Top Story Lending Related

The Consumer Financial Protection Bureau announced today its anticipated proposed rule [PDF, 1334 pages] that would require lenders who offer covered loan products to determine whether borrowers can afford the full amount of each payment when it is due without having to reborrow within the next month and limit lenders' ability to roll such debt over. Covered loans would include payday loans, single-payment auto title loans and certain high-cost installment loans (those with an "all-in" APR over 36 percent to be repaid by creditor access to the consumer's deposit account or paycheck or secured by a vehicle title).

Under the proposal, loans of $500 or less could be offered with a "principal reduction feature" designed to keep consumers from being trapped in debt. Lenders could also offer two longer-term loan options with more flexible underwriting by adhering to certain limits, such as loans generally meeting the parameters of the NCUA's "payday alternative loans" program or loans payable in equal installments with terms not over two years with an all-in cost of 36 percent or less, plus a reasonable origination fee.

Another provision of the proposal would require a notice in advance of a lender's attempt to collect a payment on a covered loan from the consumer's deposit account, and cut off a lender's authorization for such account access after two unsuccessful attempts, unless the lender obtains a new authorization. Comments on the proposed rule will be accepted through September 14, 2016.

• Fact sheet on proposed rule
• Proposed model disclosure forms

The Bureau also announced an inquiry into other potentially high-risk loan products and practices that are not specifically covered by the proposed rule. A Request for Information was issued with a comment deadline of October 14, 2016. Also released was the text of CFPB Director Cordray's prepared remarks introducing the proposal and inquiry at the Field Hearing on Small-Dollar Lending, to be held today by the Bureau in Kansas City, Missouri.

Update: The September 14, 2016, comment deadline for the proposed rule has been added. The October 14 deadline is for the inquiry into other potentially high-risk loan products and practices.

The Federal Reserve has released the March 2016 G.20 finance companies report, which covers owned and managed receivables outstanding and terms of credit on auto loans.

The FDIC has issued a list of institutions that the agency has scheduled for a Community Reinvestment Act (CRA) examination during the third quarter of 2016.

One of the FDIC's civil money penalty (CMP) orders released on May 27 assessed a $250,000 penalty on a Utah bank for engaging in (1) unsafe or unsound banking practices; (2) violations of RESPA and Regulation X by agreeing to pay fees for the referral of mortgage loan business; and (3) violations of HMDA and Regulation C because of the Bank’s significant home mortgage data accuracy errors in both 2012 and 2013. BankersOnline has been tracking HMDA CMPs for several years. This is the first HMDA penalty we have seen since November 2013.

The Federal Deposit Insurance Corporation has released a list of orders of administrative enforcement actions taken against banks and individuals in April, 2016. The 44 orders listed included one cease and desist order; three consent orders; 15 removal and prohibition orders; seven Section 19 orders; seven civil money penalties; one amended order to pay; eight terminations of consent orders and cease and desist orders; and two notices. A Minnesota bank was ordered to pay $2,000 for violations of the Flood Disaster Protection Act. CMPs were levied against five individuals in amounts ranging from $25,000 to $90,000 for unspecified infractions. Each of the five was also issued a removal and prohibition order.

The Federal Housing Finance Agency (FHFA) indices indicate that nationally, interest rates on conventional purchase-money mortgages were nearly flat from March to April, according to several indices of new mortgage contracts. The National Average Contract Mortgage Rate for the Purchase of Previously Occupied Homes by Combined Lenders Index was 3.75 percent for loans closed in late April, up 2 basis points. The average interest rate on all mortgage loans was 3.75 percent, down 1 basis point. The average interest rate on conventional, 30-year, fixed-rate mortgages of $417,000 or less was 3.94 percent, down 1 basis point. The effective interest rate on all mortgage loans was 3.89 percent in April, up 1 basis point. The effective interest rate accounts for the addition of initial fees and charges over the life of the mortgage. The average loan amount for all loans was $322,400 in April, down $2,600.

The NCUA has issued a reminder to credit unions (CUs) that a new registration system is now required for grant applicants, and low-income credit unions seeking Community Development Revolving Loan Fund assistance grants should give themselves adequate time to file. Instructions for creating an account and registering are available on the “Help Documents” section of the Office of Small Credit Union Initiatives’ Grants and Loans information page. The application deadline is June 30.

The Consumer Financial Protection Bureau has announced the filing of an administration consent order against a former Wells Fargo employee for an illegal mortgage fee-shifting scheme. The CFPB found that David Eghbali referred a substantial number of loan closings to a single escrow company, which shifted its fees from some customers to others at Eghbali’s request. Eghbali could then manipulate loan costs and ultimately increase the number of loans he closed, increasing his commissions. The consent order requires Eghbali to pay an $85,000 civil money penalty and bans him from working in the mortgage industry for one year.

The Federal Emergency Management Agency of the Department of Homeland Security has published [81 FR 33598] in today's Federal Register a final rule that identifies communities that are scheduled for suspension from the National Flood Insurance Program on June 16, 2016, for failing to comply with the floodplain management requirements of the program. Affected communities are located in:

• Louisiana -- Grant Parish
• New Jersey -- Cumberland and Salem counties
• New York -- Delaware County
• Pennsylvania -- Clinton County
• Washington -- Yakima County
• Wisconsin -- Dane and Green counties

A Save the Date has been posted on the Bureau Blog for a meeting of the CFPB’s Consumer Advisory Board in Little Rock, Arkansas, on June 9 from 10 a.m. to 4:30 p.m. CDT. The meeting will discuss an auto lending education initiative, trends and themes, and payday lending.