- The Consumer Financial Protection Bureau has launched an Online Guide for Real Estate Professionals to understand their obligations under the new “Know Before You Owe” mortgage disclosure rules, which become effective October 3, 2015. The Know Before You Owe mortgage initiative is designed to empower consumers with the information they need to make informed mortgage choices. It includes the implementation of the TILA-RESPA (Truth in Lending Act – Real Estate Settlement Procedures Act) Integrated Disclosure rule. The new rule primarily does two things, first it consolidates some of the disclosures that must be made unto fewer forms and second it changes the timing of certain activities in the mortgage lending process.
- Fannie Mae and Freddie Mac have announced an auction of Non-Performing Loans (NPLs) in the amount of 1.2 billion and provided details for bidder pre-qualification and servicer requirements. The reasons for the program are fourfold: 1. reduce illiquid assets, 2. encourage broad investor participation; 3. consider borrower outcomes; 4. a well controlled transparent process.
- The New York City Council has passed three Tenant Buyout Bills which were designed to protect tenants from landlords who want them out of rent stabilized apartments.
- The Bills are: Intro 682 – buyout offered in a threatening manner are an act of harassment. This includes untoward language, odd hour contact, frequent contact, and abusive contact.
- Intro 700 – requirement of a writing to memorialize the buyout offer, this writing must include important facts including the tenant’s right to seek legal representation and the right to refuse.
- Intro 757 – Bars repeated buyout offers by making such behavior a form of harassment when the tenant has indicated she/he is not interested.
Tag Archives: CFPB
Friday’s Government Reports Roundup
- HUD releases report of its activities, for instance, to assess its efforts on homelessness, housing vouchers, energy efficiency in multifamily housing.
- The Government Accountability Office releases report, which finds that “qualified mortgage (QM) and qualified residential mortgage (QRM) regulations are unlikely to have a significant effect on the availability or securitization of mortgages in the current market.”
- CFPB releases “2015 Plain Writing Act Compliance Report”, which gives information about what documents executive agencies are required to use plain language in.
- CFPB releases report on eClosings, finding that they can benefit consumers.
Tuesday’s Regulatory & Legislative Round-Up
- The Consumer Financial Protection Bureau recently released a compliance bulletin regarding Amendment to the Interstate Land Sales Full Disclosure Act. The bulletin provides information to interested parties, primarily developers, regarding the extension of exemption from registration and disclosure requirements of the sale of a condiminium, which is not exempt under other provisions.
- The Federal Transportation Administration (FTA) has released Final Interim Guidance regarding its Capital Investment Grant Program. This guidance provides a greater level of detail with respect to the methods of evaluation used in funding decisions. According to Enterprise Community Partners, “…the incorporation of affordable housing criteria in the evaluation framework has been effective in promoting such coordination. The revised guidance reaffirms those elements and makes two minor adjustments to the affordable housing portion of the land use rating criteria: project sponsors will now have more flexibility in certifying affordable housing data, and transit projects reaching counties with more affordable housing will receive a scoring bonus.”
Is the CFPB Unconstitutional?
DepositAccounts.com quoted me in Old Court Case Puts Consumer Financial Protection Bureau on Hot Seat. It reads, in part,
here is such a thing as a second act. Even court cases can be resurrected from the dead. Two years after State National Bank of Texas called the Consumer Financial Protection Bureau on the carpet, challenging its constitutionality in a case that was dismissed by a federal court, the D.C. Circuit court breathed new life into the debate when it reopened the case and concluded that State National Bank has legal legs to stand on and can sue, despite the fact that it is not directly supervised by the agency.
Although the D.C. Circuit court didn’t buy all of the bank’s claims, the court didn’t dismiss the bank’s claims that the CFPB should be run by a commission, instead of a single director, nor did it shoot down the bank’s contention that CFPB’s Director, Richard Cordray was improperly appointed during a Congressional recess.
“The proper ruling is that a recess appointment requires the Senate to be in recess. The Senate should determine whether it is in recess by its own rules. So a unilateral decision by the executive branch that the Senate is in recess should be disregarded,” says lawyer David Rubenstein who owns CreditShout.com and CreditForums.com.
“The solicitor general’s office will argue that this is a political question and should not be decided by the courts. If the recess appointment is struck down, then any rules and regulations passed by the CFPB also need to be struck down. Courts generally try to avoid this kind of mess. So you may see some sort of compromise,” he adds.
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Why the case matters
As for this case, scoffs [U.S. PIRG consumer program director] Mierzwinski, “Its proponents climbed a very low bar (standing to sue) to get the case reopened. Most experts on both sides think the odds of them actually winning are very low – achieving their sketchy Constitutional claims on the merits is an extremely high bar.”
The case is significant, says Brooklyn Law School professor David Reiss, “It is opening up a new can of worms for the CFPB and the consumer finance industry. But the court defers on the meat of the matter as it remands the case ‘to the District Court for it to consider the merits of the claim.’”
Reiss contends that cases such as this increase uncertainty for regulated companies, and for their customers. “Until the case is decided and the new regulatory environment becomes clear, we should expect more caution in the development of new consumer finance products and services,” says Reiss.
What To Do With MERS?
Bloomberg BNA quoted me in More Policy Queries As MERS Racks Up Court Wins (behind a paywall). The article further discusses the case I had blogged about earlier this week. It reads, in part,
Mortgage Electronic Registration Systems, Inc. (MERS), the keeper of a major piece of the U.S. housing market’s infrastructure, has beaten back the latest court challenge to its national tracking system, even as criticism of the company keeps coming (Montgomery County v. MERSCORP, Inc., 2015 BL 247363, 3d Cir., No. 14-cv-04315, 8/3/15). In an Aug. 3 decision, the U.S. Court of Appeals for the Third Circuit reversed a lower court ruling in favor of Nancy J. Becker, the recorder of deeds for Montgomery County, Pa., whose lawsuit claimed MERS illegally sidestepped millions of dollars in recording fees.
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MERS has faced an array of critics, including those who say its tracking system is cloaked in secrecy. MERS disagrees, and provides a web portal for homeowners seeking information.
A host of friend-of-the-court briefs filed in the Third Circuit blasted the company, including one filed in March by law school professors who said the MERS system “has introduced unprecedented opacity and incompleteness to the record of interests in real estate.”
One of those, Brooklyn Law School Professor David Reiss, Aug. 6 raised the question whether MERS, though not a servicer, might be the subject of increased oversight.
“The problems consumers faced during the foreclosure crisis were compounded by MERS,” Reiss told Bloomberg BNA. “Those issues have not been resolved by the MERS litigation, and it would be interesting to see if the Consumer Financial Protection Bureau will seek to regulate MERS as an important player in the servicing industry. It would also be interesting to see whether state regulators will pick the ball in this area by further regulating MERS to increase transparency and procedural fairness for homeowners,” he said.
eClosings
The Consumer Financial Protection Bureau has issued a report on its eClosing pilot, Leveraging Technology to Empower Mortgage Consumers at Closing. The term “eClosing” refers to technology-enabled loan closings. The CFPB became interested in how eClosings “could facilitate embedding educational materials to closing platforms in addition to early review of closing documents” and conducted a pilot program to evaluate them. (6) The study has methodological limitations (see discussion on page 11), but the CFPB has drawn some interesting conclusions from its study. These include,
- On average, eClosing borrowers in the pilot had higher scores than paper borrowers on our measured outcomes, including perceived empowerment, understanding (perceived and actual), and efficiency.
- Consumers who received and reviewed documents before the closing meeting reported feeling more empowered in the closing process, with higher levels of perceived understanding and efficiency. Additionally, these consumers had higher scores on the actual understanding quiz relative to those who did not review documents before the meeting.
- Most pilot borrowers with access to CFPB educational materials stated that they used these materials and reported that they were useful.
- eClosing transactions in the pilot exhibited shorter closing meetings and earlier document delivery, which matched higher scores on consumer perceptions of efficiency.
- First-time homebuyers, low/moderate income borrowers and borrowers with the most years of formal education all had the largest positive gains between paper and eClosing, yet all scored relatively low on our measures of understanding and perceived empowerment. (9-11)
All of this seems good enough, but not great — a bunch of subjective improvements for consumers. One would have hoped that there would be some objective measures (other than the length of the closing itself) of the benefits for consumers.
This does not mean that the CFPB should stop pushing eClosing technologies. But I do think that consumer protection initiatives should focus more on objective measures of success. Too often financial education initiatives report that consumers feel better without proving that they are, in fact, better off.
Monday’s Adjudication Roundup
- The Third Circuit upholds class certification in case against PNC Bank NA, in which individuals are alleging the bank participated in an illegal home equity lending scheme.
- Residential Credit Solutions Inc., a mortgage servicing company, will pay $1.6 million in restitution and fines, according to the CFPB, for many violations, but specifically for issues with loan modifications and treating consumers as if they had defaulted.
