Mortgages

On January 9, 2019, a divided three-judge panel of the Ninth Circuit held that the Federal National Mortgage Association, or Fannie Mae, is not a “consumer reporting agency” within the meaning of the Fair Credit Reporting Act (the “FCRA”). The case, Zabriskie v. Federal National Mortgage Association, was brought by prospective borrowers who were unable to refinance their current mortgage loans due to allegedly erroneous information in their credit histories, as reported by Fannie Mae software that is commonly used by mortgage lenders.
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Continue Reading Fannie Mae is Not a Consumer Reporting Agency Under the FCRA, Ninth Circuit Says

On April 26, 2018, the Bureau of Consumer Financial Protection (the “Bureau”) finalized an amendment to the “Know Before You Owe” mortgage disclosure rule (also known as the TILA-RESPA Rule), which it proposed in July 2017 and which we previously described in this blog. The amendment eliminates uncertainty regarding a timing restriction in the…

On September 20, 2017, the Consumer Financial Protection Agency (“CFPB”) announced final amendments to Regulation B, which implements the Equal Credit Opportunity Act (“ECOA”), to provide flexibility and clarity to mortgage lenders regarding the collection and retention of information about the ethnicity, sex, and race of certain mortgage applicants.  The CFPB also issued proposed policy guidance, with a request for public comment, regarding the loan-level Home Mortgage Disclosure Act (“HMDA”) data reported by financial institutions that the CFPB plans to disclose to the public beginning in 2019.

Regulation B Amendments

ECOA prohibits a creditor from discriminating against an applicant with respect to any aspect of a credit transaction on a prohibited basis, which includes, among other things, race, color, religion, national origin, sex or marital status, or age (provided the applicant has the capacity to contract).  To implement ECOA’s antidiscrimination principles, Regulation B generally prohibits a creditor from inquiring about the race, color, religion, national origin, or sex of an applicant or any other person (“applicant demographic information”) in connection with a credit transaction.

The amendments announced by the CFPB are designed to align Regulation B’s rules regarding the collection and reporting of applicant demographic information by mortgage lenders with the CFPB’s 2015 revisions to Regulation C, which implements HMDA and governs the collection, reporting, and disclosure of mortgage lending information, including HMDA’s separate requirement to collect and report applicant demographic information.  The revisions to Regulation C go into effect on January 1, 2018.

The amendments make three substantive changes to Regulation B:

  • Permitting additional flexibility in the collection of demographic information: Regulation B provides exceptions to the prohibition of creditor inquiries into applicant demographic information.  One such exception is that creditors that receive an application for certain dwelling-secured loans are required to collect and retain protected information, including race and ethnicity information.  This information is collected in terms of specified racial and ethnic categories that are broad and aggregated (e.g., Asian, Hispanic).   However, this aggregated racial and ethnic categorization is somewhat inconsistent with the revisions to Regulation C, pursuant to which creditors must permit applicants to self-identify their race and ethnicity using certain disaggregated racial and ethnic subcategories (e.g., Mexican, Puerto Rican, or Cuban under the aggregate category of Hispanic).  To remedy this inconsistency, the Regulation B amendments allow creditors to collect the applicant’s information using either the aggregate ethnicity and race categories or the disaggregated ethnicity and race categories and subcategories required by revised Regulation C.  In addition, to standardize the treatment of co-applicants under Regulation B and Regulation C, the amendments clarify that a creditor is permitted, but not required, to collect applicant demographic information from a second or additional co-applicant.

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Continue Reading The CFPB Finalizes Amendments to ECOA Regulations and Seeks Public Comment on HMDA Policy Guidance

On August 21, 2017, the OCC issued guidance permitting national banks and federal savings associations to establish programs to offer mortgages with loan-to-value (“LTV”) ratios exceeding 100 percent in communities that have been officially targeted for revitalization by a federal, state, or municipal governmental entity or agency, or by a government-designated entity.

Under existing supervisory guidance, banks are expected generally to limit the LTV ratios of their owner-occupied residential loans to no more than 90 percent, unless borrowers have credit enhancement in the form of mortgage insurance or readily marketable collateral.  The existing guidance recognizes that banks can exceed this limit without obtaining credit enhancement in individual cases, subject to certain conditions.  The OCC’s new guidance allows banks’ mortgage loans to have LTV ratios exceeding 100 percent without credit enhancement as part of an overall program of lending in distressed communities.  (The new guidance does not explain whether mortgages with LTV ratios between 90 and 100 percent are eligible as program loans.)…

Continue Reading OCC Permits Programs for Higher LTV Mortgage Lending in Distressed Communities

On July 14, 2017, the Consumer Financial Protection Bureau (“CFPB”) issued a proposal to ease, at least temporarily, the reporting requirements for community banks and credit unions under the Home Mortgage Disclosure Act (“HMDA”). The proposed rule would raise the threshold at which financial institutions have to report on home equity lines of credit for…

On July 7, 2017, the Consumer Financial Protection Agency (“CFPB”) announced final amendments to its “Know Before You Owe” (“KBYO”) mortgage disclosure rule to memorialize informal guidance regarding the rule, clarify certain aspects of the rule, and provide implementation guidance to industry. The CFPB also issued a proposed rule regarding when a creditor may compare…

On April 20, 2017, the CFPB sued nonbank mortgage loan servicer Ocwen Financial Corporation and its subsidiaries (collectively, “Ocwen”) in the U.S. District Court for the Southern District of Florida. The Bureau’s complaint alleges violations of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Fair Debt Collection Practices Act, the Real Estate Settlement Procedures Act, the Truth in Lending Act, and the Homeowners Protection Act of 1998.

In a strongly worded press release, the CFPB alleged that Ocwen engaged in “significant and systemic misconduct at nearly every stage of the mortgage servicing process.”  CFPB Director Richard Cordray stated that “Ocwen has repeatedly made mistakes and taken shortcuts at every stage of the mortgage servicing process, costing some consumers money and others their homes.”  In its own statement, Ocwen vigorously denied any wrongdoing and accused the CFPB of bringing a “politically-motivated” lawsuit in an attempt to divert attention from mounting public criticism of the Bureau.

The CFPB’s new complaint was accompanied by a separate case brought by the State of Florida against Ocwen for similar allegations.  In addition, 20 states filed cease-and-desist orders alleging escrow management issues and seeking to prohibit Ocwen from originating or acquiring any new loans.

Notably, Ocwen is already subject to a $2.1 billion settlement approved in 2014 for similar allegations in a case brought by the CFPB, 49 states, and the District of Columbia.  The Bureau’s allegations largely relate to Ocwen’s conduct since January 2014 when the CFPB’s mortgage servicing and other mortgage rules became effective, although the Bureau’s allegations relating to Ocwen’s marketing and billing of add-on products date to July 2011.

The Bureau’s allegations, which Ocwen has vigorously denied, are summarized below.…

Continue Reading CFPB Sues Ocwen for Alleged Violations of Consumer Financial Laws

On April 13, 2017, the Consumer Financial Protection Bureau (“CFPB”) issued a Notice of Proposed Rule Making (the “NPRM” or “proposal”) to amend the Regulation C final rule issued by the CFPB in October 2015 (“Final Rule”).  Regulation C implements the Home Mortgage Disclosure Act (“HMDA”), 12 U.S.C. § 2801 et seq.  The Final Rule modified the types of institutions and transactions subject to Regulation C, the types of data that institutions are required to collect, and the processes for reporting and disclosing the required data.  The Final Rule included, but was not limited to, amendments required by the Dodd Frank Wall Street Reform and Consumer Protection Act.  Most of the requirements of the Final Rule become effective in January 2018.
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Continue Reading CFPB Proposes Revisions to Final Rules under Home Mortgage Disclosure Act (Regulation C)

On February 8, 2017, the Consumer Financial Protection Bureau (“CFPB”) released its monthly complaint report. For the month of December 2016, the products and services generating the most complaints were debt collection, credit reporting, and mortgages, collectively representing about 65 percent of complaints.

In a year-to-year comparison covering the three-month time period between October and December in 2015 and 2016, student loans showed the greatest increase in complaints— an increase of 109 percent—of any product or service. The CFPB attributes part of this increase to a February 2016 update to its student loan intake form, which allowed it to accept complaints about Federal student loan servicing.  During the same period, complaints about prepaid products, payday loans, and mortgages declined by 59 percent, 23 percent, and 5 percent respectively. The decline in complaints about these products continues a trend reported in the CFPB’s last complaint report.…

Continue Reading CFPB’s Monthly Complaint Report Focuses on Mortgages

On November 9, 2016, the New York State Department of Financial Services (“NYDFS”) entered into a consent order with PHH Mortgage Corporation and PHH Home Loans (collectively “PHH”) to settle allegations that PHH violated New York and federal laws relating to mortgage origination and servicing.  NYDFS discovered the alleged violations of law in a series of examinations of PHH conducted between 2010 and 2014, and PHH self-identified one violation in 2014 and reported it to NYDFS in 2016.
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Continue Reading New York DFS Enters Consent Order with PHH Mortgage