CFPB's Five Year Strategic Plan

Recently, the Consumer Financial Protection Bureau (CFPB) published for comment on its website its draft Strategic Plan for 2013 - 2018 (Plan).

According to the CFPB, the plan includes the following four goals:

(1) Prevent financial harm to consumers while promoting good practices that benefit them.

(2) Empower consumers to live better financial lives.

(3) Inform the public, policymakers, and the CFPB’s own policymaking with data-driven analysis of consumer finance markets and consumer behavior.

(4) Advance the CFPB’s performance by maximizing resource productivity and enhancing impact. For each goal, the plan identifies outcomes to be achieved and how progress will be measured.

Submit comments to StrategyPlanComments@cfpb.gov before October 25, 2012. 

__________________________________________________

IN THIS ARTICLE

Goals, Strategies, and Metrics

Goal 1: Prevent Financial Harm to Consumers

Goal 2: Empower Consumers to Live Better Financial Lives

Goal 3: Inform The Public

Chart: Data Sources and Data Outputs

Goal 4: Maximizing Resources and Impact

Library

___________________________________________________

Goals, Strategies, and Metrics

The Plan outlines these goals, strategies, and metrics:

- Four strategic goals that outline what the CFPB aims to achieve.

- Desired outcomes in support of its goals.

- Strategies that state the actions the CFPB will take to accomplish our outcomes.

- Performance measures that CFPB will track against specific targets in order to assess its progress toward achieving its outcomes.

- Indicators that the CFPB will track and use to assess progress toward achieving our outcomes. 

(Unlike performance measures, indicators do not reflect targets.)

Goal 1

Prevent Financial Harm to Consumers while Promoting Good Practices

The CFPB stated that, prior to Congress enacting the Consumer Financial Protection Act (CFPA) as Title X of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act (Public Law 111-203, dated July 21, 2010), consumer financial protection had not been the primary focus of any one Federal agency, and no agency had effective tools to set the rules for and oversee the whole market.

Per the CFPB, the result was a system without sufficiently effective rules or consistent enforcement of the law. The CFPB believes that the consequences can be seen both in the 2008 financial crisis and in its aftermath.

The CFPB increased accountability in government by consolidating consumer financial protection authorities that had existed across seven different federal agencies into one, the Consumer Financial Protection Bureau. In addition to establishing the CFPB's enforcement powers, the CFPA gives the CFPB the authority to supervise and examine many financial institutions that were not previously subject to Federal oversight, such as nonbank mortgage companies, payday lenders, and private education lenders.

With the consolidation of existing and new federal authorities under one roof, the CFPB seeks to be properly focused and equipped to prevent financial harm to consumers while promoting practices that benefit consumers across financial institutions.

Goal 2

Empower Consumers to Live Better Financial Lives

This second goal of the CFPB is "to arm consumers with the knowledge, tools, and capabilities they need in order to make better informed financial decisions by engaging them in the right moments of their financial lives, in moments when the consumer is most receptive to seeking out and acting on assistance."

The CFPB plans to develop and maintain a variety of tools, programs, and initiatives that provide targeted, meaningful, and accessible assistance and information to consumers at the moment they need it.

To reify this goal, the CFPB has predicated two outcomes.

Outcome # 1:

The first outcome will collect, monitor, respond to, and share data associated with consumer complaints and inquiries about consumer financial products or services.

The CFPB has asserted that the consumer response function is central to its mission. The CFPB would provide direct assistance to consumers, in real-time, through its Consumer Response team. (See our October 4, 2012 article on Consumer Complaints and the Consumer Response team.) This team hears directly from consumers about the challenges they face in the marketplace and brings their concerns to the attention of the financial institutions that the CFPB regulates for investigation and resolution.

The Consumer Response team is tasked also to learn from the experiences of already operating complaint centers, for instance, by using the historical data from the FTC's Consumer Sentinel network, which is a collection of consumer complaint data from a variety of contributors, to inform its approach to handling complaints.

Performance metrics are applied by deriving data from complaint volume, the percentage of complaints routed through the dedicated company portal, and the complaint cycle time (i.e., intake cycle time, from receipt to company referral; company cycle time, from referral to company response; consumer cycle time, from company closure response to dispute; investigations cycle time, from investigations queue to closure).

Loan Originator Compensation: Past is Prologue - Part I

In the economic sphere an act, a habit, an institution, a law
produces not only one effect, but a series of effects.
Of these effects, the first alone is immediate;
it appears simultaneously with its cause; it is seen.
The other effects emerge only subsequently; they are not seen;
we are fortunate if we foresee them.
What Is Seen and What Is Not Seen[i]
Frédéric Bastiat

Since April 6, 2011, mortgage loan originators (MLOs) have struggled to comply with the many requirements imposed on them by the MLO compensation provisions of the Truth in Lending Act (TILA),[ii] as amended by Title XIV of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank). That date was the compliance effective date.[iii] Prior to that date, however, there were considerable and persistent efforts made to postpone its implementation. I tracked the burgeoning protests and litigation in a series of articles[iv] and newsletters.[v] Associations resisted these TILA revisions on behalf of their membership. The National Association of Mortgage Brokers (NAMB) and the National Association of Independent Housing Professionals (NAIHP) sued the Federal Reserve Board of Governors (FRB). Amicus briefs were filed. Many members of Congress, from both sides of the aisle, also protested aspects of the new MLO compensation requirements. All for naught!*

April 6, 2011 arrived. Resistance was futile!

The FRB had issued final rulemaking and official staff commentary with respect to the loan originator compensation rules and anti-steering provisions, but further guidance came to a virtual full stop on January 26, 2011, when the FRB issued its Compliance Guide for Small Entities on Loan Originator Compensation and Steering.[vi] After that, the FRB offered some conference calls, a webinar – which ostensibly cleared up some confusion, while causing other confusion – and provided occasional updates of the oral, rather than the written, official variety.

In the meantime, the Consumer Financial Protection Bureau (CFPB) received its “enumerated authorities” on July 21, 2011. From that date forward, the CFPB was in charge of promulgating and administering these compensation guidelines.

And on October 6, 2011 - exactly six months to the day when the rule became effective - the first examination guidelines for loan originator compensation were promulgated.[vii] In the State Nondepository Examiner Guidelines for Regulation Z - Loan Originator Compensation Rule, issued by the Multi-State Mortgage Committee (MMC),[viii] we were given a pretty good idea of the direction that federal and state regulators would be taking in their regulatory examinations for loan originator compensation.[ix]

For the most part, my firm’s clients were prepared for implementation of the compensation rule, but we spent hundreds of hours preparing them for it, consisting of many conferences and meetings, which included very comprehensive reviews of employment agreements, compensation plans, disclosures, policies and procedures, and many other details, both logistical and systemic.

Inevitably, I felt mortgage loan originators needed more information than was readily available. So, we consolidated our knowledgebase and offered the FAQs Outline - Loan Originator Compensation, a compendium of questions and answers about the MLO compensation requirements, first published on March 21, 2011 with 142 FAQs and 35 pages. About a year later, after 20 updates, the FAQs Outline was up to 450 FAQs and 147 pages![x]

In this article, the first in a two-part series, I will consider the recent CFPB proposal, issued on August 17, 2012, which contains certain proposed rules governing mortgage loan originations, especially relating to the MLO compensation guidelines in Regulation Z, the implementing regulation of TILA. Comments for this proposal are due by October 16, 2012.[xi]

In the second part of this series, I will explore these proposals in considerable depth, specifically their clarification of and expansion on existing regulations governing MLO compensation and qualifications.

The CFPB does plan to implement new laws, including a restriction on the payment of upfront discount points, origination points, and fees on most mortgage loan transactions. For this reason, I will conclude this article with a brief, generic outline of certain proposals. To some extent, these new proposals exemplify the hurly-burly, roller-coaster ride we’ve been jaunting about on, in the on-going, elusive quest to implement the MLO compensation rule.

Small Business Review Panel

There is only one difference between a bad economist and a good one:
the bad economist confines himself to the visible effect;
the good economist takes into account both the effect that can be seen
and those effects that must be foreseen.
What Is Seen and What Is Not Seen[xii]
Frédéric Bastiat

The CFPB is required to certify that a proposed rule will not have a significant, adverse, economic impact on a substantial number of small entities.[xiii] The Small Business Regulatory Enforcement Fairness Act (SBREFA) provides the basis for a review, inasmuch as, among other things, “small businesses bear a disproportionate share of regulatory costs and burdens.”[xiv] In order to comply with this requirement, the CFPB convened and chaired a Small Business Review Panel to consider the impact of the proposal and obtain feedback from representatives of the small entities that would be subject to the rule. When preparing the proposed rule and an initial regulatory flexibility analysis, the CFPB is expected to consider this panel’s findings.

The panel consisted of representatives from the CFPB, the Chief Counsel for Advocacy of the Small Business Administration (SBA), and the Administrator of the Office of Information and Regulatory Affairs within the Office of Management and Budget (OMB).[xv] On the panel were so-called small entity representatives (SERs), individuals who represent the business entities that would be subject to the CFPB’s proposal.[xvi] On July 11, 2012, the panel issued its report.[xvii]

Here are certain, salient topics that were reviewed by the panel:

• Payment of Discount Points
• Payment of Origination Points and Fees in Creditor-Paid Compensation
• Payment of Origination Points and Fees in Brokerage-Paid Compensation
• MLO Retirement Plans, Profit-Sharing, and Bonuses
• Pricing Concessions and Point Banks
• MLO Qualification and Training Requirements

Let us now consider the panel’s suggestions, concerns, resolutions, and recommendations.

CFPB's Company Portal for Consumer Complaints

Last year, we notified you about the Company Portal Manual (Manual) issued by Consumer Financial Protection Bureau (CFPB). The Manual gave instructions on the use of the special access portal, known as the Company Portal (Portal). The Portal allows financial institutions to view and respond to complaints in the CFPB consumer complaint database. At that time, the Portal was enabled to take consumer complaints about credit cards and provider resources for distressed homeowners.

Since the inception of the Portal, we have responded to numerous requests from clients to help them navigate its rather labyrinthine pathways. Thus, we have obtained considerable experience in guiding our clients from point of contact with the CFPB to point of resolution. In most instances, resolution of the complaint was achieved. While the CFPB continues to acquire statistics about the nature of the complaints, we also have become familiar with how best to respond to the complaints and have kept our own database.

When I cite statistics in this article, the time frame that I am writing about is July 21, 2011 to June 1, 2012. More recent statistics have not yet been officially announced by the CFPB. However, it is known that this database is updated on a daily basis. Retroactive data is expected shortly.

I would like you to become more familiar with the Portal and learn how to set up your access to it. Of course, in an article I can only offer a generic, rather than a detailed, description. I encourage you to explore the Portal, download the most recent Manual, and, most importantly, draft and implement complaint management procedures for using it. Regulators will surely expect as much!

_________________________________________________________

IN THIS ARTICLE

Statistics
Common Complaints
Screening Process
Flow Chart
Step-by-Step Procedures
CFPB Response
Company Response
Monetary Relief
Specifying Relief and Status
Government Portal
Requesting Access
Login
Viewing Complaints
Technical Assistance
Library

_________________________________________________________

Statistics

By this point, the CFPB has staffed a Consumer Response team. The Consumer Response team, or “Consumer Response” as it has become known, began taking consumer complaints about credit cards on July 21, 2011; it began handling mortgage complaints on December 1, 2011; and it began accepting complaints about bank products and services, private student loans, and other consumer loans on March 1, 2012. Over the next year, the CFPB expects to handle consumer complaints on all products and services under its authority.

According to the CFPB, between July 21, 2011, and June 1, 2012, the CFPB received approximately 45,630 consumer complaints, including approximately:

- 16,840 credit card complaints,

- 19,250 mortgage complaints,

- 6,490 bank products and services complaints, and

- 1,270 private student loan complaints.

Approximately 44 percent of all complaints were submitted through the CFPB’s website and 11 percent via telephone calls. In the same period, referrals from other regulators and agencies accounted for 39 percent of all complaints received. (The rest were submitted by mail, email, and fax.)

Furthermore, the CFPB has notified the public that more than 37,120 complaints (81 percent) of complaints received as of June 1, 2012, have been sent by Consumer Response to companies for review and response. The remaining complaints have been referred to other regulatory agencies (9 percent), found to be incomplete (4 percent), or are pending with the consumer or the CFPB (6 percent).

Companies have already responded to approximately 33,000 complaints or 89 percent of the complaints sent to them for response.

Common Complaints

In a June 2012 report, the CFPB stated that the most common type of mortgage complaint is about problems consumers have when they are unable to pay, such as issues related to loan modifications, collection, or foreclosure. The example given was where a "consumer confusion persists around the process and requirements for obtaining loan modifications and refinancing, especially regarding document submission timeframes, payment trial periods, allocation of payments, treatment of income in eligibility calculations, and credit bureau reporting during the evaluation period."

The "shelf life" of documents provided as part of the loan modification process was cited as of particular concern to consumers. As the CFPB asserts: "though consumers must provide documents within short time periods and income documentation generally remains valid for up to 60 days, lengthy evaluation periods can result in consumers having to resubmit documentation - sometimes more than once. This seems to contribute to consumer fatigue and frustration with these processes."

Other common types of mortgage complaints are those about making payments, such as issues related to loan servicing, payments, or escrow accounts. Here, the example given, is where "consumers express confusion about whether making timely trial period payments will guarantee placement into a permanent modification. Issues related to applying for the loan, such as the application, the originator, or the mortgage broker, are also among the most common type of mortgage complaints."

In the CFPB's view, "consumers filing complaints about problems when they are unable to pay generally appear to be driven by a desire to seek agreement with their companies on foreclosure alternatives."

CFPB Proposes New Servicing Rules - RESPA

Recently, the Bureau of Consumer Financial Protection (Bureau) issued proposed rules (Proposal) to amend Regulation X, which implements the Real Estate Settlement Procedures Act (RESPA) and the official interpretation of the regulation.

The proposed amendments implement the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) provisions regarding mortgage loan servicing. Specifically, this proposal requests comment regarding proposed additions to Regulation X to address seven servicer obligations:

1) Correct errors asserted by mortgage loan borrowers; 

2) Provide information requested by mortgage loan borrowers;

3) Ensure that a reasonable basis exists to obtain force-placed insurance;

4) Establish reasonable information management policies and procedures;

5) Provide information about mortgage loss mitigation options to delinquent borrowers;

6) Provide delinquent borrowers access to servicer personnel with continuity of contact about the borrower's mortgage loan account; and

7) Evaluate borrowers' applications for available loss mitigation options.

The Proposal would modify and streamline certain existing servicing-related provisions of Regulation X. For instance, it would revise provisions relating to:

1) A mortgage servicer's obligation to provide disclosures to borrowers in connection with a transfer of mortgage servicing, and
2) A mortgage servicer's obligation to manage escrow accounts (including the obligation to advance funds to an escrow account to maintain insurance coverage and to return amounts in an escrow account to a borrower upon payment in full of a mortgage loan).

The Bureau proposes 'companion' regulations implementing amendments to the Truth In Lending Act (TILA) in Regulation Z (the 2012 TILA Servicing Proposal). We will provide an outline of the 2012 TILA Servicing Proposal in a subsequent newsletter.

Comments Due: On or before October 9, 2012.

____________________________________________________

IN THIS ARTICLE

Scope

Nine Major Topics

Small Servicers

Library

____________________________________________________

Scope

• The Proposal generally applies to closed-end mortgage loans, with certain exceptions.

• Under the Proposal, open-end lines of credit and certain other loans, such as construction loans and business-purpose loans, are excluded.

• Under the 2012 TILA Servicing Proposal, the periodic statement and adjustable-rate mortgage (ARM), disclosure provisions apply only to closed-end mortgage loans, but the prompt crediting and payoff statement provisions apply both to open-end and closed-end mortgage loans.

• Reverse mortgages and timeshares are excluded from the periodic statement requirement, and certain construction loans are excluded from the ARM disclosure requirements.

• The Bureau is seeking comment on whether to exempt small servicers from certain requirements or modify certain requirements for small servicers.

Nine Major Topics

The Proposal covers nine major topics, as follows:
   
1. Periodic billing statements.

Dodd-Frank generally mandates that servicers of closed-end residential mortgage loans (other than reverse mortgages) must send a periodic statement for each billing cycle. These statements must meet the timing, form, and content requirements provided for in the rule. The Proposal contains sample forms that servicers could use.

The periodic statement requirement generally would not apply for fixed-rate loans if the servicer provides a coupon book, so long as the coupon book contains certain information specified in the rule and certain other information is made available to the consumer. The proposal also includes an exception for small servicers that service 1000 or fewer mortgage loans and service only mortgage loans that they originated or own.
   
2. Adjustable-rate mortgage interest-rate adjustment notices.

Servicers would have to provide a consumer whose mortgage has an adjustable rate with a notice 60 to 120 days before an adjustment which causes the payment to change. The servicer would also have to provide an earlier notice 210 to 240 days prior to the first rate adjustment. This first notice may contain an estimate of the rate and payment change. Other than this initial notice, servicers would no longer be required to provide an annual notice if a rate adjustment does not result in an increase in the monthly payment. The Proposal contains model and sample forms that servicers could use.
   
3. Prompt payment crediting and payoff payments.

As required by Dodd-Frank, servicers must promptly credit payments from borrowers, generally on the day of receipt. If a servicer receives a payment that is less than a full contractual payment, the payment may be held in a suspense account. When the amount in the suspense account covers a full installment of principal, interest, and escrow (if applicable), the Proposal would require the servicer to apply the funds to the oldest outstanding payment owed. A servicer also would be required to send an accurate payoff balance to a consumer no later than seven business days after receipt of a written request from the borrower for such information.