2013 – Page 5 – Consumer Financial Services Watch

New State Laws May Reduce Foreclosure Timelines

Jun 13 2013

Is this the beginning of the end for foreclosure mediation programs?

Currently under review by Missouri Governor Jeremiah “Jay” Nixon is House Bill 446, which would prohibit cities and counties from enacting laws or ordinances impacting the enforcement of servicing of real estate loans. (The Governor’s deadline for action is July 14.) The measure’s real impact: abolishing local-level foreclosure mediation programs, such as those in place in the city of St. Louis and St. Louis County since 2012 (until recently enjoined by Missouri courts).

Fannie Mae and Freddie Mac to Restrict Purchases to Qualified Mortgages – The Future for Non-QM Loans Remains Unclear

Jun 11 2013

By: Kristie D. Kully , Andrew L. Caplan

On May 6, 2013, the FHFA, the regulator (and conservator) of Fannie Mae and Freddie Mac (the “GSEs”), directed the GSEs to limit their mortgage acquisitions to Qualified Mortgages (or loans that are otherwise exempt from the CFPB’s Ability to Repay Rule), effective January 10, 2014. This FHFA Directive (the “Directive”) will ensure that the GSEs only purchase loans that are fully amortizing, have a term of 30 years or less, and have points and fees limited to 3% of the total loan amount (and meet all the other QM criteria). Read More

CFPB Addresses Double-Counting of Loan Originator Compensation in Points and Fees

Jun 04 2013

By: Kristie D. Kully , Anaxet Y. Jones

Earlier this week, the Consumer Financial Protection Bureau (“CFPB”) issued a final rule (the “Final Rule”) that attempts to fix the double-counting problem when including loan originator compensation in the points and fees calculation for Qualified Mortgages (“QMs”) and high-cost loans under Section 1026.32 (“HOEPA Loans”). Read More

Fair Lending with a Twist: Discrimination Against White Males

May 30 2013

By: Melanie Brody, Tori K. Shinohara

A Maryland-based community bank recently was the target of an OCC enforcement action alleging that the bank discriminated against white men. Specifically, the OCC alleged that First Community Bank discriminated on the basis of race and sex by imposing a ceiling on loan compensation paid by female and minority borrowers, but not by other borrowers. The Bank settled and agreed to make restitution to the aggrieved borrowers. Read More

Was Chicken Little an Optimist?

May 30 2013

By: Jonathan D. Jaffe , Kristie D. Kully , David A. Tallman, Andrew L. Caplan , Eric Mitzenmacher

The Consumer Financial Protection Bureau (“CFPB”) issued a true game changer on January 10, 2013, with its Ability to Repay and Qualified Mortgage Rule (the “Final Rule” or the “Rule”). Some industry observers seem to consider Chicken Little an optimist—not only is the sky falling, but the earth is trembling and the seas boiling. But everyone appears to agree that the Rule has caused the ground to shift beneath our feet. As we describe in this Client Alert, the Final Rule will almost certainly result in fewer borrowers qualifying for mortgages, and will likely result in higher interest rates for many who do qualify.

To read the full alert, click here.

Solicitor General Urges Supreme Court to Reject Mt. Holly Case; Argues No Review Is Needed as to Whether the Fair Housing Act Recognizes Disparate Impact Claims

May 22 2013

By: Andrew C. Glass, Roger L. Smerage

In an increasingly complex battle among the branches of the federal government, the Solicitor General recently urged the Supreme Court to deny certiorari in the appeal titled Township of Mount Holly, New Jersey v. Mt. Holly Gardens Citizens in Action, Inc., et al., No. 11-1507. The Mt. Holly matter seeks review of whether the Fair Housing Act recognizes a disparate impact theory of discrimination and if so, how courts are to analyze such claims. A disparate impact theory imposes liability on defendants for actions that are undertaken without discriminatory intent but that nonetheless have a disproportionately harmful effect on particular groups of individuals. The Supreme Court had previously granted certiorari to review these same questions in the appeal titled Magner v. Gallagher, No. 10-1032, which appeal the defendants subsequently withdrew under circumstances garnering review by Congress.

Consumer Financial Services Group Highlights Key Legal Issues at MBA Conference

May 16 2013

Members of the K&L Gates Consumer Financial Services Group will speak on key topics at the upcoming MBA Legal Issues and Regulatory Compliance Conference in Boca Raton, FL (May 19-22).

Melanie Brody will discuss a topic on everyone’s radar — fair lending and disparate impact — on Tuesday morning (May 21) , with a repeat session on Tuesday afternoon . Melanie also will facilitate a fair lending roundtable discussion on Tuesday afternoon.

Paul Hancock will address major litigation and enforcement trends on Monday afternoon (May 20).

Philip Schulman will speak at the Government Housing round table on Monday afternoon (May 20) about FHA Landmines, including the perils to the Online Annual Certification, the increase in False Claims Act cases against approved mortgagees, and indemnification demands of Lender Insurance participants.

Nanci Weissgold will participate on both the Sunday (May 19) and Tuesday (May 21) panels on the CFPB National Servicing Standards (“NSS”) and other servicing requirements. Come to the dive deep session on Sunday afternoon for an overview of the RESPA and TILA provisions of the NSS. On Tuesday, Nanci will focus on non-default servicing standards, including challenges with implementing error resolution, information requests, record retention and general policy and procedure requirements.

In addition, many of our group’s attorneys are attending the conference. We look forward to seeing you all in Boca!

K&L Gates/Ernst & Young Symposium Provides Fair Lending and UDAAP Strategies

May 13 2013

On Thursday, May 9, K&L Gates and Ernst & Young co-sponsored a Fair and Responsible Banking symposium in New York City. The symposium gave our fair lending and UDAAP team a chance to discuss compliance and enforcement issues with over 70 in-house lawyers, fair lending officers and compliance officers from a wide array of institutions. K&L Gates and Ernst & Young strategized with capital markets investors, banks, mortgage lenders, auto lenders, credit card issuers and other unsecured lenders about how to tackle the challenges they face from today’s heightened regulatory scrutiny. The hot topics that were on everyone’s mind included, among other things:

developing and implementing effective compliance management systems
avoiding and defending disparate impact claims
identifying and curtailing unfair, deceptive, and abusive acts and practices
understanding and preparing for examinations or investigations
managing vendors appropriately

If you would like a copy of the materials from this event, please contact Melanie Brody (melanie.brody@klgates.com) or Stephanie Robinson (stephanie.robinson@klgates.com).

NMLS Advance Notice Release

May 09 2013

By: * Stacey L. Riggin
Ms. Riggin is not admitted to the practice of law.

On May 8, 2013, the Conference of State Bank Supervisors published release notes for a June 24, 2013 Nationwide Multistate Licensing System (“NMLS” or the “System”) upgrade which includes, among other changes, an advance filing feature that will permit state licensees to file advance notice of certain business changes electronically through the NMLS. Presently, state licensees must submit advance notices in hard copy paper format outside the System. This upgrade should ease the burden on state licensed entities to provide advance notice and, where applicable, secure prior approval of, changes in officers, directors and direct or indirect shareholders. The advance notice filing feature also may be used in connection with a legal name change, office relocation and organizational changes. Not only will this help to facilitate the notification process, but the advance filing feature should significantly enhance the method by which state regulatory agencies can process and approve these changes. This is welcome news to the industry after the release of the upgrade was postponed earlier this year.

Although this change will allow for filings regarding transactions that have a future effective date to be made and processed through the NMLS, the new process will add a layer of complexity to certain transactions where state law only requires that notice be submitted, as the System will require that state regulators check-off a box to approve or accept the change. Administrators of the NMLS have indicated that they are willing to consider a change in the System to distinguish filings requiring approval from those that require mere notice, but those changes cannot be implemented before the “roll-out” of this new feature.

Credit Card Repayment Ability Fix Issued by CFPB

May 08 2013

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.

Archive:2013