Top Story Lending Related

The Department of Housing and Urban Development has announced the approval of a Conciliation Agreement with OceanFirst Bank, headquartered in Toms River, New Jersey. The Agreement resolves a complaint against OceanFirst alleging that the bank engaged in redlining by restricting access to credit and mortgage lending services in majority-Black, Hispanic, and Asian neighborhoods in the New Brunswick, New Jersey area.

HUD's complaint alleges that, from 2018 through at least 2022, OceanFirst failed to provide mortgage lending services to predominantly Black, Hispanic, and Asian neighborhoods in Middlesex, Monmouth, and Ocean Counties. Specifically, the complaint alleges states that OceanFirst acquired and subsequently closed branches and loan production offices in these neighborhoods, which, coupled with its insufficient marketing efforts and fair lending policies, led to OceanFirst failing to serve the needs of these neighborhoods.

Under the terms of the Agreement, OceanFirst will:

• Invest at least $14 million in a loan subsidy fund with the goal of increasing access to credit for home mortgage loans, home improvement loans, and home refinance loans in majority-Black, Hispanic and Asian neighborhoods in the New Brunswick area
• Spend at least $400,000 on professional services for residents in these neighborhoods to increase access to residential mortgage credit and serve the credit needs of those communities through partnerships with one or more community-based or governmental organizations that provide services related to credit, financial education, homeownership, and/or foreclosure prevention
• Spend at least $140,000 each year of the Agreement ($700,000 total) on advertising, outreach, consumer financial education, and credit counseling in these neighborhoods
• Maintain a full-service branch opened in December 2023 and open a loan production office (LPO) located in these neighborhoods. The LPO will include a community room to accommodate financial education classes that OceanFirst will make available to the public and to community organizations and include an ATM that will not charge fees to OceanFirst’s customers and maintain lower fees for non-customers than what is available at nearby ATMs
• Assign or hire at least two full-time loan officers to solicit mortgage applications primarily in majority-Black, Hispanic, and Asian neighborhoods in the New Brunswick area
• Hire or designate a full-time position of Director of Community Lending
• Provide at least four outreach programs per year for real estate brokers and agents, developers, and public or private entities engaged in residential real estate-related business in these neighborhoods to inform these stakeholders of OceanFirst’s products and services
• Provide at least six consumer education seminars per year targeted and marketed toward residents of neighborhoods of color in the New Brunswick area to cover credit counseling, financial literacy, or other related consumer financial education
• Comply with HUD’s Guidance on Application of the Fair Housing Act to the Advertising of Housing, Credit, and Other Real Estate-Related Transactions through Digital Platforms for all OceanFirst’s advertising and targeting.

OceanFirst agreed to resolve the complaint voluntarily and HUD issued no findings related to the complaint’s allegations.

The CFPB has released Frequently Asked Question (FAQ) guidance on Buy Now, Pay Later (BNPL) products. The FAQs provide guidance on applying Regulation Z to BNPL products, such as how to apply credit card periodic statement requirements to Pay-in-Four BNPL products that are accessed by digital user accounts.

The FAQs can also be downloaded as a PDF document.

The Federal Reserve Board has released the Federal Open Market Committee statement following the committee's meeting of September 17–18, 2024.

In light of the progress on inflation and the balance of risks, the Committee decided to lower the target range for the federal funds rate by 1/2 percentage point to 4-3/4 to 5 percent. In considering additional adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks. The Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage‑backed securities. The Committee is strongly committed to supporting maximum employment and returning inflation to its 2 percent objective.

In its Implementation Note issued with the committee's statement, it is reported that the Board of Governors voted unanimously to lower the interest rate paid on reserve balances to 4.9 percent, effective September 19, 2024, and that the Board also voted unanimously to approve a 1/2 percentage point decrease in the primary credit rate to 5 percent, effective September 19, 2024.

The Board and FOMC also released the economic projections from the FOMC meeting.

The Office of the Comptroller of the Currency has reported the performance of first-lien mortgages in the federal banking system during the second quarter of 2024.

The OCC Mortgage Metrics Report, Second Quarter 2024 showed that 97.3 percent of mortgages included in the report were current and performing at the end of the quarter, a decrease from the 97.4 percent in first quarter 2024, and unchanged from the 97.3 percent a year ago.

The percentage of seriously delinquent mortgages—mortgages that are 60 or more days past due and all mortgages held by bankrupt borrowers whose payments are 30 or more days past due—remained stable from the previous quarter and a year ago.

The Federal Housing Finance Agency yesterday released an interactive tool for tracking data on multifamily mortgages that enables users to review details about loans and properties at both the state and national levels. The tool, known as a data visualization dashboard, provides a more accessible way to view and understand data on multifamily mortgages. It is derived from the Enterprise Multifamily Public Use Database (PUDB) of mortgage acquisitions by Fannie Mae and Freddie Mac (the Enterprises).

The Enterprise Multifamily PUDB Dashboard includes data snapshots of key statistics, time series charts, and state maps of multifamily housing characteristics such as median loan amount, number of properties, average number of units per property, and unit affordability. The underlying aggregate statistics presented in the dashboard come from three multifamily data files in the Enterprise PUDB, updated annually since 2008, including two property-level datasets and a data file on the size and affordability of individual units. The dashboard shows characteristics about multifamily loan, property, and unit characteristics at the national level and loan and property characteristics at the state level.

The CFPB has announced it has sued Horizon Card Services and its CEO Robert Kane for tricking consumers into signing up for its expensive membership credit card. Horizon’s credit card, which could come with almost $300 in annual fees on a card with a $500 credit limit, could only be used to purchase goods from the company’s overpriced online store and nowhere else. The CFPB alleges Horizon and Kane lured consumers into the membership program through deceptive marketing. Horizon charged consumers illegal and excessive fees, and also made it unreasonably difficult for consumers to cancel memberships and obtain refunds. The CFPB is asking the court to end Horizon and Kane’s illegal conduct, and to order them to pay a fine and redress to consumers.

The Horizon Card Services membership came with periodic fees, and was targeted toward financially vulnerable, subprime consumers. Between 2017 and 2021, Horizon enrolled nearly 900,000 consumers in its membership program who collectively paid more than $51 million in fees. 93% of those consumers never used any Horizon product yet paid over $45 million in fees.

Although marketed as a regular credit card, the line of credit from Horizon could be used only to purchase goods from an online store called Horizon Outlet. The outlet has a limited selection of overpriced or off-brand goods. Between 2017 and 2021, only 6% of consumers ever used their cards at the outlet.

According to the CFPB's Complaint, from 2017 to 2021, Horizon required customers to pay up to $24.99 a month, or about $300 a year, in “membership fees” for the credit line. These fees amounted to 60% of the $500 credit limit provided by Horizon for the first year of membership, which far exceeds the 25% cap set by the Truth in Lending Act and its implementing regulation, Regulation Z.

The FDIC has issued FIL-62-2024 with guidance to provide regulatory relief to financial institutions and facilitate recovery in areas of Pennsylvania — Lycoming, Potter, Tioga, and Union Counties — affected by Tropical Storm Debby August 9–10, 2024.

Yesterday, the CFPB announced it has filed a proposed stipulated final judgment and order against the student loan servicer Navient for years of failures and lawbreaking. If entered by the court, the proposed order would permanently ban the company from servicing federal Direct Loans and would forbid the company from directly servicing or acquiring most loans under the Federal Family Education Loan Program . These bans would largely remove Navient from a market where it, among other illegal actions, steered numerous student loan borrowers into costly repayment options. Navient also illegally deprived student borrowers of opportunities to enroll in more affordable income-driven repayment plans and forced them to pay much more than they should have. Under the terms of the order, Navient would have to pay a $20 million penalty and provide $100 million in redress for harmed borrowers.

The CFPB’s investigation of Navient kicked off a series of efforts by state and federal agencies to examine forbearance steering and other breakdowns in the income-driven repayment program. Those efforts have resulted in more than $50 billion in debt relief for more than 1 million borrowers who were wrongly steered into forbearance, as well as those who had payments miscounted. Yesterday’s order complements actions already taken by the Department of Education and state attorneys general to provide redress to borrowers harmed by Navient.

According to the CFPB’s press release, Navient is a repeat offender with a long history of regulatory violations. After a referral from the CFPB, in 2014, the Department of Justice and the Federal Deposit Insurance Corporation ordered Navient and its predecessor, Sallie Mae, to pay almost $100 million for illegally overcharging nearly 78,000 servicemembers. In 2021, the Department of Education ordered Navient to return more than $22 million in overcharges. In 2022, 39 state attorneys general announced a $1.85 billion settlement with Navient for originating predatory student loans in addition to its forbearance steering practices.

In 2021, Navient’s contract with the Department of Education to service Direct Loans finally ended. Navient announced in early 2024 that it intended to transfer the servicing of its remaining loans to another servicer.

The OCC has announced it has entered into a Formal Agreement with Wells Fargo Bank, N.A.

The Formal Agreement identifies deficiencies relating to the bank’s financial crimes risk management practices and anti-money laundering internal controls in several areas including suspicious activity and currency transaction reporting, customer due diligence, and the bank’s customer identification and beneficial ownership programs.

The agreement requires the bank to take comprehensive corrective actions to enhance its Bank Secrecy Act/anti-money laundering and U.S. sanctions compliance programs.

The Federal Housing Finance Agency yesterday released an online risk analysis tool that provides geographic estimates for physical risks from various types of natural disasters as well as nationwide data on housing and the mortgage market.

The tool — known as the Mortgage Loan and Natural Disaster Dashboard— is intended to give property owners, community leaders, financial institutions, policymakers, and other stakeholders better insight into which areas of the country are most likely to incur greater damages from hurricanes, flooding, wildfires, and other types of natural hazards. Users can combine FHFA’s Public Use Database (PUDB) with data on previous disasters and other analysis from the Federal Emergency Management Agency (FEMA). They can identify areas of the country with elevated disaster risk based on several factors, and which of those areas have concentrations of properties financed with loans acquired by Fannie Mae, Freddie Mac, and the Federal Home Loan Banks.

The dashboard utilizes data from three publicly available sources. The PUDB provides a geographic breakdown of loans acquired by FHFA’s regulated entities. FEMA’s National Risk Index identifies communities most at risk for 18 types of natural hazards. The third source, FHFA’s Duty to Serve High-Needs Rural Areas data, pinpoints rural areas in the country that are characterized by a high concentration of poverty and substandard housing conditions.

The data on mortgages were updated as of 2022 and the data on past natural disasters reflected in the online tool were updated as of 2023, while the Census tracts were drawn from the 2020 U.S. Census. Dashboard users can view nationwide mortgage data at the Census-tract level overlaid with expected annual damages for 18 different types of natural disasters.