CFPB Enforcement

  • Mortgage rules: On September 29th, the CFPB announced that it entered into a Consent  Order with Flagstar Bank (MI), a federal savings bank and mortgage servicer that  administers foreclosure relief programs. The Consent Order requires Flagstar Bank to pay a  $10 million fine and $27.5 million in consumer redress for alleged violations of the CFPB’s  new mortgage servicing rules. The Consent Order is the CFPB’s first enforcement action  under its mortgage servicing rules that took effect in January 2014. The CFPB stated that it  found, in its examinations and investigation, that from 2011 to the present Flagstar Bank  “failed consumers…at every step of the process” by:
    • Closing borrower applications due to Flagstar’s own “excessive delays”;
    • Delaying beyond permissible time periods its approval or denial of borrower applications;
    • Failing to notify borrowers of incomplete applications;
    • Miscalculating borrowers’ income;
    • Denying applications for unspecified reasons;
    • Misinforming borrowers of their appeal rights; and
    • Placing borrowers in “trial period purgatory,” which increased some borrowers’  loan amounts.

CFPB Director Richard Cordray stated on a press call, “Since we first announced these  [mortgage rules] almost two years ago, we have made clear that we expect full compliance  to clean up the problems that had been pervasive in this industry and caused so many  people to lose their homes. … We need all mortgage servicers to understand that they must  step up and follow the law. We are working very hard to fulfill this objective.”

  • RESPA: On September 30th, the CFPB announced that it entered into a Consent Order with  Lighthouse Title (MI), a title insurance agency. The Consent Order requires Lighthouse  Title to pay a $200,000 civil monetary penalty for allegedly violating the Real Estate  Settlement Procedures Act (RESPA) by entering into, “illegal quid pro quo [real estate]  referral agreements.” The CFPB alleged that Lighthouse Title, “entered into marketing  services agreements (MSAs) with various companies, including, for example, real estate  brokers, with the understanding that the companies would refer mortgage closings and title  insurance business to Lighthouse.” The CFPB concluded in its investigation that, “the  companies on average referred significantly more business to Lighthouse when they had  MSAs than when they did not.”

CFPB Operations

  • Manufactured housing: On September 30th, the CFPB published a white paper report entitled, “Manufactured-housing Consumer Finance in the United States.” In an introduction, the CFPB stated that it is interested in manufactured housing finance for two reasons: (1) because it is an important source of housing for rural and low-income consumers; and (2) because manufactured housing finance may involve financially vulnerable demographic groups. In its analysis, the CFPB found that:
    • Compared with residents of site-built homes, manufactured housing residents are more likely to be older and tend to have lower incomes or net worth;
    • Manufactured homes typically cost less than site-built homes;
    • About 60% of manufactured housing residents who own their home also own the land it is sited on;
    • An estimated 65% of borrowers who own their land and who took out a loan to buy a manufactured home between 2001 and 2010 financed the purchase with a chattel loan;
    • Manufactured home owners typically pay higher interest rates for their loans than site-built borrowers; and
    • The current state of manufactured housing production, retail, and financing reflects in part a rapid growth during the 1990s and subsequent sharp contraction.

The CFPB added that the new mortgage rules that went into effect in January 2014, “may affect the market for smaller-mortgages and, more specifically, the manufactured housing segment of the market,” but that it is so far “premature to reach conclusions on the marketwide effects of the rules.”

  • Mortgages: On September 26th, the CFPB published in the Federal Register (79 FR 57892) a notice and request for comment on its proposed information collection entitled, “Owning a Home Evaluation Study.” As part of its “Owning a Home” project, the CFPB seeks to survey prospective homebuyers exposed to related tools and resources that the CFPB developed and survey also those prospective homebuyers not exposed to such materials. “We will then compare the two groups’ attitudes, behaviors, and outcomes,” the CFPB stated, in order to identify, among other things, whether and how the “Owning a Home” project impacts consumers and which consumer segments or profiles most benefit. The CFPB will accept public comments on the notice through November 25th.
  • Credit counseling: On September 26th, the CFPB announced a research pilot program to examine the effectiveness of early intervention credit counseling for those consumers at risk of credit card debt default. The CFPB stated in a press release that, “currently there is limited research on the effectiveness of early-intervention credit counseling strategies,” and that the CFPB is seeking to help consumers avoid default—currently from credit card debt, but perhaps in the future in connection with home, auto, or other loans—and subsequent harm to their credit reports. Accordingly, the CFPB will partner with Barclaycard and Clarifi in their own counseling trial project. The CFPB added, “The information shared by Barclaycard and Clarifi will be de-identified, and appropriate precautions will be taken to ensure that individual consumers cannot be identified through the data.”

CFPB Rulemaking

  • Military lending: On September 26th, the CFPB issued a press release in support of the Defense Department’s proposed military lending rule (79 FR 58602). Among other things, the proposed rule would impose a 36% interest-rate limit, including all interest and fees, on military loans. Cordray stated, “By broadening the types of credit covered under the law, this proposal would carry out the will of Congress by enabling the CFPB to stop lenders from harming servicemembers in ways the law was intended to stop.” Holly Petraeus, the CFPB’s Assistant Director for the Office of Servicemember Affairs, added, “Less than a decade after [the Military Lending Act (MLA)] was passed, those who would profit by charging exorbitant rates to the military have found it all too easy to evade the original intention of the MLA. Taking advantage of loopholes, lenders have continued to charge military families annual percentage rates as high as 500 percent.”

CFPB Outreach

  • Financial literacy: On October 2nd, Cordray delivered prepared remarks to the President’s Advisory Council, during which he introduced the CFPB’s new Assistant Director for the Office of Financial Education, Janneke Ratcliffe. Cordray briefly highlighted the CFPB’s efforts to improve consumers’ financial well-being through increasing financial education for children, including by providing parents, guardians, and teachers with resources for teaching children. Ratcliffe was previously a senior research fellow in housing policy at the Center for American Progress and Associate Director at the University of North Carolina’s Center for Community Capital.
  • Financial literacy: On September 29th, Cordray delivered prepared remarks to the Society for Financial Education and Professional Development at their seventh annual Financial Literacy Leadership Conference. Cordray highlighted the various CFPB functions that he claims protect and empower consumers, such:
    • Supporting financial education for young people;
    • Targeting financially vulnerable demographic groups–such as minorities, seniors, servicemembers, and students—with specific financial education information, tools, and other resources; and
    • Encouraging employers to assist with employees’ financial wellness.
  • Financial literacy: On September 26th, the CFPB published a blog post on its community financial coaching initiative to announce that the CFPB’s contractor, Armed Forces Services Corporation, is seeking 20 partner organizations to provide an existing service delivery location at which to place a community financial coach that would, “provide coaching to consumers, including veterans and those who are low-income or economically vulnerable.” The CFPB is accepting submissions through October 15th.