Mortgage Banking Update
In This Issue:
- Ballard Spahr Creates California “Mini-CFPB” Team and Launches New Resource Center
- President Biden Extends COVID-19 Relief for FHA, USDA, and VA Borrowers
- FHFA Extends Foreclosure and Eviction Moratoriums, Maximum Forbearance Term, and Origination Flexibilities
- What Do Acting CFPB Director Uejio’s Comments on Consumer Complaint Responses and Potential Racial Disparities Mean for Regulated Financial Institutions?
- Acting Director Uejio Allows Publication of Final CFPB Rule on Role of Supervisory Guidance
- FTC Issues Annual ECOA Report to CFPB
- HUD Acting Assistant Secretary Issues Directive to Enforce FHA to Prohibit Sexual Orientation Discrimination: What are the Implications for the CFPB?
- NCUA and CFPB Sign MOU on Improving Collaboration
- Acting Director Uejio Asks for Report Highlighting Companies With Poor Track Record in Responding to Consumer Complaints
- This Week’s Podcast: The Times at the CFPB are A-Changing: Perspectives on the CFPB Under Acting Director David Uejio and Director Rohit Chopra: Part I
- Chopra Confirmation Hearing Reported to be Scheduled for March 2
- DFPI Will Look at COVID-19-Related Compliance in Mortgage Loan Servicer Exams
- CFPB Recruiting New Attorneys
- Eleventh Circuit Rejects Administrative Feasibility as a Prerequisite for Class Certification
- Did You Know?
- Looking Ahead
For the latest updates on the Coronavirus COVID-19 pandemic visit the Ballard Spahr COVID-19 Resource Center
Effective January 1, 2021, California’s revamped consumer protection agency—the Department of Financial Protection and Innovation (DFPI)—has new, sweeping power over consumer financial services providers in the most populous U.S. state. To help clients navigate this new regulatory authority, Ballard Spahr’s nationally recognized Consumer Financial Services Group has created a California “Mini-CFPB” team. The new team draws on our long history of counseling clients whose businesses are governed by government regulatory agencies, including the Consumer Financial Protection Bureau—the model for the DFPI—as well as the DFPI’s predecessor agency, the California Department of Business Oversight.
Since the DFPI gained its expanded authority last month, we have been hired to represent clients in connection with two of the first waves of DFPI investigations. In addition to handling enforcement matters, our DFPI-related capabilities include helping clients with agency examinations, licensing issues, and rulemaking proposals. Our team is closely monitoring all regulatory, supervisory, and enforcement developments relating to the DFPI.
To provide one location where members of the consumer financial services industry can access key information, we have created a California Consumer Financial Protection Law Resource Center that can be accessed on our blog, Consumer Finance Monitor. Additional insights will be highlighted in our Consumer Finance Monitor podcast, where guests have included DFPI General Counsel Bret Ladine.
On February 16, 2021, President Biden announced an extension of the foreclosure moratorium and the availability of forbearance relief for Federal Housing Administration (FHA), U.S. Department of Agriculture (USDA), and U.S. Department of Veterans Affairs single-family home loan borrowers experiencing financial hardship due to COVID-19. As previously reported, the Federal Housing Finance Agency (FHFA) recently announced the extension of the foreclosure moratorium and the availability of forbearance relief for Fannie Mae and Freddie Mac single-family home loan borrowers.
For FHA, USDA, and VA borrowers, the foreclosure moratorium is extended through June 30, 2021. Additionally, borrowers who entered into a forbearance on or before June 30, 2020 may receive an additional six months of mortgage payment forbearance, in three-month increments. Borrowers who are not in a forbearance may now request a COVID-19 forbearance through June 30, 2021.
The actions by President Biden are addressed by the U.S. Department of Housing and Urban Development (HUD) in Mortgagee Letter 2021-05, by the USDA in Release No. 0026.21, and by the VA in Circular 26-21-04 and Circular 26-21-05.
Borrowers who are not in a forbearance and request a COVID-19 forbearance by June 30, 2021 may receive an initial forbearance of up to six months, and an additional forbearance of another six months (the USDA refers to the periods as being 180 days). The agencies advise that the eviction moratorium also is extended through June 30, 2021, and that the foreclosure and eviction moratoriums do not apply to properties determined to be legally vacant or abandoned. The agencies also advise that for borrowers in a COVID-19 forbearance, the servicer must waive all late charges, fees and penalties.
HUD and VA advise that (1) for borrowers currently in a forbearance who request an additional forbearance period, no extended forbearance period may continue beyond December 31, 2021, and (2) for borrowers not in a forbearance who request a forbearance by June 30, 2021, the forbearance period may not extend beyond June 30, 2022.
HUD also addresses various permanent loss mitigation and home disposition options, and advises that it is removing the restriction on borrowers receiving more than one COVID-19 home retention option.
The Federal Housing Finance Agency (FHFA) announced February 9, 2021, the extension of the Fannie Mae and Freddie Mac moratorium on single family foreclosures from February 28, 2021, to March 31, 2021. The moratorium on evictions from single family homes owned by Fannie Mae or Freddie Mac also is extended until March 31, 2021. The announcement does not address evictions from multi-family properties subject to a Fannie Mae or Freddie Mac loan.
FHFA also announced that qualifying borrowers with Fannie Mae and Freddie Mac mortgages who are reaching the end of the 12-month maximum forbearance term under the CARES Act can receive an additional forbearance extension of up to three months, providing for up to 15 months of missed payments.
Fannie Mae addresses the foreclosure moratorium extension and forbearance term extension in an update to Lender Letter 2021-02, and Freddie Mac addresses the foreclosure moratorium extension and forbearance term extension in Bulletin 2021-6. With regard to the foreclosure moratorium, both Fannie Mae and Freddie Mac advise that the moratorium does not apply to properties determined to be vacant or abandoned. With regard to the forbearance term extension, both Fannie Mae and Freddie Mac advise that the servicer must establish a Qualified Right Party Contact to evaluate the borrower for an extension. Freddie Mac also addresses revisions to the COVID-19 payment deferral, and Fannie Mae does so in Lender Letter 2021-07.
On February 10, 2021, FHFA announced the extension of COVID-19-related loan origination flexibilities from February 28, 2021, to March 31, 2021. The flexibilities relate to alternative appraisals on purchase and certain refinance loans, alternative methods for verifying employment before closing, and the expanded use of powers of attorney to assist with loan closings. Fannie Mae addresses the extension in updates to Lender Letter 2021-03 and Lender Letter 2021-04. Freddie Mac addresses the extension in Bulletin 2021-7.
As we reported, Acting CFPB Director Dave Uejio recently shared a blog post in which he directed the Bureau’s Consumer Response Unit to prepare and publish a report highlighting companies with a poor track record of responding to consumer complaints. He stated that “senior leadership of these companies can expect to hear from me.” Acting Director Uejio also expressed concern about “disparities in some companies’ responses to Black, Brown, and Indigenous communities” found by consumer advocates, but he did not name those consumer advocates or the studies that may have prompted his comments.
First, with regard to Acting Director Uejio’s comments about responsiveness to consumer complaints, the CFPB’s own website currently indicates that 97% of all companies provide timely responses to consumer complaints. Based on that statistic, U.S. companies regulated by the CFPB appear to take consumer issues reported to the Bureau seriously, and if any are slow to respond, it would be a small fraction of only 3% of CFPB-regulated entities.
Second, we are aware of several studies that might have prompted Uejio’s comments about racial disparities in company complaint responses – some of which are older and others that are more recent. For example, back in 2013, the National Community Reinvestment Coalition issued a study alleging that people in minority communities were more likely to submit complaints to the CFPB than those in predominantly white areas, and that banks were more likely to address concerns of consumers from predominantly white neighborhoods than those from minority areas.
Over the past three years, two academic studies have used the CFPB complaint database for empirical research and a 2018 FTC study leveraged the Consumer Sentinel database, which contains millions of consumer complaints filed with the FTC, CFPB and other federal and state government agencies. In each study, the researchers used proxy data based on matching addresses or zip codes to U.S. Census data to determine race, ethnicity and socioeconomic demographics. A brief synopsis of each study follows below:
- A 2021 study by two Boston College researchers, entitled “The Financial Restitution Gap in Consumer Finance: Insights from Complaints filed with the CFPB“, found that complaints from low-income zip codes or zip codes that have a larger share of African American population are approximately 30% less likely to receive financial restitution than complaints from high-income and low-African American representation by zip codes. They also found that complaints filed during the Trump Administration were 30% less likely overall to result in restitution than during the Obama Administration.
- In a study entitled “Color and Credit: Race, Regulation, and the Quality of Financial Services“ published in 2020, professors Taylor Begley and Amiyatosh Purnanadam looked at the “quantity versus quality” tradeoff in consumer financial services. The authors reviewed instances of fraud, mis-selling and poor customer service (indications of quality) for mortgage products by reviewing CFPB consumer complaints during the period 2012-2016. The authors found substantially more complaints in zip codes with lower than average income and educational attainment and higher percentages of minority populations. The authors concluded that although the quantity of financial products and services has increased, the quality of the offerings greatly decrease for lower-income, minority borrowers.
- A 2018 FTC study authored by Devesh Raval (“Which Communities Complain to Policymakers?”), which used the Consumer Sentinel database, found disparities in complaints submitted to the FTC, Better Business Bureau and CFPB. The study found that complaints vary across communities, but that higher complaint rates exist in more heavily black, college educated, and urban communities, whereas lower complaint rates were found in more heavily Hispanic and higher household size communities. The demographics of complaints were quite different for the CFPB, however, with much higher rates of complaints from black and college educated areas compared to the FTC or Better Business Bureau. Significantly higher rates of finance-related complaints came from black communities across all three complaint sources (CFPB, FTC and Better Business Bureau).
Certain limitations underlie all three studies, however. For example, the CFPB does not collect protected class information in accepting consumer complaints, so any studies of consumer complaint data must of necessity rely on proxy data to determine race and ethnicity. Proxies have been shown to be inherently unreliable with high error rates. In addition, the CFPB’s complaint database contains limited, summary information about complaints that only shows zip code (and sometimes only the first 3 digits to protect privacy), together with an indicator variable of whether the complainant is elderly or a servicemember/veteran. So as a threshold matter, relying in part on abbreviated zip code information from the CFPB’s consumer complaint database does not represent solid empirical data.
In addition, none of the studies attempts to control for variables that might impact the outcome of a complaint, such as the subject matter or complexity of the complaint, or even whether the complaint was well-founded in the first place. We doubt that such variables can be controlled for in an analysis, but without them, there is no way to avoid comparing apples and oranges within the complaint population. Treating them all as fungible, however, seems to us to be an unfounded starting point for these analyses.
Given the limitations of these studies, if the CFPB thinks there are racial or ethnic disparities in company responses to consumer complaints (timeliness, quality of customer service, restitution, etc.), we believe the Bureau should conduct its own independent study rather than rely on third-party studies. The CFPB has all of the data from the original complaints that it can draw upon to provide better data for such an analysis.
What does all of this mean for regulated financial institutions and financial services companies? Based on the title of Acting Director Uejio’s blog post (“Consumers and their experiences to be at the foundation of CFPB policymaking”) and the content, which indicates the CFPB will “mak[e] sure that consumers who submit complaints to [the Bureau] get the response and the relief they deserve,” it is clear that consumer complaint management has suddenly taken on heightened attention under new CFPB leadership. This will play out not only in the way the CFPB interacts with financial institutions and financial services companies through its complaint portal about individual complaint responses, but also in the way that complaint information is used to inform the Bureau’s policymaking, supervision and enforcement approach. Consumer complaints will be used as a key source for targeted examinations, investigations and enforcement, as well as to drive the CFPB’s rulemaking process and issuance of guidance.
Financial institutions and financial services companies supervised by the CFPB should view Acting Director Uejio’s blog post as a warning to prepare for additional scrutiny of consumer complaints. Now is the time to revisit consumer complaint management programs, policies and procedures and processes to ensure that they meet current CFPB expectations and can withstand close examination. Ensuring a timely, substantive and complete response that fully addresses a consumer’s concern and treating all complainants fairly and consistently are critical objectives. Under the CFPB’s Company Portal Manual, regulated entities are required to respond to a complaint within 15 calendar days and resolve the complaint within 60 calendar days.
For a more in-depth discussion of this issue, as well as a discussion of best practices for an effective consumer complaint management program, please tune into our podcast which will air on March 8, 2021.
The CFPB’s final rule on the role of supervisory guidance was published in last Friday’s Federal Register.
On January 20, 2021, President Biden’s Chief of Staff Ronald Klain issued a memorandum to the heads of executive departments and agencies setting forth the terms of a regulatory freeze. The memorandum included the requirement for a rule that had been sent to the Federal Register but not yet published to be immediately withdrawn from the Office of the Federal Register and approved by a department or agency head appointed by President Biden.
The CFPB’s final rule on the role of supervisory guidance was issued on January 19, 2021. Accordingly, assuming the CFPB is now considered an executive agency as a result of the U.S. Supreme Court’s Seila Law decision making the CFPB Director removable at will by the President, Mr. Klain’s memorandum would have required the CFPB to withdraw its rule for approval by Acting Director Uejio. The publication of the CFPB’s final rule in the Federal Register presumably means that Acting Director Uejio has approved the final rule.
On January 26, 2021, the FTC sent its annual letter to the CFPB reporting on the FTC’s activities related to the Equal Credit Opportunity Act (“ECOA”) and Regulation B. The Bureau leverages the FTC’s annual letter for its own Annual Report to Congress on ECOA.
The FTC has authority to enforce the ECOA and Regulation B with respect to nonbank financial service providers within its jurisdiction. The letter notes that, consistent with the Dodd-Frank Act, the FTC continues to coordinate certain ECOA enforcement, rulemaking, and other activities with the CFPB pursuant to a memorandum of understanding with the Bureau.
Unlike several of the FTC’s prior letters on its ECOA activities in recent years, the letter describes the Commission’s 2020 ECOA enforcement activities. As usual, the letter contains sections on research and policy developments, as well as educational efforts.
With regard to fair lending enforcement, the letter highlights two developments:
- The FTC brought one fair lending enforcement action in 2020 in federal court against a New York City car dealer and its general manager. In the FTC’s complaint, the Commission alleged that defendants violated ECOA and Regulation B by discriminating against African American and Hispanic consumers who financed vehicle purchases by charging them higher dealer mark-ups and fees than similarly situated non-Hispanic white consumers. In May 2020, the defendants agreed to pay $1.5 million to settle the charges, which the FTC issued as refunds to affected individuals. Defendants were also required to establish a fair lending program that will place a cap on the amount of any interest mark-up the dealer may charge to consumers, among other things.
- During 2020, the FTC and CFPB jointly filed an amici curiae brief with the U.S. Court of Appeals for the Second Circuit in Tewinkle v. Capital One, N.A., which urged the court to reverse a district court ruling that an individual who had already received credit from the defendant and who was not currently applying to the defendant for credit was not an “applicant” for purposes of the ECOA’s adverse action notice requirement. The plaintiff had alleged that a notice sent to him by the bank that it was terminating his checking account and overdraft line did not comply with the adverse action notice requirement in ECOA and Regulation B. The district court adopted the magistrate’s recommendation that the complaint should be dismissed because the plaintiff was not applying for credit and therefore was not an “applicant” entitled to notice under the ECOA. The agencies argue that an individual does not cease to be an “applicant” under ECOA and Regulation B after receiving (or being denied) an extension of credit and that ECOA’s protections apply to any aspect of credit transaction, including those pertaining to an existing arrangement with a creditor, noting there is “no temporal qualifier in the statute.” The brief also argues that Regulation B has for nearly 50 years expressly provided that the term “applicant” includes those who have received credit from a creditor. The matter remains pending in the Second Circuit.
With respect to research and policy development, the initiatives described in the letter include the following:
- The FTC submitted a comment letter in response to the CFPB’s request for information concerning ECOA and Regulation B. The comment addressed two topics related to agency discretion and highlighted the FTC’s work in disparate impact analysis and small business lending.
- In 2020, the FTC hosted the 13th Annual FTC Microeconomics Conference, which included a paper session and discussion on “Un”Fair Machine Learning Algorithms. The issues addressed were that financial institutions increasingly use machine learning algorithms in making decisions in areas such as access to credit, and several studies have shown that enforcing equal treatment in algorithms often leads to disparate outcomes across demographic groups if systemic differences exist in the groups.
- The FTC’s Military Task Force continued its work on military consumer protection issues. The letter also notes that the FTC staff serves as a liaison to the American Bar Association’s Standing Committee on Legal Assistance for Military Personnel (“ABA LAMP”), which supports initiatives to deliver legal assistance and services to servicemembers, veterans, and their families.
- The FTC continues to be a member of the Interagency Task Force on Fair Lending along with the CFPB, DOJ, HUD and the federal banking agencies. Interestingly, the letter notes that “[s]tarting in 2020, the FTC also began participating in the newly-formed Interagency Fair Lending Methodologies Working Group.” The Working Group consists of staff members from the FTC, CFPB, DOJ, HUD, federal banking agencies, and the Federal Housing Finance Agency. The Working Group’s purpose is to “coordinate and share information on analytical methodologies used in enforcement of and supervision for compliance with fair lending laws, including ECOA, among others.” Currently, no information is publicly available about this new group.
- With regard to the FTC’s consumer and business educational initiatives, the FTC states that in 2020, it “conducted efforts to provide education on significant issues, including those related to credit transactions to which Regulation B pertains.” As an illustration, the FTC references two blog posts – one related to the New York City auto dealer case (consumer tips to avoid discriminatory practices and fees and tips to avoid paying too much for a new car), and another related to the risk of unfair or discriminatory outcomes in businesses’ use of artificial intelligence technology.
Last week, HUD’s Acting Assistant Director for Fair Housing and Equal Opportunity issued a memorandum directing HUD’s Office of Fair Housing and Equal Opportunity to take a series of actions “to administer and fully enforce the Fair Housing Act to prohibit discrimination because of sexual orientation and gender identity.”
The memorandum is intended to implement President Biden’s Executive Order 13988 on Preventing and Combating Discrimination on the Basis of Gender Identity or Sexual Orientation (Executive Order). The Executive Order cites the U.S. Supreme Court’s decision last year in Bostock v. Clayton County, Georgia, in which the Court ruled that firing an employee for being homosexual or transgender constitutes discrimination based on the employee’s sex in violation of Title VII of the Civil Rights Act. Title VII makes it “unlawful…for an employer to fail or refuse to hire or to discharge any individual, or otherwise to discriminate against any individual…because of such individual’s race, color, religion, sex, or national origin.”
The Executive Order states that “under Bostock’s reasoning, laws that prohibit sex discrimination—including Title IX of the Education Amendments of 1972, the Fair Housing Act, and section 412 of the Immigration and Nationality Act, along with their respective implementing regulations—prohibit discrimination on the basis of gender identity or sexual orientation, so long as the laws do not contain sufficient indications to the contrary.” (citations omitted). The Executive Order directs the heads of every federal “agency” to assess all agency actions that were taken “under Title VII or any other statute or regulation that prohibits sex discrimination” and “consider whether to revise, suspend, or rescind such agency actions, or promulgate new agency actions, as necessary to fully implement statutes that prohibit sex discrimination and [the Biden Administration’s policy to prevent and combat discrimination on the basis of gender identity or sexual orientation, and fully enforce Title VII and other laws that prohibit such discrimination.]”
By its terms, the Executive Order does not apply to agencies defined as an “independent regulatory agency” by 44 U.S.C. Sec. 3502(5). Despite the U.S. Supreme Court’ Seila Law decision making the CFPB Director removable at will by the President, the CFPB continues to be included as an “independent regulatory agency” by Sec. 3502(5).
Nevertheless, it is likely that the CFPB under the Biden Administration will take steps to implement the Administration’s policy goals, including making discrimination on the basis of gender identity or sexual orientation a focus of fair lending supervision and enforcement. The ECOA makes it “unlawful for any creditor to discriminate against any applicant, with respect to any aspect of a credit transaction on the basis of race, color, religion, national origin, sex or marital status, or age (provided the applicant has the capacity to contract).” Under former Director Cordray’s leadership, the CFPB began to build a case for extending ECOA protection to discrimination based on gender identity or sexual orientation. While the CFPB under former Director Kraninger’s leadership did not publicize any efforts to extend ECOA protections to sexual orientation or gender identity, the CFPB continued to maintain information about credit discrimination on its website containing the following statement: “Currently, the law supports arguments that the prohibition against sex discrimination also affords broad protection from discrimination based on a consumer’s gender identity and sexual orientation.” Also, in lieu of holding a symposium on ECOA issues, the CFPB issued a request for information in July 2020 seeking comment on various issues relating to the ECOA and Regulation B. Among such issues is whether the Supreme Court’s Bostock decision should affect how the CFPB interprets the ECOA’s prohibition of discrimination on the basis of sex, and if so, in what ways.
Companies should also be mindful of the fact that numerous state laws already prohibit discrimination in credit transactions on the basis of sexual orientation or gender identity. Companies that have not already revised their policies, procedures, and fair lending analyses to incorporate discrimination based on sexual orientation or gender identity should not delay in giving attention to this issue.
On January 14, 2021, the NCUA and CFPB announced the agencies have entered into a memorandum of understanding relating to their joint supervision of federally insured credit unions over $10 billion in assets. The MOU seeks to “improve coordination, cooperation, and efficiency generally, and to reduce the burden to institutions and examination staff” by proactively sharing information and coordinating on examinations. The MOU adds to the current collaboration framework and does not replace existing MOUs between the agencies and state regulators.
In the MOU, the agencies agree to collaborate on examinations as follows:
- In accordance with a 2012 MOU, the agencies will continue to share relevant supervisory information, including request letters and examination reports, through electronic means. The agencies will also establish a working group to develop a process for sharing information securely.
- The agencies will share examination schedules with each other and with each other’s regional offices annually, and where there is overlap in subject matter areas for review, the agencies will coordinate examination activities to the extent possible.
- The agencies’ supervision and enforcement staff will meet semiannually to review possible actions and resolve any conflicts with regard to what constitutes compliance and the appropriate remedy for noncompliance. If one agency has already reviewed a matter being considered by the other agency for possible enforcement action and found no violation or imposed a supervisory remedy, staff will ensure agency leadership is aware of the potential conflict before proceeding with the action.
- Each agency will notify the other of any action or suit at least two days in advance.
The agencies also agreed to certain administrative steps to improve collaboration processes and understanding of the regulatory environment. The agencies will meet semiannually to discuss supervision strategy and identify opportunities for coordination. The chief data officers from each agency will also meet semiannually to facilitate information sharing and data management. At least annually, the agencies will also share training materials and each agency will make its training programs available to the other agency’s staff. Beginning in 2022, the agencies will hold at least one training per year on a topic of mutual interest.
The agencies also agreed to further discussion on potentially sharing the data collected from the voluntary diversity self-assessment.
While this MOU is another step in the right direction for more proactive collaboration between the NCUA and CFPB, larger credit unions preparing for CFPB oversight are still faced with the numerous challenges of interacting with an unknown regulator. Ballard Spahr’s consumer finance team is experienced with the CFPB’s expectations and supervisory process. We help clients prepare for examinations in advance by assessing their compliance management systems, identifying areas of compliance risk, and conducting substantive reviews similar to an examination. During an examination, we can assist in responding to exam inquiries and organizing a presentation. If the $10 billion mark is within sight at your credit union, let our team help you prepare for the CFPB.
Again demonstrating that he does not intend to merely be a caretaker for the CFPB’s next Director, Acting Director Uejio has publicly shared his statement to the Bureau’s Division of Consumer Education and External Affairs (CEEA) in which he directs Consumer Response to prepare a report highlighting the companies with a poor track record in responding to consumer complaints. The publication of Mr. Uejio’s statement to CEEA follows the publication of his statements to the Bureau’s Division of Supervision, Enforcement, and Fair Lending and Division of Research, Markets, and Regulations.
In his statement to CEEA, Mr. Uejio indicated that “making sure that consumers who submit complaints to us get the response and the relief they deserve” is one of his top priorities. He raised the concern that “some companies have been lax in meeting their obligation to respond to complaints” and commented that “[i]t is the Bureau’s expectation that companies provide substantive responses that address the issues consumers describe in their complaints.” He also raised concern about “disparities in some companies’ responses to Black, Brown, and Indigenous communities” found by consumer advocates. (He did not identify those consumer advocates.) Mr. Uejio stated that he has asked Consumer Response “to prepare a report highlighting the companies with a poor track record on these issues” and indicated that the Bureau will publish this analysis and that “senior leadership of these companies can expect to be hearing from me.”
Mr. Uejio’s statement also raised the specter that the CFPB could place increasing reliance on unverified, anecdotal information in consumer complaints. He commented that “[t]he Bureau must transition from treating consumer input as mere anecdotes or stories to a world in which the experience of our neighbors, our families, and our communities serve as crucial data that drives our policymaking.”
Mr. Uejio also listed the following steps that he has asked CEEA to take “[t]o help consumers navigate the housing protections for those affected by COVID”:
- Target Bureau resources to reach and help struggling homeowners in delinquency or at risk of foreclosure and renters at risk of eviction to ensure they know their rights.
- Ramp up our coordination efforts with other agencies to provide help and information to at-risk homeowners and renters.
- Collaborate with coalitions of stakeholders, including consumer advocates, civil rights groups, grassroots, community-based organizations, and individual consumers to get these messages to homeowners in languages and terminology they understand.
- Help ensure homeowners and renters can access HUD-approved housing counseling organizations to help them manage the challenges they face due to financial hardships brought on by COVID.
He indicated that he has also directed CEEA to:
- Lead a refresh of the Bureau’s website “so it is more user friendly, focused on consumers rights, and signals that in no uncertain terms, we are on their side.”
- Expand the Bureau’s social media presence.
- Aggressively rebuild and repair the Bureau’s relationships with consumer, civil rights, racial justice, and tribal and Indigenous rights groups.
In Part I of our two-part podcast, we are joined by special guest former CFPB Director Richard Cordray. After discussing the process of transitioning to new leadership, Mr. Cordray shares his thoughts on how Mr. Uejio and, if confirmed by the Senate, Mr. Chopra, are likely to approach their new leadership roles at the CFPB and their expected priorities.
Ballard Spahr attorney Alan Kaplinsky hosts the conversation.
Click here to listen to the podcast.
According to the Consumer Bankers Association, the Senate Banking Committee will hold a hearing on March 2, 2021 to consider President Biden’s nomination of Rohit Chopra to serve as CFPB Director. The nomination was officially received by the Senate on February 13.
In its February 2021 Bulletin, the California Department of Financial Protection and Innovation (DFPI) reminds licensed mortgage loan servicers that DFPI examinations will include processes to determine compliance with state and federal laws providing consumer protections with regard to COVID-19-related foreclosures. The DFPI notes that these laws “include provisions allowing for forbearance of mortgage payments, post-forbearance options forbidding the requirement of lump sum payments, and the extension of the California Homeowner Bill of Rights to tenant occupied principal residences.” The DFPI also notes that California law protects both federally backed and non-federally backed mortgage loans.
The bulletin also warns that the DFPI will take the necessary actions to ensure that mortgage loan servicers comply with the homeowner protections in the California Homeowners Bill of Rights (which was enacted in 2013).
In perhaps the most direct confirmation that the Biden Administration plans to return the CFPB to the dominant and active role it had under the leadership of former Director Cordray, Acting Director Uejio has published a blog post announcing that the Bureau has launched “an effort to recruit attorneys at all experience levels to join our team.”
Mr. Uejio indicates in his blog post that the Bureau’s recruitment of more attorneys is necessary to support the Bureau’s ability to engage in “vigorous oversight of all applicable Federal laws and the fullest utilization of our legal authorities.” The Bureau’s job posting (which is linked to Mr. Uejio’s blog post) states even more directly that the Bureau “is currently working to ramp up the vigor of our oversight of consumer financial laws.”
The Bureau’s recruitment efforts include all of its attorney groups, including the Offices of Enforcement, Regulations, Supervision Policy, Fair Lending and Equal Opportunity, and the Legal Division.
The Eleventh Circuit has joined the Second, Sixth, Seventh, Eighth, and Ninth Circuits in rejecting administrative feasibility as a prerequisite for class certification. The decision reverses unpublished Eleventh Circuit authority and deepens a circuit split with the First, Third, and Fourth Circuits on the issue.
In Cherry v. Dometic Corporation, 18 owners of gas-absorption refrigerators manufactured and sold by Dometic Corporation sued the company over alleged product defects. The plaintiffs sought to represent a class consisting of “all persons who purchased in selected states certain models of Dometic refrigerators that were built since 1997.” At the class-certification stage, the parties each addressed whether the proposed class satisfied Rule 23’s ascertainability requirement. Plaintiffs argued, among other things, that the proposed class was ascertainable because the class definition relied on objective criteria. Dometic asserted that ascertainability requires proof of administrative feasibility, which the plaintiffs failed to satisfy. The district court denied certification. Relying on unpublished Eleventh Circuit decisions, the district court concluded that administrative feasibility is an element of Rule 23’s ascertainability requirement, and the plaintiff had not satisfied it.
Plaintiffs appealed, arguing that administrative feasibility is not required to satisfy ascertainability or otherwise certify a class. The Eleventh Circuit agreed. As explained by Chief Judge Pryor, ascertainability – i.e., the requirement that class membership is capable of determination – is an implied prerequisite of Rule 23. Yet “[a]dministrative feasibility is not an inherent aspect of ascertainability,” as class “membership can be capable of determination without being capable of convenient determination.” Nor is administrative feasibility required for class certification under circuit precedent or Rule 23’s text. Accordingly, “[p]roof of administrative feasibility cannot be a precondition for certification.”
While administrative feasibility is no longer a prerequisite for certification in the Eleventh Circuit, it remains relevant to Rule 23(b) classes. A district court may consider administrative feasibility as part of Rule 23(b)(3)(D)’s manageability criterion. “But because Rule 23(b)(3) requires a balancing test, it does not permit district courts to make administrative feasibility a requirement.” Chief Judge Pryor further cautioned that “[a]dministrative feasibility alone will rarely, if ever, be dispositive, but its significance will depend on the facts of each case.”
It remains to be seen whether the Cherry decision will prompt more class actions in the Eleventh Circuit, especially in light of the appellate court’s recent rejection of incentive awards for named plaintiffs. For those lawsuits that are filed, plaintiffs may be trading a hurdle to certification for practical difficulties with identifying and notifying members of an unwieldy class.
State Regulatory Registry Releases Annual Report Looking Back on 2020
In conjunction with the 2021 Nationwide Mortgage Licensing System (NMLS) Annual Conference, the State Regulatory Registry (SRR) released its 13th Annual Report, “Creating a Path to Modernization,” which highlights SRR’s activities and the NMLS program operations and performance in 2020. The report addresses various topics including:
- The launch of the State Examination System (SES);
- Transitioning the money services businesses industry onto NMLS; and
- State agencies and industry responses to the COVID-19 pandemic, for example, implementing remote-work policies and conducting online proctored testing for the SAFE MLO test.
Washington State Publishes Fourth Amended Guidance for Mortgage Loan Servicers to Support Consumers During COVID-19
The Washington State Department of Financial Institutions recently published a fourth amended guidance urging regulated and exempt residential mortgage loan servicers to continue to take reasonable and prudent actions to support consumers who are adversely impacted by COVID-19. Among other actions, the Department suggests forbearing mortgage payments, refraining from reporting late payments to credit rating agencies, and proactively reaching out to mortgagors to explain the assistance being offered to mortgagors.
The amended guidance is effective until the state is no longer operating under a state of emergency declaration.
Virtual | April 8, 2021
Credit Reporting under the CARES Act
Speaker: Kim Phan
CCPA to CPRA - Enhancing Privacy Compliance Systems
Speaker: Kim Phan
The Twin Challenge of 2021- Compliance and COVID
Speaker: Richard J. Andreano, Jr.
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