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Calif. Legislature Okays Homeowners’ Bill of Rights
San Francisco Chronicle (07/02/12) Buchanan, Wyatt and Lagos, Marisa

On July 2, California lawmakers passed the Homeowner Bill of Rights, a package of foreclosure prevention bills sponsored by California Attorney General Kamala Harris that mirror and extend many of the provisions implemented under the nationwide mortgage settlement between 49 state attorneys general and the five largest servicers to all mortgage servicers in the state. Governor Jerry Brown has indicated he will sign the measures into law, stating, “This bill establishes important consumer protections that are long overdue and I commend Attorney General Kamala Harris for her determined pursuit of these changes.” Republican lawmakers and industry representatives have said the legislation will harm the housing market recovery by creating new regulatory and legal hurdles and reducing loan values, making it more difficult for consumers to obtain loans.
The law, which would take effect Jan. 1, 2013, would prohibit lenders from “dual tracking,” or foreclosing on borrowers while they are pursuing a loan modification, require banks to provide borrowers eligible for a loan modification with a “single point of contact,” require lenders to provide a clear explanation of their decision to deny a request for a loan modification, and subject lenders to civil fines for “robo-signing.” California homeowners would also be permitted to sue servicers for “significant, material violations” of the new laws, a provision Republicans warn will only result in more money for attorneys.

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CFPB Adopts Rule on Privileged Information, but Legislation Still Needed

The Consumer Financial Protection Bureau (CFPB) adopted a Final Rule on June 28 stating that any person submitting information to the CFPB during the supervisory or regulatory processes does not waive any privilege. The rule also states that the Bureau’s transfer of privileged information to another Federal or State agency does not waive any applicable privilege, whether the privilege belongs to the Bureau or any other person.

While AFSA welcomes the Bureau’s commitment to maintaining the confidentiality of nonpublic information belonging to its regulated entities, the association maintains that a federal law is needed to codify the Bureau’s authority to assert the non-waiver of privilege and establish parity in the treatment of banks, credit unions and non-depository financial institutions. AFSA will continue to urge Congress to pass a legislative fix.

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Joint Letter Details Concerns about NM Revised Rule on Sale Negotiations in a Foreign Language

On June 29, AFSA and the Consumer Installment Lenders Association of New Mexico sent a joint letter to New Mexico Attorney General (AG) Gary K. King outlining concerns about the AG’s proposed amendments to the Rule on Negotiating a Sale in a Language other than English, which would require all material discussions leading up to an agreement to be separately memorialized, if they occurred in a language other than English. Because it would be nearly impossible to comply with, AFSA views the existing and proposed amended regulation as an effective English-only requirement.
To view the comment in its entirety, please click here.

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Inside the Beltway
Two Years Later, Many of Dodd-Frank’s Rules Remain Unwritten, Report Finds
The Hill (07/02/12) Schroeder, Peter

Almost 36 percent of the approximately 400 rules required by the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) have yet to be written, according to a report by law firm Davis Polk. Regulators have missed 63 percent of the 221 deadlines that have passed, and only 37 percent have finalized rules. Bank regulators have had the most trouble meeting deadlines, failing to produce finalized rules 73 percent of the time. The Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) have had to meet the requirements of the law without the additional funding the president requested. Banks and financial institutions have pushed to delay rules on several key provisions of the law due to concerns that poor implementation could stifle the financial sector and economy.

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Consumer Financial Political Bureau
The Wall Street Journal (07/03/12) Kissel, Mary

Representative Patrick Henry (R-NC) sent a letter to Consumer Financial Protection Bureau (CFPB) Director Richard Cordray questioning the frequency of interactions between the Bureau’s top staffers and the White House, stating they “could suggest that the Bureau's regulatory actions are indirectly shaped by these interactions.” Rep. Henry requested detailed information about the interactions, but his request will likely be stonewalled like previous inquiries from House Republicans about Bureau spending and hiring practices. However, McHenry’s letter could help Republicans target the Bureau if they win a congressional majority, as a demonstration of the Bureau’s lack of traditional checks and balances, and why they are necessary.

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National and State News
Springfield Anti-foreclosure Ordinances May Stand, U.S. District Court Judge Michael Ponsor Rules
The Republican (07/03/12) Kinney, Jim

On July 3, U.S. District Judge Michael A. Ponsor ruled in favor of Springfield, Mass., in a lawsuit filed by a group of local banks, allowing the city to implement two anti-foreclosure ordinances it adopted in the summer of 2011. One ordinance requires lenders to give the city a $10,000 bond to secure and maintain foreclosed, vacant properties in the city. The second would require lenders to engage in city-approved mediation with homeowners facing foreclosure. In his decision, Ponsor wrote, “The modest effort made by the city to soften this crisis through the promulgation of the two ordinances violates no constitutional provision or state statute.” Amaad I. Rivera, the city councilor who authored the ordinances, said he wants the ordinance implemented as soon as possible.
The ruling can be viewed here.

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Auto Sales in June Provided Bright Spot for U.S. Economy
Bloomberg (07/03/12) Trudell, Craig

Auto sales in June surpassed expectations, rising 22 percent – the best first half for vehicle sales since 2008. “The auto market continues to be the one bright spot in an otherwise complicated and generally negative marketplace,” said Jesse Toprak, an analyst at researcher TrueCar.com. “The industry was able to carry a more than 14 million selling rate despite the roller-coaster ride we experienced in the economy and financial markets last month.”
Many analysts were cautious going into June because of May’s drop in auto sales and the decrease in consumer confidence and rise in unemployment. According to Alec Gutierrez, an analyst at Kelley Blue book, the sales are “a testament to the strength of consumer demand for new vehicles despite all the negative news out there.” If vehicle sales remain on track with analyst estimates of a 38 percent gain from 2009, it would be the industry’s third year of at least 10 percent sales increases, which has not occurred since 1971 to 1973. However, looking at the economy as a whole, many analysts continue to predict moderate, gradual economic growth.

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Cities Consider Seizing Mortgages
The Wall Street Journal (07/04/12) Timiraos, Nick

Cities in California are considering using their eminent-domain powers to restructure mortgages for underwater homeowners, a step they say will help residents reduce debt that is restraining economic growth and prevent foreclosures that are eroding the tax base. San Bernardino County and the cities of Ontario and Fontana want to use eminent domain, which allows them to forcibly acquire property if they can reuse it in a way considered in the greater public’s interest, to acquire underwater mortgages from mortgage-bond investors, reduce the loan principal to match the current property value and resell the reduced mortgages to new investors. Unlike other mortgage modification efforts that require beneficiaries to show hardship, borrowers under this program would have to be current on their mortgage payments. The program also is restricted to mortgage-backed securities that are not federally guaranteed.
Investors and several trade associations have raised concerns about the plan, stating that the move could make banks less willing to lend – driving up borrowing costs, further depressing property values and not addressing the actual problem of borrowers already in default. Mortgage Resolution Partners, the venture-capital firm raising funds for the program, predicts legal action from loan owners, as the seizure of home-mortgage liens and not the property has never been conducted through eminent domain. San Bernardino County and the cities of Ontario and Fontana do not need permission from their city councils or board of supervisors to move forward with the program because it is privately financed.

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Small Business Lending Recovers, Delinquencies Drop to Record Low
The Washington Post (07/02/12) Harrison, J.D.

In May, the volume of loans to small businesses reached the largest month-to-month increase in three years, according to data by Thompson Reuters and PayNet. This growth comes after four months of decline. Borrowing rose 18 percent compared to May 2011, indicating small businesses are looking and finding more financing to expand their businesses. PayNet founder Bill Phelan attributes the growth to low interest rates and stronger balance sheets. He predicts “steady and cautious expansion by small business, if we can avoid external shocks such as another credit crisis.” Small business owners behind at least one month on their loan payments also dropped in May from 1.28 to 1.18 percent, the lowest since PayNet began tracking data in 2005.

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July 5, 2012

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