Consumer Law & Policy Blog

Politico Articles and the CFPB

In Wall Street turns wrath — and cash — on Obama, Ben White reports that the financial industry is making enormous donations against President Obama.  In explaining which firms are making the contributions, and why, White notes: "Many smaller and midsize banks also recoiled over the creation of a powerful regulator in the Consumer Financial Protection Bureau, which they claim has far too much unchecked power and will drive up their compliance costs."  Meanwhile, CFPB head Richard Cordray published an op-ed, which, among other things, describes some of the Bureau's upcoming initiatives:

In the future, we will also issue new consumer protections around “force-placed insurance” — a term referring to hazard insurance that mortgage servicers secure at the borrower’s expense, typically at a very high cost, when they believe (even erroneously) that a borrower’s previous hazard insurance has lapsed.

Under the new law, we will write a rule to prevent servicers of most mortgages from charging for this insurance unless there is a reasonable basis to believe that borrowers have failed to maintain their own insurance. It will require servicers to provide consumers an opportunity to obtain their own insurance, which is generally less expensive than force-placed insurance obtained by the servicer.

We will also issue new disclosures for hybrid adjustable-rate mortgages — complicated loans that usually start with a “teaser” interest rate before resetting to a much higher rate. Consumers will be notified months ahead of their first interest rate adjustment and will receive a good-faith estimate of their new monthly payment, along with a list of alternatives they may pursue to head off the higher rate, including refinancing and renegotiation of loan terms

Debate Over the Mortgage Fraud Settlement

Michael Hiltzik explains why he thinks the mortgage fraud settlement is great -- for politicians and banks, that is. And, in a long, detailed post at Credit Slips, Georgetown Law prof Adam Levitin says that the score is "Banks 1, Public 0." On the other hand, the National Consumer Law Center's reaction is largely favorable.

UPDATE: Consumers Union says that "[t]he settlement represents an important step in the effort to help homeowners harmed by the foreclosure crisis and will require the participating banks to implement reforms to prevent certain foreclosure abuses in the future. But more is needed to hold financial institutions accountable for their role in precipitating the nation’s economic crisis[.]"

House Republicans Continue Efforts to Enable Financial Institutions to Regulate Their Regulator, the CFPB

The Washington Post reports that "The House GOP is now moving forward with bills that would remove the CFPB director from overseeing the Federal Deposit Insurance Company and allow Congress to directly control its funding every year."  As for why this would enable financial institutions to curb the CFPB, see here.  WaPo ominously notes: "[T]he GOP’s new bills provide a clear guide to what is likely to happen to the CFPB if Republicans take full control of Congress and/or the White House."

The Foreclosure Settlement

The only original source materials available so far are the press releases at HUD and Justice.  A dedicated web site has been set up, www.nationalmortgagesettlement.com, but the actual settlement terms have not been released yet.

Analysis will really have to wait until the settlement documents are filed in federal court.  For example, the press releases refer to $10 billion in principal reduction (on non-GSE mortgages) but HUD Secretary Donovan said at the press conference that banks will not get dollar-for-dollar credit to reduce principal that would be uncollectible.  For example, if a homeowner is 50% underwater and 24 months delinquent and the bank has already written off 50% of the $200,000 loan, the bank does not get full credit for reducing principal by $100,000.  He speculated that the $10 billion could actually produce $35 billion in loan balance reductions for borrowers, but we will need to see the settlement language to evaluate that assertion.

It is certainly a plus to have Joseph Smith, former chief bank regulator for North Carolina, acting as monitor.  Hopefully he will have an adequate staff for the job. 

From what I can see, the settlement does not completely eliminate the notorious "dual tracking" of foreclosures and workouts, which Fannie Mae and Freddie Mac will continue in any event given that they are not covered by this deal. 

More comments when we know what the actual terms are. Update:  there may not be final actual terms, according to this report in American Banker. 

More on the Mortgage Fraud Settlement

Here, here, here, and here. The agreement is between state attorneys generals and five major banks -- Wells Fargo, Bank of America, JPMorgan Chase, Ally Financial, and Citigroup. Here's a nice FAQ from the Washington Post. There, the Post reports that "California’s Attorney General Kamala Harris has not yet publicly committed to a deal" in part because she objects "a provision that protects banks from future lawsuits." (More recent reports indicate, however, that Harris has agreed to the deal.) I'm not familiar with the details (of course), but it strikes me that it would be difficult at best for the states' settlement with the banks to preclude suits by individuals against the banks (whether the individuals were suing alone or in classes). Perhaps the dispute was over the scope of the release regarding future suits by states against the banks. We shall see.

Consumer Health Takes a Hit at the Movie Theater

The folks at the Consumerist explain just how unhealthy it can be to chow down at the movie theater. Here's the intro: "Like to snack at the movies? That tub of popcorn and large soda can amount to almost a full day's calories, two days' worth of fat and a cup of sugars." The article includes a bunch of data from a Consumer Reports investigation.

Huge Mortgage Deal About to Go Down

"Government officials are on the verge of an agreement worth as much as $25 billion with five major banks, capping a yearlong push to settle federal and state probes of alleged foreclosure abuses by lenders," says the Wall Street Journal. "The deal would represent the largest government-industry settlement since a mammoth, multistate deal with the tobacco industry in 1998."

Save the Date--Teaching Consumer Law Conference

On Friday, May 18^th and Saturday, May 19^th, the Center for Consumer Law at the University of Houston will present its sixth Teaching Consumer Law Conference. This is a unique conference for professors, adjuncts professors and those interested in teaching consumer law.

This year’s Conference looks at topics relevant to teaching consumer law in the new and evolving economy. More than 25 presenters from around the world will discuss issues of interested to anyone with an interest in how consumer law is taught in law school.

For a look at schedule topics and presenters, and to receive a brochure and registration form as soon as it is available, click here. For more information, contact me at, alderman@uh.edu.

 

New Foreclosures Report from NCLC

A new report from the National Consumer Law Center, documents, for the first time, how foreclosure mediation can keep paying borrowers in their homes while saving billions of dollars for local governments and investors. The report concludes that allowing homeowners to face mortgage servicers and their attorneys without third-party intervention is a recipe for disaster.

Rebuilding America: How States Can Save Millions of Homes Through Foreclosure Mediation calls on all states to adopt strong foreclosure mediation programs. The report reviews existing programs in 19 states and makes recommendations for best practices for all states to adopt, using foreclosure mediation data from the last three years to draw its conclusions. The report includes examples of programs that are more successful (Connecticut, Nevada, and New York) and those that are less so. Judicial enforcement of mediation program requirements in several states is also included.

The NCLC website also includes information regarding court decisions, pending mediation state legislation, model documents and a summary of all current state programs as well as a link to each program. 

CBS News Video of Odometer Fraud

 

Odometer fraud violates the Federal Motor Vehicle Information and Cost Savings Act, 49 U.S.C. § 32701 et seq., and gives rise to liability under the common law fraud tort and state UDAP statutes--but that doesn't mean it doesn't happen, as the story indicates.