Consumer Law & Policy Blog

CFPB Report on Reverse Mortgages

Consumer Reports explains that

A report today by the Consumer Financial Protection Bureau shows that an increasing number of homeowners are taking out reverse mortgages at a younger age, putting them at risk of using up the funds prematurely. The financial watchdog also announced plans to collect input from the public on rules to rein in reverse mortgage abuses. The CFPB report found that half of reverse mortgage borrowers are in their 60s, and that 73 percent of all borrowers took all or almost all of their available funds up front. Overall, almost 10 percent of all reverse mortgage borrowers are at risk of foreclosure. Non-borrowing spouses are especially vulnerable.

Here is the CFPB's report, which was mandated by the Dodd-Frank financial reform legislation. Go here for the CFPB's 4-page brochure on reverse mortgages. More information can be found here. HT to Craig Briskin.

Affordable Care Act upheld

The coverage is everywhere by now, but for readers of the blog, a quick summary of the major points in today's decision:

1. The ACA's individual mandate is constitutional under Congress's taxing power and therefore upheld. (Five justices agree that the the commerce power does not sustain the mandate, but there is no one opinion for this group.)

2. The ACA's expansion of Medicaid eligibility impermissibly coerces states by threatening to withhold all Medicaid funding (not just funding for the expansion) if the states do not comply. But this problem is remedied by limiting the penalty to the withdrawal of funding for the expansion only (as opposed to all Medicaid funding).

3. No other provision of the ACA is affected.

So, overall, the ACA is upheld, by a 5-4 vote (Roberts, Ginsburg, Breyer, Sotomayor, Kagan). The dissenters (Scalia, Kennedy, Thomas, and Alito) would have thrown the entire law out.

Supreme Court Decides First American Financial Corp. v. Edwards

The case has been dismissed! More later.

New Student Loan Costs, Despite The Deal on Interest Rates

We reported here that congressional negotiators had come to a deal that prevented federal student loan interest rates from doubling on July 1 (from 3.4% to 6.8%). But as the Washington Post explains in this article there's some fine print that students are going to hate:

College students are facing a roughly $20 billion increase in the cost of their federal loans, despite a much-heralded deal in Washington to contain the expense of higher education. Starting Sunday, students hoping to earn the graduate degrees that have become mandatory for many white-collar jobs will become responsible for paying the interest on their federal loans while they are in school and immediately after they graduate. That means they’ll have to pay an extra $18 billion out of pocket over the next decade. Meanwhile, the government will no longer cover the interest on undergraduate loans during the six months after students finish school. That’s expected to cost them more than $2 billion.

 

Which Lenders Have Been the Subject of the Most Complaints Reported in the CFPB's Credit Card Database ?

by Jeff Sovern

The Charlotte Observer created a chart, which you can see here.  Looks like the winner is Cap One. But the Observer's chart is not ideal, though it's an improvement over the way the Bureau presented the raw data.  Ideally, the chart would indicate the resolution of the complaints, at least to the extent the Bureau's data included that, as well as the number of credit card customers each issuer has, since, all other things equal, we would expect issuers with more customers to generate more complaints.  Put another way, if a lender with few credit cardholders has, say, twenty complaints, and another lender with five times as many customers has forty complaints, the second lender would have fewer complaints per account and so would appear to do a better job of satisfying consumers.  The number of credit cards each lender issues may not be publicly available, however.  You can read another story about the database here.

Apparent Deal on Student Loan Interest Rates

Federal student loan interest rates will double from 3.4% to 6.8% on July 1 unless Congress intervenes. As reported this morning in the Washington Post, a deal Senate has apparently been struck. The sticking point has been how to pay for the government subsidy that creates these below-market rates. Here's what the deal provides on that score:

The extension would be paid for by raising premiums for federal pension insurance, an idea acceptable to businesses because rules on how companies calculate their pension liabilities would be changed. [Ed note: Does this mean that pensioners are actually paying for the subsidized interest rates?]  A senior Democratic aide said the pension proposals, which came from [Senator Harry] Reid, would generate $5.5 billion. Meanwhile, students would be limited in how long they could receive a federally subsidized loan to 150 percent of their program length — so, six years for a four-year undergraduate degree — a suggestion from Republicans.

More on D.C. Circuit Ruling Upholding Greenhouse Gas Rules

We posted yesterday about the D.C. Circuit's ruling upholding the Obama Administration's regulations on greenhouse gas emissions. For reaction to this major ruuling, go here, here, here, and here. The LA Times reminds us of the political volatility of the issue:

The fuel economy standard crafted with the auto industry, built on EPA's decision to regulate greenhouse gases, may have been the signature environmental accomplishment of the Obama administration. But the EPA's greenhouse gas efforts may end up being curtailed down the line. Presumptive Republican presidential candidate Mitt Romney has vowed, if elected, to strip the EPA of its authority to regulate the emissions.

Robert Hockett Paper on Using Eminent Domain to Solve the Mortgage Overhang

 

Robert C. Hockett

 of Cornell has written It Takes a Village: Municipal Condemnation Proceedings and Public/Private Partnerships for Mortgage Loan Modification, Value Preservation, and Local Economic Recovery. The paper was also discussed in Robert J. Shiller's Economic View column in the Sunday Times.  Here's the paper's abstract:

Respected real estate analysts now forecast that the U.S. is poised to experience a renewed round of home mortgage foreclosures over the coming 6 years. Up to 11 million underwater mortgages will be affected. Neither our families, our neighborhoods, nor our state and national economies can bear a resumption of crisis on this order of magnitude.

I argue that ongoing and self-worsening slump in the primary and secondary mortgage markets is rooted in a host of recursive collective action challenges structurally akin to those that brought on the real estate bubble and bust themselves. Collective action problems of this sort require duly authorized collective agents for their solution. At present, the optimally situated such agents for purposes of mortgage market clearing are municipal governments exercising their traditional eminent domain authority.

I sketch a plan pursuant to which municipalities, in partnership with investors, can condemn underwater mortgage notes, pay mortgagees fair market value for the same, and systematically write down principal. Because in so doing they will be doing what parties themselves would do voluntarily were they not challenged by structural impediments to collective action, municipalities acting on this plan will be rendering all better off. They will also be leading the urgently necessary project of eliminating debt overhang nationwide and thereby at last ending our ongoing debt deflation.

Class action related cert grants yesterday

GENESIS HEALTHCARE CORP. v. SYMCZYK --Whether defendants in a FLSA collective action may moot the case by making a Rule 68 offer of judgment to the named plaintiff that would provide complete individual relief.

(This is related to the issue whether the named plaintiff in a class action may likewise be "picked off," an issue percolating in the courts of appeals. Disclosure: my colleague Adina Rosenbaum here at Public Citizen is co-counsel for the Respondent.)

COMCAST CORP. v. BEHREND -- “Whether a district court may certify a class action without resolving whether the plaintiff class has introduced admissible evidence, including expert testimony, to show that the case is susceptible to awarding damages on a class-wide basis.”

D.C. Circuit Upholds EPA's Greenhouse Gas Rules

In this 82-page opinion, the D.C. Circuit has largely upheld the Environmental Protection Agency's greenhouse gas rules issued after the Supreme Court's decision in Massachusetts v. EPA demanded regulatory action on greenhouse gases. (The court dismissed part of the challenge on the ground that the challengers lacked standing.)

The per curiam opinion came from a panel comprised of Judges Sentelle, Rogers, and Tatel. To give you an idea of the breadth of the interests at stake: The first 14-plus pages of the opinion is a list of the lawyers and the various parties, non-profit organizations, trade groups, and others who appeared before the court.

The first couple paragraphs of the opinion summarizes the issues and the results:

Following the Supreme Court’s decision in Massachusetts v. EPA, 549 U.S. 497 (2007)—which clarified that greenhouse gases are an “air pollutant” subject to regulation under the Clean Air Act (CAA)—the Environmental Protection Agency promulgated a series of greenhouse gas-related rules. First, EPA issued an Endangerment Finding, in which it determined that greenhouse gases may “reasonably be anticipated to endanger public health or welfare.” See 42 U.S.C. § 7521(a)(1). Next, it issued the Tailpipe Rule, which set emission standards for cars and light trucks. Finally, EPA determined that the CAA requires major stationary sources of greenhouse gases to obtain construction and operating permits. But because immediate regulation of all such sources would result in overwhelming permitting burdens on permitting authorities and sources, EPA issued the Timing and Tailoring Rules, in which it determined that only the largest stationary sources would initially be subject to permitting requirements.

Petitioners, various states and industry groups, challenge all these rules, arguing that they are based on improper constructions of the CAA and are otherwise arbitrary and capricious. But for the reasons set forth below, we conclude: 1) the Endangerment Finding and Tailpipe Rule are neither arbitrary nor capricious; 2) EPA’s interpretation of the governing CAA provisions is unambiguously correct; and 3) no petitioner has standing to challenge the Timing and Tailoring Rules. We thus dismiss for lack of jurisdiction all petitions for review of the Timing and Tailoring Rules, and deny the remainder of the petitions.