TILA – Consumer Financial Services Watch

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

Jan 15 2019

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.

More To Know About “Know Before You Owe”: CFPB Acknowledges TRID Challenges and Announces July 2016 Notice of Proposed Rulemaking

May 10 2016

By Jennifer Janeira Nagle and Hollee Watson

The TILA-RESPA Integrated Disclosure rule (“TRID”) went into effect on October 3, 2015, and has posed significant implementation challenges industry-wide. Those challenges have been articulated to the Consumer Financial Protection Bureau (“CFPB”) by industry participants, trade groups, and congressional leaders alike. In response, the CFPB has issued guidance in the form of letters, webinars, educational videos, guides, and factsheets. Notwithstanding this informal guidance, and despite the CFPB’s assurances that its initial compliance examinations would be “diagnostic and corrective, not punitive,” see December 29, 2015 Letter from CFPB Director Richard Cordray to the Mortgage Bankers Association, the mortgage industry continues to experience uncertainty and risk in its efforts to implement TRID’s sweeping changes to TILA and RESPA. See January 29, 2016 Mortgage Industry Trade Group Letter to CFPB; March 11, 2016 Sen. Bob Corker Letter to CFPB.

In the wake of pressure for more formal guidance, the CFPB recently announced that it will issue a Notice of Proposed Rulemaking (“NPRM”) on TRID in late July. In an April 28, 2016 letter to mortgage industry trade groups, Director Richard Cordray acknowledged that “the implementation of the Know Before You Owe rule poses many operational challenges” and that “there are places in the regulation text and commentary where adjustments would be useful for greater certainty and clarity.”

VA Issues QM FAQs, Focuses on IRRRLs

Jan 29 2016

On May 9, 2014, the Department of Veterans Affairs (“VA”) issued an Interim Final Rule defining which VA-guaranteed loans would be “qualified mortgages” or “QMs” for the purposes of the Truth in Lending Act’s (“TILA”) ability-to-repay requirements. With its recent release of Circular 26-13-3, the VA has now clarified the application of that rule through FAQs focusing largely on Interest Rate Reduction Refinance Loans (“IRRRLs”). These loans are VA streamlined refinances, which generally allow for reduced income verification for eligible veterans’ loans. IRRRLs represent a small sliver of mortgage lending in the United States, but their treatment under VA’s Interim Final Rule has presented significant problems for some lenders.

CFPB Takes Action Against Another Buy-Here Pay-Here Used Car Dealer

Jan 28 2016

On Thursday, January 21, 2016, the CFPB entered into a consent order with a small buy-here pay-here used car dealer. This is the third CFPB settlement against a buy-here pay-here dealer. The settlement resolves allegations that the dealer inaccurately disclosed finance charges to consumers in violation of the Truth in Lending Act (“TILA”) and the prohibition on deceptive acts or practices, and engaged in abusive sales practices.

TRID/KBYO Rule: The CFPB Tries to Calm Lender Fears

Dec 30 2015

On December 29, 2015, CFPB Director Richard Cordray responded to MBA President and CEO David Stevens’ desperate plea for clarity to address what the MBA claimed is a significant rejection by large aggregators and investors of correspondent lending channel loans for minor or technical TRID errors. In its December 21, 2015 letter to Director Cordray, Mr. Stevens noted that these minor and technical errors include “issues with the alignment or shading of forms, rounding errors, time stamps with the wrong time zone, or check boxes that are improperly completed on the LE.” The MBA feared that without some clarity from the CFPB disruption and liquidity issues would overwhelm the mortgage markets.

United States Supreme Court: TILA Does Not Require Consumers To File A Lawsuit Within Three Years In Order To Assert A Right To Rescind

Jan 21 2015

By: Brian M. Forbes and Gregory N. Blase

For several years, federal courts have struggled with the question of whether a consumer who wishes to rescind a loan pursuant to the federal Truth in Lending Act (“TILA”) may do so by sending a notice of rescission within three years after the closing date, or whether the statute also requires the consumer to file a lawsuit within that three-year time period. On January 13, 2015, the United States Supreme Court, in Jesinoski v. Countrywide Home Loans, Inc., No. 13-684, slip op. (U.S. Jan. 13, 2015), resolved that question and held that sending a written notice of rescission within three years after closing is sufficient to exercise the right of rescission under TILA; the statute does not require a consumer to also file a lawsuit within that timeframe.

Mortgage Broker or Mini-Correspondent: CFPB Issues Policy Guidance on Questions for Consideration

Jul 18 2014

By: Holly Spencer Bunting, Anaxet Y. Jones

In response to what the CFPB views as an increasing trend among mortgage brokers shifting to a mini-correspondent lender model, the CFPB recently issued “Policy Guidance on Supervisory and Enforcement Considerations Relevant to Mortgage Brokers Transitioning to Mini-Correspondent Lenders” (“Policy Guidance”) regarding the application of Regulations X (RESPA) and Z (TILA) to transactions involving mini-correspondent lenders. In addition to providing background on the differences between brokers and mini-correspondents and certain requirements of Regulations X and Z, the Policy Guidance identifies questions the CFPB may consider when reviewing mini-correspondent transactions and the relationship between the mini-correspondent lender and the investor as part of CFPB examinations or enforcement actions. The CFPB, however, stops short of drawing any lines in the sand between what it considers to be brokered transactions and bona fide secondary market transactions under the mini-correspondent model. Read More

VA Issues Interim Final Rule Defining Qualified Mortgages

May 12 2014

By: Jonathan D. Jaffe, Eric Mitzenmacher

On May 9, the United States Department of Veterans Affairs (“VA”) issued an interim final rule defining which VA-guaranteed and VA-originated loans will have qualified mortgage (“QM”) status under the Truth-in-Lending Act’s (“TILA’s”) Ability to Repay (“ATR”) rule. Read More

RESPA/TILA Combined Mortgage Disclosure Forms Remain Largely Unchanged

Nov 21 2013

The wait is over. The anxiety begins. On Wednesday, November 20, 2012, the CFPB released its final regulations requiring combined mortgage disclosure forms under the Real Estate Settlement Procedures Act and the Truth in Lending Act. With an effective date of August 1, 2015, mortgage companies and settlement companies have 20 months to implement new Loan Estimate and Closing Disclosure forms that will forever replace the GFE, initial and final TIL statements, and HUD-1. Read More

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.

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