House Representatives Send Letter to CFPB Seeking Assurance of (Consumer Financial Services Alert - April 17, 2012)

Edited by Michael P. Whalen and James W. McGarry

Originally published 17th April 2012

In this Issue:

House Representatives Send Letter to CFPB Seeking Assurance of Cost-Benefit Analysis on All New Rules Issued CFPB Previews Mortgage Servicing Rules Coming this Summer CFPB Proposes Rule to Narrow Scope of Regulation Z CFPB Launches College Financial Aid Comparison Tool CFPB to Hold Supervised Banks and Nonbanks Responsible for Service Providers' Violations of Federal Consumer Financial Protection Laws CFPB Continues to Push Its Interpretation of the Rescission Period under TILA CFPB Issues Annual Consumer Response Report CFPB Releases Debt Collection Report Industry Coalition Pushes for Broad Definition of "Qualified Mortgage" FRB Issues Policy on Renting REO Property FTC Announces Schedule for Reviewing Regulations NCUA Launches Financial Literacy Website for Kids OCC Issues Examination Procedures for the S.A.F.E. Act Fourth Circuit Revives Class Action Allowing Claims under Maryland's Repossession Statute The Department of Justice Sues Mortgage Bankers for Violations of Fair Housing Act and Equal Credit Opportunity Act Eighth Circuit Affirms Dismissal of RICO Suit over Alleged Inflated Appraisals District Court Rules on Payment Protection Plan Allegations New York State Department of Financial Services to Further Investigate Force-Placed Insurance Practices CFPB HAPPENINGS

House Representatives Send Letter to CFPB Seeking Assurance of Cost-Benefit Analysis on All New Rules Issued

House Representatives Randy Neugeberger and Shelley Capito submitted a letter to the CFPB seeking assurance that the CFPB will conduct "rigorous, transparent cost-benefit analysis" when issuing new rules. The letter also requested that CFPB Director Richard Cordray respond to a series of questions posed in the letter. Among the questions asked by the Representatives include: whether the CFPB would commit to adopting a rule only if it determines that the rule's economic benefits outweigh its costs; and how the CFPB defines "significant rule" for purposes of Section 1022(d) of the Dodd-Frank Act, which requires the CFPB to evaluate the effectiveness of a "significant rule" five years after the rule's effective date. Rep. Neugeberger is the Chairman of the Subcommittee on Oversight and Investigations and Rep. Capito is the Chairman of the Subcommittee on Financial Institutions and Consumer Credit within the Committee on Financial Services. Click here for the letter.

CFPB Previews Mortgage Servicing Rules Coming this Summer

The CFPB previewed mortgage loan servicing rules under consideration. Generally, the rules would implement requirements of the Dodd-Frank Act, which would go into effect on January 21, 2013, unless final rules are issued on or before that date. The concepts in the rules being considered outside the Dodd-Frank provisions are consistent with servicing requirements in the recent mortgage servicing consent orders and related Fannie Mae and Freddie Mac guidelines. Rulemaking is planned in eight areas:

Monthly Mortgage Statements. Servicers would be required to provide borrowers with monthly statements containing certain information, such as a summary of loan terms; breakdown of payments by principal, interest, fees, and escrow; late fee warnings; and information about loss mitigation options for delinquent borrowers.

ARM Adjustment Disclosures. Earlier disclosures of interest rate changes on most ARMs would be required. The disclosures would include an explanation of how the new payment is determined and when the change goes into effect; amount of the new payment; list of alternatives that may be pursued if the new monthly payment is unaffordable; contact information for housing counselors; and amount of any prepayment penalty.

Force-Placed Insurance. Servicers would be required to provide two notices to borrowers before charging for forced-placed insurance. The notices would include a good faith estimate of the insurance cost.

Communication of Loss Mitigation Options. Servicers would be required to make good faith efforts to contact delinquent borrowers to inform them of their options to avoid foreclosure. In these contacts, servicers would have to provide borrowers with information about the foreclosure process, loss mitigation options, and housing counselor availability.

Payment Crediting. Payments would have to be credited to the account on the day received. Partial payments may be retained in a suspense account, but must be applied to the earliest delinquent payment when the suspense account balance reaches one full monthly payment.

Error Resolution. Servicers notified of certain servicing-related errors by borrowers would generally have to acknowledge receipt of the notice within five days and conclude the investigation in 30 days. Shorter timeframes would be imposed on errors relating to payoffs and foreclosures.

Access to Servicer Foreclosure Prevention Team. Servicers would be required to provide delinquent borrowers with direct, ongoing access to staff dedicated to...