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Consumer Financial Services Watch

News and developments related to consumer financial products and services

CFPB Proposes Strict Controls on Discount Points, Origination Fees, and Broker Compensation

By K&L Gates on Posted in Bureau of Consumer Financial Protection (CFPB), Mortgage Lending

By Kris D. Kully

The Consumer Financial Protection Bureau (CFPB) is considering putting strict limits on a creditor’s ability to price its mortgage loans, and on a consumer’s ability to choose among pricing options.

By way of implementing the far-reaching provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the CFPB is proposing to require that when a creditor pays a mortgage loan originator’s compensation (which includes most mortgage loan transactions), any up-front amounts the consumer pays for the loan must be in the form of bona fide discount points that reduce the interest rate or a flat origination fee that does not vary with the loan amount. Continue Reading

FTC Mobile Payments Workshop: Providers Are Poised to Take Steps Forward. How Will Regulators Respond?

By K&L Gates on Posted in Other Federal Agencies & GSEs, Payment Systems

By: Eric Mitzenmacher

On April 26th, the FTC gathered private sector representatives, regulators, and academics for a workshop to discuss the state of the mobile payment industry. Some commentary has interpreted regulators’ comments at the workshop to be a signal that regulators intend to use a “light touch” as the industry matures, but the phrase only partially hits the mark. Continue Reading

Conflicted Out: When Must a Servicer Follow FHA Guidelines over the Global Foreclosure Settlement Servicing Standards?

By K&L Gates on Posted in FHA/VA, Mortgage Servicing

By: Krista Cooley, Rebecca Lobenherz

The National Servicing Standards, outlined in the March 2012 Global Foreclosure Settlement, are difficult to reconcile with the already stringent servicing requirements in place for the Federal Housing Administration’s (“FHA”) single family loan insurance program. The National Servicing Standards are expressly subject to and must be interpreted in accordance with applicable federal, state and local laws, rules and regulations, and the terms and provisions of the requirements, binding directives and investor guidelines of the mortgage insurer, including FHA. In the event of a conflict between such requirements and the National Servicing Standards such that a servicer cannot comply with the National Servicing Standards without violating these requirements or being subject to adverse action, then the servicer must document such conflicts and notify the monitoring committee that the servicer intends to comply with the FHA requirements to the extent necessary to eliminate the conflict. Continue Reading

Maryland “Facebook Law” Regulates Employer Access to Social Media Accounts

By K&L Gates on Posted in Privacy & Information Security

By: David A. Tallman, Andrew L. Caplan

It is increasingly common for employers to request that job applicants and employees divulge the passwords to their Facebook accounts and to other social media sites. This trend has not gone unnoticed by the media and privacy advocates, which view this practice as an intrusive violation of individual privacy. On the other hand, employers often have valid reasons to exercise oversight over social media activities, especially in financial services and other highly regulated industries where employees’ activities may be more likely to cause the company to incur liability. Continue Reading

Force-Placed Insurance Standards in the Global Foreclosure Settlement

By K&L Gates on Posted in Bureau of Consumer Financial Protection (CFPB), Mortgage Servicing

By: Steven M. Kaplan, Rebecca Lobenherz

Force-placing insurance could be a hazardous practice if not done appropriately. The Consumer Financial Protection Bureau (“CFPB”) has made force-placed insurance a main focus of its desired mortgage servicing reforms and new rules on the issue are expected to be released by the CFPB as soon as this week. This is in addition to high-profile investigations into force-placed insurance by New York and California. Therefore, it should be no surprise that a significant section of the March 2012 Global Foreclosure Settlement lays out new force-placed insurance standards for parties to the settlement agreement. Continue Reading

Tenants’ Rights under the Global Foreclosure Settlement Agreement

By K&L Gates on Posted in Litigation & Enforcement Actions, Mortgage Servicing, Other Federal Agencies & GSEs

By: Nanci L. Weissgold, Morey E. Barnes Yost

Buried deep in the 40-plus pages of “Servicing Standards” that are part of the recently announced global foreclosure settlement agreement (the “Agreement”) are two bullets on a topic that could impact thousands: tenants’ rights.

Specifically, the Agreement requires subject servicers to: (1) comply with all applicable state and federal laws governing the rights of tenants living in foreclosed residential properties; and (2) develop and implement written policies and procedures to ensure compliance with such laws. Continue Reading

CFPB Issues First “Bulletin” Regarding TILA’s Loan Originator Compensation Rule

By K&L Gates on Posted in Bureau of Consumer Financial Protection (CFPB), Mortgage Lending

By: Jonathan D. Jaffe

The CFPB issued its first pronouncement—which it refers to as a Bulletin—regarding the Truth in Lending Act’s (“TILA”) loan originator compensation rule (the “LO Comp Rule”). The Bulletin is noteworthy for at least two reasons: the CFPB took a practical approach to resolve the issue, and the CFPB announced that it anticipates issuing a proposed rule for public comment in the near future on the loan origination provisions in the Dodd-Frank Act. Continue Reading

National Mortgage Foreclosure Settlement Tackles “Dual Tracking” of Foreclosure and Loan Modification

By K&L Gates on Posted in Litigation & Enforcement Actions, Mortgage Servicing, Other Federal Agencies & GSEs

By: Stephanie C. Robinson,  Kerri M. Smith

At what point is it appropriate after a borrower defaults to initiate foreclosure proceedings? As soon as the borrower defaults? Few, if any, servicers follow this rule. During a review of loss mitigation options? During a trial modification? Servicers long have felt that the extraordinary delays in completing foreclosures based on some state laws weigh in favor of starting the foreclosure process as soon as possible. Of course, the servicer always can call off the foreclosure if the loss mitigation option succeeds, but a decision to delay the initiation of foreclosures can result in investor claims. On the other hand, borrowers who think they are in the running for a loan modification often are angry and dismayed when the foreclosure notice arrives. The national foreclosure settlement between the country’s five largest residential mortgage loan servicers and the federal government and 49 state attorneys general places a number of restrictions on the controversial but common practice of “dual tracking” foreclosures and loan modifications. Continue Reading

Protecting the Protectors – the Global Settlement Agreements’ SCRA Provisions

By K&L Gates on Posted in Bureau of Consumer Financial Protection (CFPB), Litigation & Enforcement Actions, Mortgage Servicing, Other Federal Agencies & GSEs, Servicemember Protections

By: Jonathan D. Jaffe

Given the reported violations of the provisions of the Servicemembers Civil Relief Act (“SCRA”) by some servicers, and the attendant enforcement and civil actions against those servicers, state and federal regulators clearly felt compelled to impose significant SCRA-related requirements on the nation’s five largest residential mortgage loan servicers (the “Servicers”) in the recent global settlement agreements (the “Agreements”) entered into between those regulators and Servicers, described here. Continue Reading

BIGGER! BOLDER! BETTER? The NMLS Expands to License More Consumer Financial Services – Mortgage Finance Licensees Will Need to Amend Their Account Records

By K&L Gates on Posted in Bureau of Consumer Financial Protection (CFPB)

By: Costas A. Avrakotos

The idea was first floated, then floundered, moved forward with few fans and fleeting fanfare, secured a firm foothold, found a favorable following, was force-fed by federal law, and now four years since its formation, it is poised to forever change the way that consumer financial services will be licensed and regulated by the states. Beginning next month, the Nationwide Mortgage Licensing System (the “NMLS” or the “System”) will go through a metamorphosis, and eventually emerge as the System through which most, if not all, state licenses for consumer financial services will be applied for, processed and renewed.

To view the complete alert online, click here.