July 12: CFPB Recent Updates
The Consumer Finance Protection Bureau (CFPB) is responsible for consumer protection in the financial sector. CFPB’s jurisdiction includes credit unions, banks, securities firms, payday lenders, mortgage-servicing operations, foreclosure relief services, debt collectors, and other financial companies operating in the United States. NASCUS closely monitors CFPB developments and responds to requests for comments on rules impacting the credit union system.
CFPB Proposes Rules to Help Homeowners Avoid Foreclosure
The Consumer Financial Protection Bureau (CFPB) today proposed new rules to make it easier for homeowners to get help when they are struggling to pay their mortgage. The proposal, if finalized, would require mortgage servicers to focus on helping borrowers, not foreclosing, when a homeowner asks for help. The proposed changes would also make it simpler for servicers to offer assistance by reducing paperwork requirements, improve communication with borrowers, and ensure critical information is provided in languages borrowers understand. The CFPB is requesting comment about several other topics, including possible approaches it could take to ensure servicers are furnishing accurate and consistent credit reporting information for borrowers undergoing review for assistance.
Mortgage servicers are the companies that handle the day-to-day management of mortgage loans. They collect monthly payments, maintain loan records, and importantly, help find options for homeowners who are struggling to make their payments. In general, the faster a servicer gets a borrower into one of these options, the smaller the losses for investors and the more likely foreclosure is avoided. These options can include temporarily pausing payments or extending the loan term to lower monthly payments.
CFPB Issues Proposed Rule to Amend the Mortgage Servicing Rules
Today, the CFPB issued a Notice of Proposed Rulemaking (NPRM) related to the mortgage servicing rules in Regulation X.
In general, the proposed rule would streamline existing loss mitigation requirements to provide borrowers with quicker loss mitigation solutions, add foreclosure procedural safeguards that begin as soon as a borrower requests loss mitigation assistance, revise certain early intervention requirements, and provide borrowers with access to certain mortgage servicing communication in languages other than English. The proposed rule also requests comment on various servicing issues, including comment on servicer furnishing practices for consumer reporting.
You can read the NPRM and an unofficial redline of the proposed changes here: www.consumerfinance.gov/rules-policy/notice-opportunities-comment/open-notices/streamlining-mortgage-servicing-for-borrowers-experiencing-payment-difficulties-regulation-x/.
You can also read a Fast Facts summary of the proposed rule here: https://www.consumerfinance.gov/compliance/compliance-resources/mortgage-resources/mortserv/.
The CFPB took action against repeat offender Fifth Third Bank for a range of illegal activities that would result in the bank paying millions in penalties as well as paying redress to harmed consumers.
Today’s CFPB order, the first of the actions, addresses the CFPB’s findings that Fifth Third Bank illegally triggered repossessions and charged illegal fees by forcing loan borrowers into unnecessary and duplicative coverage policies. Between July 2011 and December 2020, more than 50% of the policies were charged to borrowers who had either always maintained their own coverage or obtained the requisite coverage within a 30-day timeframe of their prior policy lapsing. Specifically, Fifth Third Bank’s conduct harmed borrowers by:
- Charging extra fees for unnecessary and duplicative coverage: In more than 37,000 instances, Fifth Third Bank illegally charged fees that provided no value at all. In some cases, the policy was duplicative of coverage borrowers already had on their vehicles. Some cases involved the consumer obtaining the requisite coverage within 30 days of lapse and did not have the force-placed policy canceled in its entirety. These borrowers paid over $12.7 million in illegal, worthless fees. While consumers received coverage with no value, Fifth Third Bank profited. When the unnecessary or duplicative coverage was cancelled, borrowers were entitled to a refund of the illegally charged fees. But instead of refunding the money directly to borrowers, Fifth Third Bank applied the refunds to consumers’ outstanding loan balances. Fifth Third also reinsured its coverage program and made millions by getting paid fees that far exceeded any claim losses under the program.
- Punishing borrowers with repossessions: Fifth Third Bank demanded borrowers pay for coverage they did not need or else face delinquency, additional fees, and repossessions. Fifth Third Bank conducted repossessions of vehicles when the delinquency was caused by the bank charging unnecessary and duplicative coverage.
The second of the two actions announced today resolves the CFPB’s March 2020 lawsuit against Fifth Third Bank for creating fake customer accounts and using a “cross-sell” strategy to increase the number of products and services it provided to existing customers.
Failures in student and auto loan servicing
CFPB examiners found multiple instances of unfair, deceptive, or abusive acts or practices at companies servicing auto loan and student loans, including:
- Auto loan servicers mishandled consumers’ final loan payments: CFPB examiners found that servicers did not provide adequate notification that borrowers were required to make their final payments manually, despite the borrowers being enrolled in autopay. The servicers then illegally charged the borrowers late fees for failing to make the final payment on time.
- Student loan servicers created excessive barriers to assistance, provided inaccurate information about benefit forms, and failed to notify consumers about funds transfers: Examiners found certain servicers had excessive phone hold times, their call centers were significantly understaffed, they had problems with their interactive voice response systems, and some consumers were prevented from accessing online account management portals. Additionally, servicers provided inaccurate information about the forms borrowers were required to submit to qualify for loan programs with certain benefits such as forbearance. They also failed to follow requirements about notifying consumers of preauthorized electronic funds transfers that were larger than prior transfers under the same authorization.
Deception and harassment by debt collectors
The CFPB’s recent examinations of debt collectors identified violations of the Fair Debt Collection Practices Act and other violations of consumer protection law, including:
- Debt collectors violated disclosure requirements and misled borrowers: Examiners found that debt collectors, including student loan debt collectors, did not provide validation notices within five days of their initial communication with borrowers, as required. Some student loan debt collectors concealed their true company names in communications, misleading borrowers about their identity.
- Debt collectors harassed borrowers and communicated with them at inconvenient or unusual times or places: Examiners uncovered instances of collectors using aggressive or verbally abusive language, including to consumers unable to pay due to a recent hospitalization. In other cases, debt collectors communicated with consumers at times and places known by the collectors to be inconvenient or unusual; made over 100 calls to consumers despite being asked to stop; and failed to cease contacting consumers by a certain form of communication, such as a text message or specific telephone number, despite being asked to stop by consumers.
CFPB and FHFA Release Updated Data from the National Survey of Mortgage Originations for Public Use
The Consumer Financial Protection Bureau (CFPB) and the Federal Housing Finance Agency (FHFA) today published updated loan-level data for public use collected through the National Survey of Mortgage Originations (NSMO). The data also provide updated mortgage performance and credit information for a nationally representative sample of mortgage borrowers from 2013 to 2021.
Since 2014, FHFA and CFPB have sent quarterly surveys to borrowers who recently obtained mortgages. These surveys gather feedback on borrowers’ experiences during the mortgage process, their perceptions of the mortgage market, and their future expectations. Today’s release adds one additional year of new mortgage data through 2021.
“This year’s survey provides new insights into appraisal satisfaction and willingness to move for borrowers with new mortgages,” said Jason Brown, CFPB Assistant Director for Research. “With the release of the public use file, we invite researchers to help us understand the challenges facing consumers and help us to find ways to improve the market for consumers.”
Today’s release features data on three new survey questions first asked of mortgage borrowers in 2021.
- When asked about appraisal satisfaction, 70 percent of respondents reported being very satisfied with their property appraisal, 23 percent reported being somewhat satisfied, and 6 percent were not at all satisfied.
- When questioned on their willingness to move from their primary residence, 50 percent of respondents reported being unwilling to move, 20 percent were unsure about moving, 25 percent were willing and able to move, and 5 percent were willing but unable to move.
- When prompted to select from a list of factors important to borrowers choosing a mortgage lender/broker, 8 percent of respondents selected accommodations for people with disabilities as an important factor in their choice.
The NSMO is a component of the National Mortgage Database (NMDB®), the first comprehensive repository of detailed mortgage loan information designed to support policymaking and research efforts and to help regulators better understand emerging mortgage and housing market trends.