PHH’s hidden gem

The long-awaited en banc decision in PHH Corp., v. CFPB has finally been issued. The Court of Appeals for the D.C. Circuit upheld the constitutionality of the Consumer Financial Protection Bureau (CFPB) and reversed a prior finding that its structure is unlawful. This case has been discussed for years, with good reason.What is truly notable is the underlying issue that was appealed in the first place:  the CFPB’s new interpretation of RESPA regarding payments for business referrals. 


Consumer Lending and Services, Federal Regulatory, Legal Developments

Federal district court sanctions CFPB for violations of discovery orders

A federal court in Georgia recently imposed sanctions on the Consumer Financial Protection Bureau (CFPB) after finding that the regulator engaged in a pattern of conduct that warranted substantial penalties. While the bureau is usually the accuser of wrongful conduct, it had some explaining to do in CFPB v. Universal Debt Solutions. Read More >>

Consumer Lending and Services, Federal Regulatory, Legal Developments

Remember to update the Ohio Homebuyers’ Protection Act form for 2017

Residential Mortgage lenders should be mindful to not forget to update their Ohio Homebuyers’ Protection Act Informational Document with the 2017 prepayment penalty adjustment. Beginning January 1, 2017, no mortgage broker, loan officer or nonbank mortgage lender may charge a penalty for the prepayment or refinancing of a residential mortgage obligation secured by a first lien if the loan amount is less than $88,503. See Ohio Revised Code 1343.011(C)(2).

The Ohio Homebuyers’ Protection Act Informational Document is required by Ohio Revised Code 1345.05(G). An acknowledgement of the consumer’s receipt must be retained by the lender, mortgage broker and loan officer, as applicable. The Ohio Attorney General and the Department of Commerce may examine your records to ensure that you are providing the most current version of this document to consumers with the 2017 adjusted amount.

Also, don’t forget that Nationwide Multistate Licensing System & Registry (NMLS) renewal season started November 1.

Consumer Lending and Services, Fair Lending, Legal Developments, State Regulatory

Proposed Ohio bill could impact nonbank lenders and credit services organizations

The Ohio General Assembly is considering a major overhaul of Ohio’s banking laws, and hidden within the 443-page legislation are two changes that will likely impact nonbank lenders, lead generators and credit services organizations. Senate Bill 317 was introduced on April 20, 2016, and proposes to do the following:

  1. In the current version of the bill, Section 1103.18 of the Ohio Revised Code would be amended to allow a state-chartered bank to sue and obtain a temporary restraining order, an injunction and damages, including punitive damages, from any person who uses a state bank’s name in an advertisement in a manner that misleads a person into believing that the person issuing the advertisement is associated or affiliated with the state bank.

Thus, mailers showing a consumer’s current bank lender on the envelope, in the envelope window or anywhere in the advertisement could subject the nonbank lender to civil litigation and punitive damages.

  1. The bill also proposes to grant the deputy superintendent for consumer finance authority to examine credit services organizations licensed under Chapter 4712 of the Ohio Revised Code. The amendment, however, is not being made to Chapter 4712. Instead, the amendment has been placed in Ohio Revised Code Section 1181.21(C).

Track the progress of the bill here.

Consumer Lending and Services, Legal Developments, State Regulatory

FDIC under fire following recent string of data breaches

A recent data breach at the Federal Deposit Insurance Corporation (FDIC) is just one of many that have occurred in the past several months. The banking regulator is now under fire for its responses following a slew of breaches involving more than 10,000 sensitive and private data records. The FDIC was questioned about the breaches on May 12, 2016, during a hearing held by the House of Representatives Subcommittee on Oversight. Representatives criticized the FDIC, suggesting that it handled the incidents too slowly, did not notify Congress in a timely manner and failed to provide requested documents.

The FDIC was also criticized for failing to notify its employees who were affected by the breaches. It is estimated that the personal data of approximately 160,000 people have been impacted by these breaches, which occurred between October 30, 2015, and the present. The information includes names, bank account numbers and, possibly, social security numbers. According to Republican Representative Barry Loudermilk, chair of the subcommittee, the FDIC has still not notified any of these employees that their private information may have been compromised.

Evidence shows that at least seven recent breaches were caused by former employees as they were leaving the FDIC. The FDIC maintains that these breaches occurred inadvertently, but Congress is skeptical that the breaches were not intentional. One case is allegedly the subject of a criminal investigation. While the FDIC has indicated that it is completing a “top to bottom review” of its technology information policies, it appears that Congress will continue to apply pressure to the FDIC related to its response and handling of these breaches. According to Rep. Loudermilk in the subcommittee’s press release, the American people “have good reason to question whether their private banking information is properly secured by the FDIC.”  

Depository Institutions, Federal Regulatory, Legal Developments

Announcing our Cybersecurity Law blog

Readers of the Financial Services Law blog are invited to visit our newly-launched Cybersecurity Law blog, an online resource featuring news, information and legal analysis on current cybersecurity and data breach issues. Articles and posts, authored by Bricker & Eckler attorneys, share in-depth insights and legal implications on topics that have both local and global significance.  

We encourage you to subscribe to the blog via FeedBurner to have frequent updates sent directly to your inbox. Additionally, be sure to visit the blog and bookmark the site for easy reference. 

Compliance Management, Consumer Lending and Services, Depository Institutions, Fair Lending, Federal Regulatory, Federal Regulatory, Legal Developments, Non-Depository Institutions, State Regulatory

Are MSAs lawful? CFPB finally makes a statement: It’s all in the facts

The CFPB has just published written guidance on the issue of marketing service agreements (MSAs). These agreements create significant regulatory and legal risk, given that the Real Estate Settlement Procedures Act of 1974 (RESPA) establishes significant civil and criminal sanctions for steering business or providing “kickbacks” for the referral of business among real estate settlement service providers.

In the past year, several major RESPA penalties were ordered by the CFPB, with the bureau’s language striking at the very heart of whether relations between lenders and other real estate participants would ever be deemed lawful. Now, the CFPB has spoken directly to the issue.

In its October 8, 2015, Compliance Bulletin, the bureau has brought considerable doubt as to whether the exchange of money or referrals between providers can ever been free from risk. Read more in the latest Bricker publication.

Consumer Financial Protection Bureau, Legal Developments

Want some regulatory relief?

These days, you have to take relief when you can get — even if it is in small doses. This week, HUD granted some relief for FHA-approved mortgagees. HUD issued ML 2015-21, which grants additional time to utilize loss mitigation options or initiate foreclosure in certain circumstances. 

HUD mortgagees must utilize a loss mitigation option or commence foreclosure within six months of default (Regulation X). Thus, an extension of this timeline is a blessing and a curse. Using an extension may further delay the foreclosure process. However, complying with the CFPB-imposed timelines is often difficult, if not impossible. 

In granting mortgagees extra time, HUD reiterated the fact that there are already eight automatic extensions available to mortgagees who may be unable to initiate foreclosure in the time required. HUD has now introduced two additional “new and improved” automatic extensions.

HUD will now allow an automatic extension for commencing foreclosure in those cases in which the servicer needs additional time to comply with the appeals process required by the CFPB. If there is a formal loss mitigation denial, a 90-day extension will begin to run on the date the mortgagee sends notice to the borrower that the loss mitigation effort has been denied. 

In addition, HUD has allowed an automatic 90-day extension in cases where a federal regulation requires a delay in the initiation of foreclosure and the delay is not covered in any of the other automatic extensions. 

In both of these cases, mortgagees do not need to obtain HUD approval via the EVARS system. However, the mortgagee must document the use of the automatic extension in the claim review file and file reports related to the extension in the SFDMS and on HUD Form 27011, Part A. 

The loss mitigation and foreclosure process is very complicated and requires some clear planning and strict adherence to a variety of time restrictions. Those lenders that utilize subservicers must prioritize compliance with these standards in their oversight procedures. 

Any compliance relief related to stringent timelines is always welcome, given that lenders are held to a high standard of compliance. So, take this as an ounce of good news.

Consumer Financial Protection Bureau, Federal Regulatory, Legal Developments

TRID implementation countdown

Do not be fooled by false reports of another delay in TILA/RESPA Integrated Disclosure (TRID) requirements — the rule takes effect October 3. Lenders are busy running sample loan scenarios through their loan origination systems, calling vendors to troubleshoot problems, consulting with IT employees and getting ready for the dreaded deadline. 

In the next few days, someone may advise you to not worry about the TRID deadline because CFPB Director Richard Cordray told members of Congress that there will be a “hold harmless” period. But Director Cordray said no such thing. When pressed during questioning at the House Financial Services Committee hearing today, he stated that there will be an informal grace period. However, this is not a free pass — October 3 is still the deadline for TRID compliance. 
If you want to be able to sell the loans you originate to investors, and if you want to avoid becoming a defendant in a civil action by a consumer for violating the Truth in Lending Act, keep forging ahead with TRID compliance and be ready to go this Saturday.


Compliance Management, Consumer Financial Protection Bureau, Federal News, Legal Developments