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Consumer Financial Services Watch

News and developments related to consumer financial products and services

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

California Attorney General Offers Online and Mobile “Do Not Track” Privacy Policy Recommendations

Posted in Mortgage Servicing, Other Federal Agencies & GSEs

By: Jonathan D. Jaffe, Jeremy M. McLaughlin

California Attorney General Kamala Harris recently issued guidance to help companies provide more “meaningful” privacy policies. Entitled “Making Your Privacy Practices Public,” the recommendations consolidate previously issued guidance and provide new information regarding online tracking and Do Not Track (DNT) signals. As the guidance document indicates, the recommendations “are not regulations, mandates or legal opinions” and offer greater protections than those required under existing law. Clearly, though, they reflect the attorney general’s preferences and what she believes are privacy best practices. Continue Reading

Inspector General Urges FHFA to Consider Suing Servicers, Force-Placed Insurers

Posted in Litigation & Enforcement Actions, Mortgage Servicing, Other Federal Agencies & GSEs

By: Nanci L. Weissgold, Kerri M. Smith, * Christopher Shelton
* Mr. Shelton is not admitted in D.C. Supervised by Nanci Weissgold, member of D.C. Bar.

On June 25, 2014, the inspector general of the Federal Housing Finance Agency (FHFA) issued a report on force-placed insurance with only one recommendation: FHFA should consider suing servicers and force-placed insurers for hundreds of millions of dollars in allegedly “excessive” force-placed insurance premiums.

As we discussed in a recent blog post, “force-placed” or “lender-placed” insurance is an area of increasing controversy, with Fannie Mae and Freddie Mac rolling out new restrictions on perceived conflicts of interest between insurers and the servicers that bring them business. The inspector general noted these reforms going forward, but believes that FHFA should also assess how to pursue perceived past abuses. Continue Reading

Recent Force-Placed Insurance Initiatives by FHFA & CFPB Suggest Divergent Priorities

Posted in Bureau of Consumer Financial Protection (CFPB), Litigation & Enforcement Actions, Mortgage Servicing, Other Federal Agencies & GSEs

By: Nanci L. Weissgold, *Christopher Shelton
* Mr. Shelton is not admitted in D.C. Supervised by Nanci Weissgold, member of D.C. Bar.

Force-placed insurance is under continuing scrutiny by the Federal Housing Finance Agency (FHFA) and the Consumer Financial Protection Bureau (CFPB). However, each agency’s focus is slightly different. FHFA, perhaps galvanized by a New York enforcement action, has focused on conflicts of interest between servicers and insurers. The CFPB has focused on erroneous placing of insurance and excessive charges. Continue Reading

K&L Gates Invitation: Distinguished Speaker Program – Michael Turner (R-OH)

Posted in Bureau of Consumer Financial Protection (CFPB)

Date: Tuesday, June 24, 2014
Time: 8:30 a.m. EDT
Location: K&L Gates, 1601 K Street NW, Washington, D.C. 20006

K&L Gates is pleased to invite you to our June 24th Distinguished Speaker breakfast with Congressman Michael Turner (R-OH).

Congressman Turner was first elected in November 2002 and currently represents Ohio’s 10th Congressional District. The 10th District is located in southwest Ohio and includes Montgomery and Greene counties and part of Fayette County. Congressman Turner is an attorney and, before being elected to Congress, was in private practice and corporate law for 13 years. He also served as the mayor of Dayton between 1994-2002.

Congressman Turner is a long-time member of the House Armed Services Committee, where he serves as the chairman of the Tactical Air and Land Forces Subcommittee. He is also a senior member of the House Oversight and Government Reform Committee.

Congressman Turner holds a BA in political science from Ohio Northern University, a law degree from Case Western University School of Law, and a MBA from the University of Dayton.

To attend, please click here to register by 5:00 p.m. EDT, Monday, June 23.

 This event is not a fundraiser. To maintain the informality of this event, it is strictly off the record.

Commonwealth of Massachusetts v. FHFA: Fremont Meets The Federal Government

Posted in Litigation & Enforcement Actions, Mortgage Lending, Mortgage Servicing, Other Federal Agencies & GSEs, UDAAP

By: Irene C. Freidel

On June 2, 2014, the Commonwealth of Massachusetts sued the Federal Housing Finance Agency (FHFA), Fannie Mae, and Freddie Mac in state court, under Massachusetts’ consumer protection statute (“Chapter 93A”) to force them to sell foreclosed properties to non-profit organizations at fair market value, so that the properties can then be re-sold or leased back to the former homeowner. See Commonwealth of Massachusetts v. Federal Housing Finance Agency, et al., C.A. No. 14-1763 (June 2, 2014). Among other things, the lawsuit seeks a declaration that the GSEs’ current anti-fraud guidelines violate Massachusetts foreclosure law (M.G.L. c. 244, § 35C(h)), an order requiring property sales to non-profits in specific transactions, an injunction to prevent the GSEs from refusing to adhere to Massachusetts law, and an award of penalties of up to $5,000 for each transaction that the court determines constituted an unfair and deceptive practice under state law. The lawsuit follows a series of communications between the Massachusetts Attorney General and FHFA beginning in 2012 in which the state has demanded that FHFA direct the GSEs to change their anti-fraud “arms-length” requirements that apply to short sales and REO transactions. Continue Reading

K&L Gates Webinar: Mortgage Loan Servicers and Affiliated Service Providers – What are the Rules?

Posted in Mortgage Lending

By: Holly Spencer Bunting, Kristie D. Kully,  Kerri M. Smith, Nanci L. Weissgold

No one said it was going to be easy to be a servicer of residential mortgage loans.

The current scrutiny of servicing practices is at a fever pitch. Recently, one focus of federal and state officials has been on enforcing the broad array of laws, regulations, and other requirements applicable to a servicer’s engagement of affiliated service providers. In particular, regulators are increasingly interested in the reliance by servicers upon affiliated service providers, and the perception that the servicer may have conflicts of interest or is self-dealing. In fact, regulators such as New York State Department of Financial Services Superintendent Benjamin Lawsky are becoming significant obstacles to the transfer of mortgage servicing rights in certain cases, probing into compliance failures in past servicing practices and potential conflicts of interest with affiliated service providers. Continue Reading