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CFPB Report on 2020 law violations

The Bureau has issued its Summer 2021 Supervisory Highlights, a report on legal violations identified by the Bureau’s examinations in 2020. The report also highlights prior CFPB supervisory findings that led to public enforcement actions in 2020 resulting in more than $124 million in consumer remediation and civil money penalties.

Under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, the CFPB has the authority to supervise large banks, thrifts, credit unions with assets over $10 billion, and certain nonbanks for compliance with Federal consumer financial law. Bureau-supervised nonbanks include mortgage companies, private student lenders, and payday lenders, as well as nonbanks the Bureau defines through rulemaking as “larger participants” of other consumer financial markets as defined by Bureau rules.

According to the Bureau's press release, there were four particularly concerning findings in the report:

  • Consumer reporting companies accepted consumer data from unreliable furnishers. CFPB examiners found that consumer reporting companies are accepting information from companies that furnish consumer data, even though there were ample signs that these furnishers were unreliable.
  • Redlining. Examiners observed discouragement of people in minority neighborhoods from applying for credit by, among other things, locating offices in almost exclusively majority-white neighborhoods, only using pictures of white people in direct mail marketing campaigns, and publishing loan officer headshots of almost exclusively white people. Examiners noted these practices lowered the number of applications from minority neighborhoods relative to other comparable lenders.
  • Foreclosure issues. Examiners found several violations of the mortgage servicing rules in Regulation X, including instances of some servicers making the first notice or filing for foreclosure when it was prohibited. For example, some servicers filed for foreclosure before they had evaluated borrowers’ appeals, and some servicers had failed to notify their foreclosure counsel to stop all legal filings at the time that the servicer received a completed loss mitigation application. Examiners also found that some servicers engaged in a deceptive act or practice when they represented to borrowers that they would not initiate a foreclosure action until a specified date, but nevertheless initiated foreclosures prior to that date.
  • Student loan borrowers misled about Public Service Loan Forgiveness. Examiners found significant problems in how student loan servicers informed consumers about the Public Service Loan Forgiveness (PSLF) program. For example, examiners found servicers misled consumers to believe they could not access PSLF if they had older loans under the Federal Family Education Loan Program (FFELP), even though they could access PSLF by consolidating FFELP loans into Direct Loans.


House prices rose in April

The FHFA has released its April 2021 House Price Index, which indicates house prices rose nationwide in April, up 1.8 percent from the previous month. House prices rose 15.7 percent from April 2020 to April 2021. The previously reported 1.4 percent price change for March 2021 was revised upward to a 1.6 percent increase.

For the nine census divisions, seasonally adjusted monthly house price changes from March 2021 to April 2021 ranged from +1.2 percent in the West North Central division to +2.6 percent in the Mountain and Middle Atlantic divisions. The 12-month changes ranged from +13.0 percent in the West North Central to +20.6 percent in the Mountain division.​


GSEs will follow CFPB rule before its effective date

The FHFA has announced that Fannie Mae and Freddie Mac (the Enterprises) will not be permitted to make a first notice or filing for foreclosure that would be prohibited by the CFPB's Protections for Borrowers Affected by the COVID-19 Emergency Under the Real Estate Settlement Procedures Act (RESPA), Regulation X Final Rule [issued Monday] before the CFPB rule takes effect on August 31, 2021.

With some exceptions, the CFPB final rule prohibits servicers from making a first notice or filing for foreclosure in most cases covered by the rule before December 31, 2021. There is a one month gap between the expiration of the Enterprises' moratoriums on single family foreclosures and Real Estate Owned evictions (which expire July 31) and the effective date of the CFPB rule. By requiring Enterprise servicers to follow the CFPB's new protections a month before the CFPB rule takes effect will protect borrowers from foreclosure and provides certainty for servicers about Enterprise expectations.

“The COVID-19 pandemic has created many financial challenges for families. Through no fault of their own, many of these families had to rely on COVID-19 forbearance to stay safe in their homes during the pandemic. Today, many families' finances are improving allowing them to exit forbearance. The protections FHFA is putting in place today will protect vulnerable families as they begin their financial recovery from the impact of the COVID-19 pandemic," said FHFA Acting Director Sandra L. Thompson.


Mortgage performance declines

The OCC Mortgage Metrics Report, First Quarter 2021 showed that 94.2 percent of mortgages included in the report were current and performing at the end of the quarter, compared to 96.5 percent a year earlier due to the COVID-19 pandemic.

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—was 4.6 percent in the first quarter of 2021, compared to 5.2 percent in the prior quarter and 1.4 percent a year ago.

Servicers initiated 833 new foreclosures during the first quarter of 2021­, a 5.6 percent increase from the previous quarter and a 95.8 percent decrease from a year ago. Events associated with the COVID-19 pandemic, including foreclosure moratoriums, have significantly affected these metrics.

Servicers completed 47,773 mortgage modifications in the first quarter of 2021, an increase of 16.4 percent from the previous quarter. Of the first quarter modifications, 55.3 percent reduced borrowers' monthly payments, and 27,503, or 57.6 percent, were "combination modifications"—modifications that included multiple actions affecting affordability and sustainability of the loan, such as an interest rate reduction and a term extension.

The first-lien mortgages included in the OCC's quarterly report comprise 24 percent of all residential mortgage debt outstanding in the United States or approximately 13.2 million loans totaling $2.64 trillion in principal balances.


CFPB amends Reg X with temporary foreclosure safeguards

On Monday, the CFPB finalized amendments to the federal mortgage servicing regulations (Regulation X) to reinforce the ongoing economic recovery as the federal foreclosure moratoria are phased out and which will help protect mortgage borrowers from unwelcome surprises as they exit forbearance. The amendments will support the housing market’s smooth and orderly transition to post-pandemic operation.

The final rule issued yesterday will establish temporary special safeguards to help ensure that borrowers have time before foreclosure to explore their options, including loan modifications and selling their homes. The rules cover loans on principal residences, generally exclude small servicers, and will take effect on August 31, 2021. The rules will:

  • Give borrowers a meaningful opportunity to pursue loss mitigation options. As borrowers exit forbearance, to ensure they can pursue foreclosure avoidance options, servicers must meet temporary special procedural safeguards before initiating foreclosures for certain mortgages through the end of the year.
  • Allow mortgage servicers to help borrowers faster. Under the new temporary rule, servicers can offer streamlined loan modifications to borrowers with COVID-19-related hardships without making borrowers submit all the paperwork for every possible option. These streamlined loan modifications cannot increase borrowers’ payments and have other protections built into them. With this flexibility, servicers can get borrowers into affordable mortgage payment plans faster, with less paperwork for both the servicer and the borrower.
  • Ensure borrowers are advised of their options. Servicers will be required to increase their outreach to borrowers before initiating foreclosure and tell borrowers key information about their repayment or other options when they communicate with borrowers who are exiting forbearance or struggling to make mortgage payments.

Under the CFPB’s rule, foreclosures will be able to start if the borrower:

  • Has abandoned the property;
  • Was more than 120 days behind on their mortgage before March 1, 2020;
  • Is more than 120 days behind on their mortgage payments and has not responded to specific required outreach from the mortgage servicer for 90 days; or
  • Has been evaluated for all options other than foreclosure and there are no available options to avoid foreclosure.

The Bureau has released an Executive Summary of the final rule. The BankersOnline Regulations pages for Regulation X have been updated with the amendments.


FDIC May enforcement actions

The FDIC has released a list of enforcement actions taken by the agency in May. In addition to the previously announced civil money penalty imposed on Umpqua Bank, the list included:

  • an order that an Iowa Bank pay an $8,000 civil money penalty for violations of the flood insurance laws and regulations
  • a notice of charges and of right to a hearing to the current or former Chairman of an Illinois bank stating the FDIC's intention to prohibit him from the industry and to assess a $105,000 civil money penalty. He is alleged to have recklessly participated or engaged in unsafe or unsound practices in connection with the bank and breached fiduciary duties owed to the bank, and those practices and breaches involved personal dishonesty.
  • an order of prohibition issued to a former loan officer at Banner Capital Bank, Harrisburg, Nebraska, who neither admits nor denies that he (1) devised and executed a scheme to make a fraudulent loan and used the proceeds for his personal benefit while employed as a loan officer at the bank, and (2) misappropriated funds from a Bank ATM


State-level credit union data report

The NCUA has released its First Quarter 2021 Quarterly U.S. Map Review, which indicates federally insured credit unions continued to experience double digit asset and share-and-deposit growth over the year ending in the first quarter of 2021.

Nationally, median asset growth for federally insured credit unions over the year ending in the first quarter of 2021 was 17.1 percent, compared with growth of 3.0 percent during the same period a year earlier. Median growth in shares and deposits over the year ending in the first quarter of 2021 was 19.5 percent, compared with 2.9 percent during the first quarter of 2020.

Loans outstanding declined 0.4 percent at the median over the year ending in the first quarter of 2021. This stands in contrast to the previous year when loans grew by 2.0 percent at the median. The median total delinquency rate among federally insured credit unions was 34 basis points at the end of the first quarter of 2021, compared with 59 basis points in the first quarter of 2020.

Overall, 77 percent of federally insured credit unions had positive net income in the first quarter of 2021, compared with 80 percent in the first quarter of 2020. The annualized median return on average assets of federally insured credit unions nationally was 38 basis points in the first quarter of 2021, compared with 41 basis points in the first quarter of 2020


FDIC FinTech online seminar

Tomorrow, from 1:00- 4:30 p.m. ET, the FDIC will hold an online seminar — Fintech: A Bridge to Economic Inclusion — Opportunities for Consumers and Small Businesses. Speakers include FDIC Chairman McWilliams and Chief Innovation Officer Sultan Meghji. Panel discussions will explore:

  • Enhancing inclusive consumer banking through fintech;
  • Deploying technology to improve credit access to small businesses; and
  • Exploring future opportunities for technology to drive inclusion.

Registration is available online TODAY, through 11:00 p.m. ET.


PPPLF extended for last time

The Federal Reserve Board on Friday announced it will extend for a final time its Paycheck Protection Program Liquidity Facility, or PPPLF, by an additional month to July 30, 2021. The extension is being made as an operational accommodation to allow additional processing time for banks, community development financial institutions, and other financial institutions to pledge to the facility any PPP loans approved by the Small Business Administration through the June 30 expiration of the PPP program. The PPPLF extends term credit to financial institutions making PPP loans, accepting the PPP loans as collateral. The liquidity provided by the PPPLF bolsters the effectiveness of the PPP by helping eligible financial institutions fund PPP loans.


2021 list of distressed or underserved geographies

The FFIEC reports the Federal Reserve Board and the FDIC have announced the availability of the 2021 list of distressed or underserved nonmetropolitan middle-income geographies. These are geographic areas where revitalization or stabilization activities are eligible to receive CRA consideration under the community development definition. Distressed nonmetropolitan middle-income geographies and underserved nonmetropolitan middle-income geographies are designated by the agencies in accordance with their CRA regulations.


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