Student Loan Ombudsman Reports on Survey of Student Loan Servicers
On February 3, 2014, the CFPB’s Student Loan Ombudsman, Rohit Chopra, wrote a letter1 summarizing the responses he received to a November 2013 request he issued to private student loan servicers in which he asked them to voluntarily describe their payment processing policies. The November request reflected the CFPB’s concerns as to whether servicers can and do honor borrowers’ instructions for servicers to direct the payments they make above monthly minimums to pay down particular loans.
Among the key findings in the Ombudsman’s February 3rd letter were the following:
- Many servicers say that they cannot honor specific payment allocation instructions communicated through online or third-party bill pay services that borrowers often utilize to remit their payments.
- Many servicers are not well-equipped to process borrowers’ payment instructions when third parties, such as the Department of Veterans Affairs, make loan payments on behalf of borrowers, such as servicemembers and veterans who receive educational benefits under the GI Bill.
- Some servicers have recently changed their payment allocation policies to process borrowers’ payment instructions or to otherwise allocate payments from borrowers in excess of the monthly minimums to pay down loans with the highest interest rates.
- Many servicers indicated that they are working to better communicate their payment processing policies to their customers.
CFPB Takes First Step in HMDA Rulemaking
On February 7th, the CFPB took a preliminary step toward initiating a rulemaking, authorized by the Dodd-Frank Act and the Home Mortgage Disclosure Act (HMDA), which will increase the amount of data that financial regulators collect about the residential mortgage market. Specifically, the CFPB is convening a panel of small businesses to provide feedback on the potential expansion of the HMDA dataset.2 The CFPB intends to use the panel to seek early feedback from small lenders on how data can be updated to better reflect what is happening in the market. Although the information would be reported to financial regulators, not all of the information provided by lenders would be disclosed in the public version of the HMDA dataset. Potential changes under consideration by the CFPB include:
- Improvements required by Dodd-Frank: The Dodd-Frank Act directs the CFPB to update HMDA regulations by having lenders report specific new information, including the length of the loan, total points and fees, the length of any teaser or introductory interest rates, and the applicant or borrower’s age and credit score.
- New developments in the market: The CFPB is considering additional underwriting information, such as the interest rate, the total origination charges, and the total discount points of the loan.
- Monitoring access to credit: The CFPB is also considering requiring institutions to include an explanation of rejected loan applications and whether the lender considered the loan to be a “Qualified Mortgage.”
Acknowledging the burden for lenders in collecting and submitting HMDA information, the CFPB is also reviewing reporting requirements. The CFPB has thus requested feedback on ways in which it can streamline reporting, standardize the threshold requirement for reporting, and improve data entry.
In conjunction with this announcement, the CFPB also released a new online tool that provides the public with easier access to HMDA mortgage data for the period from 2007 through 2012. 3 Users of the tool now have the ability to filter data based on different categories and to create summary tables.