights Key Consumer Problems Bureau Seeks to Address

During last week’s meeting of the CFPB’s Consumer Advisory Board, Director Richard Cordray revealed a handful of consumer problems his agency plans to address in the future. The first class of problems is “the deceptive and misleading marketing of consumer financial products and services,” Cordray said. “Sometimes the problem that consumers face is not out-and-out misrepresentation, but instead that critical product information is presented to them in a manner they cannot readily understand and compare,” he explained.… Read More

CFPB Doesn’t Yield on Authority to Share Information with State AGs

The CFPB published a final rule on disclosure of records and information earlier this month in which it did not back off of its insistence that it has discretionary authority to share confidential information with state attorneys general. Under the final rule, the CFPB is allowed to provide discretionary disclosures of confidential information to state AGs “to the extent that the disclosure of the information is relevant to the exercise” of the AG’s statutory authority. And the rule enables the bureau to similarly disclose... Read More

Bureau Looks for More Flexible Repayment Options for Students

The CFPB recently put out a request for information seeking public input on ways to provide struggling private student loan borrowers with more flexible, more manageable repayment options. Federal student loans frequently provide for income-based repayment options for borrowers with partial financial hardship, as well as rehabilitation options for borrowers in default, according to the bureau’s notice. However, “In general, private student loans do not offer similar modified repayment options.” In July, the director... Read More

New Servicing Regs Hit Small, Midsize Servicers Hardest

Some mortgage servicers face capacity issues when it comes to the plethora of new regulatory requirements and need outsource assistance, but the rest of the industry will need help with the process requirements and planning, according to a compliance service provider. “While all mortgage servicers are facing challenges in staying compliant with the industry’s many changing regulations, the nature of those challenges varies by the organization’s size and require varying solutions,” said Loren Morris, senior vice... Read More

Industry Groups Ask CFPB for Help With Trial Disclosure Programs

Various segments of the financial services industry are struggling with the CFPB’s trial disclosure programs proposal, with some of the trade representatives appealing to the bureau for some changes or assistance. The proposed policy would allow companies to test new consumer disclosures on a case‐by‐case basis. The CFPB would approve limited‐time exemptions from federal disclosure laws to enable the companies to conduct the trials, and the bureau would use the resulting information to improve its disclosure rules and model... Read More

QRM Should Align With CFPB’s QM Definition, Fed Governor Testifies

Federal regulators should consider aligning the pending risk retention rule’s “qualified residential mortgage” standard with the “qualified mortgage” standard under the ability‐to‐repay rule the CFPB finalized on Jan. 10, Federal Reserve Governor Daniel Tarullo said. Defining QRMs as QMs would eliminate the downpayment requirement initially proposed for QRMs and allow greater access to credit for borrowers than a more stringent QRM definition, he said at a Senate Banking, Housing and Urban Affairs Committee hearing on... Read More

Worth Noting

CFPB Remains on Radar of Hostile House GOP. The activities and influence of the CFPB will be a subject of keen interest to hostile Republicans on the House Financial Services Committee, according to the committee’s recently published agenda for the 113th Congress. The committee said it will scrutinize the CFPB’s regulatory, supervisory and enforcement initiatives to make sure they protect consumers against unfair and deceptive practices without stifling economic growth, job creation or reasonable access to credit. “In... Read More

The Week Ahead

Monday, February 25: Comments are due on the CFPB’s proposed amendments to Regulation Z (ability-to-repay rule). Tuesday, February 26: Federal Reserve Board Chairman Ben Bernanke is scheduled to appear before the Senate Banking, Housing and Urban Affairs Committee to deliver the central bank’s Semiannual Monetary Policy Report to the Congress. The Senate Finance Committee is scheduled to vote on President Obama’s nominee for Treasury Secretary, Jack Lew, the president’s former chief of staff and a former official at... Read More

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