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Letter Urges Caution in CFPB Rewrite of HMDA Rules
AFSA and the Consumer Mortgage Coalition submitted a join letter to the Consumer Financial Protection Bureau (CFPB) regarding the bureau’s outline of proposals under consideration for amendments to Regulations C, which implements the Home Mortgage Disclosure Act (HMDA). The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) transferred HMDA rulemaking authority to the CFPB and directed the CFPB to expand the HMDA dataset to include additional loan information. The Dodd-Frank Act requires the reporting of certain additional data points, but the CFPB is permitted to include even more than the act mandates.
AFSA and CMC contend that several of the data points the CFPB outline suggests including are unnecessary to meet the purpose of HMDA. The groups suggest that the CFPB coordinate with other regulators, including the Treasury Department’s Office of Financial Research, to rationalize and modernize overlapping reporting requirements.
The letter stated, “We support the purposes of HMDA reporting about lending practices. At the same time, we do not believe HMDA reporting should determine lending practices, or that financial institutions should be required to collect or obtain information that they do not use in their lending operations, except to the extent the information is truly necessary to accomplish HMDA’s purposes. We also believe that HMDA data should be as helpful as reasonably possible, consistent with protecting the financial privacy of borrowers and loan applicants.”
AFSA and Other Trades Comment on FHA Regulation
AFSA signed a joint comment letter on the Federal Housing Administration’s (FHA) proposal to revise regulations that allow mortgage companies to charge borrowers interest through the end of the month during which a loan is paid in full. The proposal would permit mortgage companies to charge interest only through the day the loan is fully paid.
The trade groups seek the FHA’s regulations to be consistent with the CFPB’s. The trade groups also requested that the amendment eliminate the requirement for servicers to remit the amount of interest that would have been paid through the end of the month to investors. “It would be most advisable for HUD, FHA, Ginnie Mae, and the CFPB to coordinate their actions so that the intended consumer protection can be implemented. Servicers should not be required to remit to investors charges that servicers cannot collect from consumers.”
New House Bill Would Regulate How CFPB Handles DataSubprime Auto Finance News (05/09/14)
Rep. Lynn Westmoreland (R-GA) introduced a bill on May 9 that would change and regulate how the Consumer Financial Protection Bureau (CFPB) handles consumer data. The bill would do a number of things to secure consumer data, including: create a consumer opt-out for data collected by the CFPB; create a 60-day deletion policy after an investigation has ended; require the bureau to offer one free year of credit monitoring to consumers whose data is used in investigations; and subjecting several key staff to confidential security clearances.
“It is highly concerning that they have access to collecting your data without your permission and have no time limit on keeping your information in their system. These CFPB employees can view your information, such as your Social Security and credit card numbers, but don’t have any security clearances,” said Westmoreland.
The CFPB Data Collection Security Act is co-sponsored by Reps. MIchele Bachmann (R-MN), Kerry Bentivolio (R-MI), Sean Duffy (R-WI), Billy Long (R-MO), Blaine Luetkemeyer (R-MO), and Bill Posey (R-FL).
U.S. Backs Off Tight Mortgage RulesThe Wall Street Journal (05/13/14) Timiraos, Nick and Solomon, Deborah
Facing growing concern that some of their efforts to tighten mortgage-lending standards could halt a housing rebound and economic recovery, the Obama administration and federal regulators are reversing course. Six federal agencies are expected to finalize new mortgage securitization rules in the next several weeks that are expected to scale back the down payment requirements from previous proposals.
When regulators originally proposed in March 2011 that banks would have to retain five percent of a loan’s risk once it was securitized unless the borrower made a 20 percent down payment, lawmakers, affordable housing groups and the industry balked, saying it would shut millions of creditworthy borrowers, particularly first-time buyers and minorities, out of the market. Eventually, the agencies agreed to a 10 percent down payment requirement. More than 10,000 comment letters responded to that proposal, with the vast majority stating that regulators should avoid a high down-payment level.
Just this week, on May 13, regulators announced a series of steps to help ease standards and open the mortgage market to first-time and other entry-level buyers. Federal Housing Finance Agency (FHFA) director Mel Watt said that Fannie Mae and Freddie Mac should focus on making more credit available to homeowners. Watt said he would direct Fannie and Freddie to be clearer about what triggers "put-backs," which have cost lenders billions of dollars. Housing and Urban Development Secretary Shaun Donovan announced similar changes to loans insured by the Federal Housing Administration.
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Big Bank Critic Sen. Brown Eyes Committee GavelUSA Today (05/11/14) Shesgree, Deidre
Senator Sherrod Brown (D-OH) may not be actively trying to push others away from the chairmanship of the Senate Banking Committee, but he is not keeping it a secret that he wants the job. The committee and its chairman have oversight of Wall Street banks down to small town financial services companies.
While activists have applauded Brown’s recent push to get the top spot in Congress in relation to finance, bankers and industry analysts have begun worrying about what could happen to the industry if he gets the job. As the Senate Banking Committee Chairman, he would be able to push his priorities, including expanding affordable housing and cracking down on financial practices that he has identified as risky. "He has radical views on what the banking sector should look like," said Tony Fratto, partner, Hamilton Place Strategies, a consulting firm that represents large financial firms and banks. Fratto predicted that as chairman, Brown would “pile on more regulations."
Both analysts and activists agree that Brown would increase the profile of the committee substantially.
U.S. Household Debt IncreasesThe Wall Street Journal (05/13/14) Shah, Neil
Overall household debt has increased, according to a new study by the New York Federal Reserve Bank, despite the fact that Americans remain averse to using credit cards and taking out mortgages. Household debt rose to $11.65 trillion, including home mortgages, car loans, credit cards and student loans, in the first quarter.
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Sallie Mae Agrees to $97M Settlement over Servicemembersí Student Loans Interest RatesPolitico (05/13/14) Shah, Nirvi and Grasgreen, Allie
Student loan servicer Sallie Mae and its formerly affiliated companies - now doing business as Navient - have agreed to pay $97 million in a settlement on claims that they charged members of the military too much interest. On May 13, the Justice Department announced a $60 million settlement, while the Federal Deposit Insurance Corporation (FDIC) announced a $37 million settlement. According to the Department of Justice complaint, since 2005, Sallie Mae failed to provide members of the military the six percent interest rate cap they were entitled to under the Servicemembers Civil Relief Act. U.S. Attorney General Eric Holder stated that the Justice Department hopes the enforcement action serves as a message to other lenders that similar activity will not be tolerated.
The settlement requires that Navient determine a borrower’s military status instead of relying on the borrower to volunteer that information. Also as part of the settlement, Sallie Mae will have to make it easier for servicemembers to receive their interest rate reduction and delete any negative entries from credit reports from those affected.
Education Department Secretary Arne Duncan said that the department will be reviewing the enforcement action and Sallie Mae’s business practices to determine if the contract between the department and Sallie Mae had been breached.
May 15, 2014
AFSA Newsbriefs is a weekly executive summary of AFSA initiatives and consumer credit articles. AFSA Newsbriefs is free for members. Send an email to [email protected] 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.