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The CFPB has made available a beta version of its 2018 HMDA data platform. The platform is for the reporting of data collected in 2018 that must be reported in 2019.

During the beta period, reporting institutions can test and retest 2018 HMDA data files as often as desired to assess if their Loan Application Register (LAR) data complies with the reporting requirements outlined in the Filing Instructions Guide for HMDA data collected in 2018.

No 2018 data can actually be submitted through the platform until January 2019. Based on the substantial changes to HMDA data for 2018, testing whether LAR data complies with the reporting requirements will likely be beneficial for many reporting institutions.

This afternoon, by a vote of 50-49, the Senate confirmed Kathy Kraninger as CFPB Director.

Pursuant to the Dodd-Frank Act, the CFPB Director has a five-year term.  The approximate 12 months during which Mick Mulvaney has served as Acting Director since former Director Cordray’s resignation last November does not count against Ms. Kraninger’s five-year term.  As a result, Ms. Kraninger could serve as Director for approximately three years of the next four-year Presidential term that begins in January 2021 even if a Democratic President is elected.

There is, however, a “wildcard” that could potentially shorten Ms. Kraninger’s tenure, namely the ongoing litigation challenging the CFPB’s constitutionality.  In September 2018, a petition for certiorari was filed in the U.S. Supreme Court by State National Bank of Big Spring which, together with two D.C. area non-profit organizations that also joined in the petition, had brought one of the first lawsuits challenging the CFPB’s constitutionality.  Following the D.C. Circuit’s en banc PHH decision that held the CFPB’s structure is constitutional, the D.C. Circuit, based on PHH, summarily affirmed the district court’s judgment entered against the plaintiffs.  The issue of the CFPB’s constitutionality is also currently pending in two circuit courts–the Second Circuit in the RD Legal Funding case and the Fifth Circuit in the All American Check Cashing case.  In all of these cases, the CFPB’s constitutionality has been challenged based on its single-director-removable-only-for-cause structure.

These cases create a strong likelihood of this issue coming before the Supreme Court in the next year or so.  If the CFPB’s structure is found to be unconstitutional and severing Dodd-Frank’s for-cause removal provision is determined to be the appropriate remedy (as the D.C. Circuit determined in its PHH panel decision), a Democratic President might have the ability to remove Ms. Kraninger without cause before the end of her five-year term.

 

 

Last week, the CFPB Ombudsman’s Office released its seventh annual report covering the Office’s activities during fiscal year 2018. The Ombudsman’s Office is intended to serve as an independent, impartial, and confidential resource that assists consumers, financial entities, consumer or trade groups, and others in informally resolving process issues with the CFPB. The Office works outside of the CFPB’s business lines, reporting to the Deputy Director with access to the Director. One of its stated goals is to serve as an early warning system and catalyst for change.

In the annual report, the Office provides examples of its work in the 2018 fiscal year and discusses the types of internal and external engagement in which it has participated during that period.

Some noteworthy items include:

  • An overview of the Office’s efforts in assisting stakeholders in engaging with the Bureau’s Request for Information process, sharing resources to assist consumers in recognizing financial frauds and scams, and facilitating technical assistance to companies responding to consumer complaints.
  • Discussion of the Office’s continued practice of regular meetings with Bureau leadership and staff and the Office’s external outreach activities, including two Ombudsman Forums hosted by the Office and an overview of the new criteria the Office will use in determining the topics and format for future Forums.
  • While the CFPB generally prefers to avoid endorsements of groups or entities, the Office received an inquiry about a Bureau blog post that did recommend one group to consumers for a certain kind of assistance. This inquiry led the Office to study the Bureau’s internal guidance about naming entities in blogs, social media, and print materials for a positive purpose. The study resulted in the Office recommending that the Bureau supplement its guidance as it relates to the commercial impact of the Bureau recommending a group or entity, incorporate review of agency risk associated with such action, and make internal guidance about the endorsement of entities more widely available to Bureau staff.
  • A review of the Bureau’s process for responding to consumer complaints about companies initiated by third parties who are unauthorized to receive the company’s substantive response to the complaint. In these types of situations, a third-party, who is not a customer or authorized person on an account for the company, submits a complaint to the Bureau about the company’s handling of an account or some other action taken by the company. When the company researches the complaint, it learns that the person who brought the complaint is not authorized to receive information responding to the substance of the complaint. When the Bureau is notified that the complaint was brought by an unauthorized person, the Bureau closes the consumer complaint and it is not reopened even if the person submits authorization information. The Office recommended ways for the Bureau’s telephone contact center to be better prepared to address these situations. More specifically, the Office recommended that the telephone contact center be given information that would allow it to answer questions about the unauthorized third party issue, provide additional information to the third party on what it means to be unauthorized, inform consumers that even if new authorization information is submitted the Bureau will not reopen a complaint that was closed because it was initiated by an unauthorized third party, and share that consumers may submit authorizing information required by the company that is the subject of the complaint in a new consumer complaint to be sent to the company.
  • A recommendation that the Bureau provide a direct avenue for non-consumers, meaning anyone who contacts the Bureau about something other than an individual consumer finance question or complaint – including researchers and academics seeking information – to access the Bureau via telephone, or offer a way for non-consumers to know that non-consumer information is available when contacting the Bureau’s main telephone number.

Report of the data and analysis surrounding the individual inquiries received by the Office in FY2018 compared to inquiries received in FY2015-2017. As in the last few years, mortgages were the financial product most commonly underpinning consumer complaint-related inquiries to the Ombudsman, followed by other credit products (26 percent), deposit products (13 percent), credit reporting (13 percent), debt collection (6 percent), and methods of payment (4 percent).

The CFPB recently issued revised versions of the small entity compliance guides for the Loan Originator Rule and the Home Ownership and Equity Protection Act (HOEPA) Rule.

While some of the most well-known provisions of the Loan Originator Rule are the provisions addressing loan originator compensation, the rule also defines the concept of a loan originator and addresses qualification and other requirements related to loan originators. Among various changes, the guide for the Loan Originator Rule is revised to reflect (1) the broadening of an exemption from the concept of a loan originator with regard to retailers of manufactured and modular homes and their employees made by the Economic Growth, Regulatory Relief, and Consumer Protection Act (Act), which was adopted earlier this year (2) the process for contacting the CFPB with informal inquiries about the rule, and (3) that the TILA/RESPA Integrated Disclosure (TRID) rule is now in effect (the prior version of the guide was issued in March 2015 and the TRID rule became effective in October 2015).

Among various changes, the guide for the HOEPA Rule is revised to reflect (1) the broadening of the exemption from the concept of a loan originator made by the Act (which is noted above), as this can affect the requirement to include loan originator compensation in points and fees for purposes of the points and fees threshold under the HOEPA rule, and (2) the process for contacting the CFPB with informal inquiries about the rule.

Note that for purposes of the points and fees cap to determine qualified mortgage loan status under the ability to repay rule, the definition of “points and fees” set forth in the HOEPA rule is used. As a result, corresponding changes likely will be made to the provisions of the small entity compliance guide for the ability to repay rule to reflect that the Act’s broadening of the exemption from the concept of a loan originator with regard to retailers of manufactured and modular homes and their employees may affect the calculation of points and fees for qualified mortgage purposes. The current version of such guide was issued in March 2016, and the version of the guide on the CFPB’s website includes a notice that the guide has not been updated to reflect the Act.

The CFPB has issued its Spring 2018 Semi-Annual Report to Congress covering the period October 1, 2017 through March 31, 2018.

At 41 pages, the new report is even shorter than the Bureau’s last semi-annual report (which was 55 pages) and continues what appears to be a goal under Acting Director Mulvaney’s leadership of issuing semi-annual reports that are substantially shorter than those issued under the leadership of former Director Cordray.  Like the prior semi-annual report under Mr. Mulvaney’s leadership, and also in contrast to the reports issued under former Director Cordray’s leadership, the new report does not contain any aggregate numbers for how much consumers obtained in consumer relief and how much was assessed in civil money penalties in supervisory and enforcement actions during the period covered by the report.

Pursuant to Section 1017(a)(1) of the Dodd-Frank Act, subject to the Act’s funding cap, the Fed is required to transfer to the CFPB on a quarterly basis “the amount determined by the [CFPB] Director to be reasonably necessary to carry out the authorities of the Bureau under Federal consumer financial law, taking into account such other sums made available to the Bureau from the preceding year (or quarter of such year.)”  The new report references the January 2018 letter sent by Mr. Mulvaney to former Fed Chair Yellen requesting no funds for the second quarter of Fiscal Year 2018.

Mr. Mulvaney has, however, sent letters to Fed Chair Powell requesting funds transfers for the third and fourth quarters of FY 2018 and for the first quarter of FY 2019.  The amounts requested are, respectively, $98.5 million, $65.7 million, and $172.9 million.  (In contrast, former Director Cordray’s final transfer request, which was for the first quarter of FY 2018, sought a transfer of $217.1 million.)  Two of Mr. Mulvaney’s letters included the following statement:

By design, this funding mechanism [created by Section 1017(a)(1)] denies the American people their rightful control over how the Bureau spends their money, which undermines the Bureau’s legitimacy.  The Bureau should be funded through Congressional appropriations.  However, I am bound to execute the law as written. 

The new report indicates that the Bureau had 1,671 employees as of March 31, 2018, representing a slight increase in the number of employees (1,627) as of March 31, 2017.  The new report does not discuss any ongoing or past developments of significance beyond those we have covered in previous blog posts.

 

 

 

 

 

A number of housing and financial industry trade groups, including the Mortgage Bankers Association and Real Estate Services Providers Council, Inc. (RESPRO®), recently sent a letter to Senators Mitch McConnell (R-KY) and Charles E. Schumer (D-NY) supporting the confirmation of Kathleen Kraninger as CFPB Director.

The trade groups state that Ms. Kraninger “has the ability to lead and manage a large government agency, like the Bureau, which is tasked to ensure consumers’ financial interests are protected,” and “also fulfill the equally important role of ensuring businesses have the necessary compliance support to further those interests.”

Addressing concerns regarding the CFPB, the trade groups state “Our members believe the Bureau must improve its examination, enforcement, rulemaking and guidance processes to assist with regulatory compliance and bring certainty in the marketplace. As evidenced during the Senate Banking Committee confirmation hearing, Ms. Kraninger’s testimony conveyed a commitment to such actions along with a thoughtful review of the law for corresponding administrative actions.”

As we reported previously, the Senate Banking Committee voted to approve Ms. Kraninger’s nomination as CFPB Director, but the full Senate has not acted on the nomination. If the Senate does not act on Ms. Kraninger’s nomination during the lame-duck session, the nomination will be returned to President Trump. Once the new Congress convenes next year, the President could re-nominate Ms. Kraninger or nominate another individual for CFPB Director. As we reported previously, under the Federal Vacancies Reform Act Mick Mulvaney can continue to serve as Acting CFPB Director for a 210-day period if Ms. Kraninger’s nomination is returned or rejected, and once another nomination is made he could serve as Acting Director during the Senate’s consideration of the second nomination.

The CFPB and Federal Housing Finance Agency (FHFA) have released the first public use file containing data from the National Survey of Mortgage Originations. The NSMO is a component of the National Mortgage Database (NMDB®) program, which we reported on previously.

Since 2014, the CFPB and FHFA have sent approximately 6,000 surveys each quarter to consumers who recently obtained mortgage loans to obtain feedback on their experiences during the origination process, their perception of the mortgage market and their future expectations. The recently issued public use file reflects data from the first 15 quarterly waves of surveys, and covers nearly 25,000 loans originated from 2013 to 2016.

Letters are sent to consumers randomly selected for the survey in both English and Spanish, and consumers who elect to complete a survey may do so in English or Spanish. The current version of the survey contains 94 questions. Topics addressed by the questions include the shopping process, factors regarding the consumer’s selection of the mortgage lender and mortgage loan, the application process, satisfaction with the lender and origination process, whether the consumer experienced certain issues at the loan closing (such as whether the loan documents were not ready or whether the consumer felt rushed or was not given time to read documents), information regarding the consumer (including demographic and income data), whether the consumer expects changes in household income or expenses, whether the consumer expects any changes in employment status, and transaction details (such as purpose for the loan, down payment amount, sources of funds for down payment, factors influencing decision to refinance, interest rate and whether rate is fixed or adjustable, parties who contributed to the payment of closing costs, the type of property and other property details).

FHFA Deputy Director Sandra Thompson stated that “The goal of the survey is to obtain information to help improve lending practices and the mortgage process for future borrowers.” CFPB Acting Director Mick Mulvaney stated that “These data will allow greater transparency, accountability, and effectiveness around borrowers’ mortgage experiences.” The surveys are intended to address the FHFA obligation under the Housing and Economic Recovery Act to conduct monthly mortgage surveys of all residential mortgages, and the CFPB obligation under Dodd-Frank to monitor the primary mortgage market, including through the use of survey data.

The CFPB recently issued a revised version of the Home Mortgage Disclosure (Regulation C) Small Entity Compliance Guide to reflect a partial exemption to Home Mortgage Disclosure Act (HMDA) requirements made by the Economic Growth, Regulatory Relief, and Consumer Protection Act and a related interpretive procedural rule issued by the CFPB. Pursuant to the partial exemption, depository institutions and credit unions are exempted from the new HMDA reporting categories added by Dodd-Frank and the HMDA rule adopted by the CFPB with regard to (1) closed-end loans, if the institution or credit union originated fewer than 500 such loans in each of the preceding two calendar years, and (2) home equity lines of credit (HELOCs), if the institution or credit union originated fewer than 500 HELOCs in each of the preceding two calendar years.

There also are revisions that are not related to the partial exemption. Section 4.1.2 is revised to clarify loans that are not counted when determining if an institution’s lending volume triggers HMDA reporting. The table in Section 5.8 of the Guide regarding the loan amount reported is revised for (1) counteroffer situations when the applicant did not accept or failed to respond to the counteroffer and (2) situations in which an application is denied, closed for incompleteness or withdrawn.

The CFPB has issued a “Complaint snapshot: 50 state report” that provides overall complaint data on a state-by-state basis.  The report includes the District of Columbia.  Last October, the CFPB issued a 50-state snapshot that was limited to student debt.

In its blog post about the report, the Bureau highlights that since January 2015:

  • The Bureau has received more complaints from consumers in California than any other state, with Florida, Texas, New York, and Georgia taking the next four spots.
  • Florida consumers complained to the Bureau most often about credit or consumer reporting, while the most common complaint received from consumers in Texas was about debt collection.
  • Wyoming consumers submitted the fewest complaints of any state.

The report begins with national complaint data which shows that between January 2017 and June 2018, the Bureau received 494,540 complaints, and that 98% of company responses during that period were timely.  The top five products by volume since 2015 were, in descending order, debt collection, credit or consumer reporting, mortgage, credit card, and checking or savings.

In addition to the top five products by volume since 2015, the report indicates on a national basis and for each state and the District of Columbia, the report indicates:

  • Top issue reported by consumers for each of the top five products by volume since 2015
  • Average complaints per month between January 2017 and June 2018
  • Change in average monthly complaints comparing 2018 to 2017
  • Change in complaint volume comparing the first and second quarters of 2018
  • Timely company responses between January 2017 and June 2018
  • Complaints per 100,000 in population between January 2017 and June 2018
  • 2017 vs. 2016 comparison of the top five products by volume
  • Top five products by quarterly percentage change, comparing 2017 fourth quarter complaints with 2018 first quarter and second quarter complaints