Dodd-Frank News Center

CFPB substantially strengthens mortgage borrower consumer protections

This story appeared in Bank Digest.

The Consumer Financial Protection Bureau has adopted a final rule that provides new measures intended to ensure that homeowners and struggling borrowers are treated fairly by mortgage servicers. The final rule is the result of a November 2014 proposed rulemaking that addressed nine major mortgage-related topics.

The new protections provided to consumers include requiring servicers to provide foreclosure protections for borrowers who have brought their loans current at any time since submitting the prior complete loss mitigation application. Other provisions include expanding consumer protections to surviving family members and other homeowners by establishing a broad definition of "successor in interest" and providing borrowers in bankruptcy periodic statements with specific information tailored for bankruptcy, as well as a modified written early intervention notice to let those borrowers know about loss mitigation options.

California man sentenced to prison over mortgage loan modification scheme

This story appeared in Bank Digest.

Aria Maleki, of Santa Ana, Calif., has been sentenced to nine years and four months in federal prison, followed by three years of supervised release, for heading a mortgage loan modification scheme that defrauded more than 1,000 struggling homeowners across the United States, SIGTARP has reported.

According to SIGTARP's release, court documents and statements made in court showed that Maleki and others jointly operated a series of California-based companies that falsely purported to provide home mortgage loan modifications and other consumer debt relief services to numerous homeowners in exchange for upfront fees, but few homeowners received any mortgage loan modifications through these companies, and few received refunds of their fees.

FHFA Refinance Report filed

This story appeared in Bank Digest.

The Federal Housing Finance Agency has released its May Refinance Report, which shows that Fannie Mae and Freddie Mac loans refinanced through the Home Affordable Refinance Program accounted for 4 percent of all refinancings in May. According to the FHFA, borrowers completed 6,091 refinances in May through HARP, bringing total refinances from the inception of the program to 3,412,982.

In addition, total refinance volume increased in May 2016, and mortgage rates decreased, with the average interest rate on a 30‐year fixed rate mortgage falling to 3.60 percent from a 3.61 percent rate in April.

ATR/QM Small Entity Compliance Guide updated

This story appeared in Bank Digest.

The Consumer Financial Protection Bureau has updated its Small Entity Compliance Guide for the Ability-to-Repay and Qualified Mortgage Rule to incorporate clarifications and amendments to the rules issued by the CFPB on May 29, 2013, and July 10, 2013. Among other things, the updated guide discusses: the types of creditors and loan programs that are exempt from the ability-to-repay requirements; how debt and income will be determined under appendix Q for the purpose of meeting the 43 percent debt-to-income requirement under the general QM provision; and the factors that make a QM loan "higher-priced." 

Four sentenced to prison for California-based mortgage modification scheme

This story appeared in Bank Digest.

The Office of the Special Inspector General for the Troubled Asset Relief Program announced that on July 29, four California men were sentenced for defrauding hundreds of victims in a real estate scam that included fraudulently collecting upfront fees for loan modification services and sending fake letters with mortgage servicer logos offering home loan modification assistance. Victim losses in the case are estimated to be in excess of $130,000.

Ability to Repay Rule Finalized

By John M. Pachkowski, J.D., Editor, CCH Federal Banking Law Reporter, Coordinating Editor, Bank Digest; Author, Anti-Money Laundering and Bank Secrecy: Compliance and the USA PATRIOT Act; co-Author CCH Financial Privacy Law Guide and Dodd-Frank Wall Street Reform and Consumer Protection Act—Law, Explanation and Analysis

The Consumer Financial Protection Bureau has announced the release of a final rule to implement the provisions of the Dodd-Frank Act requiring mortgage lenders to consider consumers’ ability to repay home loans before extending them credit. The rule will take effect on Jan. 10, 2014.

With adoption of the final rule, the CFPB noted that “Lenders can no longer offer no-doc, low-doc loans, otherwise known as ‘Alt-A’ loans, where some lenders made quick sales by not requiring documentation, then offloaded these risky mortgages by selling them to investors.”

The CFPB’s final rule is similar to a 2008 final rule issued by the Federal Reserve Board which prohibited creditors from making “higher-price mortgage loans” without assessing consumers’ ability to repay the loans; however, the CFPB final rule covers the entire mortgage market.

Significant Mortgage Loan Origination Rule Changes Proposed

By Richard Roth, J.D., Editor, the CCH Federal Banking Law Reporter, CCH Bank Compliance Guide, Bank Digest; co-author, Dodd-Frank Wall Street Reform and Consumer Protection Act—Law, Explanation and Analysis.

The Consumer Financial Protection Bureau has proposed changes to the rules governing mortgage loan origination practices that would affect the terms that can be offered to consumers and the ways in which loan originators can be compensated. Among the provisions in the proposed amendments to Reg. Z—Truth in Lending (12 CFR 1026) is a requirement that loan originators make available a no-point, no-fee loan option. The rule also would adopt uniform qualification and fitness standards for loan originators.

In announcing the proposed rulemaking, CFPB Director Richard Cordray noted, “Consumers have a hard time comparing loans when they are dealing with a bewildering array of points and fees. We want to provide consumers with clearer options and enable them to choose the loan that they believe is right for them.”

FBI Releases Report on Mortgage Fraud

This story appeared in Bank Digest.

According to the FBI's 2010 Mortgage Fraud Report, mortgage fraud continued at elevated levels in 2010, consistent with levels seen in 2009. Mortgage fraud schemes were found to be particularly resilient, readily adapting to economic changes and modifications in lending practices. Mortgage fraud perpetrators included licensed/registered and non-licensed/registered mortgage brokers, lenders, appraisers, underwriters, accountants, real estate agents, settlement attorneys, land developers, investors, builders, bank account representatives and trust account representatives. 

Merkley Pushes for Foreclosure Intervention Measures to Stabilize Housing Market

This story appeared in Bank Digest.

Sen. Jeff Merkley, D-Ore., has released a plan to help homeowners and is calling upon the Obama administration to make housing issues a top priority because “our economy cannot recover until our housing market recovers.” Noting that home prices recently fell to their lowest level since the collapse of the housing market, Merkley said, “Falling home prices are wiping out the investments made by American families, hurting our economy and triggering another wave of foreclosures. We must act now to stem this tide and keep families in their homes.”

Merkley's plan is intended to bolster the housing market and would give families options to remain in their homes by making improvements in three key areas:

• Improve loan modifications by offering a single point of access and eliminate the so-called “dual track,” where banks negotiate a mortgage modification while simultaneously moving forward with the foreclosure process.
• Provide families facing foreclosure with options by creating a “short refinance” program, establishing a third-party review system and enacting a new “lifeline bankruptcy option.”
• Bolster the housing market by enacting a permanent tax credit for first-time homebuyers.

Frank Responds to Mortgage Servicer Agreement

 This story appeared in Bank Digest.

Rep. Barney Frank, D-Mass., the Ranking Member of the House Financial Services Committee, released a statement in response to the announcement by federal banking regulators that they had successfully negotiated a consent agreement with 14 of the nation’s largest mortgage servicers. Frank noted, “I appreciate the recognition by the regulators that the status quo for mortgage servicing is intolerable. However, the enforcement orders alone are insufficient to address past problems and future standards. First, I want to make it very clear that these  enforcement orders are in no way preemptive of any state actions to address mortgage servicing standards, nor are they intended to be the final word on this issue. Second, with respect to the terms of the consent orders, they call for a bank employee to serve as a single point of contact for borrowers to obtain loan modification and loss mitigation information. I believe that it is also important to require servicers to make in-person contact with the borrower facing foreclosure if there has been no communication with the borrower for at least 45 days. Obviously, in-person service will not be possible or necessary for every troubled borrower, but in certain circumstances it should be required and can readily be achieved.”