On July 27, the CFPB and DOJ proposed a settlement with a nonbank mortgage lender for its discriminatory “redlining” lending practices against minority families living in the greater Philadelphia area. If approved by the court, the mortgage lender would be required to pay more than $22 million in civil penalties, and would be the CFPB’s first nonbank mortgage redlining settlement.

Continue Reading CFPB, DOJ Propose $22 Million Penalty Against Nonbank Mortgage Lender for Illegal Redlining

Recently, the United States Court of Appeals for the 4th Circuit held that a mortgage servicer’s failure to provide a required disclosure informing borrowers of their three-day right to rescind the loan under the Truth in Lending Act (TILA) does not relieve borrowers of their obligation to return disbursed loan proceeds upon an effective rescission. The ruling reversed a West Virginia District Court’s ruling against the mortgage servicer in a purported class action.

Continue Reading 4th Circuit: Borrower Must Return Loan Proceeds After Rescission Despite Lender’s Failure to Meet TILA Requirements

On May 16, the CFPB released a report examining metrics on mortgage servicers’ responses to the COVID-19 pandemic.  According to the report, homeowners are still facing significant risks and challenges in working with mortgage servicers, particularly borrowers struggling with mortgage payments after their COVID-19 hardship forbearances and other protections under the CARES Act have expired.
Continue Reading CFPB Report on Mortgage Servicers Examines Industry Responses After Pandemic Protections End

In a novel transaction for the blockchain and mortgage industries, a blockchain-focused financial services company and an investment firm announced the completion of a transaction involving the origination of digital mortgage loans and transfer of ownership via blockchain technology. The eNote digital mortgage assets were originated on the Provence Blockchain and registered on the financial services company’s Digital Asset Registration Technologies (DART) platform. DART monitors blockchain-based asset transfers and is intended to enable an efficient alternative to the existing loan tracking database systems.
Continue Reading Recent Transaction Transfers Ownership of Digital Mortgage Loans via Blockchain

On February 23, the CFPB outlined a proposal for upcoming joint rulemaking to prevent algorithmic bias in automated home valuation models (AVMs).  Here, the CFPB is specifically focused on the potential for AVMs to pose fair lending risks to homebuyers and homeowners.  The CFPB issued the outline pursuant to a requirement under the Small Business Regulatory Enforcement Fairness Act that includes “collecting small entities’ advice and recommendations on the potential impacts of the proposals under consideration and feedback on regulatory alternatives to minimize these impacts.”
Continue Reading CFPB Seeks to Prevent Algorithmic Bias in Automated Home Valuation Models

The CFPB, OCC, FDIC, NCUA, and state financial regulators issued a statement this week ending the temporary supervisory and enforcement flexibility provided to mortgage servicers due to the COVID-19 pandemic by the agencies.  In April 2020, the banking agencies issued an interagency statement that relaxed supervision and enforcement of mortgage servicers’ compliance with certain requirements because of constraints caused by the pandemic.  For instance, the banking agencies indicated that they would not intend to take supervisory or enforcement action against mortgage servicers for delays in sending certain early intervention and loss mitigation notices and taking certain actions relating to loss mitigation set out in the mortgage servicing rules, provided that servicers are making good faith efforts to provide these notices and take these actions within a reasonable time.

Continue Reading Banking Agencies: Mortgage Servicers Should Prepare For Increased Scrutiny

The CFPB recently announced that its two final debt collection rules implementing the Fair Debt Collection Practices Act (FDCPA) will take effect as planned on November 30.  The CFPB had previously proposed extending the final rules’ effective date by 60 days to allow for additional comments and time for implementation for those affected by COVID-19 (a recent Sheppard Mullin article discussing the COVID-related impact on debt collection was recently covered here).  Based on industry feedback, however, the Bureau determined that an extension is unnecessary, explaining that while “consumer advocate commenters generally supported extending the effective date, they did not focus on whether additional time is needed to implement the rules.”

Continue Reading CFPB Confirms November 30 Effective Date for Debt Collection Final Rules

When President Biden signed the bill on June 17 which made Juneteenth (June 19) a federal legal holiday immediately, it impacted certain Regulation Z timing requirements related to rescission of closed-end mortgage loans and the TILA-RESPA Integrated Disclosures (TRID), particularly with respect to transactions that either (i) closed on or before June 17, 2021 but for which consumers’ rescission periods had not yet expired or (ii) were close to the planned closing date on June 17, 2021 and subject to certain disclosure timing requirements of the TRID provisions.  Since the CFPB did not publish immediate guidance, mortgage lenders were forced to make educated guesses as to how to treat Friday, June 18 and Saturday, June 19, particularly with respect to measurement periods that had already commenced before or on the date the new law became effective.  On August 5 the CFPB published an interpretive rule on how to deal with these issues, and the Bureau consistently reached a result which permitted mortgage lenders to treat June 19 as either a business day or a federal holiday for the purposes of these provisions, as set forth immediately below in more detail.

Continue Reading CFPB Reaches Correct Resolution On Juneteenth Disclosure Issues

On July 1, the Federal Housing Finance Agency (FHFA) released a Policy Statement on its commitment to comprehensive fair lending oversight of Fannie Mae, Freddie Mac, and the Federal Home Loan Banks (collectively, “regulated entities”).  The FHFA addressed its position on:  (i) monitoring and information gathering; (ii) supervisory examinations; and (iii) administrative enforcement related to the Equal Credit Opportunity Act, the Fair Housing Act, and the Federal Housing Enterprises Financial Safety and Soundness Act.  The FHFA added that the statement operates as a “foundation for future interpretations by the agency and its regulated entities.”  Comments on the policy statement are due 60 days after publication in the Federal Register.

Continue Reading FHFA Releases Policy Statement On Fair Lending

At the recent FDIC conference, “Fintech: A Bridge to Economic Inclusion,” FDIC Chairman Jelena McWilliams remarked that while the proportion of U.S. households that were banked in 2019 was 94.6 percent, 7 million households still reported no banking relationship.  She also noted that “the rates for Black and Hispanic households who do not have a checking or savings account at a bank remain substantially higher than the overall ‘unbanked’ rate.”  Referencing her personal challenges in establishing credit as a young immigrant to the United States 30 years ago, McWilliams discussed technology’s role in creating and facilitating a more inclusive financial system through the FDIC’s multi-pronged, novel approach to tackle the issue of financial inclusion, which includes:

Continue Reading FDIC Chairman Discusses FinTech and Bank Innovation