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Agencies Set Mortgage-Servicing Rules for Military Members
Bloomberg (06/21/12) Dougherty, Carter and Gittelsohn, John

The Consumer Financial Protection Bureau (CFPB), Federal Reserve, Federal Deposit Insurance Corp., National Credit Union Administration and Office of the Comptroller of the Currency issued guidance on June 21 for mortgage servicers to provide information servicemembers need to sell their homes or modify loans when they must relocate.
 
The goal of the guidance is to ensure that servicemembers who receive permanent change in station orders get “clear, accurate, and timely information about available options such as loan modification or short sale,” said CFPB director Richard Cordray. According to the CFPB, approximately one-third of active-duty servicemembers get these orders each year. Department of Defense figures state that about 180,000 members of the military are homeowners.
 
The guidance also addresses two specific practices: asking servicemembers to waive their rights under the Servicemembers Civil Relief Act as a condition for assistance or skip mortgage payments to become eligible for assistance.

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AFSA News
AFSA Submits Statement on Mortgage Disclosures

AFSA submitted a written statement to the House Financial Services Committee for its June 20 hearing entitled “Mortgage Disclosures: How Do We Cut Red Tape for Consumers and Small Businesses?” The committee heard from Consumer Financial Protection Bureau (CFPB) Deputy Director Raj Date on the Bureau’s efforts to combine and update the various federal disclosures that consumers receive when taking out a residential mortgage loan.
 
The Dodd-Frank Wall Street Reform and Consumer Protection Act instructs the CFPB to harmonize the overlapping and sometimes conflicting requirements of the Real Estate Settlement Procedures Act and the Truth in Lending Act. AFSA has monitored the CFPB’s development of prototype model forms since May 2011. At the hearing, committee members questioned Date on several concerns, including whether final settlement forms could be delivered to the borrower three business days in advance of closing. The Bureau is expected to propose a formal rule by July 21 to implement these changes.
 
In its testimony, AFSA urged a carefully synchronized rollout of revised forms and various other mortgage reforms in the pipeline to avoid needless hardship. “Were the Bureau to issue new model forms and compel their implementation by lenders prior to the completion of other major changes in the pipeline, the forms might need to be revised a second time. This would impose substantial costs on industry, as it would have to repeat the implementation process. This hardship can be avoided if regulators take a coordinated, deliberate approach to rolling out the aforementioned interrelated reforms.”

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Important Topics Discussed at AFSA’s 14th Annual SGA and Legal Issues Forum

AFSA held its 14th annual State Government Affairs and Legal Issues Forum June 12-13 in conjunction with the National Association of Consumer Credit Administrators’ Annual Meeting in Fort Lauderdale, Fla. The joint educational session provided attendees with an in-depth update on important legislative and regulatory developments, such as a discussion on current priorities for state and federal regulators by a panel comprised of Brian Fink with the Consumer Financial Protection Bureau, Tom Pahl with the Federal Trade Commission and James Keiser with the Pennsylvania Department of Banking. Phil Lehman, assistant attorney general of the North Carolina Department of Justice Consumer Protection Division, discussed the Nationwide Mortgage Servicing Settlement and attorney generals’ priorities.
 
Attendees also heard from industry representatives on how the industry has changed in recent years and how it is doing today. Mike Calhoun, president of the Center for Responsible Lending, offered his view on the next big hurdles in consumer credit. Jennifer Duffy, senior editor of the Cook Political Report, gave her predictions for the 2012 elections. Dr. William Dunkelberg provided an economic update. The next State Government Affairs and Legal Issues Forum will be held June 12-13, 2013, in San Antonio, Texas.

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HUD Disparate Impact Rule Focus of Joint Trades Meeting with OIRA

On June 19, AFSA and several other trade associations met with the Office of Management and Budget’s Office of Information and Regulatory Affairs (OIRA) to discuss the Department of Housing and Urban Development’s (HUD) “Fair Housing Act’s Discriminatory Effects Standard” rule, which is currently under review in final form. The purpose of the rule is to establish uniform standards for determining when a housing practice with a discriminatory effect violates the Fair Housing Act (FHA). The meeting followed a joint letter the trades sent on the proposed rule in January. The meeting was attended by staff from the OIRA, HUD and the domestic policy office of the White House, who asked many questions about several of the points that were raised by industry. These types of meetings are offered as a last step in the process that industry can use to express concerns about final regulations.
 
In the meeting, the trade associations reiterated their support for the FHA, reminding the government representatives that they and their members devote substantial resources on an ongoing basis to the advancement of fair lending. The associations said that while they wholeheartedly oppose the disparate treatment of individuals (“Disparate treatment” describes an intentional act of discrimination against individuals “because of” certain characteristics such as race or ethnicity), they do not believe that the disparate-impact cause of action (“Disparate impact” describes the differential results that arise from “practices that are facially neutral in their treatment of different groups” but that may “fall more harshly on one group than another) created by the proposed by HUD finds support in the FHA. In fact, the joint trades believe that the rule as proposed exceeds HUD’s authority. Unlike certain employment discrimination statutes, the FHA does not contain a provision proscribing lending practices that “otherwise adversely affect” individuals on the basis of the enumerated traits or characteristics. Indeed, the FHA does not include any of the words that have been interpreted as giving rise to disparate-impact claims. By creating liability for disparate impact, the rule is inconsistent with the plain language of the FHA. The associations also said that it would be impossible to comply with the Consumer Financial Protection Bureau’s (CFPB) rule on “qualified mortgages” without facing repercussions from HUD’s FHA rule.

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Inside the Beltway
CFPB Publishes Credit Card Complaint Database over Industry Objections
American Banker (06/19/12) Davidson, Kate

The Consumer Financial Protection Bureau began publishing credit card complaints received since June 1, 2012, in a searchable database. The beta version of the database went live June 19 despite industry objections that consumer complaints are subjective and unverified and could significantly harm companies’ reputations. The Bureau plans to post older complaints by the end of the year.
 
Before a complaint is put in the database, the named bank has to verify a commercial relationship with the consumer and must ensure the bank is within the CFPB's jurisdiction and that the complaint has not been submitted more than once. Each entry includes the type of complaint, company, date of submission, and consumer's zip code, as well as the action taken, amount of time the company took to respond, how it responded and whether the consumer disputed the response. No confidential information about a consumer's identity is included.
 
In comment letters submitted earlier this year on the topic, industry groups urged the Bureau not to disclose the names of card issuers because doing so could unfairly harm them. "There is no public policy purpose served by the release of data by issuer," the American Financial Services Association, Consumer Mortgage Coalition and Mortgage Bankers Association said in a joint comment letter Jan. 30. "Disclosing the names of individual card issuers serves only as fodder for plaintiff attorneys." CFPB Director Richard Cordray defended the release of the information. "We believe the disclosure of this data not only serves the public interest, but promotes the advancement of the free market system," he said.  
 
In addition to launching the database, the CFPB published a notice seeking comment on the addition of other types of complaints to the database.

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Texas Bank Challenging Dodd-Frank, Consumer Bureau in Court
The Hill (06/21/12) Schroeder, Peter

A suit being filed in U.S. District Court by a Texas community bank challenges the constitutionality of the Consumer Financial Protection Bureau (CFPB). The bank claims that the CFPB lacks sufficient checks and balances. “No other federal agency or commission operates in such a way that one person can essentially determine who gets a home loan, who can get a credit card and who can get a loan for college,” said Jim Purcell, head of the Big Spring, Texas, bank. “Dodd-Frank effectively gives unlimited regulatory power to this so-called Consumer Financial Protection Board, also known as CFPB, with a director who is not accountable to Congress, the President or the Courts."
 
The bank will be represented by the White House Counsel under former President George H.W. Bush, C. Boyden Gray. “As a whole, Dodd-Frank aggregates the power of all three branches of government in one unelected, unsupervised and unaccountable bureaucrat,” Gray said.

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National and State News
Local Payday Lender Regulations to Take Shape
San Antonio Express-News (06/21/12) Baugh, Josh

An ordinance regulating payday and auto title lenders is now being drafted in San Antonio, Texas. The city’s legal staff was directed by the City Council Governance Committee at their June 20 meeting to return with a draft ordinance in August. According to Councilmember Diego Bernal, who proposed the ordinance, it will look similar to those already enacted in the cities of Austin and Dallas.
 
According to Bernal, the ordinance would limit payday loans to 20 percent of the borrower’s gross monthly income, and auto title loans to the lesser of three percent of the borrower’s gross annual income or 70 percent of the vehicle value. Loans would also be limited to no more than four installments or three rollovers or renewals, and proceeds from each installment or renewal would have to reduce the loan principal by 25 percent.
 
Critics of the proposal have said that the ordinance’s rules, if similar to other Texas cities, are too broad. Lawsuits filed by the lending industry are currently pending in those cities, and San Antonio officials expect that lawsuits will also be filed if this ordinance is adopted, although payday industry representatives have said they hope a lawsuit will be avoided. Bernal has invited opponents to take part on the creation of the ordinance, saying there is room for nuance.

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S&P Experian: Auto Loan Defaults Sink to Lowest Level in Eight Years
SubPrime Auto Finance News (06/20/12)

Default rates reached new lows in May for all loan types measured in the S&P/Experian Consumer Credit Indices, the firms reported, with auto loan defaults dropping to their lowest level in eight years. Consumer default rates for first mortgage liens, second mortgage liens, bank cards and auto loans all posted their lowest rates since the end of the recession as the national composite reading declined from 1.86 percent in April to 1.62 percent in May. According to David Blitzer, managing director and chairman of the index committee for S&P Indices, “May 2012 data showed continued improvements in consumer credit quality.” Blitzer also said that the index data based on geography showed upbeat trends, with default rates dropping to post-recession lows in all five cities the indices cover ­– Los Angeles, Chicago, Miami, New York and Dallas. Blitzer also indicated that “data from the Federal Reserve show that consumer borrowing through bank cards and auto loans was rising while mortgages outstanding were declining at the end of the first quarter.”

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People
Cordray Fills Out Staff Roster at CFPB
American Banker (06/20/12) Adler, Joe

The Consumer Financial Protection Bureau (CFPB) has named officials to six senior positions. Steven Antonakes, previously the Bureau’s assistant director of large bank supervision, was named associate director for supervision, enforcement, and fair lending. Len Kennedy was promoted from his role as the Bureau’s general counsel to senior advisor and counselor to CFPB Director Richard Cordray. Meredith Fuchs, previously principal deputy general counsel, will succeed Kennedy as the Bureau’s general counsel. Wendy Kamenshine has been named ombudsman after serving as acting ombudsman since July 2011. A previous senior fellow at the Center for American Progress, Camille Busette was named assistant director of the Office of Financial Education; and Clifford Rosenthal, previously president and chief executive officer of the National Federation of Community Development Credit Unions, was named as assistant director of financial empowerment.

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June 21, 2012

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AFSA's mission is to protect and improve the consumer credit business, maintain a positive public image, and create a legislative climate in which reasonable credit regulation can and will be enacted. The association operates in the public interest, encourages and maintains ethical business practices, supports financial education for consumers of all ages, and provides other assistance in related fields on an as-needed basis.

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