|March 3, 2014|
Previously published on February 27, 2014
Speaking at a Mortgage Bankers Association meeting on February 19th, CFPB Deputy Director Steven Antonakes made frank comments regarding the CFPB’s view of the current state of compliance by the mortgage servicing industry with the CFPB’s new servicing rules. Antonakes said that he remains “deeply disappointed by the lack of progress the mortgage servicing industry has made” and warned that the CFPB’s work in the area is “far from over.”
Chief among the CFPB’s concerns are documentation practices, loss mitigation processes, and wrongful foreclosures. According to Antonakes, the CFPB expects mortgage servicers to “conduct outreach to ensure that all consumers in default know their options” and to “assess loss mitigation applications with care, so that consumers who qualify - get the loss mitigation that saves them...from foreclosure.” The CFPB also expects servicers to “pay exceptionally close attention to servicing transfers.”
Acknowledging that the CFPB had previously stated that it would be lenient with mortgage servicing companies that made “good-faith efforts” to comply with the CFPB’s new mortgage servicing rules, Antonakes changed tack and warned that the CFPB’s tolerance will only extend so far. Antonakes stated: “A good-faith effort, however, does not mean servicers have the freedom to harm consumers. It has felt like ‘Groundhog Day’ with mortgage servicing for far too long.”
Antonakes concluded his remarks by saying that “business as usual has ended in mortgage servicing. Groundhog Day is over.”
Trade Group Criticizes CFPB
In a recent letter addressed to CFPB Director Richard Cordray, the U.S. Chamber of Commerce’s Center for Capital Markets Competitiveness criticized the CFPB’s regulatory approach of “regulation by enforcement settlement combined with issuance of brief guidance statements” with respect to certain areas of regulation. The Chamber encouraged the CFPB to follow the formal rulemaking process with public notice and comment in order to avoid the “uncertainty and adverse consequences” caused by CFPB’s current approach. Specifically, the letter identified three areas in which the Chamber sees this as an issue: (1) the definition of “abusive” acts and practices; (2) testing for disparate impact liability in the indirect auto lending context; and (3) standards for a financial service company’s liability for the actions of its service providers.
CFPB Issues Final Rule on Attorneys Fees in Adversarial Proceedings
On February 10th, the CFPB published final regulations implementing the Equal Access to Justice Act (EAJA). The EAJA provides for payment of fees and expenses to eligible parties who have prevailed against the CFPB in certain administrative proceedings. In order to obtain an award, the EAJA requires the filing of an application that shows that the party is a prevailing party and is eligible to receive an award under the EAJA. The CFPB’s implementing regulations require applicants to submit certain information in their applications. The rule’s eligibility criteria limit the award of attorneys fees to certain small entities. For example, ineligible for an award of attorneys fees are individuals with a net worth of more than $2 million and public or private entities (e.g., corporations, LLCs and partnerships) with a net worth of more than $7 million and more than 500 employees. The rule becomes effective on March 12, 2014.
Increased Scrutiny of Largest Student Loan Servicer
The nation’s largest student loan servicer disclosed in its annual report filed this week that it has seen a “significant” increase in the number of requests and investigative demands from regulators, including both states attorney generals and the CFPB. The requests are related to the servicer’s business and its service providers.