November 1, 2013
Measuring Progress at the CFPB
The Bipartisan Policy Center issued a white paper, The Consumer Financial Protection Bureau: Measuring the Progress of a New Agency:
This paper measures the agency’s actions against its mandate. It analyzes the start-up and operational challenges the Bureau has faced and the critical choices it has made. Throughout this process, the Task Force met with leading consumer advocates, federal and state bank regulators and their staffs, and regulated industry participants in the bank and nonbank space. (5)
I was particularly intrigued by the external metrics that the Bipartisan Policy Center recommends for the CFPB:
- Are there quality, safe products available in both the bank and nonbank space?
- Is the CFPB identifying and responding promptly to problems in both the bank and nonbank space?
- Does the Bureau engage consumers in a meaningful way? For example, specific metrics should track its regulatory and outreach efforts to growing minority populations.
- Is the CFPB collaborating effectively with other regulators in both the bank and nonbank space, to ensure a high level of consumer protection?
- Is there a healthy amount of quality product innovation in the financial services marketplace the Bureau regulates? (10)
These are all reasonable metrics, but most importantly, the white paper “recommends that the CFPB measure success as it relates to consumer behavior by finding demonstrable evidence of improved consumer decision-making with regard to consumer products.” (10) I think that this is perhaps the most important of the metrics and one that the CFPB has made the least progress in measuring. It will be interesting to see how the CFPB makes progress in this regard.
The rest of their findings are organized as follows:
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Guidance vs. Rule-Making
- Supervisory and Examination Process
- Data Requests and Collection
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Consumer Complaint Portal
- Civil Penalty Fund
- CFPB Consultation with Other Agencies
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CFPB’s Authority to Cover Lending Activities of Auto-Dealers
- CFPB Funding and Accountability
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Performance Metrics
- [External Metrics]
- Internal Metrics
November 1, 2013 | Permalink | No Comments
October 31, 2013
Qualified Residential Mortgage Comments
The agencies responsible for the Qualified Residential Mortgage rules that address the issue of credit risk retention for mortgage-backed securities requested that comments on the proposed rulemaking be submitted by yesterday. And comments there were. Here is a sampling:
The Urban Institute argues that
In formulating their QRM recommendations, the Agencies have done an admirable job balancing these considerations: on one hand, they wanted QRM loans to have a low default rate; on the other hand, if QRM is too tight, it will impede efforts to bring private capital back into the market and will further restrict credit availability. The right balance would thus appear to be precisely where they have landed with their main proposal: that QRM equal QM. (2)
The Securities Industry and Financial Markets Association effectively agrees with this and argues that
QM should be adopted as the standard for QRM, rather than QM-plus. QM is a meaningful standard for high quality loans. The characteristics of QM-plus, particularly the 70 percent LTV ratio, would exclude most borrowers from these loans. We believe the adoption of QM-plus would reduce the competitiveness of private mortgage originators and delay the transition of the housing finance system away from the GSEs. (vi)
The American Enterprise Institute, on the other hand, argues that
The preferred response, in our opinion, is to implement the Dodd-Frank Act by creating a combination of the QM and a standard for a traditional prime mortgage that Congress intended for the QRM. For this reason, we have filed this comment with the agencies, detailing how it is possible to comply with the clear language and intent of the act and still provide a flexible set of standards for prime mortgages — which have low credit risk even under stress. (4)
My thoughts on the proposed QRM rule can be found here, here, here and here.
October 31, 2013 | Permalink | No Comments
October 30, 2013
Reiss (and Others) on Post-Bloomberg Brooklyn
The NY Daily News ran a story on a panel I moderated last night at Brooklyn Law School, The Fab Four! Brooklyn Heights Councilmen Since 1975 Share Stage and Talk About Past, Future, Bloomberg. The speakers gave their thoughts on a variety of topics, including what’s next for New York City:
David Reiss: What are your predictions for a post-Bloomberg Brooklyn?
Levin: The likely mayor is going to be very far to the left. (Bill de Blasio) has been more engaged with people that are not elite and he has a greater vision of equity. It’s a big challenge because it’s a big city, like steering a gigantic ocean liner. I don’t think there will be lots of changes on day one but there will be policy changes that can be shifted that will cause a big change, like universal pre-kindergarten and mandatory inclusionary zoning. His goal is to decrease the economic disparity in the city and it’s a big challenge.
Yassky: A lot of the changes you’ve seen are here to say. There’s a much bigger swatch of Brooklyn that will be professional office workers, people who are working in Manhattan and not in traditional blue collar jobs. That spread throughout Brooklyn is here to stay. So many neighborhoods have excellent public spaces which is ameliorating inequality in the near term. It’s taking better public goods, like parks, to do it, and you don’t need rose colored glasses to see that. These changes don’t reverse very quickly and easily.
Fisher: He’ll be a mayor from Brooklyn, so it’s got to be a good thing for all of us. The nostalgia here is over; Brooklyn is the world again. When I grew up, people were nostalgic for the good old days. No one is nostalgic for those days now. Brooklyn has really reached a turning point. The bar has been raised in post-Bloomberg Brooklyn. So many people in Brooklyn now expect government to function and be responsive. As long as people feel invested in the borough, they’ll make it possible for Steve and whoever comes after to keep the progress going.
October 30, 2013 | Permalink | No Comments
October 29, 2013
Eminent Distraction?
The Urban Institute posted Eminent Domain: The Debate Distracts from Pressing Problems. The issue brief concludes
The negative indicators shared by municipalities that have considered the eminent domain solution (e.g., high unemployment, low incomes, high proportions of underwater homeowners, slower HPI recovery, etc.) indicate that their shared problems extend beyond housing. These cities have traditionally suffered from lack of investment, high crime rates, concentrated poverty, and other general barriers to opportunity. These factors contributed to their poor performance during and after the housing crash, and the relief efforts to date, both from lenders and policymakers, have been modest relative to the scale of the problem.
Yet it is unclear that seizing loans through eminent domain will produce the desired outcomes: preventing foreclosures and, thus, ensuring that the community fabric and the municipality’s economy remain intact. For example, Richmond is targeting performing loans in PLS, and while the eminent domain plan is designed to help underwater mortgage holders, investors assert that nearly a third of target loans are above water. In contrast, a much wider universe of nonperforming, underwater loans is in private-label and agency securities that are, arguably, at more immediate risk of default. Additionally, implementing eminent domain will likely have repercussions in the housing finance markets that will lead to higher interest rates and down payments.(14)
The conclusion then outlines “some less disruptive alternatives.” (14) I am not sure that I agree with all of the conclusions of the report. For instance, I doubt that there would be higher interest rates and down payments as a result of the use of eminent domain by municipalities. Lenders have notoriously short memories (for a survey of short lender memories, see This Time Is Different.) But this issue brief is important because it is not looking at the legality of the use of eminent domain — others have done that — but at the practicality of this approach. And it raises serious concerns that will need to be addressed by its proponents.
October 29, 2013 | Permalink | No Comments
October 27, 2013
California Northern District Court Dismissed Plaintiff’s Claims Due to Flawed Reliance on Non-California Law
The California Northern District Court in deciding Newbeck v. Washington Mutual Bank, et al., No. C 09-1599 CW (N.D. Cal., 2010), dismissed the plaintiff’s claims.
In reaching this conclusion, the California Northern District Court noted that plaintiff‘s reliance on non-California law was flawed.
The court further noted that the plaintiff, in using non-California law to analyze judicial foreclosures, was erroneous and misplaced. The court noted that the law cited also did not support a claim to set aside a non-judicial foreclosure.
October 27, 2013 | Permalink | No Comments
Eastern District of California Found That MERS Was Not Required to Register to do Business in California
The United States District Court, Eastern District of California, in deciding Bogdan v. Countrywide Home Loans, 09-1055 (E.D. Cal. 2010), found that MERS was not required to register to do business in California.
The Eastern District of California, after considering the plaintiff’s contentions, also dismissed the plaintiff’s fraud and unfair competition claims against MERS.
October 27, 2013 | Permalink | No Comments
