Our Mini-Theme: The CFPB's New Mortgage Origination and Servicing Rules

In last month's Business Law Today, I introduced you to both the Consumer Financial Services Committee and financial services industry's new super-regulator - the Consumer Financial Protection Bureau (CFPB). Creating a brave new world of consumer financial services, the CFPB has vigorously pursued enforcement actions against large banks, engaged in supervisory examinations of "larger participants" and their progeny, enacted sweeping mortgage regulations, adopted regulations on debt collectors and consumer reporting agencies, issued civil investigative demands, commissioned studies on issues relating to federal finances services, and much more.

No one part of the industry has felt the tidal wave of CFPB rulemaking more than the mortgage industry. This BLT mini-theme is dedicated to the myriad of mortgage origination and servicing rules recently enacted by the CFPB.

In this issue, Amy Durant, of Bodman, PLC, in Ann Arbor, Michigan, discusses the requirements of the CFPB's Loan Originator Compensation Rule. The rule includes loan originator qualification requirements, requires the use of unique identifiers on certain loan documents, prohibits mandatory arbitration provisions and the financing of single-premium credit insurance for covered loans, and extends record keeping requirements. It also prohibits upfront points and fees in connection with certain loans, terms that require the borrower to submit a dispute to binding arbitration, and prohibits financing premiums for credit insurance.

Sanford Shatz, of Irvine, California, provides an overview of the CFPB's Ability-to-Repay and Qualified Mortgage Rule, giving historical context for the rule. The Ability-to-Repay Rule requires that a creditor make a "reasonable and good faith determination at or before consummation that the consumer will have a reasonable ability to repay the loan according to its terms." The Dodd Frank Act also provided that "qualified mortgages" are entitled to a presumption that the creditor making the loan satisfied the ability-to-repay requirements. The Qualified Mortgage Rule establishes a safe harbor and creates a conclusive presumption for loans that meet certain criteria and are not high-priced loans that the creditor made a good faith and reasonable determination of the consumer's ability to repay.

Angela Cheek of Mavent, Inc., of Irvine, California, addresses the new rules expanding the types of transactions subject to the Home Ownership and Equity Protection Act of 1994 (HOEPA), revising and expanding HOEPA thresholds, and imposing additional requirements on HOEPA loans. The final rule also amends Regulation Z and Regulation X (RESPA) by imposing homeownership counseling requirements. The article focuses not only the components of the rule, but also on its impact on creditors, brokers, purchasers, and consumers.

After a credit crisis, where mortgage servicing jumped to the forefront of American political discourse, and borrower complaints to federal and state regulators skyrocketed, the CFPB took the opportunity to establish mortgage servicing standards. In her article, The New World of Mortgage Servicing, Lynette Hotchkiss of OneWest Bank, in Pasadena, California, provides an overview of the two mortgage servicing rules amending Regulation X, which implements the Real Estate Settlement Procedures Act, and Regulation Z, which implements the Truth in Lending Act. The rules are nuanced and complicated. Included in her article are explanatory "Sidebars" for clarification.

The Consumer Financial Services Committee focuses on these and other laws affecting the industry on a daily basis. If you joined us in April in D.C., you received but a taste of the complex and detail driven world that is consumer financial services. We welcome you to join the Consumer Financial Services Committee. The benefits are many, and the cost of joining is zero. Please visit us at the CFSC website.

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Question: In 2013, Edward Snowden facilitated the release of more than 58,000 classified documents and exposed the Section 215 bulk data collection and PRISM monitoring programs. Who is credited in some circles as pulling off the first network “hack” in history? 

Please see Inside Business Law for the answer to this month’s Business Law Section Trivia Question.

The June 2016 issue of Business Law Today will have two main themes: compliance and white collar crime. Compliance topics include practical tips ranging from hiring in the workplace to regulatory compliance with company jets. White collar crime will look inside encryption for lawyers as well as multijurisdictional bribery enforcement. In this issue, readers will get acquainted with the brand-new cyber technology column and the second piece in a three-part series on commercial contracts.

Do you have a great idea for a BLT article? Would you like to see more of a featured column? Let us know how we can make Business Law Today the best resource for you and your clients. We welcome any suggestions. Please send us your feedback here.

Saratoga Institute on Equine, Racing and Gaming Law
August 9-10, 2016
Saratoga Springs, NY

Business Law Section Annual Meeting
September 8-10, 2016
Boston, MA

Miscellaneous IT Related Legal News (MIRLN) 17 April - 7 May 2016 (v19.07)

BLT is a web-based publication drawing upon the best of the Section's resources, including featured articles and other information from around the Section. Stay informed on the latest business law practice news and information that will benefit you and your clients.