For more information, please visit www.lenderlawwatch.com or www.enforcementwatch.com 11 MORTGAGE CREDIT CARDS AUTO LOANS TELEPHONE CONSUMER PROTECTION ACT CONSUMER FINANCIAL & PROTECTION BUREAU STUDENT LENDING DEBT COLLECTION WHAT TO WATCH More HMDA updates from the CFPB | Increased RESPA activity | Continued focus on discriminatory origination and servicing practices the goal of evaluating community housing needs and discriminatory lending practices. The proposed revisions include permitting some data fields to be marked as “not applicable” for loans originated before certain regulatory requirements took effect, clarifying the definitions of “temporary financing” and “automated underwriting system,” and reiterating that financial institutions must report on purchased loans. Most HMDA provisions took effect on January 1, 2018. Court Enters Judgment Against Mortgage Lender for Violating FHA Underwriting Requirements. In September, the U.S. District Court for the Southern District of Texas entered a $296 million judgment against Allied Home Mortgage, and a $25 million judgement against its CEO, after a jury found that they violated the FCA and FIRREA in underwriting FHA-insured loans through shadow branches and by falsifying quality control reports. This is the only case to go to trial so far concerning allegations that, during the financial crisis and its aftermath, a lender originated mortgage loans through HUD’s direct endorsement program in violation of underwriting requirements. CFPB Updates TILA-RESPA Integrated Disclosure Rule (TRID). In July, the CFPB finalized amendments to the “Know Before You Owe” mortgage disclosure rule, or TRID. These amendments allow a lender to exclude the finance charge from the total of payments calculation, clarify that a housing assistance loan’s eligibility for a partial exemption for disclosure requirements is unaffected by the lender charging recording or transfer tax fees, and explain how a lender can provide separate disclosure forms to different parties to a transaction in order to protect privacy. Instead of fixing the compliance “Black Hole,” where a closing delay results in a lender being unable to use the required Closing Disclosure form to reset fee tolerances, the CFPB issued a new proposal for public comment. LOOKING AHEAD TO 2018 This year, the CFPB will be re-examining its mortgage- related regulations under the Dodd-Frank Act, as every five years the CFPB is required to review its regulations. The CFPB’s 2018 review will encompass industry defining rules such as the ability-to-repay requirement. The CFPB has commented that it plans to examine whether the requirement has become too burdensome. It is far from certain that the requirement will survive the combination of industry pressure and a new CFPB director. Mortgage servicing is likely to remain a focal point of the CFPB’s enforcement energies. The Spring 2017 Supervisory Highlights noted that three mortgage servicing practices of particular concern were dual tracking, vague periodic statements, and errors in disbursing escrow funds. In October, the CFPB issued a proposed rule clarifying when servicers must provide periodic statements to borrowers in bankruptcy. That rule goes into effect in April 2018, so lenders should expect the CFPB to emphasize compliance with that rule during examinations or through enforcement actions. Members of both political parties in Congress have introduced so-called “Madden fix” bills that would permit a nonbank entity that purchases loans from a national bank to charge the same rate of interest on the loans as the national bank. In 2015, the Second Circuit ruled in Madden v. Midland Funding, LLC that the National Bank Act did not preempt state law usury claims against nonbank assignees of a bank loan. Congress is likely to “fix” Madden by amending Section 85 of the Act to extend preemption of state law to third-party transfers. Finally, trends observed in 2017, such as the CFPB’s focus on RESPA or the DOJ’s focus on discriminatory lending, are likely to continue. And to the extent federal enforcement begins to lag under new leadership, state attorneys general have indicated that they intend to pick up the slack to sustain, or even increase, enforcement. In December, a group of 17 Democratic state attorneys general, led by the New York and California attorneys general, informed President Trump that they intend to take enforcement into their own hands should the CFPB, under Director Mulvaney, fail to zealously enforce consumer protection laws.