Tag:ECOA

1
DACA Recipients Are Ineligible for FHA Mortgage Insurance Officially, but Lending to DACA Recipients and Other Immigrant Communities Is Subject to Many Unresolved Compliance Challenges
2
Revamped Relief: The CFPB’s Proposed Rule to Improve its No-Action Letter Program and to Establish a Regulatory Sandbox
3
Marketplace Lender Seeking Fair Lending Guidance Receives CFPB’s First No-Action Letter
4
Divided Supreme Court Affirms Dismissal of “Spousal Guarantor” ECOA Discrimination Lawsuit
5
CFPB and DOJ Continue to Pursue Indirect Auto and Redlining Claims
6
DOJ and CFPB Settle Discriminatory Mortgage Pricing Case with Wholesale Lender
7
Mortgage Servicers: Don’t Forget ECOA’s Valuation Rule
8
Credit Card Repayment Ability Fix Issued by CFPB
9
Private Student Lenders, Get Ready for Your Final Exams: The CFPB Releases Its Student Lending Examination Procedures
10
CFPB’s Proposed Rule on Receiving a Copy of Your Appraisal and Valuation

DACA Recipients Are Ineligible for FHA Mortgage Insurance Officially, but Lending to DACA Recipients and Other Immigrant Communities Is Subject to Many Unresolved Compliance Challenges

By Andrew C. Glass, Gregory N. Blase, and Daniel S. Cohen

For the past six months, the mortgage lending industry has reported receiving conflicting messages from the Department of Housing and Urban Development (“HUD”) and the Federal Housing Administration (“FHA”) regarding Deferred Action for Childhood Arrivals (“DACA”) recipients’ eligibility for FHA-insured mortgages. In December 2018, Senators Robert Menendez (D-NJ), Cory Booker (D-NJ), and Catherine Cortez Masto (D-NV) asked HUD to clarify whether it has “developed a policy regarding DACA recipients’ eligibility for FHA-insured mortgage loans.” If not, the senators requested HUD to “promptly provide clear and written guidance to FHA-approved lenders clarifying” that DACA recipients are not ineligible for FHA insurance simply because of their DACA status. [1] In response, HUD issued a letter explaining that is has “not implemented any policy changes” with respect to “FHA’s eligibility requirements” for non-U.S. citizens who are lawful residents. HUD reiterated that “non-U.S. citizens without lawful residency are ineligible for FHA financing.” [2] In early 2019, Fannie Mae issued a guide regarding “non-citizen borrower eligibility,” explaining that mortgages provided to DACA recipients are eligible to be purchased by Fannie Mae because DACA recipients are lawful nonpermanent residents because they have a valid Employment Authorization Document number. [3] During congressional testimony in April, HUD Secretary Ben Carson seemingly clarified that DACA recipients are eligible for FHA-insured mortgages. The secretary commented that “plenty of DACA recipients … have FHA mortgages,” and that he would be surprised if lenders received statements to the contrary from HUD staff.

Read More

Revamped Relief: The CFPB’s Proposed Rule to Improve its No-Action Letter Program and to Establish a Regulatory Sandbox

By Andrew C. Glass, Gregory N. Blase, Daniel S. Cohen

INTRODUCTION
In December of 2018, the Senate confirmed Kathy Kraninger as the second Director of the Consumer Financial Protection Bureau (“CFPB”). The path Director Kraninger will chart is uncertain, but the CFPB has already begun initiating changes to which the financial services industry should pay attention. For instance, in mid-December 2018, the CFPB issued a proposed rule to modify its No-Action Letter Program (the “Program”) and to establish a regulatory “sandbox” (a formal process to temporarily exempt companies from certain statues and regulations so they can test new products with consumers). Below, we provide a brief history of the Program as well as a discussion of the key elements of the proposed rule.

Read More

Marketplace Lender Seeking Fair Lending Guidance Receives CFPB’s First No-Action Letter

By David D. Christensen, Jennifer Janeira Nagle, and Brandon R. Dillman

The Consumer Financial Protection Bureau (“CFPB”) recently issued its first letter pursuant to a no-action letter policy launched in February 2016. The CFPB developed the policy to encourage innovation in the fintech marketplace by creating a testing ground for new technologies and consumer lending methods, particularly where the applicability or impact of existing regulations is uncertain. To take advantage of the policy, a company must submit an application describing the product, method, or service at issue and identify the specific rules and regulations for which the company seeks guidance. If the application is approved, a no-action letter is issued indicating that the CFPB “has no present intention to recommend initiation of an enforcement or supervisory action” against the applicant with respect to the specific product, method, or service and regulatory concerns covered by the company’s application.

Read More

Divided Supreme Court Affirms Dismissal of “Spousal Guarantor” ECOA Discrimination Lawsuit

By Andrew C. Glass, Roger L. Smerage and Olivia Kelman

On March 22, 2016, the United States Supreme Court issued its first 4-4 split decision since the passing of Justice Antonin Scalia. In Hawkins v. Community Bank of Raymore, No. 14-520 (U.S. Mar. 22, 2016), the Court reviewed whether the Federal Reserve Board (“FRB”) exceeded its authority when it amended Regulation B, implementing the Equal Credit Opportunity Act (“ECOA”), to cover loan “guarantors” as loan “applicants.” In a per curiam opinion, the Court affirmed the determination of the United States Court of Appeals for the Eighth Circuit that (1) the plain language of ECOA excludes loan guarantors from the definition of loan applicants authorized to bring an antidiscrimination suit under the statute, and thus (2) the FRB’s conflicting amendment was not entitled to deference to be afforded to regulations that interpret silent or ambiguous statutory provisions. Yet, the Court’s even split means that Hawkins will be binding precedent only in the Eighth Circuit and not nationwide.

Read More

CFPB and DOJ Continue to Pursue Indirect Auto and Redlining Claims

By: Melanie Brody, Christa Bieker

The Department of Justice (“DOJ” or the “Department”) and the Consumer Financial Protection Bureau (“CFPB” or the “Bureau”) are increasingly pursuing lenders suspected of discriminatory lending practices. Last week, the DOJ and the CFPB announced two settlements with lenders resolving alleged violations of the Equal Credit Opportunity Act (“ECOA”) and the Fair Housing Act. These announcements come only days after the DOJ and the CFPB announced a consent order with Hudson City Savings Bank resolving allegations of racial redlining.

On September 28, the CFPB and the DOJ announced a consent order with Cincinnati-based Fifth Third Bank (“Fifth Third”) resolving allegations that Fifth Third’s indirect auto-lending pricing policies discriminated against African American and Hispanic borrowers. Although the CFPB does not have oversight over car dealers, the Bureau is able to investigate the auto loans that lenders like Fifth Third make through dealers. Coordinated investigations into Fifth Third’s indirect auto-lending business led the Bureau and the Department to conclude that African American and Hispanic borrowers paid approximately 35 or 36 basis points more, respectively, in dealer markups than similarly situated non-Hispanic white borrowers, which resulted in African American and Hispanic borrowers paying an average of $200 more for their car loans.

Read More

DOJ and CFPB Settle Discriminatory Mortgage Pricing Case with Wholesale Lender

By: Melanie Brody, Anjali Garg

On May 28, 2015, the DOJ and the CFPB filed a complaint and proposed consent order against Provident Funding Associates (Provident) alleging that the mortgage lender violated the Fair Housing Act and ECOA by charging African American and Hispanic borrowers higher broker fees than it charged white borrowers. To resolve these claims, Provident will pay $9 million to approximately 14,000 borrowers who allegedly paid higher interest rates and/or fees for mortgages between 2006–2011. The agencies did not impose a civil money penalty against Provident.

Read More

Mortgage Servicers: Don’t Forget ECOA’s Valuation Rule

By: Nanci L. Weissgold, Kerri M. Smith

Mortgage loan servicers are toiling away at executing all the new servicing requirements in the CFPB’s Regulation Z and Regulation X amendments by the January 10, 2014 deadline. Given this overwhelming task, it is understandable that some servicers may not be as familiar with the CFPB’s ECOA Valuation Rule amending Regulation B. The Rule, which imposes an obligation to furnish a copy of valuations to borrowers of first-lien loans and to provide notice to borrowers of this right, may apply to a servicer’s loss mitigation efforts.

Read More

Credit Card Repayment Ability Fix Issued by CFPB

By: David A. Tallman , Eric Mitzenmacher

Financial life just got a little bit easier for stay-at-home moms and dads. For over a year and a half, regulations originally promulgated by the Federal Reserve (and reissued by the CFPB) have restricted credit access for “spouses and partners who do not work outside the home,” based on an interpretation of the Credit Card Accountability, Responsibility, and Disclosure Act (the “CARD Act”) that required a creditor to consider a card applicant’s “independent” ability to repay any credit extended. On May 3, the CFPB finalized amendments to Regulation Z that loosen the credit card underwriting standards, allowing consumers over age 21 to qualify based on any income to which they have a “reasonable expectation of access.” By acknowledging that the practical aspects of interfamily relationships may sometimes support a determination that a consumer has an ability to repay even when the consumer may not have a formal legal right to the underlying income or assets, the Bureau acquiesced to the requests of a broad-based coalition of politicians, consumer groups, and credit card issuers to remove an artificial barrier to the ability of stay-at-home spouses and partners to obtain and build credit.

Read More

Private Student Lenders, Get Ready for Your Final Exams: The CFPB Releases Its Student Lending Examination Procedures

By: Stephanie C. Robinson, Rebecca Lobenherz

This week the Consumer Financial Protection Bureau (“CFPB”) released an addendum to its Supervision and Examination Manual focused on the examination of private student lenders. The Student Lending Examination Procedures, available on the CFPB’s website, provide guidance to CFPB examiners on how to review private student lenders for compliance with consumer financial protection laws. The CFPB has supervisory authority over both very large banks and nonbanks that make private student loans. Read More

CFPB’s Proposed Rule on Receiving a Copy of Your Appraisal and Valuation

By: Nanci L. Weissgold, Kerri M. Smith

Although Congress mandated the sunset of the Home Valuation Code of Conduct (HVCC) in the Dodd-Frank Act, Congress effectively codified many of its requirements, including the obligation to furnish a copy of an appraisal to borrowers. To implement this statutory change to ECOA, the CFPB proposes to amend Regulation B to make the furnishing of “any and all written appraisals and valuations” developed in connection with the application for a first-lien loan mandatory, rather than at the consumer’s request. Comments to the ECOA proposed rule are due on October 15, 2012.

Read More

Copyright © 2023, K&L Gates LLP. All Rights Reserved.