Header graphic for print

Consumer Financial Services Watch

News and developments related to consumer financial products and services

2013 HMDA Data is Now Available; Mortgage Lenders Should Consider Evaluating Redlining Risk

Posted in Bureau of Consumer Financial Protection (CFPB), Fair Lending/Anti-Discrimination, Mortgage Lending

By: Melanie Brody, Anjali Garg*
*Ms. Garg is not admitted in D.C. She is supervised by Stephanie Robinson, a member of the D.C. Bar.

It has been a busy week in the fair lending space. Last week, the CFPB issued a white paper describing its proxying methodology for imputing race and ethnicity when analyzing fair lending compliance on non-mortgage credit products along with a proposed rule to oversee nonbank auto finance companies. This week, the Federal Financial Institutions Examination Council released the 2013 Home Mortgage Disclosure Act (“HMDA”) data, and the Federal Reserve released its own analysis of the data. Continue Reading

K&L Gates Live Webcast: Telemarketing and the Telephone Consumer Protection Act—Avoiding Traps and Minimizing Risk

Posted in Mortgage Servicing

Join us for this upcoming live video webcast on Thursday, October 2nd, from 12:00 p.m. to 1:30 p.m. (ET).

The program will include an in-depth discussion, followed by a lively Q&A session on a variety of issues involving the Telephone Consumer Protection Act (TCPA). Our knowledgeable panel will cover a range is issues, including:

  • Restrictions on texting and other types of communications
  • Issues around “Automatic Telephone Dialing Systems”
  • “Prior Express Consent” and revocation
  • Damages and standards for finding knowing and willful violations
  • Defense of class certification
  • Compliance and telemarketing issues
  • Insurance coverage
  • Other emerging issues

Continue Reading

CFPB Proposes New Rule to Oversee Nonbank Auto Finance Companies

Posted in Bureau of Consumer Financial Protection (CFPB), Fair Lending/Anti-Discrimination, Personal Property Financing

By: Melanie Brody, Anjali Garg*
*Ms. Garg is not admitted in D.C. She is supervised by Stephanie Robinson, a member of the D.C. Bar.

The CFPB proposed a new rule on September 17, 2014, that would enable the Bureau to oversee nonbank auto finance companies. With the proposal, the CFPB takes another step toward expanding its supervisory authority over nonbanks. The Bureau released the proposed rule along with a report on recent examinations of bank auto lending activities and a white paper describing its proxying methodology for imputing race and ethnicity when analyzing fair lending compliance on non-mortgage credit products. Continue Reading

Big Data takes a Big Step: CFPB Offers Insight into Its Fair Lending Proxy Methodology

Posted in Bureau of Consumer Financial Protection (CFPB), Fair Lending/Anti-Discrimination, Mortgage Lending, Mortgage Servicing

By: Melanie BrodyAnjali Garg*
*Ms. Garg is not admitted in D.C. She is supervised by Stephanie Robinson, a member of the D.C. Bar.

The Home Mortgage Disclosure Act requires residential mortgage lenders to collect race and ethnicity information about loan applicants, and lenders, regulators and others routinely use this information to statistically evaluate whether there is a risk that a lender has discriminated against borrowers on a prohibited basis. With regard to other types of credit, with respect to which federal law generally prohibits the collection of demographic information, lenders and other interested parties must impute credit applicants’ race and ethnicity using proxies. For example, a lender could use the racial composition of the census tract in which a consumer resides to assign an assumed race to the consumer. Although proxying provides a way to evaluate fair lending risk in the absence of actual demographic data, there historically has not been a generally-accepted methodology for performing the proxy process, and this has made it particularly challenging to evaluate fair lending compliance for non-mortgage credit products. Continue Reading

Developments in Cybersecurity Law Governing the Investment Industry

Posted in Bureau of Consumer Financial Protection (CFPB)

By: Luke T. Cadigan, Sean P. Mahoney

The Investment Lawyer, Vol.21, No. 8, August 2014
Reprinted with Permission

Regulatory focus on cybersecurity is intensifying. Unlike other compliance matters, the deterrent effect of enforcement actions following data security breaches may be insufficient to achieve regulators’ purpose of ensuring that technology platforms are secure before an event occurs. Thus, in the area of cybersecurity, regulators appear to be shunning granular, prescriptive rules and instead insisting upon more holistic management of cybersecurity risk. Continue Reading

What’s the Deal With the CFPB and Bitcoin?

Posted in Bureau of Consumer Financial Protection (CFPB), Payment Systems, UDAAP

By: David L. Beam

The Consumer Financial Protection Bureau just released an advisory for consumers on digital currencies (a.k.a. “virtual currencies”) like Bitcoin. But the thing that’s most extraordinary about the advisory on digital currency is what it doesn’t say. Continue Reading

CFPB Issues Proposed Rule to Impose Additional Reporting Requirements Under Regulation C

Posted in Bureau of Consumer Financial Protection (CFPB)

By: Melanie Brody, Stephanie C. Robinson, Jay M. Willis

On Friday, the CFPB released a proposed rule that would significantly expand the scope of financial institutions’ mortgage lending data reporting requirements under the Home Mortgage Disclosure Act, or HMDA.

First enacted in 1975, HMDA was originally intended to allow both regulators and the public at large to examine whether lenders were effectively serving the credit needs of the communities in which those lenders were located. To that end, the Act required covered institutions to collect and publicly disclose data regarding their mortgage lending activities, thus allowing both public officials and the mortgage lending industry the means necessary to respond to areas of need. Subsequent amendments to the Act, designed to assist regulators in monitoring compliance with fair lending laws, required that covered financial institutions also report the race, ethnicity, sex, and annual income of both applicants and borrowers for home mortgage loans (and mortgage loans purchased by the institution). Continue Reading

Mortgage Broker or Mini-Correspondent: CFPB Issues Policy Guidance on Questions for Consideration

Posted in Bureau of Consumer Financial Protection (CFPB), Litigation & Enforcement Actions, Mortgage Lending

By: Holly Spencer Bunting, Anaxet Y. Jones

In response to what the CFPB views as an increasing trend among mortgage brokers shifting to a mini-correspondent lender model, the CFPB recently issued “Policy Guidance on Supervisory and Enforcement Considerations Relevant to Mortgage Brokers Transitioning to Mini-Correspondent Lenders” (“Policy Guidance”) regarding the application of Regulations X (RESPA) and Z (TILA) to transactions involving mini-correspondent lenders. In addition to providing background on the differences between brokers and mini-correspondents and certain requirements of Regulations X and Z, the Policy Guidance identifies questions the CFPB may consider when reviewing mini-correspondent transactions and the relationship between the mini-correspondent lender and the investor as part of CFPB examinations or enforcement actions. The CFPB, however, stops short of drawing any lines in the sand between what it considers to be brokered transactions and bona fide secondary market transactions under the mini-correspondent model. Continue Reading

Agencies Issue Recommendations for Managing Home Equity Lines of Credit Nearing Their End-of-Draw Periods

Posted in Mortgage Lending

By: Jonathan D. Jaffe, Jeremy M. McLaughlin

Many mortgage industry pundits have written about an impending home equity line of credit (HELOC) crisis resulting from a significant volume of HELOCs reaching the end of their interest-only draw periods. In fact, the Office of the Comptroller of the Currency (OCC) estimates that $23 billion in HELOCs will reset in 2014 at the largest national banks; $42 billion in 2015; $50 billion in 2016; and $56 billion in 2017. There is a legitimate question whether many of these borrowers will be able or willing to repay the much higher, fully amortizing payments required during the HELOCs’ repayment periods. It is obvious that federal banking regulators share these concerns and have given them a lot of thought. Continue Reading

K&L Gates Webinar: What’s What with Marketing and Services Agreements under RESPA

Posted in Bureau of Consumer Financial Protection (CFPB)

By: Phillip L. Schulman

Interest in Marketing and Services Agreements (MSAs) has skyrocketed. No doubt, the Qualified Mortgage 3 percent cap calculations have somewhat dampened enthusiasm for affiliated businesses. As a result, real estate brokers and builders see MSAs as a viable option — and that means lenders, title companies, and closing agents have taken notice. While MSAs are lawful, the RESPA requirements for these arrangements, like many aspects of RESPA, are not crystal clear. A HUD Interpretive Rule issued in June 2010 provides some guidance, but until the Consumer Financial Protection Bureau makes its intentions known, settlement service providers must take care to adhere to the exemption standards set forth in Section 8(c)(2) of RESPA. Continue Reading