Alston & Bird Consumer Finance Blog

Home Mortgage Disclosure Act (HMDA)

Alston & Bird Adds Consumer Finance Partner Aldys London in Washington, D.C.

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Alston & Bird has strengthened and expanded its capabilities for advising companies on state and federal consumer finance regulatory compliance issues with the addition of partner Aldys London in the firm’s Washington, D.C. office. Her clients include mortgage companies, consumer finance and FinTech companies, secondary market investors, real estate companies, home builders, insurance companies, banks, and other financial institutions and settlement service providers.

“It’s a pleasure to welcome Aldys, who brings deep experience and a sterling reputation for counseling consumer financial service entities as they navigate complex regulatory issues, including licensing, the intersection of state and federal regulatory compliance, and key approvals for transactions,” said Nanci Weissgold, Alston & Bird partner and co-chair of the firm’s Financial Services & Products Group. “With our shared emphasis on collaboration and excellent service, we are confident that she will successfully draw on our firm’s vast resources and expertise to benefit her clients.”

London provides advice on state licensing for mortgage lenders and related service providers, mortgage brokers, FinTech companies, lead generators, servicers, debt collectors, and investors. She is well versed in federal registration and licensing requirements imposed by the SAFE Act, as well as state laws and regulations concerning fees, disclosures, loan documentation, interest rates, privacy, advertising, data breach, and telemarketing.  Her practice also covers seeking and maintaining approvals from state and federal agencies and GSEs.  She is adept at federal laws governing real estate mortgage transactions, including preemption, privacy, fair lending and consumer protection.

In addition, London assists a variety of consumer financial services companies in obtaining regulatory approvals for complex acquisitions, mergers, and asset transfer transactions. She performs due diligence reviews for proposed acquisitions and IPOs, reviews and prepares policies and procedures, conducts regulatory compliance audits of financial institutions, and assists with structuring and developing compliance and training programs. She also assists clients with responses to regulatory audits and investigations by state and federal regulators.

“Clients rely on Aldys’ sound counsel because of her technical rigor and thorough understanding of the consumer finance market,” said Stephen Ornstein, Alston & Bird partner and co-leader of the firm’s Consumer Financial Services Team. “Her legal skills, combined with her excellent business sense and ability to develop strong relationships, make her a valuable asset to our firm and our clients.”

Alston & Bird’s Consumer Financial Services Team focuses on the regulation of consumer credit and real estate, with a broad emphasis on origination, servicing, and secondary mortgage market transactions. This team addresses the compliance challenges of major Wall Street financial institutions, federal- and state-chartered depository institutions, hedge funds, private equity funds, national mortgage lenders and servicers, mortgage insurers, due diligence companies, ancillary service providers, and others.

Federal Administrative Agencies Issue COVID-19 Guidance

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A&B ABstract:  On March 26, the Consumer Financial Protection Bureau (“CFPB”) issued three separate policy statements in response to the COVID-19 pandemic.  These announcements recognize the operational and resource challenges companies are facing as a result of the pandemic, and provide some regulatory flexibility.  Separately, the CFPB and four prudential banking regulators issued a statement encouraging the responsible financing of small-dollar loans to individuals and businesses.  These statements follow a joint statement issued by the CFPB with the Federal Reserve Board (“FRB”), Federal Deposit Insurance Corporation (“FDIC”), and Office of the Comptroller of the Currency (“OCC”) (collectively, the “Agencies”) giving CRA credit for activities in response to COVID-19.

Agencies:

On March 26, the Agencies issued a Joint Statement specifically encouraging financial institutions to offer responsible small-dollar loans to both consumers and small businesses in response to COVID-19. The Agencies recognized the important role that responsibly offered small-dollar loans can play in helping customers meet their needs for credit due to temporary cash-flow imbalances, unexpected expenses, or income short-falls during periods of economic stress or disaster recoveries.

The Agencies indicated that loans can be offered through a variety of loan structures, including open-end lines of credit, closed-end installment loans, or structured single payment loans, provided they are offered in a manner that is consistent with safe and sound practices, provides fair treatment of consumers, and complies with applicable statutes and regulations, including consumer protection laws.

CFPB:

On March 26, CFPB issued three separate policy statements intending to provide needed flexibility to enable financial companies to work with customers in need as they respond to the COVID-19 pandemic. The CFPB also postponed two data collections associated with its 1071 (small business data collection) and Property Assessed Clean Energy (PACE) rulemakings.

First Policy Statement

The first Policy Statement suspended until further notice the requirement to report quarterly HMDA data. Financial institutions normally required to make such quarterly reports are those that reported for the preceding calendar year at least 60,000 covered loans and applications (excluding purchased loans). Institutions may voluntarily continue making quarterly HMDA data submissions, and should continue to collect and record HMDA data in anticipation of making annual data submissions.

Second Policy Statement

The second Policy Statement suspended until further notice the submission of the following information relating to credit card and prepaid accounts:

  • annual submission of certain information concerning agreements between credit card issuers and institutions of higher education;
  • quarterly submission of consumer credit card agreements;
  • collection of certain credit card price and availability information from a sample of credit card issuers; and
  • submission of prepaid account agreements and related information.

Institutions may voluntarily continue to make such submissions, and should maintain records sufficient to allow them to make such delayed submissions pursuant to future CFPB guidance.

Third Policy Statement

The third Policy Statement sought to encourage financial institutions undertaking prudent efforts in good faith to work constructively with borrowers and other customers to meet their financial needs. To that end, the CFPB committed to: (1) take into account current and resource challenges affecting financial institutions when scheduling supervisory and enforcement activity; and (2) consider the circumstances that financial institutions face as a result of COVID-19 when conducting exams or other supervisory activities and in determining whether to take enforcement action.

Takeaway:

The Agencies’ measured guidance is welcomed by the industry.  In particular, the CFPB’s commitment to work with affected financial institutions in scheduling examinations and other supervisory activities provides needed flexibility, allowing institutions to best address the immediate and resource-intensive needs of its customers during these challenging times.  Companies should be mindful to document their efforts as inevitable issues will arise when all the dust settles.

 

CFPB Issues Its Fall 2019 Rulemaking Agenda

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A&B Abstract:

On November 20, 2019, the Consumer Financial Protection Bureau (the “Bureau” or “CFPB”) published its Fall 2019 Rulemaking Agenda (the “Rulemaking Agenda”) as part of the Fall 2019 Unified Agenda of Federal Regulatory and Deregulatory Actions. The Rulemaking Agenda sets forth the matters that the Bureau reasonably anticipates having under consideration during the period from October 1, 2019 to September 30, 2020.  The Rulemaking Agenda is the first Unified Agenda prepared by the CFPB since Director Kraninger embarked on her “listening tour” shortly after taking office in December 2018. Below we highlight some of the key agenda items discussed in the Rulemaking Agenda.

Implementing Statutory Directives

In the Rulemaking Agenda, the Bureau indicates that it is engaged in a number of rulemakings to implement directives mandated in the Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018 (“EGRRCPA”), the Dodd-Frank Act and other statutes.  For example:

Truth in Lending Act

In March 2019, the Bureau published an Advanced Notice of Proposed Rulemaking (“ANPR”) seeking public comment relating to the implementation of section 307 of the EGRRCPA, which amends the Truth in Lending Act (“TILA”) to mandate that the Bureau prescribe certain regulations relating to “Property Assessed Clean Energy” (“PACE”) financing.  The Bureau indicated that it is reviewing the comments it has received in response to the ANPR as it considers next steps to facilitate the development of a Notice of Proposed Rulemaking (“NPRM”).

TRID Rule Guidance

The Bureau has also been engaged in several other activities to support its rulemaking to implement the EGRRCPA.  For example, the Bureau noted that it has (i) updated its small entity compliance guides and other compliance aids to reflect the EGRRCPA’s statutory changes; and (ii) issued written guidance as encouraged by section 109 of the EGRRCPA, which provides that the Bureau “should endeavor to provide clearer, authoritative guidance” on the CFPB’s TILA/RESPA Integrated Disclosure rule.

Implementation of Section 1071 of Dodd-Frank

Additionally, the Bureau is undertaking certain activities to facilitate its mandate to prescribe rules implementing Section 1071 of the Dodd-Frank Act, which amended the Equal Credit Opportunity Act to require financial institutions to collect, report, and make public certain information concerning credit applications made by women-owned, minority-owned, and small businesses.  For example, on November 6, 2019, the Bureau hosted a symposium on small business data collection in order to facilitate a discussion with outside experts on the issues implicated by creating such a data collection and reporting regime.

We have previously issued an advisory in which we discuss the key mortgage servicing takeaways from the EGRRCPA.

Continuation of the CFPB’s Spring 2019 Rulemaking Agenda

The Rulemaking Agenda notes that the Bureau will continue with certain other rulemakings that were described in its Spring 2019 Agenda that are intended to “articulate clear rules of the road for regulated entities that promote competition, increase transparency, and preserve fair markets for financial products and services.”  Such rulemakings include:

HMDA and Regulation C

In May 2019, the Bureau issued a NPRM to (i) reconsider the thresholds for reporting data about closed-end mortgage loans and open-end lines of credit under the Bureau’s 2015 Home Mortgage Disclosure Act (“HMDA”) Rule and to incorporate into Regulation C an interpretive and procedural rule that the Bureau issued in August 2018 in order to implement certain partial HMDA exemptions created by the EGRRCPA.  In summer 2020, the Bureau is expecting to issue an NPRM to follow-up on an ANPR issued in May 2019 related to data points and coverage of certain business- or commercial-purpose loans.  The Bureau also anticipates issuing a NPRM addressing the public disclosure of HMDA data in light of consumer privacy interests to allow the Bureau to concurrently consider the collection and reporting of data points and the public disclosure of those data points.

Proposed Regulation F

In May 2019, the Bureau issued a NPRM which would, for the first time, prescribe substantive rules under Regulation F, which implements the Fair Debt Collection Practices Act, to govern the activities of debt collectors (the “Proposed Rule”). The Proposed Rule would address several issues related to debt collection, such as (i) addressing communications in connection with debt collection; (ii) interpreting and applying prohibitions on harassment or abuse, false or misleading representations, and unfair practices in debt collection; and (iii) clarifying requirements for certain consumer-facing debt collection disclosures.  The Bureau noted that it is also engaged in testing of consumer disclosures relating to time time-barred debt disclosure issues that were not part of the Proposed Rule.  The results of the CFPB’s testing will inform the Bureau’s assessment of whether to issue a supplemental NPRM seeking comments on any disclosure proposals related to the collection of time-barred debt.

We previously published a five-part blog series in which we discussed the provisions of the Proposed Rule that are under consideration. We will continue to monitor and report on any developments related to the Proposed Rule.

Payday, Vehicle Title, and Certain High-Cost Installment Loans (the “Payday Rule”)

The Bureau is expecting to take final action in April 2020 on the NPRM issued in February 2019 related to the reconsideration of the mandatory underwriting requirements of the 2017 Payday Rule.  That said, we note that the U.S. District Court for the Western District of Texas has stayed the Payday Rule’s August 19, 2019 compliance date. The parties before the court have a status hearing on December 6, 2019 which could affect the stay and the effective date of the Payday Rule.

Remittance Rule

In addition, the Rulemaking Agenda notes that the Bureau is planning to issue a proposal this year to amend the CFPB’s Remittance Rule to address the effects of the expiration in July 2020 of the Rule’s temporary exception allowing institutions to estimate fees and exchange rates in certain circumstances.

New Rulemakings and Review of Existing Regulations

Expiration of the “GSE Patch”

In January 2019, the Bureau completed an assessment of certain rules that require mortgage lenders to make a reasonable and good faith determination that consumers have a reasonable ability to repay certain mortgage loans and that define certain “qualified mortgages” that a lender may presume comply with the statutory ability-to-repay requirement. The “GSE Patch” is set to expire in January 2021, meaning that loans eligible to be purchased or guaranteed by GSEs that are originated after that date would not be eligible for qualified mortgage status under its criteria. In July 2019, the Bureau issued an ANPR to amend Regulation Z, regarding the scheduled expiration of the GSE Patch, and is currently reviewing the comments it received since the comment period closed on September 2019.

As noted in a previous blog post, the CFPB announced in its ANPR, that the Bureau does not intend to extend the GSE patch permanently. It will be interesting to see whether the Bureau will allow the patch to expire in January 2021 as planned of if the Bureau will use this as an opportunity to possibly extend the expiration date.

Addition of New Regulatory Agenda Items

In response to feedback received in response to the Bureau’s 2018 Call for Evidence and other outreach efforts, the Bureau is adding two new items to its long-term regulatory agenda to address concerns related to (i) loan originator compensation; and (ii) the use of electronic channels of communication in the origination and servicing of credit card accounts.

Review of Existing Regulations

The Rulemaking Agenda also highlights the Bureau’s active review of existing regulations.  For example, the CFPB will be assessing its so-called TRID Rule pursuant to Section 1022(d) of the Dodd-Frank Act, which requires the CFPB to publish a report assessing the effectiveness of each “significant rule or order” within five years of it taking effect.  The Bureau must issue a report with the results of its assessment by October 2020.

The Rulemaking Agenda further notes that, in 2020, the Bureau expects to conduct a 610 RFA review of the Regulation Z rules that implemented the Credit Card Accountability Responsibility and Disclosure Act of 2009.  Section 610 of the RFA requires federal agencies to review each rule that has or will have a significant economic impact on a substantial number of small entities within 10 years of publication of the final rule.

Takeaway

The Bureau’s Rulemaking Agenda gives industry an advanced look at what to expect from the CFPB in the coming months. We expect the Bureau to be active in working through their agenda and will provide further updates as they become available.

* We would like to thank Associate, David McGee, for his contributions to this blog post.

CFPB Issues Final HMDA Rule Incorporating Reporting Exemptions

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A&B ABstract:  In a final rule issued on October 10, 2019, the CFPB amended Regulation C under the Home Mortgage Disclosure Act to incorporate exemptions created by the Economic Growth, Regulatory Relief, and Consumer Protection Act, among other changes.

Discussion:

Effective January 1, 2020, the Consumer Financial Protection Bureau issued a final rule under the Home Mortgage Disclosure Act (“HMDA”), addressing certain exemptions from HMDA’s reporting requirements.

Threshold Exemption for Reporting on Open-End Loans

The CFPB has extended to January 1, 2022, an increased threshold for reporting HMDA data on open-end loans.  Specifically, the rule maintains the threshold of 500 transactions below which a lending institution is not required to report loan data.  (Thus, an entity originating fewer than 500 transactions is exempt.)   However, if a financial institution that is under the 500-transaction threshold chooses to report any excluded applications for, or originations or purchases of open-end lines of credit, it must report all such transactions.

Incorporation of Partial Exemptions Under the Regulatory Relief Act

The final rule incorporates into Regulation C provisions of an August 2018 interpretive and procedural rule adopted pursuant to the Regulatory Relief Act.  Specifically, an insured depository institution or credit union covered by a partial exemption may report exempt data fields as long as it reports all data fields within any exempt data point for which it reports data.  Section 1003.3(d) makes a partial exemption available to an entity that, in each of the preceding two calendar years, originated fewer than 500 closed-end mortgage loans or 500 open-end lines of credit.

The final rule also include clarifications:

  • That only loans and lines of credit that are otherwise reportable under HMDA count towards the thresholds for the partial exemptions;
  • Of which data points the partial exemptions cover; and
  • On the applicability of the partial exemptions to insured depository institutions with less-than-satisfactory CRA examination histories.

Takeaway:

In its rule announcement, the CFPB indicated that it will address permanent coverage thresholds for both closed-end mortgage loans and open-end lines of credit in a separate final rule.  We will continue to monitor the rulemaking process.