All Things CFPB

February 2, 2015

By: Victor Kang, Partner

CFPB Update – Potential Expanded Foreclosure Protections

In late November 2014, the CFPB proposed 7 sweeping changes:

1 – Require servicers to provide certain borrowers with foreclosure protections more than once over the life of the loan

2 – Expand consumer protections to surviving family members and other homeowners

3 – Require servicers to notify borrowers when loss mitigation applications are complete

4 – Protect struggling borrowers during servicing transfers

5 – Clarify servicers’ obligations to avoid dual-tracking and prevent wrongful foreclosures

6 – Clarify when a borrower becomes delinquent

7 – Provide more information to borrowers in bankruptcy

The CFPB is intending to enact these proposals in the Q1 of 2015 as the 90 days comment period will be ending shortly this month. Once we get the final word from CFPB, we will provide further guidance and analysis. For the original press release from the CFPB, please see:

CFPB: Blotter Report:

The following are true stories; the names have been excluded to protect the innocent.

As we begin the New Year, we want to take a moment to reflect on some of the penalties meted out by the CFPB. Throughout the past few years, the CFPB has continued to show that they are able and willing to dole out heavy punishments. We want to look at the allegations and judgments handed down and utilize them as learning opportunities. While we may not always agree with the final verdicts from the CFPB, there’s no question that by analyzing these violations we can gain great insight into where the CFPB is focused. Below is quick rundown of some of the CFPB’s enforcement actions in the past year or so.

Servicing issues related to loss mitigation – $2 billion in relief to borrowers – The CFPB severely punished a servicer for systemic misconduct throughout the entire foreclosure process. Allegations from the CFPB include using shortcuts with borrowers and failing to apply payments properly. Insurance was also forced onto the borrowers and false information was given to borrowers. Lastly, the CFPB found that there was deception of foreclosure alternatives and robo-signing of documents.

Servicing issues related to loss mitigation- $37.5 Million ($27.5 million to borrowers; $10 million in fines) A bank was fined for allegedly blocking borrowers’ attempts at saving their homes. The CFPB claimed that the bank took excessive time to process foreclosure loss mitigation requests and denied modifications to qualified borrowers. Other allegations included failure to communicate loan modification deadlines and also not properly finalizing modifications.

Loan origination issues – $730,000 in relief to borrowers – In this situation, the CFPB penalized a mortgage lender for giving bonuses to employees for steering consumers into loans with higher interest rates. The compensation plan violated the Federal Reserve Board’s Loan Originator Compensation Rule.

Unfair charges for services – $58 Million ($48 million to consumers; $9 million in fines)- A bank was penalized heavily for allegedly billing consumers for services that were not received. Those services included identity protection and credit monitoring services. These charges were sold to consumers as an add-on product that was available for mortgages, loans, credit cards and checking accounts. The bank allegedly offered the product, but then did not produce the service and incurred interest and fees that were not valid.

Loan origination issues for illegal referrals – $200,000 in fines – A title insurance company was fined by the CFPB for illegal referral agreements. The allegations were that the title company violated RESPA by entering into kickback programs that were disguised as marketing services provided by the marketing company. The claim is that the title company paid the marketing company and the money was then passed to the brokers to gain their referrals.

Illegal debt collection in violation of SCRA – $2.5 million in relief to consumers; $100,000 civil penalties – A furniture/electronics retailer and their affiliate companies/attorneys violated the SCRA in their collection of debts from active member servicemen. They were alleged to have filed several thousand lawsuits in Virginia despite the contract being out-of-state and the wrong venue. They also doublecharged Servicemembers and contacted their commanding officers to get payments.

Loan origination issues for referral kickbacks – $35.7 million in penalties – Two banks were allegedly tied to mortgage kickback programs for referrals and marketing services with a title company. Loan officers at both banks accepted illegal gifts and cash to steer borrowers into using a preferred title company. Even after several warnings about the practice occurring, neither bank resolved the issue to the satisfaction of the CFPB.