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Consumer Financial Services Watch

News and developments related to consumer financial products and services

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

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.