CFPB to Shine Spotlight on Mini-Correspondent Mortgage Lending?

On July 9, 2014, the Consumer Financial Protection Bureau (“CFPB” or “Bureau”) issued Policy Guidance on the issue of Mortgage Brokers Transitioning to Mini-Correspondent Lenders (“Policy Guidance”), which highlights risks and considerations that should be taken into account by brokers who may be considering or venturing into the mini-correspondent channel.

The Mini-Correspondent Model

Mini-correspondents are mortgage lenders that close the loans in their own name but that operate with limited net worth. Mini-correspondents fund mortgage loans using warehouse lines of credit, which are sometimes supplied by the entities that will purchase the loans. Mini-correspondents vary in size and structure, but many have leaner operations and staffing than lenders in other channels. Under some—but not all—arrangements, the investor may underwrite, condition, and issue closing instructions as is done in the broker/wholesale model. Continue reading this entry

CFPB Expands Its Enforcement Efforts Against Payday Lending

In November, 2013, the Consumer Financial Protection Bureau announced its first enforcement action against a payday lender. Cash America International was fined $5 million and was ordered to refund $14 million to its borrowers due to violations of the Military Lending Act. Recently, the CFPB took action against one of the nation’s largest payday lenders, ACE Cash Express, “for inducing payday borrowers into a cycle of debt”, according to CFPB Director Richard Cordray.

ACE agreed to pay a civil penalty of $5 million, and to pay up to $5 million in refunds to its customers. Although ACE maintains that the practices that the CFPB found illegal ceased in 2012, and involved a very small number of its borrowers, “ACE used false threats, intimidation, and harassing calls to bully payday borrowers” according to Director Cordray. Continue reading this entry

CFPB Proposes Public Disclosure of Consumer Complaint Narratives

Will the CFPB start disclosing consumers’ gripes and rants? Would it provide endless hours of salacious reading, like complaints posted on popular online review sites like Yelp and Angie’s List? Could it become a platform for publicizing unverified or, in worst cases, false and defamatory allegations which could harm compliant and conscientious businesses?

We may find out soon, as the CFPB recently published a notice of proposed policy statement detailing such plans.

The CFPB has been soliciting and compiling complaint data from consumers for a few years, but it previously disclosed only aggregated and non-narrative information from those complaints. Under the proposal, the CFPB’s public database would be expanded to contain narrative complaints of consumers who “opt-in” to make their stories public. The CFPB promises to take “all reasonable steps” to remove personal identifying information before it is publicly accessible. Finally, rather than verifying consumers’ complaints before publication, the CFPB proposes to permit companies to publish their own responses and “let the public decide”.

CFPB Issues Electronic-Closing Pilot Guidelines and Seeks to Use Technology to Improve Mortgage Closing Experience

The Consumer Financial Protection Bureau (CFPB) recently announced that it is launching an electronic-closing (e-Closing) Pilot program designed to address some of the most common concerns relating to the mortgage closing process. CFPB states that electronic closing has the potential to address current challenges by shifting the closing experience toward a more paperless process and by facilitating other consumer-friendly improvements. Common consumer concerns relating to the current mortgage closing process include: Continue reading this entry

Eleventh Circuit Further Muddies the Waters for Collectors

The Telephone Consumer Protection Act’s safe harbor for calls made with the prior express consent of the called party is destroyed the moment the debtor says, “Stop calling me!” So too, a collector can be liable for autodialed calls to a third party even though a debtor gives that number as her own. These are the conclusions of the United States Court of Appeals for the Eleventh Circuit in the Osorio v. State Farm  decision issued last month. They are sure to prompt creditor and collectors everywhere to reevaluate their dialer practices and procedures.

Here are the facts. Clara Betancourt opened a State Farm credit card account to pay her car insurance premium. During the account opening process State Farm alleged Betancourt said the telephone number she provided was her own. When Betancourt failed to pay timely the minimum balance due on her card, State Farm placed 327 autodialed calls to the number Betancourt provided in an attempt to collect. The problem for State Farm was the number Betancourt gave was not her own. It belonged to her life partner, Freddie Osorio, with whom she lived and had a child. When State Farm’s collection agency FMS, Inc. called to collect, Osorio answered the telephone and stated on two occasions, “Please stop calling.” Continue reading this entry