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CFPB Changes HMDA Data Collection
Mortgage News Daily (02/07/14) Swann, Jann

The Consumer Financial Protection Bureau (CFPB) announced that it is making initial preparations to improve the data collected under the Home Mortgage Disclosure Act (HDMA). The bureau also is introducing a new tool that will allow easier access and navigation of the publicly available data. HDMA data is reported by 7,400 financial institutions on approximately 18.7 million loans. Financial institutions collect and report information such as the general location of the property, type of property, race, ethnicity and gender of the applicant, and general information about the loan itself.

HDMA was enacted in 1975 as a way to ensure that financial institutions were serving the housing needs of their communities. It has since been expanded to capture more information to identify possible discriminatory lending practices. The CFPB argued that additional information, such as on home equity lines of credit, could help regulators and researchers monitor the health of the market.

The CFPB must address several areas that are required by the Dodd-Frank Wall Street Reform and Consumer Protection Act, including the collection of information on the length of the loan, total points and fees, the length of any teaser rates, and the applicant’s age and credit score. Additionally, the bureau could consider collecting information on underwriting and pricing information and explanations of rejections or debt-to-income ratios of borrowers. The CFPB is considering a proposal that would require the same reporting procedures for all financial institutions, regardless of size, that make more than 25 loans a year.

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AFSA, Mortgage Trade Submit Comment to CFPB on Closing Process

AFSA and the Consumer Mortgage Coalition submitted a comment letter on Feb. 7 to the Consumer Financial Protection Bureau (CFPB) in response to the bureau’s request for information regarding the mortgage closing process. The letter questioned why the CFPB issued this inquiry after finalizing its Know Before You Owe (KBYO) regulations that revise the mortgage closing disclosures. “If the result of this request for information will be amendments to the final KBYO rules, we request that the CFPB make clear as soon as possible what may change so that the industry does not begin implementing a regulation that will change before it becomes effective,” the letter stated.

The associations offered some suggestions for the CFPB’s “Shopping for your home loan” booklet to help explain closing processes to borrowers. The letter also encouraged the CFPB to post interactive, self-paced training courses for borrowers online.

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AFSA SGA Issues White Paper on Trend in Vehicle Franchise Legislation

AFSA’s State Government Affairs Committee issued a white paper on Feb. 7 focusing on a trend in vehicle franchise legislation that affects the relationship between auto manufacturers regulated financial institutions and auto dealers related to the sale of ancillary products. These products include vehicle service contracts, guaranteed asset protection (GAP) waivers and extended warranties.

The paper outlines recent legislation in Florida, Illinois, Mississippi, New Hampshire, New York, North Carolina, Oklahoma, and South Carolina with provisions prohibiting a manufacturer (or captive finance company) from coercing or requiring a dealer to sell or sell exclusively their ancillary products or to take action against a dealer for offering third-party products. In some cases, the provisions prohibit captive finance companies from offering exclusivity incentives to the dealer and/or requiring the dealer to disclose to the consumer when it is a third-party product.

While the stated goal of this legislation may be to avoid preferential treatment of any one company’s ancillary products, in certain circumstances, these bills can impair a financial institution’s ability to choose not to finance products from third parties that may put the financial institution in a position of financial responsibility for the products.

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Inside the Beltway
Senate Banking GSE Reform Bill Nears Completion
American Banker (02/12/14) Finkle, Victoria

Senate Banking Committee Chairman Tim Johnson (D-SD) and ranking member Mike Crapo (R-ID) are expected to unveil their bipartisan mortgage finance market overhaul bill soon, according to sources tracking the negotiations. The two lawmakers are under pressure to produce a reform bill. Without action soon, the effort will run up against election season, meaning it could stall for a year or more. The two negotiators are making progress, however, and issued a rare joint statement noting that the issue is still a high priority for the committee.

Little information surrounding the contents of the bill has actually come out. However, industry analysts expect the bill to draw heavily from the framework put forth by Sens. Bob Corker (R-TN) and Mark Warner (D-VA). That bill would have unwound Fannie Mae and Freddie Mac and require private lenders to hold a ten percent loss position on any loans guaranteed by the government. Johnson and Crapo’s bill is likely to differ slightly from this framework.

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Consumer Agency Seeks to Break the Logjam in Financial Education
Time (02/10/14) Kadlec, Dan

In a new report, the Consumer Financial Protection Bureau (CFPB) set forth guidelines for gathering evidence that personal financial education changes behavior and helps consumers make better financial choices. The report notes that many programs need funding to set up data collection systems, but need data-driven analysis to raise the funds. The report calls on “service providers, financial institutions, policy makers and funders to build a growing body of rigorous evidence of what works.” The bureau’s office of financial education will then take the information and use it to determine best practices.

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HUD's Donovan: Eminent Domain Issue Will be Left to Courts
PoliticoPRO (02/12/14) Prior, Jon

Shaun Donovan, Secretary of the U.S. Department of Housing and Urban Development, addressed eminent domain in a Feb. 12 speech. He stated that courts will have to resolve whether or not municipalities can seize underwater mortgages. Officials in Richmond, Calif., and several other municipalities have offered to purchase loans without using eminent domain, but have threatened to use the power if their offer is declined. The Richmond plan depends upon the ability to refinance loans through the Federal Housing Administration (FHA). Donovan did not address what role, if any, the FHA would be willing to play in the plan.

Several government officials have discouraged the use of eminent domain to seize mortgages. Last month, a Treasury official highlighted that using eminent domain would prevent private capital from returning to the housing market.

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National and State News
Prepaid Cards often Used to Manage Funds
The Boston Globe (02/11/14) Carrns, Ann

A new Pew Charitable Trusts study, which examined consumers’ use of prepaid cards, showed that many users also have bank accounts, contrary to the perception that prepaid cards are predominantly used by consumers who cannot qualify for traditional checking accounts. According to the survey, 59 percent of prepaid users reported having checking accounts. As cards continue to become more affordable, with lower fees, consumers are electing to use their prepaid cards as a budget control tool. In 2012, Americans loaded $64 billion onto prepaid cards. Nearly 75 percent of users are under the age of 50.

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Schneiderman Would Push Bank to Address Foreclosed Properties
Democrat & Chronicle (02/10/14) Spector, Joseph

Under a new vacant property registration proposal by N.Y. Attorney General Eric Schneiderman, banks and financial institutions would be held responsible for vacant and abandoned properties. New York has been hard hit by the housing crisis, and many houses in upstate cities still sit vacant. Approximately 7,000 homes in Buffalo, 2,200 in Rochester and nearly 10 percent of the homes in Orange County remain abandoned.

Schneiderman noted that homeowners often leave their property before the foreclosure process ends and before the financial institution can take control of the home, meaning they fall into disrepair. The attorney general’s measure would create a statewide vacant property registry and require financial institutions to take control of a house much sooner than the end of the foreclosure process. It also would mandate that banks send notice to homeowners, informing them that they can stay in the home until they voluntarily surrender the title or are ordered to leave by the court.

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American Express Merchant Fee Accord Wins Court Approval
Bloomberg News (02/06/14) Smythe, Christie

On Feb. 6, U.S. District Court Judge Nicholas Garaufis ruled that a preliminary settlement between American Express and U.S. merchants could move forward, scheduling a final date for Sept. 17. The settlement allows merchants to encourage customers to use debit cards, which cost retailers less to process than credit cards.

According to a Dec. 20, 2013, filing, the settlement also “unlocks the value” of a settlement between Visa and MasterCard that offered businesses the ability to add surcharges to credit-card transactions as a way to steer customers toward debit cards. The difference between the two settlements is that the American Express suit does not include damages. The American Express settlement may result in higher costs for credit-card users.

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February 13, 2014

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