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GOP Looks to Limit CFPB, NLRB Powers in Reaction to ‘Recess’ Appointments
The Hill (01/18/12) Kasperowicz, Pete

Legislation has been introduced by House Republicans in response to President Obama’s recess appointment of Richard Cordray as head of the Consumer Financial Protection Bureau (CFPB) and the three appointments to the National Labor Relations Board (NLRB). Republicans contend that the appointments were illegal as the Senate was not in recess, but rather, holding pro forma sessions every few days. The proposed legislation would limit the CFPB’s and NLRB’s authority to operate as long as they are headed by appointees who were recess-appointed while the Senate was in recess.
Rep. Diana Black (R-TN) and 69 co-sponsors have introduced H.Res. 509, which disapproves of the recess appointments. Rep. Jeff Landry’s (R-LA) proposed bill, H.R. 3770, the Executive Appointments Reform Act, would limit the powers of the CFPB’s board if the director is recess-appointed while the Senate is not in recess, stating that “No rule, order or other administrative action shall be considered final if the director was appointed during a recess of the Senate and the position of director was vacant while the Senate was in session, until the director has been confirmed by the Senate.” The bill also would amend the Dodd-Frank Wall Street Reform and Consumer Protection Act to prevent recess appointees from being paid a salary until they have been confirmed by the Senate and would prohibit them from working without pay. The bill also would prevent the recess-appointed NLRB officials from working without pay, and ensure that only Senate-confirmed members of the NLRB could constitute a quorum.

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MoneySKILL Enrollment Continues to Grow

MoneySKILL curriculum’s outreach has expanded, reaching more than 72,000 students in 2011. In addition to teachers, many parents are using the course in their home schooling. In 2011, two modules were added on identity theft based on information from the Federal Trade Commission, and a junior high/middle school version was released. Teachers from all 50 states and several foreign countries have enrolled students in the course to educate them on the basic understanding of money management fundamentals in the content areas of income, expenses, saving, credit and insurance.

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Inside the Beltway
Payday Lending is Focus of Consumer Bureau Alabama Field Hearing
Bloomberg (01/19/12) Dougherty, Carter

Payday lending was the focus of the Consumer Financial Protection Bureau’s (CFPB) first public hearing since the recess appointment of Richard Cordray as director of the agency. “The purpose of all our research and analysis and outreach on these issues is to help us figure out how to determine the right approach to protect consumers and ensure that they have access to a small-loan market that is fair, transparent, and competitive,” Cordray said at the hearing in Birmingham, Ala. Testimony from consumer and civil rights groups, industry representatives and the public providing “on the ground insight into the payday lending market,” were included at the hearing. According to Cordray, the goal should be that “we all look to develop a more vibrant, competitive market for small consumer loans.” New regulations or explicit restrictions on payday lending were not mentioned. Consumer advocates have criticized the payday loan industry, specifically how customers pile up loans that have annual percentage rates, which they say puts consumers in a “debt trap.” Payday lenders, however, say that their businesses provide credit to an underserved population that cannot get loans anywhere else and that their loans are cheaper than overdraft and utility cut off fees that they would otherwise have to pay. Cordray stated that the issue of repeat borrowing will be key for the agency, which plans on looking “into this topic to understand what consumers know when they take out a loan and how they are affected by long-term use of these products.”

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CFPB Wants to Partner with Mayors to Detect ‘Predatory Lenders’
HousingWire (01/18/12) Panchuk, Kerri

At the U.S. Conference of Mayors, Consumer Financial Protection Bureau (CFPB) director Richard Cordray stated that the new agency would partner with municipal governments to detect bad actors in the financial services sector. Cordray advised the mayors to report local lending practices that threaten neighborhood stability. He talked about how an individual’s financial problems can impact communities, such as leading to the prevalence of vacant, foreclosed properties. Cordray told the mayors that the CFPB will serve as a resource for cities by providing them with educational materials for citizens and a place to contact with complaints about predatory or unsafe lending practices.

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White House Signals More Aggressive Stance to Protect Homeowners
The Hill (01/15/12) Bolton, Alexander

The Obama Administration has indicated that it will play a more significant role in helping underwater homeowners in 2012. According to Rep. Barney Frank (MA), the ranking Democrat on the Financial Services Committee, the administration understands “that there needs to be a comprehensive strategy to diminish the foreclosure rate and clean up the housing problem.” The administration is looking at solutions that do not require an expenditure of taxpayer money due to the constraints of record budget deficits. The most likely option available to them is to put more pressure on banks to help troubled homeowners refinance – a choice that is supported by Frank, particularly given the difficulties the administration would have in convincing the Republican-controlled house to set aside more money to prevent foreclosures. The speed of home mortgage refinancing could also be increased considerably if the administration clears obstacles by Fannie Mae and Freddie Mac. However, Edward DeMarco, the acting director of the Federal Housing and Finance Agency, has been reluctant to take an activist role, and Republicans refuse to confirm Obama’s nominee to replace DeMarco.
White House spokeswoman Amy Brundage noted that along with looking at new ways to help homeowners, the president would expand the work he started on day one to stabilize the housing market and help homeowners “through refinancing efforts, foreclosure prevention programs and programs directed at the hardest hit states.” Many of these efforts, like the Home Affordable Modification Program, however, did not meet expectations, as many underwater homeowners were unable to obtain refinancing. “We’re going back to the drawing board, talking to banks, try to put some pressure on them to work with people who have mortgages to see if we can make further adjustments, modify loans more quickly, and also see if there may be circumstances where reducing principal is appropriate,” President Obama said in a statement in July. Housing experts warn that not successfully helping homeowners would be a major obstacle for Obama in this year’s election.

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National and State News
Federal Judge Sides with City in Vacant Housing Case
The Chicago Tribune (01/19/12) Podmolik, Mary Ellen

On Jan. 19, U.S. District Court Judge Joan Lefkow tabled the Federal Housing Finance Agency’s (FHFA) request for a summary judgment in its suit filed in December to exempt Fannie Mae and Freddie Mac properties from the city’s vacant building ordinance, temporarily siding with the city of Chicago. The ordinance, which was passed in November, requires mortgagees of vacant properties in foreclosure, even if they do not have legal title to the property, to register the vacant buildings for a fee and meet certain property upkeep requirements.
Judge Lefkow ordered the city of Chicago to file its response to the FHFA’s suit, and stated that the FHFA is not permitted to file a motion for summary judgment in the case until the end of next month. FHFA attorney Howard Cayne argued that the case involves jurisdiction and that the city has no legal standing over the federal agency. He also stated that the costs of the ordinance’s requirements violate the agency’s federal mandate to conserve the assets because the costs of complying would be passed on to taxpayers. Lefkow seemed to consider the FHFA’s comments, and told the attorneys “if FHFA has no responsibility to do what the ordinance says, then the case is over. It doesn't depend on the facts. It depends on the law.” The attorney for the city, Michael Dolesh, cited that the FHFA’s guidelines for mortgage servicers instruct them to follow local ordinances, to which Cayne reiterated his earlier points about the FHFA’s federal mandate.

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MERS Settles, Avoiding Class Action Foreclosure Fee Lawsuit
American Banker (01/19/12) Kilgore, Austin

A last-minute settlement is expected to hold off potential class action status in a lawsuit against Merscorp and a number of shareholders that claims foreclosed borrowers were overcharged for attorneys’ fees and other expenses that were not actually incurred during the foreclosure process. The case has not been dismissed and probably will not be until the settlement is finalized. Details about the settlement have not been made public due to a confidentiality agreement. The plaintiffs, Jose and Lorry Trevino, filed a motion seeking class action status on Jan. 12. Class action status would expand the plaintiffs in the case to include all foreclosed borrowers since Sept. 20, 2001, whose mortgages or deeds of trust were assigned to MERS and who received a demand to pay expenses in excess of what MERS and its member servicers actually paid.
In the suit, the plaintiffs claimed breach of contract, unjust enrichment and breach of duty of good faith and far dealing. They argued that due to the MERS’ and servicers’ prearranged set fees with foreclosure attorneys, the expenses note holders are authorized to be reimbursed for are limited. The plaintiffs also alleged that attorneys were sending demands for payments significantly higher than the arranged flat fee. The complaint sought to recover the alleged excessive expenses.

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HUD's Donovan: Robosigning Settlement Imminent, 1 Million Affected
American Banker (01/18/12) Collins, Brian and Muolo, Paul

The legal settlement between the nation’s attorneys general, the Department of Justice and the U.S. Department of Housing and Urban Development (HUD) and several of the nation’s servicers over “robosigning” allegations is “very close” to being finalized, Shaun Donovan, HUD Secretary, announced at the U.S. Mayors Conference on Jan. 18. Donovan estimated that the settlement would provide approximately one million borrowers with some type of meaningful principal reduction on their mortgage debt and others with “direct compensation.” He stated that the settlement should have a substantial effect on the housing market and allow lenders to loosen their underwriting standards so more homebuyers can obtain mortgage credit. Servicers are hopeful that once the deal is finalized it will put behind the uncertainty that has been hanging over them since “robosigning” entered the national sphere almost two years ago.

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Credit-Card Loan Balances Set to Rebound in 2012
The Wall Street Journal (01/17/12) Johnson, Andrew R.

The average combined loan balances for the six largest credit card issuers in the U.S. will grow about 6 percent in 2012 ­– the first increase since 2008, according to Moody’s Investors Service. These estimates signal a turning point for the industry after being hit with new regulations, including the Credit Card Accountability, Responsibility and Disclosure Act of 2009, which hindered credit card lenders’ ability to raise interest rates on revolving loan balances and charge certain penalty fees, as well as the deleveraging of borrowers due to the recession. Cautiousness led to consumers paying down more of their card balances, making delinquency rates and loan write offs improve significantly, but also causing revenues for big card issuers to shrink. Data reported by the Federal Reserve this month, however, shows that revolving credit grew at an annualized rate of 8.5 percent in November, suggesting that consumers are more willing to take on credit card debt, particularly as credit quality continues to improve. This rise of loan balances bodes well for the net revenue of card issuers.

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January 19, 2012

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