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Richmond Misses its Chance to Turn the Page on Mortgage-Seizing Plan
Contra Costa Times (07/06/14) Barnridge, Tom

By a 4-3 margin the Richmond, California, city council rejected a resolution by Councilman Nat Bates to terminate the contract the city has with Mortgage Resolution Partners, the company that wants to seize underwater mortgages using the city’s eminent domain power, repackage them and sell them at a profit. Several flaws have been pointed out with the plan, most critically, whether eminent domain can even be used in this way. Additionally, the plan would affect barely three percent of single-family residences in Richmond, would not help anyone already in foreclosure and would inevitably lead to a legal battle.

Residents attending the city council meeting shared their frustration with the plan. "Why don't you just go ahead and forget this eminent domain thing, because it's not going to work," the first public speaker said. "Everybody knows it was a scam. Let's just drop it. You're wasting people's time," said another. "It's obvious that there are no other cities dumb enough to fall for this scheme," said a third individual.

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Management Training Program Draws Record Numbers

The second year of The EDGE – Education, Development, Growth and Enrichment – was a success, with 92 participants from 22 AFSA member companies. Held June 2-5 at Mercer University in Atlanta, the program provides high-quality management training classes for the consumer finance industry.

The industry’s top executives shared their personal formulas to be successful in a fast-paced and ever-changing environment. Several AFSA representatives volunteered their time as instructors and serve on The EDGE Advisory Board. AFSA member company executives Steve Schmelzer, Josh Johnson, Phil Hitz, Tom Fortin, Billy Fuller, Andrew Morrison, Stephanie D’Amico, and Patty Covington taught various courses, along with AFSA President & CEO Chris Stinebert, who conducted a session on the competitive environment for the consumer finance industry.

Year I selected Lawrence Gibbs, Springleaf Financial Services, to be its class representative, while Year II chose Linda Martinez, OneMain Financial, for this honor. The two class representatives will participate in THE EDGE board meeting in October to provide insights into the program and help ensure it continues to meet expectations.

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Inside the Beltway
Spending Bill Should Omit Changes to CFPB, Waters Says
American Banker (07/09/14) Finkle, Victoria

After a Rules Committee hearing on July 9, the full House is expected to consider an appropriations bill that funds Treasury Department, the Securities and Exchange Commission, the Small Business Administration and several other agencies. Rep. Maxine Waters (D-CA) is warning that the bill, as written, could threaten the ability of regulators like the Consumer Financial Protection Bureau (CFPB) from doing their job.

Waters has asked Rep. Pete Sessions (R-TX) to allow lawmakers the opportunity to object to specific measures in the bill, as part of the House rules specify. Waters is primarily concerned with the portion of the appropriations bill that requires the CFPB to be subject to the congressional budget process. The Dodd-Frank Wall Street Reform and Consumer Protection Act funds the CFPB independently through the Federal Reserve Board of Governors. The appropriations bill also would subject the Office of Financial Research to the appropriations process, loosen restrictions on the types of swaps banks can keep on their books, and restrict the Security and Exchange Commission’s spending.

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CFPB Issues Ruling to Keep Heirs from Falling into Foreclosure
DSNews (07/08/14) Templeton, Derek

On July 8, the Consumer Financial Protection Bureau (CFPB) issued a rule to make it easier for heirs to take control of family member’s homes after their death and avoid foreclosure through loan modifications and refinancing. More importantly, the bureau noted that the heir to a property can be added to a property without triggering the ability to pay rule, which requires lenders to make a good-faith effort to determine if a borrower will be able to pay back the mortgage. However, the rule does not mean the surviving family member automatically will be added to the mortgage.

“Losing a loved one should not mean also losing your home. Today’s interpretive rule makes it clear that when family members inherit property, they can take over the mortgage without jumping through unnecessary hoops,” said CFPB Director Richard Cordray. “This gives heirs an opportunity to work with the lender to pay off the loan or seek a loan modification.”

The removal of the ability to repay rule in this specific instance, the bureau contends, will allow borrowers to remain in their new homes if they wish.

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Ginnie Mae Seeks More Resources to Police Mortgage Servicers
American Banker (07/08/14) Collins, Brian

Ginnie Mae is seeking $6 million as part of an appropriations bill that is making its way through Congress to add to its small 110-employee staff as the organization’s role in the secondary mortgage market continues to expand. The company has seen its portfolio skyrocket from $1 trillion to $1.5 trillion in the last four years and has become responsible for several mortgage companies’ servicing rights. The $6 million infusion would provide for 53 new employees; the agency currently relies on contractors to perform much of its work.

Congress, for its part, does not necessarily agree with the amount, but both the House and Senate have increased the amount of cash available for staffing by $2 million and $4.5 million respectively in the latest appropriations bill. In 2013, Ginnie Mae received a similar allowance to hire 20-30 new positions, some of which remain unfilled.

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Castro Confirmed to Lead HUD
PoliticoPRO (07/09/14) Prior, Jon

In a 71-26 vote, San Antonio mayor Julian Castro was confirmed by the U.S. Senate to head the Department of Housing and Urban Development. Castro was nominated for the job by President Obama in May. He received few roadblocks on his path to nomination, being almost universally praised across the political spectrum. Castro’s name also has been tossed out as a possible vice presidential candidate in 2016, making the Washington appointment important for name recognition.

Castro will face a difficult series of policy decisions upon his taking the helm of the agency. At just 39 years old, he will have to contend with the housing market’s recovery, address affordable housing standards and deal with budget issues at the Federal Housing Administration (FHA), which required a $1.7 billion infusion of cash last year to keep its insurance fund solvent.

Republicans have used the FHA to highlight government run amok, while Democrats have – and will continue to – seek to expand home loans for lower income borrowers. “The health of the FHA has been the subject of tremendous scrutiny and debate,” Castro said at his confirmation hearing last month. “I believe that there can be action taken to ensure that FHA stays on a positive track. My understanding is that it is on a much more positive track than it has been.”

Castro also will be in the middle of the debate over what should become of mortgage giants Fannie Mae and Freddie Mac, which also required a government bailout in 2008, but returned to record profitability in recent years. As top housing official for the administration, it will be difficult for Castro to avoid such a tenuous political issue, despite the fact that the GSEs do not fall under his jurisdiction.

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National and State News
Consumer Credit in U.S. Jumps as Auto Lending Strengthens
Bloomberg (07/08/14) Glinski, Nina

For yet another month, consumer borrowing increased in the United States, particularly in the area of non-revolving credit such as auto and school loans. The sector picked up $17.8 billion in May, while the entire credit market saw a $19.6 billion uptick. Industry analysts note that the increase in borrowing is a direct result of stronger employment and stock-market gains. All three elements combined show that the market is recovering nicely from a first-quarter downturn due to the extremely cold winter.

Auto sales picked up in May to a 16.7 million annual rate; the auto loan market saw the biggest increase since February 2013. Stronger home sales are also driving demand for home furnishings and associated credit programs. Furniture stores saw an increase of 6.5 percent in profits from May 2013. All in all, consumers are quickly becoming more confident in the economy, according to the Bloomberg Consumer Comfort Index, which showed the highest rate since the latter end of 2007.

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Foreign Home Buyers Flock to U.S.
MarketWatch (07/09/14) Hoak, Amy

Home buyers from outside the United States are taking advantage of favorable exchange rates and low mortgage rates, as the amount of home sales to international buyers increased by 35 percent year over year as of March 2014. Non-citizens spent $92.2 billion from April 2013 to March 2014 on U.S. homes. Florida, California, Arizona and Texas accounted for more than half of the reported purchases. Reports show that international buyers also are looking for homes in Los Angeles, Miami, Las Vegas, Orlando and New York.

Chinese buyers grabbed the largest share in dollar value, snapping up nearly $22 billion in property with an average price of nearly $600,000. Canadians made the largest share of purchases by volume. Analysts note that people are either buying moderate second homes or investing in property in the United States. A few buyers are focusing on trophy properties. Analysts also note that the trend can make it more difficult for domestic buyers to get the property they want as foreigners tend to purchase the property in cash, driving up prices. Sixty percent of all international transactions in 2013 were cash-only purchases.

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July 10, 2014

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AFSA Newsbriefs

AFSA Newsbriefs is a weekly executive summary of AFSA initiatives and consumer credit articles. AFSA Newsbriefs is free for members. Send an email to newsbriefs@afsamail.org to subscribe.

The American Financial Services Association, or AFSA, is the national trade association for the consumer credit industry, protecting access to credit and consumer choice. The association encourages and maintains ethical business practices and supports financial education for consumers of all ages.