ThrowBack Thursday: The Roots of the Mortgage Crisis

CRC recently stumbled across a copy of a 2007 report entitled “Sustainability, not attainability: An Examination of Nontraditional Residential Mortgage Lending Products and Practices.” The report included testimony from some companies like New Century Mortgage, who caused billions of dollars in damage to the economy, to say nothing of the individual impact on families who lost their homes. You can order a copy of the report from the CA Senate for $11.75.

Below, we include some choice quotes about the valuable services that companies like New Century Mortgage were providing, or that community advocates didn’t know what they were talking about when they asked for stronger consumer protections. Of course, it turned out the advocates were right, these mortgage would go bad, and our economy would implode as a result. Perhaps smart regulation isn’t so bad after all?  Especially when it comes to the largest asset that many American families will ever own?

Want to learn more about the cost of this crisis?  Check out some other CRC posts below:





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Housing Advocates Weigh In on CFPB Mortgage Servicing Rules

Editor’s note: Earlier this month, California organizations provided input to the CFPB about its mortgage servicing rules. A number of organizations signed onto the detailed letter and analysis, including: Asian Pacific Policy & Planning Council (A3PCON)California Reinvestment CoalitionConsumer ActionConsumers UnionFair Housing Council of the San Fernando ValleyHousing and Economic Rights AdvocatesMontebello Housing Development Corporation;  National Housing Law ProjectNeighborhood Housing Services of the Silicon Valley;  Northern Circle Indian Housing AuthorityLaw Foundation of Silicon ValleyLegal Services of Northern CaliforniaPublic Counsel; and Thai CDC

The full letter is included below. Click here for a PDF of the letter.

March 16, 2015

Monica Jackson
Office of the Executive Secretary
Consumer Financial Protection Bureau
1700 G Street, N.W.

Washington, DC 20552

Re: Docket No. CFPB-2014-0033 (RIN 3170-AA49): “Amendments to the 2013 Mortgage Rules under the Real Estate Settlement Procedures Act (Regulation X) and the Truth in Lending Act (Regulation Z)”

Dear Ms. Jackson, Office of the Executive Secretary, CFPB:

The following comments are submitted on behalf of the California Reinvestment Coalition (CRC) and its undersigned members and national allies regarding the proposed rule published on December 15, 2014, “Amendments to the 2013 Mortgage Rules under the Real Estate Settlement Procedures Act (Regulation X) and the Truth in Lending Act

(Regulation Z).”1

The California Reinvestment Coalition (CRC), based in San Francisco, is a non-profit membership organization of community based non-profit organizations and public agencies across the state of California. We work with community-based organizations to promote the economic revitalization of California’s low-income communities and communities of color through access to equitable and low cost financial services. CRC promotes increased access to credit for affordable housing and community economic development, and to financial services for these communities.

CRC members address foreclosure and its impacts on communities through housing counseling, legal service provision, organizing, tenant rights work, policy advocacy, research, and community stabilization and development initiatives.

  1. Amendments to the 2013 Mortgage Rules under the Real Estate Settlement Procedures Act (Regulation X) and the Truth in Lending Act (Regulation Z), 79 Fed. Reg. 74,176 (Dec. 15, 2014).The undersigned organizations appreciate the thoughtful and deliberate work of the CFPB (Bureau) in preparing these proposed rules and believe that, with a few revisions, these rules can go a long way towards ensuring a more fair servicing market for consumers. Further, we appreciate the Bureau’s consideration of the views of housing counselors and legal service offices in California in crafting the provisions relating to successors in interest.


    Overall, we applaud the Bureau’s efforts to respond to continuing concerns about servicing abuses. The proposed rules will significantly improve protections for consumers from longstanding and pernicious problems. At the same time, the proposal includes some gaps that may allow servicers to continue to take advantage of consumers, permitting unnecessary foreclosure and other harms. We commend the Bureau for the strong steps it has proposed, while urging certain, specific refinements, including:

    Successors in Interest. We appreciate the important proposed enhancements to successors in interest protections. We hope we will see a significant reduction in the number of grieving widows and other family members who struggle to fight foreclosure on the family home. But to achieve that goal, the Bureau must extend protections to representatives of deceased borrowers’ estates. Additionally, servicers should be required to respond to successors’ written and verbal inquiries. Importantly, the Bureau must provide stronger rules to protect successors from foreclosure prior to a servicer’s confirmation of the successor’s status. Specifically, successors should have a clear private right of action if they are improperly foreclosed upon before servicers confirm
    their status as a successor. If the Bureau fails to address these gaps, it runs the risk of enabling the continuation of the worst servicer abuses.

    Preemption. The Bureau’s proposed rules must explicitly state that nothing in the rules
    preempts state laws that provide stronger borrower protections. This is critical. While the current regulatory framework may suggest that more protective state laws will not be preempted by these rules, we know that banks, lenders and servicers will continue to argue that they are immune to our state laws. Such is currently the case with California’s strong Homeowner Bill of Rights (HBOR), and we fear this servicer practice will continue with a pending state bill refining HBOR’s “borrower” definition to further clarify protections for successors in interest.

    Mortgage Servicing Transfers. We commend the Bureau for providing furtherprotections for consumers during the transfer process, where all too often borrowers fall through the cracks due to no fault of their own. We support the Bureau’s proposals to impose additional and reasonable requirements on transferee servicers as a method of protecting consumers. At the same time, we urge the Bureau to require that transferee servicers accept certain timelines and complete application determinations by transferor servicers, and provide additional notices to borrowers, including a notice within 10 days of transfer regarding the status of any pending loss mitigation application by the borrower. We also urge the Bureau to allow for the imposition of some liability for transfer abuses on the transferor servicers, as most servicing abuses originate with the transferor and can be perpetuated when the transferor hands off mismanaged loss mitigation files to transferee servicers.

    Applying Loss Mitigation Procedures More than Once Over Life of Loan. We support the Bureau’s proposal to enable consumers to seek loan modifications and other forms of loss mitigation more than once, given the reality that lives and circumstances change frequently. We urge against imposing arbitrary limitations on when consumers can avail themselves of these additional protections. We also encourage the Bureau to open up the full breadth of servicing protections to consumers who sought loss mitigation relief prior to the enactment of the servicing rules, regardless of whether they secured a loan modification, as servicing practices prior to the current rules were particularly ineffective and harmful.

    Complete Loan Modification Application. We support the Bureau’s proposal to require notification when loan modification applications become “complete.” Such notification will alert borrowers of critical deadlines and when certain protections, under both these rules and state analogues such as California’s HBOR, become effective.

    Bankruptcy. We support the Bureau’s proposals to enhance consumer notice and information rights during bankruptcy, consistent with HAMP and FHA programs, as promoting the interest of consumer education and knowledge vital to debtors in bankruptcy. We urge the Bureau to go further and require that servicers provide
    consumers with periodic statements unless the consumer discloses a desire to surrender the property, is in default, and has been denied all loss mitigation options.

    Definition of Delinquency. We support the creation of one definition of “delinquency” for purposes of these rules, and the Bureau’s efforts to ensure that consumers are protected against selective servicer determinations as to delinquency in a manner that benefits servicer interests at the expense of consumers. But all servicers should be required, not permitted, to apply payments to the oldest outstanding periodic payment in a consumer’s account.

    Forced Place Insurance. We support the Bureau’s proposal to clarify the notices that servicers must provide to consumers if the servicer believes the property is underinsured. We urge the Bureau to require servicers to include in the notice an appraisal or other report or evidence that supports the servicer’s belief.

    Trial Plan Accounting. Servicers should not be allowed to treat full consumer performance under a temporary loss mitigation plan as a partial payment. The Bureau needs to rein in any and all opportunities for servicers to begin an unending spiral of misapplied payments and inaccurate accounting that can push consumers towards unfair and unnecessary frustration and foreclosure.

    Small Servicers. While small servicers may be subject to fewer obligations, they should be required to provide periodic statements to borrowers upon request.

    1. Successors in Interest

    We applaud and appreciate the CFPB’s focus on the important issue of how survivors who are not “borrowers” on the mortgage loan are treated by servicers when the loved one on the loan has died. We understand that the Bureau proposes to protect not only people in this position, but to also extend protections to people who have an ownership interest in the subject property as a result of divorce (an additional category of people subject to Garn-St. Germain Act antiacceleration protections). We also understand the Bureau proposes that all mortgage servicing rules apply to successors in interest once the servicer has confirmed the successor’s identity and
    ownership interest in the property, and that servicers follow certain new rules as to how to confirm identity.

    The Bureau’s first step some months ago in requiring servicers to maintain policies and procedures “reasonably designed to ensure that the servicer can, upon notification of the death of a borrower, promptly identify and facilitate communication with the successor in interest of the deceased borrower with respect to the property securing the deceased borrower’s mortgage loan” was important.2 Perhaps some mortgage servicers complied with the mandate. However, we know that many servicers are not following through on policies, even if they have policies in
    place. Servicers routinely fail to implement policies pertaining to survivors under Fannie Mae and Freddie Mac rules, and routinely provide misleading, incorrect information to survivors, which frequently leads to foreclosure on the family home. Servicers still refuse to share information about the mortgage with survivors, claiming this would violate the privacy of the deceased borrower. Servicers routinely demand survivors already on title, or who have already provided proof that they inherited the property, probate the property. And servicers persistently refuse to assist survivors with loan assumption, much less loss mitigation and loan modifications.

    We agree with the Bureau’s assessment that successors in interest “are a particularly vulnerable

    2 12 C.F.R. § 1024.38(b)(1)(vi) (2014).

    group at risk of substantial harms.” In light of these realities, it is appropriate and necessary for the Bureau to impose further rules to protect consumers.

    Scope of Proposed Successors Coverage

    We agree with the Bureau’s proposed application of mortgage servicing rules to successors in interest who acquire an ownership interest in property secured by a mortgage through a transfer protected by the Garn-St. Germain Depository Institutions Act of 1982 (the Garn-St. Germain Act). We understand that the Bureau has received information from advocates indicating that former spouses or other property owners are having difficulty obtaining information about the mortgage loan from servicers, when the borrower is still alive.

    How to Confirm Successor Identity

    The Bureau’s proposed Section 1024.36(i) would require servicers to respond to a written inquiry from someone claiming to be a successor in interest. We appreciate the Bureau’s intention that “proposed § 1024.36(i) would apply to a broad range of written communication from potential successors in interest,” but we encourage the Bureau to explicitly require servicers to respond to potential successor’s verbal inquiries as well; compiling a written request may prove difficult for a successor due to age, infirmity, or distress after great personal loss. We understand that servicers must request documents from the successor to confirm the person’s identity and ownership interest in the property. We agree with the Bureau that servicers should be required to put that list of required documents in writing, not only for clarity, but because servicers are notorious for verbally communicating requests and confirmations to consumers, and later denying those conversations.

    Written Confirmation. Once confirmation is complete, servicers should absolutely be required to
    inform successors of this in writing, since confirmation triggers many additional rights under the Bureau’s proposal. And without written confirmation, the successor has no way of knowing or proving a servicer’s stance on the successor’s status, or on any other issue related to the subject property.

    Reasonable Documentation. We appreciate the Bureau’s commentary to delineate what types of documents may be deemed reasonable documentation of successor status. We suspect this area will require vigilant supervision and aggressive enforcement to protect successors.

    Meaningful Access to Information for Confirmed Successors
    Requests for Information. We appreciate that the Bureau recognizes the importance of successors being able to obtain basic information about the mortgage loan(s) on the subject property, and the importance of error correction.3 Since assumption of the loan is not required under the Bureau’s proposed definition of a successor, children of a deceased borrower, for example, will be able to obtain important information about the loan’s terms and status. With that information, successors may determine whether or not holding onto the home is a financial possibility, or if selling the property makes more sense.

    Error Correction. Similarly, a widow who is dutifully making mortgage payments but has not
    assumed the mortgage loan will be able to challenge a servicer’s failure to properly credit her ontime payments.

    Applicability of All Loss Mitigation Protections to Successors
    We also agree with the Bureau that the loss mitigation procedures contained in 12 C.F.R. § 1024.41 should apply to confirmed successors in interest. A confirmed successor should be evaluated for all options that could help that successor avoid foreclosure. Current mortgage servicing rules under RESPA would permit the successor to submit a complete loss mitigation application more than 37 days before a foreclosure sale. And, equally important, anti-dual tracking protections under §§ 1024.41(f) and (g) would apply to successors.

    We note that California’s HBOR anti-dual tracking timing requirements are more protective than RESPA’s current requirements, and that CRC and HERA currently have a pending proposal to extend HBOR protection to successors in interest in the California legislature. Since mortgage servicers and the whole financial services industry have relentlessly and shamelessly raised claims that HBOR is preempted, despite the Bureau’s clear statement that RESPA and TILA servicing rules represent a protective floor and do not preempt more protective state laws, it would be important for the Bureau to reiterate this fact in the commentary to the final rules.

    Applicability of other Servicing Rules to Successors
    We agree that the protective blanket of the rules codified in 12 C.F.R. §§ 1024.39, .40, .33, .34, and .37 should also cover successors in interest. These protections could save the family home, the largest asset most Americans will ever possess. Additional costs to servicers in complying with these protections will be negligible compared to this important goal of asset preservation. It is also simply unconscionable and cruel that servicers would do anything less than what the Bureau proposes.

    3 See 79 Fed. Reg. 74,185-86 (“The Bureau believes that §§ 1024.35 [Notices of Error] and 1024.36 [Requests for

    Information] should apply to confirmed successors in interest.”).

    Importance of Personal Representative of Estate
    The estate and its personal representative must be able to enforce mortgage servicing rules. Contrary to the Bureau’s statement that it is not useful to a borrower’s estate to invoke mortgage servicing rules, it can be incredibly important for the estate to access correct information about any encumbrances on the subject property as this may enable the estate to preserve the property for the successors. Determining what property is subject to probate and protecting it from waste is one of the fundamental elements of probate, along with determining the identity of the successor(s) in interest. The estate itself, or whoever is appointed as Personal Representative of the Estate (name/title may vary by state), must have this information to present to the probate court. Often, the Personal Representative is also a successor in interest. But until that person’s ownership interest is “confirmed” (even under the Bureau’s proposed rules regarding the confirmation process), the prior borrower’s estate and the Personal Representative of the Estate must be protected by the mortgage servicing rules so that this category of successors in interest are not put at risk of foreclosure. The Bureau’s proposal to eliminate the estate, as well as the Bureau’s failure to include the Personal Representative for the estate, will unintentionally create great harm.

    Misnomer of the “Prior Consumer”
    Finally, the Bureau requests comment as to whether a periodic statement should go to a “prior consumer.” This terminology is a complete misnomer that does not address the reality of survivor situations. To the extent the Bureau proposes to extend mortgage servicing protections to individuals who are divorced or have an ownership interest in the subject property, but the current borrower (usually the ex-spouse) is still alive, the Bureau’s proposed comment 30(d)-2 referring to “prior borrowers” seems most important. The Bureau is proposing to apply the confusing term “prior borrower” to borrowers who are existing borrowers. This would seem to arise in the context of the Bureau’s proposed coverage of an ex-spouse who is on the mortgage loan when the other spouse is not.

    The Bureau acknowledges that the ex-spouse may still be liable on the loan, but rather than use a clear and accurate term to refer to this person, the Bureau refers to him/her as a ‘prior borrower.’ In this case, with a borrower who is still alive and financially obligated for the loan in question, it is an existing borrower, not a prior borrower, who needs the servicing rule protections. In fact, the existing borrower is already covered by servicing rule protections. It is not clear why the Bureau is developing this confusing and inaccurate nomenclature, calling existing borrowers ‘prior borrowers’ just because of a divorce. A divorce does not usually end the financial obligation of the spouse who is already a borrower on the loan.

    We distinguish this new proposed category of ‘prior borrowers’ from successors in interest, who need for existing protections to continue, and the estate of the borrower its representative which still needs protections to be established. The Bureau should clearly address when certain rules will affect existing borrowers who are alive, versus affecting the estate of a borrower, versus affecting the surviving successor in interest to the property.

    TILA Definitions and Rules of Construction (§ 1026.2)
    We agree with the Bureau that, for consistency and the protection of successors in interest, it is necessary for the term “consumer” to include successors in interest. And we understand the Bureau’s position that servicers should have a chance to confirm successor in interest status to trigger Regulation Z protections. We want to echo our concerns, however, related to “prior consumers” (summarized above). The Bureau’s proposal excludes the estate of the borrower and (unintentionally, we hope), the Personal Representative of the borrower’s estate from relevant
    TILA benefits that could help preserve the estate, such as a pay-off statement. The estate and the Personal Representative of the estate require access to Regulation Z mortgage servicing protections if the protections are to fulfill the purpose of protecting successors in interest from unnecessary loss of the family home.

    AB244 Language. To illustrate the problem, we want to highlight relevant language from AB244
    (Eggman), the proposed “widows and orphans” amendment to California’s HBOR, defining successor in interest as follows:
    (i) “Successor in interest” means a natural person who provides the mortgage servicer with notification of the death of the mortgagor or trustor and reasonable documentation showing that the person is one of the following:

    (I) The personal representative, as defined in Section 58 of the Probate Code, of the mortgagor’s or trustor’s estate,

    (II) The surviving joint tenant of the mortgagor or trustor,

    (III) The surviving spouse of the mortgagor or trustor if the real property that secures the mortgage or deed of trust was held as community property with right of survivorship pursuant to Section 682.1 of the Civil Code,

    (IV) The trustee of the trust that owns the real property that secures the mortgage or deed of trust or the beneficiary of that trust.

    (ii) “Notification of the death of the mortgagor or trustor” means provision to the mortgage servicer of a death certificate, or, if a death certificate is not available, of other written evidence of the death of the mortgagor or trustor deemed sufficient by the mortgage servicer.

    (iii) “Reasonable documentation” means copies of the following documents, as may be applicable, or if the relevant documentation listed is not available, other written evidence of the person’s status as successor in interest to the real property that secures the mortgage or deed of trust deemed sufficient by the mortgage servicer:

    (I) In the case of a personal representative, letters as defined in Section 52 of the Probate Code,

    (II) In the case of a surviving joint tenant, an affidavit of death of the joint tenant or a grant deed showing joint tenancy,

    (III) In the case of a surviving spouse where the real property was held as community property with right of survivorship, an affidavit of death of the spouse or a deed showing community property with right of survivorship,

    (IV) In the case of a trust, a certification of trust pursuant to 18100.5 of the Probate Code,

    (V) In the case of a beneficiary of a trust, relevant trust documents related to the beneficiary’s interest. The above language provides a more inclusive alternative to the Bureau’s current proposal. The Bureau’s proposed rules do not address the critically important time period before a successor in interest is “confirmed:” our proposed language above does. We ask the Bureau to please consider this important issue and to state affirmatively that the borrower’s estate may enforce the mortgage servicing rules. The Bureau specifically requested comment on whether the proposed Regulation X rule changes as to successors would protect successors from unnecessary foreclosure prior to “confirmation” of successor status. The rules do not. The rules need to address the issues we have raised above.

    And we reiterate that a deceased borrower and a “prior” borrower (meaning the existing borrower who is the ex-spouse) are not the same. They do not stand in the same position or have the same interests. We would implore the Bureau not to confuse the two.

    Multiple Successors. Sometimes, especially in lower wealth communities where borrowers may
    not routinely make wills or trusts, a property may need to be probated. Additionally, in cases where a property passes to a non-spouse, there may be more than one successor in interest. This interim probate period, while ownership and successor status is being determined in court, is critically important. That is why AB244 includes personal representatives of the estate or administrators of the estate in HBOR protections. This representative is court-approved, which helps provide clarity and simplicity to servicers in determining who should receive periodic statements and other information regarding the subject property. We strongly encourage the Bureau to include representatives of the estate as confirmed successors in interest for purposes of application of servicing rules.

    Foreclosure Before Confirmation of Successor Status
    Though we touched on this problem in various sections above, this issue is important enough to highlight separately. Servicers foreclose on successors before confirming, or sometimes even investigating, the successor’s relationship to the subject property. The Bureau’s commentary is an excellent move in the right direction towards explaining how servicers should appropriately confirm successor status. But unless the Bureau establishes further protections, such as those proposed in California, foreclosures will continue to happen before confirmation is undertaken or completed. Confirmation files will be the new graveyard for documents in the mortgage servicing process, where successors send in proof of their status and servicers refuse to acknowledge receipt, verbally ask for new documents, and string successors along until foreclosure is completed.

    Loss Mitigation Efforts. We understand the Bureau’s proposed comment 41(b)-1.ii requiring
    servicers to review loss mitigation applications from a potential successor in interest, and requiring servicers to treat the applications as if they were received the day the servicer confirmed the successor’s status. By the same token, servicers do not want to undertake loss mitigation, so delaying confirmation of a successor’s identity can, and likely will, become another servicer excuse for not pursuing loss mitigation—a pretense for not following the rule. If the Bureau will not protect successors from foreclosure before the servicer completes the confirmation process, we ask the Bureau to use its supervisory authority to scrutinize servicers that seem to have high failure rates for confirming successor status.

    Private Right of Action
    One of the most important protections missing from the current proposal is a clear private right of action for aggrieved successors in interest. We anticipate that the goals of these proposals will likely be frustrated by the failure of servicers to confirm successor status for eligible consumers. Establishing a clear right of action for harmed successors would be an effective deterrent to servicers from using and abusing the confirmation process as an opportunity to avoid or forestall consumer protections. It would assist successors in avoiding or redressing improper foreclosures. This concern cannot be overstated.

    Periodic Statements for Successors
    Whether or not a servicer should be obligated to send more than one periodic statement to multiple “confirmed successors in interest” should be considered in light of how successor situations usually play out. If the Bureau is proposing to extend protections of the servicing rules to all persons with an ownership interest in the subject property, then all those persons should receive a periodic statement, provided they have given their contact information to the servicer. The periodic statement is one of the first clues to the consumer as to whether there is a problem with the account. Early notice of potential problems becomes critical when more than one person may hold title and more than person may be obligated to make payments. People inheriting a property are not in the same position as joint obligors who, presumably, entered into ownership willingly. Additional costs to a servicer for providing multiple notices is negligible compared to the benefit to the consumer.

    1. Protections for Borrowers During Servicing Transfers

    Managing the Transition between Servicers

    We appreciate that the Bureau is proposing to codify the protections extended to borrowers during servicing transfers, as well as clarifying the obligations of transferee servicers. We believe that, in general, requiring transferees to stand in the shoes of transferors, as modified by the deadline extensions described in 12 C.F.R. § 1024.41(k), is a fair compromise for both borrowers and transferee servicers.

    Transferors Should Retain Liability. We want to express concern, however, that transferor
    servicers can seemingly escape all RESPA liability if they improperly or negligently transition a borrower’s loan to a transferee servicer. While the Bureau correctly observes that both the transferor and transferee servicers “share . . . responsibility for enabling a transferee servicer to comply with [the proposed loss mitigation protections,]”4 a borrower may only enforce those protections against the transferee servicer. The transferor’s statutory requirements are currently relegated only to a RESPA section without a private right of action.5 The transferor should share liability since it shares responsibility for transitioning the loan, but also because the transferor servicer occupies a special position within the servicing transfer. Often, it is the transferor servicer that has already mismanaged the borrower’s account or modification negotiations, putting the transferee servicer in a compromised position and setting the transferee up for failure.

    Handing off a mismanaged or inaccurate loan account should, by itself, serve as a basis for a borrower’s distinct claim against the transferor servicer. Also, transferor servicers are often larger institutions than transferee servicers, enjoying more resources and personnel that should (but often fails to) make accurate and timely loan transitions possible. In some cases, then, a transferor could be more at fault for a mishandled servicing hand-off than the transferee servicer.

    4 79 Fed. Reg. 74,229.

    5 12 C.F.R. § 1024.38(b)(4) (2014).

    As a policy and practical matter, if transferor servicers shoulder at least some potential liability, they will ideally take greater care in shepherding borrowers’ loans through the servicing transition and fewer borrowers will fall through the cracks. We encourage the Bureau to give borrowers a private right of action to enforce the protections currently codified in 12 C.F.R. § 1024.38(b)(4). At the very least, we support the Bureau’s goal of continuing to “monitor whether transferor servicers’ practices raise consumer protection concerns that should be addressed through formal guidance or rulemaking.”6

    Early Intervention
    We appreciate that the Bureau is concerned with placing burdensome and unnecessary requirements on transferee servicers during the servicing transfer process. We understand, for example, the Bureau’s intent behind proposed Comment 39(b)(1)-6, which only requires transferee servicers to send delinquent borrowers an early intervention notice under 12 C.F.R. § 1024.39(b) if the transferor servicer did not already send the required notice, or if the borrower remains delinquent, or becomes delinquent again, 45 days after the servicing transfer. And we support the Bureau’s decision to lift the 180-day cap on this notice as applied to transferee servicers. We want to caution, however, that there are circumstances where borrowers would be significantly more protected if the transferee servicer sent the early intervention notice soon after the transfer date, as the following timeline demonstrates:

     Day 45 of delinquency: transferor servicer sends borrower written notice outlining potential loss mitigation programs; the borrower concludes he will not qualify for any program, so he does not start the application process

     Day 47 of delinquency: servicing is transferred to transferee servicer

     Day 50 of delinquency: borrower misses another mortgage payment

     Day 95 of delinquency: transferee servicer provides borrower with the requisite 45-day early intervention notice because the borrower has been delinquent for 45 days posttransfer.

    The transferee servicer offers more loss mitigation programs than the transferor servicer, and/or the borrower’s financial position has changed since day 45 of the delinquency. In any case, the borrower decides that he now can qualify for one or more of the loss mitigation programs offered by the transferee servicer Under this scenario, the borrower has 26 days to submit a “complete” loss mitigation application before the 121st day of delinquency and secure the strongest dual tracking protections under 12 C.F.R. § 1024.41. Had the transferee servicer provided the early intervention notice soon after the servicing transfer, however, the borrower could have had up to 75 days to submit a complete application. Servicers are notorious for dragging the application process out. Any extra time a borrower has to comply with duplicative document requests, obtain additional documents, and

    6 79 Fed. Reg. 74,229.

    otherwise engage in the protracted back-and-forth exchange with the transferee servicer will significantly impact the borrower’s future dual tracking protections. Early Intervention within 15 Days of Transfer. Mandating that a transferee servicer comply with early intervention notice requirements within, for example, 15 business days of a servicing transfer, should not prove too burdensome. Transferee servicers are already required to send borrowers written notice of the servicing transfer within those 15 days.7 That notice could easily include general information about the loss mitigation programs offered by the transferee servicer, basic instructions on the application process, and stock HUD counseling information. Nothing in the early intervention requirements of 12 C.F.R. § 1024.39(b) requires a servicer to outline the specific programs a particular borrower may qualify for; simply noting all available foreclosure alternatives will therefore create minimal costs for the transferee servicer, but could significantly impact borrowers by alerting them to their loss mitigation options with ample time to submit a complete application. We strongly encourage the Bureau to require transferee servicers to comply with the early intervention requirements of § 1024.39 within 15 days of the servicing transfer, if the borrower has a pending delinquency as of the transfer date.

    Protecting Borrowers with Pending, Complete Applications During Servicing Transfer

    Timelines. We strongly support the Bureau’s decision to generally require transferee servicers to
    comply with loss mitigation requirements according to the deadlines established for the transferor servicer. Servicing transfers happen through no fault of borrowers, who should not be penalized or disadvantaged by the transfer. We request, however, that the Bureau require transferee servicers to abide by any time extensions for a borrower to which the transferor agreed, even when not otherwise required by Regulation X. Servicers sometimes agree to postpone foreclosure to grant borrowers more time to gather information, acquire funds to cure a default, or perform other tasks prior to entering a loss mitigation plan. A servicing transfer should not affect the time made available to the borrower, and the mortgage investor to whom the servicer answers should not be able to invalidate the promises made by the transferor servicer on its behalf by suddenly transferring the servicing rights.

    “Complete” vs. “Facially Complete” Applications. We also agree with extending the dual protections in 12 C.F.R. § 1024.41(e)-(h) after the transfer, to borrowers who were protected pretransfer. Aspects of comments 41(k)-1 and 41(k)(1)(i)-1(i), however, are ambiguous and possibly at odds with comment 41(k)(3)(i)-1. Comment 41(k)-1 ensures that, for purposes of § 1024(k), a pending application is considered a “complete” application if it was complete as of the transfer date under the transferor servicer’s criteria. Comment 41(k)(1)(i)-1(i) instructs, that for purposes of § 1024.41(e)-(h), transferee servicers must treat a “complete” application, as assessed by the transferor servicer, as “facially complete” if the transferee servicer considers the

    7 12 C.F.R. § 1024.33(b)(3)(ii) (2014).

    application incomplete. By omission then, the protections contained in § 1024.41(b)-(d) should apply to applications considered “complete” by the transferor servicer but “incomplete” by the transferee servicer. These protections include those in § 1024.41(c), which require servicers to evaluate a borrower’s application if received at least 37 days pre-sale. Conversely, comment 41(k)(3)(i)-1 instructs that if a pending application is “complete” according to the transferor servicer, yet “incomplete” according to the transferee, the application must be considered “facially complete” for purposes of § 1024.41(c)(2)(iv).

    To easily avoid this confusion and possible discrepancy, we suggest that the Bureau instruct transferee servicers to treat applications considered “complete” by the transferor servicer as complete, rather than facially complete. If the servicer requires more information from the borrower to competently evaluate an application (if the transferee considers the application “incomplete,” in other words) the 30-day evaluation period required by § 1024.41(c) could be extended, while also ensuring that the foreclosure is not allowed to continue under §1024.41(f)(2) and (g). California’s HBOR imposes no timeframe on servicers to complete loss mitigation reviews; it simply prevents servicers from moving forward with foreclosure while the application is pending.8 This is a clear, uncomplicated rule that protects borrowers without imposing burdensome time requirements on servicers. A similar framework could work for the Bureau’s rules related to servicing transfers: ensure that borrowers receive all protections due a “complete” application –if the transferor servicer deemed it “complete” – while allowing a transferee servicer more time to supplement that application if necessary.

    Relatedly, transferee servicers should be required to treat borrowers as if a complete loss mitigation application was pending until the transferee’s review of loan file is complete. The transferee should not assume it has the full loan file until either: a) the transferor has certified that it has provided the transferee servicer the entire loan file, including any loss mitigation applications and workout options offered or under review; or b) 60 days have elapsed since the transfer date, during which neither the transferor nor the borrower has provided documents which indicate the existence of a pending loss mitigation application or plan. Requiring the transferee to treat borrowers as if a complete loss mitigation application is pending causes the transferee servicers to give borrowers the benefit of the doubt until the loan file is reviewed.

    Once the file is reviewed, which could happen immediately if the transferor and transferee act quickly, the transferee can proceed with any actions allowed under 12 C.F.R. § 1024.41. For the borrower, this requirement will ensure that foreclosure sales are not conducted while the transferee is ignorant of any loss mitigation activity or agreements with the transferor. Written Notices Required by § 1024.41. We also want to highlight a potential problem with comment 41(k)(1)(i)-3, which provides that if a transferor servicer provided any written notice in compliance with § 1024.41, the transferee servicer need not repeat the notice. What should

    8 See CAL. CIV. CODE § 2923.6 (2013).

    happen, however, if a transferee servicer disagrees with the transferor’s analysis articulated in a pre-transfer notice? If a transferor servicer, for example, acknowledged an application as “complete” in the written acknowledgment notice, but the transferee servicer considers the application incomplete, we believe the transferee servicer should be obligated to quickly send borrower a new notice identifying the additional documents required for an evaluation. Comment 41(k)(1)(i)-3 seems to discourage this type of timely action, but Comment 41(k)(1)(i)-1(ii) seems to require it. Under comment 41(k)(1)(i)-1(ii), a transferee servicer must try to complete a borrower’s loss mitigation application, in accordance with §1024.41(b), by identifying and requesting missing documents. Requiring a transferee servicer to timely send any notices required by § 1024.41 after the transfer, regardless of whether the transferor servicer provided that notice, would solve this problem and not impose burdensome administrative costs on the transferee servicer.

    Transfers During the Acknowledgment Period
    The undersigned agree with the Bureau’s decision to limit the extension of time a transferee servicer has to provide a 12 C.F.R. § 1024.41(b)(2)(i)(B) notice acknowledging the receipt of an application to only an extra five days. Those notices are crucial to borrowers seeking to submit complete loss mitigation applications before the 37-day cutoff for preventing foreclosure under § 1024.41(g). As any extension to a transferee in providing these notices could result in a borrower missing this cutoff, it is vital that the window of time in which servicers must notify borrowers under (b)(2)(i)(B) be as brief as possible.

    Transferee Servicer’s Time to Evaluate Pending, Complete Applications We generally agree with and support all the proposed protections contained in § 1024.41(k)(3) and the corresponding Bureau interpretations. We want to reiterate, however, the potential discrepancy between Comment 41(k)(3)(i)-1 and Comments 41(k)-1 and 41(k)(1)(i)-1(i), explained above.

    Pending Appeal During Servicing Transfer
    We also generally support the proposals contained in § 1024.41(k)(4) related to servicing transfers that occur during a pending appeal, or during a borrower’s window of time to appeal a denial. Requiring a transferee that is unable to competently evaluate a pending appeal to treat that appeal as a pending, complete application is a creative alternative that will hopefully protect borrowers. We encourage the Bureau to improve upon this requirement by allowing borrowers an option in this scenario: they can either agree to allow the transferee servicer to treat their existing application as a complete loss mitigation application, subject to a fresh review; OR the borrowers can choose to submit a new application, which is permitted under existing commentary and proposed rule § 1024.41(i). This choice could prove critically beneficial to borrowers whose income significantly changed during the transferor’s application evaluation and denial. The borrower could now qualify for the loss mitigation program already applied for, or could possibly qualify for other loss mitigation programs offered by the transferee servicer.Granting borrowers this option would not create additional burdens for the transferee servicer, which is already required to evaluate borrower’s existing application and/or work with the borrower to complete that application.

    Unaddressed Concerns Related to Servicing Transfers
    Although we appreciate the protections proposed in 12 C.F.R. § 1024.41(k), the proposed rule does nothing to address the largest problem with servicing transfers for borrowers facing foreclosure. As front-line advocates assisting homeowners in various stages of the foreclosure process, CRC members have seen what happens to borrowers in the midst of a loss mitigation negotiation when the servicing is transferred. Transferee servicers often proceed with foreclosure immediately upon transfer, but prior to receiving the complete loan file with the information on pending loss mitigation applications and options with the borrower. If the transfer occurs close enough to a foreclosure sale in a non-judicial foreclosure state, the transferee may conduct a sale of the borrower’s home before it even becomes aware of any application or option pending with the transferor. In those states, such a borrower may not discover that the transferee foreclosed in violation of § 1024.41(g) until after the sale is conducted. While borrowers can enforce the transferee’s obligations under 12 USC 2605(f), the remedies available are limited to damages only. A borrower in a non-judicial foreclosure state who discovers the transferee’s wrongful foreclosure after the sale must drag the transferee into court and prove that the foreclosure was unauthorized under other legal claims. In jurisdictions like California, the borrower may also be required to cure the default as a prerequisite to unwinding a sale by the transferee. If the sale passed title to a bona fide purchaser, it may be impossible for the borrower to unwind the foreclosure, depending on the specific facts.

    To prevent such unfortunate results, we ask the CFPB to impose extra safeguards before a transferee may proceed with foreclosure. Transferees should be required to send a notice to borrowers within 10 business days of the transfer date, describing the status of any loss mitigation application or option and any additional information that is needed to complete an application. Requiring such a notice will force transferees to review the entire loan file soon after the transfer date, which will in turn encourage transferees to work with, or even pressure, transferors to timely transmit loan files for review.

    We strongly support the sentiment behind the Bureau’s “belie[f that] the requirements contained in 12 C.F.R. § 1024.33 . . . should apply to confirmed successors in interest.”9 We feel, however, that this sentiment should be codified in the proposed rule.

    The Bureau has not proposed changes to the existing preemption language.10 While we support the Bureau’s decision to continue to allow borrowers to take advantage of more protective state and local laws governing most mortgage servicing and loss mitigation issues, we encourage the Bureau to remove the exception to the preemption rule that allows servicers to escape stricter notice requirements related to servicing transfers.11 It is critical that more protective state and local laws apply to every aspect of mortgage servicing, including the frequent transferring of servicing rights. At the very least, the new rules should explicitly provide that while the notice requirements related to servicing transfers under 12 C.F.R. § 1024.33 preempt more restrictive state laws, the proposed loss mitigation rules under 12 C.F.R. § 1024.41(k) and early intervention interpretation in Comment 39(b)(1)-6 do not preempt more protective state or localregulations related to servicing transfers.

    1. Applying Loss Mitigation Procedures More than Once Over Life of Loan

    We agree with the Bureau’s proposal to require servicers to comply with loss mitigation rules as applied to a borrower’s application submitted after previously receiving a loss mitigation plan. Existing loan modification programs, such as the Home Affordable Modification Program, already recognize that a homeowner may receive more than one loan modification over the life of a loan. The proposed change recognizes that borrowers may become current, yet experience a subsequent hardship that may require consideration for a second (or any subsequent) loan

    The Bureau should not make the right to a reevaluation contingent upon whether the borrower was current for a minimum period of time since the borrower’s previous application. There is no reason to place an arbitrary line on how long a borrower must be current to qualify for the Bureau’s procedural protections. A borrower who complies with a permanent loan modification for 11 months and who may suffer a job loss should not be treated differently from a borrower who suffered a change in employment after being current for 13 months.

    In addition, the Bureau should clarify that a borrower who applied for a loan modification before January 10, 2014, the effective date of the mortgage servicing rules, can still receive the full loss

    9 79 Fed. Reg. 74,187.

    10 See 12 C.F.R. § 1024.5(c) (2014).

    11 See 12 C.F.R. §§ 1024.5(c)(4); 1024.33(d) (2014).

    mitigation procedures under § 1024.41(i) even if the borrower remained delinquent since the prior application. Many servicers had inadequate loss mitigation procedures prior to the effective date of the servicing rules. A borrower should receive full protections under the new rules if the borrower received an inadequate review before the effective date of the rules.

    1. Notification of a “Complete” Application

    We support the proposed amendment to require notification of a complete application when the borrower initially submits an incomplete application but subsequently provides additional documents requested by the servicer to complete the application. Not only do many loss mitigation protections hinge upon the submission of a complete application, but the protections under the rule’s state law analogues, including California’s HBOR, are triggered by the submission of a complete application.12 Notification of a complete application is also important because dual tracking protections under the rules depend on when the application is complete. Requiring the servicer to notify the borrower not only that an application is complete, but also when the application became complete allows borrowers to determine what rights they are entitled to under the regulations and whether the servicer complied with those protections.

    1. Bankruptcy

    Periodic Statements
    We support the proposed requirement that servicers send modified periodic statements to consumers who have filed for bankruptcy, with content varying depending on the type of bankruptcy filing. This change would help address concerns that servicers often charge improper and inappropriate fees to borrowers in bankruptcy. Requiring periodic statements deter servicers from charging improper fees, or at the least provide borrowers with the information necessary to discern whether assessed fees are proper.

    We also support proposed comment 39(d)(1)-1 which addresses a servicer’s duty to resume compliance with early intervention requirements following a borrower’s bankruptcy, including when the borrower makes a written request to continue receiving periodic statements or coupon books. However, we urge the CFPB to require that a consumer continue to receive periodic statements unless the consumer discloses an intent to surrender the property, is in default, and has been denied all loss mitigation options. Such an approach will ensure that a consumer

    12 See, e.g., CAL. CIV. CODE § 2923.6(c) (upon borrower’s submission of a complete application, a servicer “shall notrecord a notice of default or notice of sale or conduct a trustee’s sale” while the application is pending).

    receives a statement until all retention options have been exhausted. And any cost to servicers is diminished substantially by the Bureau’s intent to provide model forms for industry use.

    Early Intervention Notices
    As to the question of whether written early intervention notices should be different for a borrower in bankruptcy, we believe that the earlier the notice is delivered, the better. As such, we recommend language that would require the written notice be provided by the 45th day of delinquency, or the 45th day after the bankruptcy commenced, whichever is earlier.

    Limiting the Bankruptcy Exemptions
    We further support the Bureau’s efforts to: 1) narrow the scope of the bankruptcy exemption from the rules’ requirements; 2) to remove the exemption to the live contact requirements for borrowers who are jointly liable with borrowers in Chapter 7 or Chapter 11 bankruptcy; and 3) to partially lift the written early intervention notice requirements where loss mitigation options are available, with certain exceptions. Such limitations further the consumer’s interest in receiving information about loss mitigation options, which may be particularly helpful to borrowers in bankruptcy trying to gain control over their finances. This approach is consistent with FHA loss
    mitigation guidance and HAMP rules which both contemplate borrowers in bankruptcy having access to loss mitigation information.

    1. Definition of Delinquency

    We support the Bureau’s proposal to define delinquency in 12 C.F.R. § 1024.31 as applied to all of the servicing provisions under Regulation X and the provisions regarding periodic statements for mortgage loans under Regulation Z. We support the Bureau’s proposed definition establishing delinquency beginning on the date a payment sufficient to cover principal, interest and if applicable, escrow, becomes due and unpaid.

    The Bureau proposes three comments to the proposed definition. First, proposed comment 31 (Delinquency)-1 confirms that delinquency is not delayed merely because a servicer allows the borrower additional time before assessing a late fee. We support this clarifying comment as a way to encourage loan agreements that provide for a grace period.

    Second, comment 31 (Delinquency)-2 clarifies that IF a servicer applies borrower’s payments to the oldest outstanding periodic payment, the date of the borrower’s delinquency must advance accordingly. Most servicers treat payments in this manner. In these cases, the proposed comment would clarify that servicers that choose this method of applying payments cannot initiate foreclosure proceedings unless the borrower is the equivalent of four months delinquent. As the Bureau notes, most servicers would not treat borrowers who are behind three or four months as
    seriously delinquent. This approach is consistent with GSE guidelines as well. As such, this proposed comment should not impose significant costs on the industry. We would go further and urge the Bureau to consider requiring that servicers apply borrower payments to the oldest outstanding periodic payment.

    Finally, proposed comment 31 (Delinquency)-3 PERMITS servicers that elect to advance outstanding funds to a borrower’s mortgage loan account to treat the borrower’s insufficient payment as timely, and therefore not delinquent for purposes of the mortgage servicing rules. We support the intent of the rule to prevent a servicer from treating a borrower as current in order toavoid early intervention, continuity of contact or loss mitigation requirements, while treating the same borrower as delinquent for purposes of initiating foreclosure. In response to the question posed in the Federal Register, we urge CFPB to limit servicer use of payment tolerance to a specific dollar amount, and propose that this amount be set at $10.

    We agree with the Bureau’s proposal regarding disclosure of the length of a consumer’s delinquency per § 1026.41(d)(8) if a servicer applies a borrower’s payment to the oldest outstanding delinquency first. Again, we think that servicers should always have to apply a consumer’s payment to the oldest outstanding delinquency. And, we think it is of great benefit to the consumer to know how long a servicer believes a delinquency has existed, potentially prompting consumers to verify records sooner rather than later. We agree with the proposal to require disclosure of the length of a consumer’s delinquency as of the date of the periodic


    1. Force-Placed Insurance

    We understand that the Bureau is proposing rules regarding the content of notices as to forceplaced insurance that would clarify and create flexibility for servicers to provide notices that include a statement of whether or not the servicer believes the property is under-insured. Weunderstand this clarification applies to both the initial notice and reminder notice from theservicer to the borrower. We believe this is a reasonable addition to the rule to help servicerscomply with § 1024.37 (b)-(c) requirements regarding the need to have a reasonable belief about a borrower’s failure to comply with hazard insurance requirements, and to send notices to the borrower regarding that belief before assessing a related fee or charge.

    In cases in which a servicer believes insufficient hazard insurance is being carried, we believenotice should also include a copy of the appraisal report or other document upon which theservicer is relying for its determination of insufficiency. Including the borrower’s mortgage loan account number on the notice is also important, as we have occasionally encountered servicers managing two or more separate loans that pertain to a borrower and confusing account information. Inclusion should be mandatory.

    1. Trial Plan Accounting

    Timely Payments as “Partial” Payments
    We understand that for consumers performing under a temporary loss mitigation plan, the Bureau is proposing to allow servicers to treat timely payments as partial payments. We believe that proposal cuts against basic contract principles, a matter of state law. For years now, consumers have been fighting servicers that have claimed that final modification agreements were only temporary. Servicers have made that claim to try to extricate themselves out of the contractual obligations of loss mitigation plans they entered into. The temporary loss mitigation program is, in fact, a contract that the consumer has the legal right to enforce under basic principles of contract. The Bureau’s proposed comment 36(c)(1)(i)-4, suggesting that a servicer can treat payments per a temporary plan as partial payments is at odds with those basic principles.

    The Bureau then states “[I]t would be unnecessarily burdensome for servicers to treat the payment due under a temporary loss mitigation program as a periodic payment, and then to have to undo that treatment if the consumer later fails to comply with the terms of the temporary loss mitigation program.” The reality is that loss mitigation agreements are achieved at great risk to both the servicer and the homeowner. It is highly burdensome for homeowners to chase after mortgage servicers who are erroneously reporting on-time payments in an incorrect fashion to the credit reporting bureaus, and who are incorrectly logging on-time payments in their own system, without regard to the governing temporary agreement. Homeowners should be able to rely on servicers’ accurately maintaining a record of temporary loss mitigation plans, and giving proper credit for payments made per the terms of the agreements. We can tell you from the arduous experience of working on modification applications for
    consumers that mortgage servicers frequently misconstrue or misinterpret numbers that we provide them, and stare at incorrect figures on-screen, even after we have alerted them to their errors. Consumers experience the same problem when they do not have advocates to assist. Convincing mortgage servicers to correct their often faulty math then becomes part of the process of issuing a final modification. The Bureau should not find it acceptable that servicers refuse to track the terms of agreements they entered into and to accurately report and apply payments made per the terms of that temporary contract.

    In allowing servicers to treat contractual payments as partial payments, the Bureau is perhaps thinking of forbearances, which are one form of temporary loss mitigation agreement, typically lasting 3-6 months. However, even such a short-term agreement is a contract, or represents a contractual modification of the underlying contract. Of particular concern are longer-term loss mitigation plans that do not last the entire life of the loan. Consider, for example, a 5-year loss mitigation plan applied to a 30-year mortgage with 23 years left. Consumers making on-time payments on such a long-term, but temporary agreement, are generally deemed to have made a contract, enforceable under state law, and entitled to the corresponding benefits. On-time payments made per the terms of the loss mitigation plan must then be treated as timely for purposes of the agreement. It is not rational to arbitrarily call payments under such a plan “partial” payments. We are also concerned about the implications that such a comment may have for purposes of fair and accurate credit reporting. We ask the Bureau to withdraw this proposecomment. Instead, we urge the Bureau to reconsider, and to enumerate exactly which situations this proposal properly applies to.

    The Bureau also proposes that a servicer’s internal, inaccurate reporting of payments under a temporary loss mitigation plan is permissible as long as servicers do not assess a late fee to the consumer, reasoning that the consumer is not harmed. Consumers are harmed by this conduct. Servicers must accurately manage and track data entry and implementation of agreements for which they are responsible. The longer servicers are allowed to improperly track their own records and agreements, the more inaccurate their records become, and the consumer is left with
    a nightmare to try to correct the errors.

    If there is a servicing transfer somewhere in the middle, all bets are off, as transferor andtransferee servicers pass the buck back and forth, blaming one another for errors in the consumer’s account, rejecting consumer requests for assistance, and, most importantly, never correcting the problem unless a regulator or tenacious advocate intervenes.

    Periodic Statements
    We agree with the Bureau’s proposed commentary to 12 C.F.R. § 1026.41(d), clarifying certain periodic statement disclosure requirements relating to temporary loss mitigation programs to the extent that it would require full disclosure as to how payments are applied. Setting forth the application of payments under a temporary loss mitigation plan will help consumers identify errors and misunderstandings more quickly.

    The language in the proposed comment regarding application of payments under the temporary plan to the underlying contract seems intended to apply only to one or two specific types of temporary loss mitigation tools, not to longer term but still temporary loss mitigation plans. To the extent that the temporary plan creates its own enforceable agreement, then disclosures should reflect how payments are applied per the terms of that agreement. To the extent that the application of payments per the temporary agreement may have other implications as to the
    former, underlying agreement, we would welcome any clarifying disclosures. It seems to us that the Bureau may want to withdraw or modify this comment to reflect exactly which types of temporary agreements it is contemplating for this scenario.

    In cases of temporary loss mitigation agreements, we ask simply that the periodic statement delivered to the consumer be accurate. A statement demanding an amount different than the amount specified in the temporary loss mitigation agreement is inaccurate. If the payment is due to change at some point from the amount due under the temporary agreement, then the servicer should send notice of that fact to the consumer before the change
    date. That notice should be sent separately from the periodic statement to alert the consumer of the impending change, much the same way that the Bureau requires a notice of change date for adjustable rate mortgages, per § 1026.20(c). It could, in fact, be logical to include such a

    requirement as a new subsection within § 1026.20.

    1. Small Servicers

    Small servicers should be required to provide periodic statements at the request of the consumer. Such statements are the primary way consumers track the status of their loan and how payments are being applied. One statement per year is insufficient. We understand that this is currently the rule that the Bureau has promulgated, but we think it is inconsistent with the Bureau’s goal and mission of protecting consumers. The marginal cost savings for a small servicer from not

    sending periodic statements can result in a huge loss to the consumer.

    1. Charged-off Loans

    We agree with the Bureau that “where a servicer continues to charge a consumer fees and interest, the periodic statement may provide significant value to a consumer.” We also strongly

    support the Bureau’s proposed rule requiring provision of a final periodic statement. Especially
    with clear labeling (since consumers are inundated with servicer notices and/or fraudulent
    foreclosure relief offers), this final statement will help consumers understand what has happened
    to their debt. The information should also help consumers in their process of addressing tax
    consequences, and it will provide clarity about final figures from the servicer’s perspective.
    Moreover, as noted by the Bureau, the final notice could serve to clarify to consumers the
    difference between charge-off, debt forgiveness and lien release. And we think that the Bureau’s
    further clarification of the fact that this rule would not affect FCPA obligations and protections is
    valuable and that the further comment 41(e)(6)-1 is needed.

    1. Balance Acceleration

    We agree with the Bureau’s discussion of the fact that “if the balance of a mortgage loan has
    been accelerated but the servicer will accept a lesser amount to reinstate the loan, the amount due
    disclosed on the periodic statement under § 1026.41(d)(1) should identify only the lesser amount
    that will be accepted to reinstate the loan.” And we agree with the Bureau’s concern that
    information regarding the accelerated balance should be delivered to the consumer. Proposed
    comment 41(d)(2)-1 suggests that it is the periodic statement that should elsewhere identify the
    accelerated balance. As long as that information is clearly located somewhere that does not
    confuse the borrower, whether on the periodic statement or in the same envelope as a separate
    statement, this important goal would be achieved.


    This proposal represents a great opportunity to advance consumer protections. With the
    additional changes recommended here, we believe these proposed rules can go a long way
    towards reducing industry abuses, and limiting household and neighborhood harm. We want to
    thank the Bureau for its continuing efforts to protect consumers, and for its consideration of our

    Should you have any questions, please feel free to contact Maeve Elise Brown of Housing and

    Economic Rights Advocates at (5-1-0) 271-8443, Brittany McCormick of National Housing Law

    Project at (6-1-2) 200-8441, Kent Qian of National Housing Law Project at (4-1-5) 546-7000 x.

    3112, Charles Evans of Public Counsel at (2-1-3) 385-2977 x. 188, or Kevin Stein of California

    Reinvestment Coalition at (4-1-5) 864-3980.

    Very Truly Yours,

    Asian Pacific Policy & Planning Council (A3PCON)

    California Reinvestment Coalition

    Consumer Action

    Consumers Union

    Fair Housing Council of the San Fernando Valley

    Housing and Economic Rights Advocates

    Montebello Housing Development Corporation

    National Housing Law Project

    Neighborhood Housing Services of the Silicon Valley

    Northern Circle Indian Housing Authority

    Law Foundation of Silicon Valley

    Legal Services of Northern California

    Public Counsel

    Thai CDC

Lack of Single Point of Contact With Financial Freedom Reverse Mortgage (Owned by OneWest) Not Helpful for Heir

The testimony of Michael Allen, a surviving family member of a OneWest reverse mortgage borrower, about the proposed OneWest and CIT Group merger, is featured in its entirety below. If you were unable to attend the hearing, CRC live-blogged it here and you may also find our CIT Group/OneWest Merger resource page helpful as well. Pictures of the rally against the merger are available here.




Thank you for the opportunity to testify today.  My testimony is in opposition to the proposed merger of OneWest Bank and CIT Financial.

My name is Michael Allen.  I live in Phoenix, Arizona.  I am Successor Trustee for my mother, the borrower of a Financial Freedom reverse mortgage.

My mother’s intention for her estate was for her family to sell the home to repay the loan.  She died on June 12, 2014

At all times, I was in compliance with HUD regulations to the best of my ability based on the limited information provided by OneWest Bank.

OneWest Bank (OWB) did not provide a Single Point of Contact nor provide any guidance or instruction to help me satisfy the loan.

I initiated all calls to OWB and spoke to a different person with a different story and different reason to deny my requests.

OWB claimed they didn’t get my documents time after time.  THEY DID

OWB sent me a short sale packet twice after I wrote saying I wanted to pay the lesser amount of the loan balance.  The appraised value was about $35,000 more than the loan balance.

OWB refused to perform or pay for a HUD required appraisal.

I called OWB on October 1st to inform them a sale was in process.

On 11/3 I received notification that OWB had recorded a Notice of Trustee sale on September 29, approx 3 months after my mother’s death and 2 months after receipt of the repayment letter.

OWB used Arizona foreclosure laws to violate HUD regulations and my right to time to sell the property.

I called OWB  – they refused to postpone auction.

The auction was cancelled with HUD intervention.

OWB added foreclosure related legal fees and drive by appraisal fees to the payoff.

The only phone call I ever received from OWB was on December 19 to tell me they have no intention of removing the accelerated foreclosure fees.

My story is illustrative of OneWest Bank’s violation of my right to repay the loan, the acceleration of foreclosure, and the related legal and appraisal fees of $2,508.50 and an unidentified servicing advance of $1,839.00 we did not receive.

I should not have to pay for OneWest Bank’s violations of HUD regulations or my rights.

I request an Investigation, audit, and review of OWB Reverse Mortgage Loan Files

  • For the servicing violations of Federal Regulations and consumer rights
  • To ensure compliance with existing laws and regulations.

Thank You!

Documented evidence of my testimony can be provided upon request.

CRC Reminds IndyMac, OneWest Bank, and Financial Freedom Customers and Former Customers about Public Hearing on Feb 26th in Los Angeles

Earlier today, CRC released an  important reminder for people whose mortgage was originated by IndyMac Bank, and later serviced by OneWest Bank, or for customers who have a reverse mortgage that is serviced by Financial Freedom.

We want the general public, but especially people with direct experiences with OneWest or Financial Freedom to know that they have an opportunity to share their experiences with the two bank regulators who are reviewing the proposed merger of OneWest with CIT Group,” explained Kevin Stein, associate director of the California Reinvestment Coalition (CRC). CRC, along with 100 other organizations, and over 15,000 people who signed a Daily Kos petition, are opposing the merger, citing a long list of concerns.

The Federal Reserve and Office of the Comptroller of the Currency are hosting a public hearing next week, on Thursday, February 26, from 8:00AM to 5:00PM in Los Angeles at the Federal Reserve building (located at 90 South Grand Ave, Los Angeles, CA 90015), and the general public is invited to attend.

Stein explains: “If you’re unable to attend the hearing, we suggest sending your comments about this proposed merger to the Federal Reserve and the Office of the Comptroller of the Currency. The deadline for comments is February 26, 2015. We have directions on how to send your comments to the Federal Reserve on our website:

Organizations opposing this merger have cited a long list of concerns, including:

1) Corporate subsidies: According to CNN (Nov 1, 2009) , CIT Group received $2.3 billion in TARP funds it never repaid, and the FDIC estimates it will pay OneWest Bank a total of $2.4 billion for costs related to soured loans, under a controversial “shared loss agreement” the FDIC has with the billionaire owners of OneWest Bank. The banks also plan to use CIT Group’s 2009 bankruptcy to further reduce their taxes if the merger is approved.

2) OneWest Bank’s troubling foreclosure record: Legal settlements, surveys of housing counselors, and rankings from J.D. Power and Associates all suggest that customers seeking help with their mortgage from OneWest Bank have encountered numerous obstacles, run-arounds, red-tape, and delays that may have pushed people into foreclosure instead of keeping their homes.

3) Outsized compensation for bank officers: According to the LA Times(Oct 14, 2014) if this merger is approved, the CEO of the bank is expected to receive an annual salary of $4.5 million, plus restricted stock options worth $12.5 million. The Chairman of the board is also expected to receive an annual salary of $4.5 million, but this is for part-time work, since he would also be allowed to continue running his hedge fund.

4) Weak Community Reinvestment Plan: Under the Community Reinvestment Act (CRA), banks are required to reinvest in the communities where they do business. Unfortunately, the CRA record for both banks is mediocre, and the bank’s future reinvestment plans (if the merger were approved) also would rank the bank near the bottom of its peer banks in California.

To read more about this merger, CRC encourages people to visit our CIT Group and OneWest Bank Merger Resource Center, where they can see in-depth analysis of the merger, why it matters to communities, and how to get involved.

We Submitted A FOIA Request About Mortgage Servicers: Here’s the GAO’s Response

Since the start of the foreclosure crisis, CRC has publicly voiced concerns that assistance provided by banks and servicers is not reaching all communities equally.  In other words, some of the communities that were targeted for some of the worst, most predatory mortgages, are the least likely to get the help they need (including sustainable, affordable modifications that keep them in their homes). CRC has worked with housing counselors across California including 10 surveys we’ve conducted with them about their first-hand experience trying to help people to avoid foreclosure.

In our most recent survey, published in May 2014, over half of the housing counselors and legal aid attorneys  said they believe that communities of color and homeowners who aren’t proficient in English are receiving worse outcomes when they seek help.

This may be due in part to banks and servicers not translating written materials they send the homeowners.  Homeowners have also shared with us that some servicers lack adequate and competent translators when homeowners call to speak to their servicer.

Our concerns were reaffirmed when the GAO released a report in February 2014 that analyzed data from the government’s main anti-foreclosure program, the Home Affordable Modification Program (HAMP).  The GAO found statistically significant differences in the rate of denials and cancellations of trial modifications and in the potential for re-default for homeowners who are protected by fair lending laws.


Unfortunately, the GAO did not report which four banks provided data that the GAO analyzed to reach these troubling conclusions.  So, we filed a Freedom of Information Act request to the GAO to find out which four banks were included.  We also asked the US Department of Treasury if the Department took any action to address the potential fair lending violations identified in the GAO report. You can read Treasury’s response here.

In December, the GAO informed us that they would NOT be providing us the data that we requested, and CRC has subsequently filed an appeal of this decision.  Stay tuned!

Why does transparency in mortgage modification data matter?  

We’re glad you asked!

In our recent comments to the Consumer Financial Protection Bureau, we weighed in with seven suggestions on the CFPB’s update to the Home Mortgage Disclosure Act and outlined the importance of transparent reporting on mortgage modifications:

The performance of financial institutions in modifying loans is and will continue to be a major factor in determining whether they are meeting local housing needs and complying with fair housing and fair lending laws. We urge the CFPB to include in its final rule the requirement that financial institutions report data on all loan modification applications, denials, and modification terms, broken out by race, ethnicity, gender and age of applicants and census tract; and that this data be publicly disclosed. 

Part of our recommendations are based on our concerns about access to relief not reaching all communities equally.  Based on the City of San Francisco’s recent RFP for banking services, we also know that banks like Bank of America, have the capacity to report on this data, even if they have resisted providing it.

Click here to view BOA’s responses to the City of San Francisco’s banking RFP.  BOA’s response includes demographic data for homeowners who sought help from the bank, so we know this is possible to do.

CRC isn’t the only organization concerned about the transparency and access to relief issue.  In March 2013, CRC, Americans for Financial Reform, and about 100 other organizations asked Joseph Smith, the National Mortgage Settlement Monitor, to provide this data.  However, he declined, stating that he didn’t believe he had the authority. (See letter here).

Bottom line: The CFPB should incorporate transparent mortgage modification data requirements so the public can see who is getting access to mortgage relief (and who isn’t), the GAO should release the data on which four banks it looked at, and more cities should follow San Francisco’s lead in asking banks to be transparent about their mortgage modification practices. 


Community Members have 6 Big Problems With OneWest and CIT Group Merger

Have you heard about the proposed bank merger of OneWest (former IndyMac) and CIT Group?

Over fifty organizations OPPOSE the merger, citing a long list of concerns to the regulators who are reviewing the proposed merger.  You can read more about their concerns here: 50 Organizations Oppose Too Big To Fail Bank Merger in California

Here’s what community leaders have said about the CIT/OneWest, Too Big To Fail merger thus far:

1) Harmful foreclosures, including on seniors with reverse mortgages

OneWest, and its subsidiary, Financial Freedom (reverse mortgage servicer) have foreclosed on tens of thousands of foreclosures, hurting homeowners and destabalizing communities.  Worse, it’s highly likely that the bank is being reimbursed by the FDIC as these mortgages go into foreclosure.

Sandy Jolley, a reverse mortgage consumer advocate who has worked with senior homeowners and their families harmed by reverse mortgages, raised the issue of harmful foreclosures on seniors by OneWest at an EGRPRA meeting earlier this week with top regulators, including the Comptroller of the Currency, Thomas J. Curry; Kay Kowitt, the Deputy Comptroller for the Western District, Martin J. Gruenberg, Chairman of the FDIC; Barry Wides, Deputy Comptroller for Community Affairs, Office of the Comptroller of the Currency; and Maryann F. Hunter, Deputy Director, Division of Banking Supervision and Regulations, Board of Governors of the Federal Reserve System, and others.

She comments: “I’m interested to see how regulators will address harmful products and practices (like reverse mortgages) in the context of measuring whether or not banks are meeting community credit needs.”

Here’s two recent stories about OneWest foreclosing on three  seniors with reverse mortgages:

From American Banker: HECM Non-Borrowing Spouses Renew Class Certification Attempts:

One, Janice Cooper, is a 73-year-old federal government retiree in Southern California with severe heart disease. She also requires the assistance of a registered service dog. Her only income comes from Social Security and does not know where she will live if the foreclosure goes through, according to the court filing.

The other, Ernestine Harris, is a longstanding plaintiff in AARP Foundation litigation against HUD. She is 65 and legally blind, according to a declaration filed by her attorney, J. Rachel Scott.

From CBS Dallas Fort Worth: 103-Year-Old North Texas Woman Fights To Keep Her House

Now OneWest, which is based in California with a small office in Dallas, is attempting to foreclose on Lewis’ home after she accidentally allowed her insurance to lapse, a violation of the loan agreement.

Daniel Rodriguez, director of the community wealth department at East LA Community Corporation explains: “Regulators missed their opportunity to prevent banks like IndyMac from making predatory mortgages, and communities throughout Los Angeles were destabilized as a result. The regulators have an important opportunity with this merger to protect homeowners from further preventable foreclosures.”

Kevin Stein, associate director of the California Reinvestment Coalition, suggests the regulators take a closer look at OneWest’s foreclosure record as part of the merger approval process: “Thousands of seniors and other homeowners have been hurt by OneWest, and counselors throughout California have rated it as one of the worst servicers in the state. This merger is an opportunity for regulators to review the bank’s record, audit their practices, and ensure that additional homeowners weren’t harmed by practices inconsistent with their loss share commitments.”

2) Bank’s Community Reinvestment Record is Weak 

Kevin Stein associate director at the California Reinvestment Coalition, explains that CIT Bank is a poster child for banks trying to circumvent the requirement to reinvest in their communities. CIT Bank accepts deposits from communities around the US ($14 billion worth in the case of CIT Bank), but only reinvests the money in Salt Lake City, Utah, near its headquarters:  “CIT Bank accepts $14 billion in deposits from around the US (via the Internet), but gets away with only reinvesting that money into communities near its Salt Lake City headquarters.”

Michael Banner, Chief Executive Officer, of Los Angeles LDC, comments: “While its peer banks have 30% of their branches in our communities, only 15% of OneWest bank branches are located in low and moderate income census tracts. If OneWest is serious about this merger moving forward, we would suggest it take a reality check and look at what its peers have accomplished as benchmarks for the many areas where it can improve.”

Roberto Barragan, president of Valley Economic Development Corporation, comments: “Here’s two banks that wouldn’t be alive without the support of taxpayers and bank regulators, and yet, they’re not willing to outline a strong plan of reinvesting in the communities where they do business? Until they are willing to come to the table with the community, this is a no-brainer for regulators. No public benefit means no merger approval.”

3) OneWest originates a low number of loans to Asian Homeowners 

Hyepin Im, president and CEO of Korean Churches for Community Development comments: “Our communities are particularly concerned about the low level of mortgage lending by OneWest as compared to its peers. According to 2013 HMDA data, for the industry as a whole, 16% of mortgage loans in California went to Asian borrowers. In comparison, only seven percent of OneWest’s mortgages went to Asian borrowers. Regulators should take a close look at OneWest’s record in light of this proposed merger.”

4) The FDIC is providing ongoing Corporate Welfare to the Billionaire Owners of OneWest Bank

When the billionaire owners of OneWest Bank purchased the bank, they secured a lucrative “shared loss” agreement from the FDIC, meaning the FDIC is help covering the cost of soured loans that were originated by IndyMac Bank.

Paulina Gonzalez, executive director of the California Reinvestment Coalition comments: “Shared loss agreements are meant to protect our entire financial system, not to facilitate the enrichment of a few private investors who stand to gain immensely from this merger, while communities are left behind. Although the Loss Share Agreement may have been appropriate during the time of the financial crisis after IndyMac failed, the transfer of the Shared Loss Agreement to CIT Group as part of this proposed merger serves no public purpose or government interest, and only enriches investors. ”

5) On Creating another Systemically Important Financial Institution (Regulator Speak for Too Big To Fail)

“We don’t need another bank that is too big to fail,” said Michael Banner, Chief Executive Officer, of Los Angeles LDC. “We need to make sure that OUR communities don’t fail, by putting protections in place that insure improved access to capital to Main Street businesses and economic development projects that create much needed jobs and revitalize those communities that were hardest hit by the Wall Street induced financial crisis.”

6) No Clear Public Benefit from this Merger

“We see there are two sets of rules for Wall Street and Main Street,” comments California Reinvestment Coalition Executive Director Paulina Gonzalez. “Bank CEOs and investors will potentially ‘earn’ millions from this merger, despite no clear community benefits from the merger, and despite the fact this merger dramatically increases risks for the US financial system. Americans who are working two or three jobs to keep their head above water will have a hard time understanding how bank regulators would approve a merger that includes a plan for exorbitant executive salaries and planned corporate tax breaks and no guarantees of a clear public benefit.”

Kevin Stein, associate director at the California Reinvestment Coalition, adds: “CIT wants regulatory approval to buy OneWest, which will bring expected corporate profits, billions for investors, and millions for bank executives.

It also wants:

  1. To not to have to pay back $2.3 billion in TARP money it received from the US Government;
  2. To take advantage of merger’s expected profits and use tax gimmicks to lower its IRS bill;
  3. To have the FDIC agree to cover certain future losses; and
  4. To not offer a meaningful plan to serve and reinvest in the community.

Has a merger ever had so much public subsidy, so much private gain, and so little public and community benefit?”

If you’re concerned about this merger, please consider taking a few minutes to send an email to the regulators that will be making the decision about it.  You may receive a response that your “email isn’t timely.”  That’s okay.  It’s still important for regulators to hear from consumers and communities that will be impacted by this merger.  If you’ve had experiences with OneWest or Financial Freedom, please add that information in your message.  Here’s the link to send a message to the bank regulators:

Tell Bank Regulators: We need Public Hearings in LA on the OneWest and CIT Group Bank Merger


Seven Home Mortgage Disclosure Act Updates the CFPB Should Make

Home Mortgage Disclosure Act

In October 2014, the California Reinvestment Coalition and 40 additional California organizations sent a letter to the Consumer Financial Protection Bureau, urging updates to the Home Mortgage Disclosure Act that will increase transparency while allowing regulators, advocates, and industry to identify troubling trends, such as widowed homeowners being unnecessarily pushed into foreclosure.  The recommendations are included below:

Monica Jackson
Office of the Executive Secretary
Consumer Finance Protection Bureau
1700 G. St. NW
Washington DC 20552

RE: Docket No. CFPB-2014-0019: California community group comments

Dear Ms. Jackson:

The undersigned community groups submit this letter to the Consumer Financial Protection Bureau (CFPB) in response to the recent proposal to amend the Home Mortgage Disclosure Act (HMDA) regulations.

We appreciate the great care that CFPB has taken to craft this proposal, and that the proposal suggests enhancements to HMDA that go beyond the requirements of the Dodd-Frank Act, as well as CFPB’s recent improvements to the HMDA website in response to recommendations by community groups.

At the same time, we have a number of concerns with this proposal, and feel that it does not go far enough to ensure that the data reported to the public meets the stated goals of HMDA; namely, to help the public determine if financial institutions are serving community housing needs, assist public officials in deciding how to distribute public investments, and identify possible discriminatory lending patterns. Specifically, our concerns with this proposal include:

1. The failure to address key priorities, such as:

a.The inclusion of loan modification data as required reporting;

b.The disaggregation of the overly broad “Asian” race category;

c.The absence of any fields relating to language access, including (at a minimum) American Sign Language, Braille, Chinese, Korean, Spanish, Tagalog and Vietnamese;

d.Whether a borrower will own the property with a non-borrowing party (the widows and orphans/successors in interest issue); and

e.Whether the borrower received pre-purchase housing counseling.

2. While proposing major advancements in some areas, the proposal does not go far enough:

a.Loans for multifamily rental housing should document the level of affordability of all units, include the number of bedrooms, and include construction lending;

b.Commercial loan and HELOC coverage should require reporting on whether a home secured loan was taken out for a “small business” purpose.

3.The reluctance of CFPB to require automatic disclosure to the public of all data collected pursuant to HMDA and the undue credence given to industry’s purported concerns about consumer privacy.

We discuss these concerns in greater detail below.

Loan Modifications: The performance of financial institutions in modifying loans is and will continue to be a major factor in determining whether they are meeting local housing needs and complying with fair housing and fair lending laws. We urge the CFPB to include in its final rule the requirement that financial institutions report data on all loan modification applications, denials, and modification terms, broken out by race, ethnicity, gender and age of applicants and census tract; and that this data be publicly disclosed.

The CFPB has the authority to require detailed reporting of loan modification data.  The HMDA statute speaks to the Bureau’s broad authority to provide for any “adjustments … for any class of transactions” (see 12 USC §2804) it deems proper to serve the goals of the Act.  Loan modifications represent the very kind of transaction Congress contemplated when crafting the Act, as they go to the heart of current efforts to serve the housing needs of our communities and to protect homeownership and equity in our neighborhoods.

The federal Home Affordable Mortgage Program (HAMP) and recent Department of Justice settlement agreements with large servicers are evidence of the prominence of loan modifications as part of federal housing policy and enforcement.

This data will also help answer the very serious question of whether discrimination is occurring in the foreclosure prevention context.  The California Reinvestment Coalition and the National Housing Resource Center have conducted surveys of nonprofit housing counseling agencies serving thousands of consumers a month, and found that housing counselors report repeatedly that borrowers of color are receiving worse loss mitigation outcomes than white borrowers.

Similarly, the National Community Reinvestment Coalition found that people of color in Washington, D.C., were more likely to go into foreclosure, even after controlling for borrower, loan, and neighborhood characteristics.   NCRC also surveyed homeowners seeking loan modifications and found that servicers pushed African American borrowers to foreclosure faster than white borrowers, and that white HAMP-eligible borrowers were more likely to receive a loan modification than African American and Latino HAMP-eligible borrowers.

Community groups nationally have decried the uneven distribution of loan modification, including loan modification relief offered as part of implementation of the National Mortgage Settlement and more recent Department of Justice settlement agreements with JPMorgan Chase, Citibank and Bank of America. Indeed, in March of last year, over 100 groups under the umbrella of Americans for Financial Reform signed a letter to the Office of Mortgage Settlement Oversight calling for greater transparency and accountability to ensure that banks comply with their fair lending obligations, and remedy the damage of foreclosures in communities of color and other low-to-moderate income communities.

Assisting distressed borrowers and saving homes from foreclosure is integral to reviving the housing market. Yet, a February General Accounting Office (GAO) report that analyzed nonpublic HAMP data confirmed the concerns of community groups in finding statistically significant differences in the rate of denials and cancellations of trial modifications, and in the potential for re-defaults of loan modifications for Limited English Proficient and African-American borrowers and other populations.

Although the public disclosures are currently limited, the HAMP program does in fact require loan modification reporting and disclosure with the added requirement that servicers report data by race and ethnicity in the public disclosure. This is an important precedent.

Directly consistent with the statutory purposes of HMDA, local governments are keen to understand whether, where and to whom loan modification relief is offered so that they can determine if financial institutions are meeting the needs of their communities and to identify whether further policy responses are necessary. As one example, the City and County of San Francisco, in its Request for Proposals for the city’s banking and credit card business, requests bank applicants to provide local data on the race, ethnicity, and census tract of foreclosure filings and loan modifications, broken out by type of modification.

The San Francisco experience suggests not only that local governments are interested in such data, but also that banks are capable of providing it. To its credit, Bank of America has provided such data to the City and County. But all financial institutions should report this data to all jurisdictions via HMDA.

The data to be reported for loan modifications should be substantially the same as data currently collected under HMDA, in that loan modifications—like mortgages—are transactions which are secured by homes and require underwriting. Ideally, all loan modifications should be reported separately in HMDA data as a separate category under “loan purpose,” or possibly “loan type.”

If reporting in the current HMDA database is not feasible, we urge the CFPB to collect and publicly disclose loan modification information separately. Federal regulators are capable of this type of reporting; for example, the FFIEC currently does separate data collecting and public disclosure of Primary Mortgage Insurance (PMI).

Disaggregating Asian American Pacific Islander Communities in HMDA Data: The HMDA data on race and ethnicity has been ineffective in capturing the diversity of experiences of Asian American and Pacific Islander borrowers. While the HMDA data overall show that “Asian” borrowers tend to experience outcomes at least as favorable as whites, some sub-groups within the AAPI population experience less success in accessing homeownership and staving off foreclosure. We ask the CFPB to require the disaggregation of this data to better reflect the experiences of households within the AAPI community.

A 2007 report by the Census Bureau, entitled, “The American Community: Asians  2004,” part of the American Community Survey report series, analyzed experiences of several subcategories of Asian American families, including: Asian, Bangladeshi, Cambodian, Chinese, Filipino, Hmong, Indonesian, Japanese, Korean, Laotian, Malaysian, Pakistani, Sri Lankan, Taiwanese, Thai, Vietnamese, and other Asian. The report noted various differences in experiences for these groups, including differences in owner occupancy and home value.

We support the analysis of the National Coalition for Asian Pacific American Community Development that a workable, federal precedent for disaggregating the broad  “Asian” race category exists in Section 4302 of the Affordable Care Act, which calls for data reporting for Asian subcategories which include Asian Indian, Chinese, Filipino, Japanese, Korean, Vietnamese, and Other Asian, as well as Native Hawaiian and Other Pacific Islander subcategories including Native Hawaiian, Guamanian or Chamorro, Samoan, and other Pacific Islander.

HMDA should require disaggregated data for “Asians” that allow borrowers to identify as Cambodian, Chinese, Filipino, Hmong, Indian, Japanese, Korean, Laotian, Thai or Vietnamese American, amongst other subgroups.

Capturing Language Access. Relatedly, immigrant and Limited English Proficient borrowers and communities have been preyed upon by unscrupulous brokers, lenders and loan servicers over the last several years with painful results. While Census data show that 18 percent of Americans speak languages other than English in their homes, almost 40 percent of Californians fall into this category; more than half of this population speaks English less than “very well.”   Spanish, Chinese, Tagalog, Vietnamese and Korean are spoken by approximately 83 percent of all Californians who speak a language other than English.

In the summer of 2006, a series of borrowers and housing counselors testified at Federal Reserve Board hearings held in San Francisco regarding the then-increasing prevalence of “bait-and-switch” tactics perpetrated on borrowers who negotiated their loans in a non-English language but received English-only documents with less favorable terms than promised.

The California legislature responded to this very real dynamic by passing a law meant to require a translation of most financial documents when the contract was negotiated in any of the five most-spoken non-English languages spoken in the state.  Significant evidence shows that many lenders continue to fail to comply with the statute.  Among the results of CRC’s housing counselling surveys was that over 60 percent of responding agencies stated that they commonly saw non-English speakers (who presumably negotiated their loans in a non-English language) who did not receive any translations of their loan.  In those cases, 60 percent of the agencies noted that the loan terms that these Limited English Proficient borrowers actually received were less favorable than what they had been promised, and 65 percent reported that the loan was unaffordable when made to the borrower.  In another survey, this one by Neighborhood Legal Services of Los Angeles County, 40 percent of Spanish-speaking homeowners reported that they did not fully understand the terms of their loan documents.

The February 2014 GAO report discussed above found statistically significant disparities in the rate of loan modification denials, cancellations, and re-defaults for LEP borrowers and other protected groups as compared to non-Hispanic white borrowers after analyzing certain loan modification data under the HAMP program.

To help address these problems, HMDA should be enhanced to require the reporting of loan data that include:

·The primary language spoken by the loan or loan mod applicant;

·The language in which the loan or loan modification application and contract were negotiated;

·The language of the loan documents.

Widows Data. We propose a data field be crafted to capture whether there is a co-owner of the property who is not on the loan, or where that person co-owns the property with someone who signs the deed of trust as a “guarantor.”  Usually the other person is a spouse.  This phenomenon is not uncommon, particularly among limited English speaking families and families of color, and can cause significant problems upon divorce or the death of one spouse.  The practice could be a sign that the broker or originator is railroading the borrower into specific loan products, or that the broker or lender is wrongfully pressuring spouses to remove one spouse from title to make the broker’s or underwriter’s job easier.

Creating such a field would be consistent with the CFPB’s guidance on successors in interest, and similar concern about this issue as expressed by Fannie Mae, Freddie Mac, and the HAMP guidance and interpretive letters.

The problem of successors in interest and non-borrower spouses will only grow as the population ages. These data are especially important and relevant as the CFPB here proposes to require the reporting of reverse mortgages, where the successors in interest dilemma is all too real.

Housing Counseling. Pre-purchase housing counseling can have a significant impact on a borrower’s ability to attain, and maintain homeownership, while avoiding predators who would seek to siphon off fees and equity. We agree with the National Housing Resource Center HMDA data should include data fields relating to counseling type (counseling or education), counseling mode (in-person, phone, online) and counseling agency HUD ID.

Other concerns. We observe that though a stated goal of HMDA is to identify discriminatory lending patterns, HMDA data do not track all protected groups under various fair housing and fair lending laws. In particular, we are concerned about the growing anecdotal evidence and cases relating to discrimination against disabled persons, including where disability can be ascertained by lenders based on source of borrower income. We are also concerned about discrimination against certain religious groups. We urge the CFPB to consider whether to link HMDA to all fair lending protections, and urge CFPB fair lending enforcement staff to be vigorous in ensuring ECOA violations are challenged.

In some respects, the proposal suggests important enhancements to data collection requirements, but does not go far enough.

Loans for Affordable Multifamily Lending: A severely underutilized aspect of HMDA is its multifamily lending data. There has been little to no analysis of this data, most researchers probably do not know it exists, and multifamily lenders may not even know whether and how to report it. It is critical to understanding whether community needs are being met to know whether institutions are supporting the development of affordable rental housing. We are very pleased to see that CFPB is considering requiring lenders to report on whether multifamily loans are for affordable housing, and how many units were constructed through use of the financing.

We further urge the CFPB to require reporting on the number of bedrooms per unit to help determine whether fair lending laws are being followed, include all construction loans which are an important way for lenders to meet community credit needs, and designate whether the developer is a nonprofit organization which is mission driven to serve the community. It is also important to know the level of affordability (for very low-, low-, or moderate-income tenants) for all units of housing. There is a strong precedent for this in Fannie Mae and Freddie Mac data collection efforts. Finally, lenders should be required to report on whether such housing is targeted to particular groups, such as seniors or persons with disabilities. These projects can be harder to finance, and the manner in which financial institutions deal with them can raise fair lending issues.

For financial institutions that are financing affordable, multifamily housing, enhancing data elements and transparency would enable them to better claim credit for this important work.

Commercial loans and “small business” purpose. We are pleased that the CFPB recognized that requiring the reporting of Home Equity Lines of Credit (HELOCs) is necessary in the wake of the problematic practices associated with these loan types during the 2000s. The proposal to require reporting of home-secured loans that finance businesses will also enhance our understanding of credit needs. But to illuminate the impact of lending practices on the intersection of small business ownership, homeownership, and jobs, commercial loan and HELOC coverage should require reporting on whether a home secured loan was taken out for a “small business” purpose, alongside “home purchase,” “home improvement,” and “refinance.” This is of particular relevance in immigrant communities, where home-secured lending is often used to help finance a small business and hire workers. We also recommend creation of a “consolidate consumer debt” loan purpose category.

Covered lenders and rural areas. We are grateful that the CFPB contemplates improving HMDA’s coverage of non-depository lenders. However, we are concerned that the proposed 25-loan threshold would eliminate 1,775 depository institutions as HMDA reporters, and we urge the CFPB to reject this proposal as it would significantly reduce coverage of lending in rural counties. The requirement of one loan to trigger HMDA reporting for depository institutions should be retained. Additionally, the 25-loan threshold (for non-depositories as we suggest, or all lenders as proposed) should require reporting by all lenders originating twenty five multi-family or single family loans.

There are a number of welcome enhancements proposed for HMDA reporting. We are particularly pleased to see CFPB go beyond the statutorily required data elements, to propose inclusion of other important data. We support the inclusion of all of these extra data fields.

Universal Loan ID. To the extent that a universal identifier could be created to track a loan across the life of the loan, this would be particularly useful, especially across servicing transfers or note sales.  In a market in which such transfers and sales are common, a standardized number could be useful for the consumer, regulators and for industry.  We would ask that the CFPB provide a common framework for identification, or that each financial institution be required to register its identifier with the CFPB, all other relevant federal regulators and state regulators.  It may be simplest to have a single registration location on-line for such a system. Identifiers should also be made publicly available.

We also support various other proposed enhancements, including:

·More transparency around lending for manufactured housing, which is a significant source of housing in California’s rural communities;

·Reasons for all loan denials;

·Age of borrower, which should be captured by actual age, or age ranges of five years;

·Reverse mortgages;

·Credit scores;

·Points and fees, origination charges, discount points;

·Loan to value and combined loan to value;

·Reporting of race, ethnicity and gender based on visual observation and surname if data are not provided by applicant;

·Nontraditional loan features, such as Interest Only, and balloon payments;

·Expanding occupancy fields to include “investment property with rental income.” This will help uncover the growth of investor purchasers of residential properties and their impact on neighborhoods;

·Considering the role of brokers in the mortgage crisis, the proposals for identifying wholesale and retail channels will make it easier for the public to identify market participants engaged in discriminatory, abusive, or illegal practices;

·Providing for quarterly reporting for larger institutions so the data are more timely and relevant.


We greatly appreciate that the CFPB is proposing to require data reporting beyond Dodd-Frank requirements, as this will greatly assist in monitoring trends in access, affordability, and sustainability of home loans. We urge the agency to consider our additional recommendations—in particular around including loan modifications, disaggregating AAPI data, language access, refining affordable multi-family housing data—and to make all the data publicly available so that the core statutory purposes of HMDA, such as holding lenders accountable for meeting housing needs and identifying discriminatory lending patterns, can be attained.

Thank you for your consideration of our views. Should you have any questions about this letter, please contact Kevin Stein.



Advocates for Neighbors, Inc.

AnewAmerica Community Corporation

Asian Pacific Islander Small Business Program

Asian Pacific Policy & Planning Council (A3PCON)

California Coalition for Rural Housing

California Housing Partnership

California/Nevada Community Action Partnership

California Reinvestment Coalition

California Resources and Training (CARAT)

Community Action Agency of Butte County, Inc.

Community HousingWorks

Community Housing Council of Fresno

Community Legal Services in East Palo Alto

Consumer Action

East Bay Asian Local Development Corporation (EBALDC)

East Bay Housing Organizations (EBHO)

East Los Angeles Community Corporation

East Palo Alto Community Alliance Neighborhood Development Organization (EPA CAN DO)

Fair Housing Council of the San Fernando Valley

Fair Housing of Marin

Housing and Economic Rights Advocates

Housing California

Inland Fair Housing and Mediation Board

Korean Churches for Community Development

Law Foundation of Silicon Valley

Montebello Housing Development Corporation

National CAPACD

National Housing Law Project

Neighborhood Housing Services Silicon Valley

Neighborhood Partnership Housing Services

NeighborWorks Orange County

Non-Profit Housing Association of Northern California (NPH)

Northbay Family Homes

Oakland Business Development Corporation

Orange County Community Housing Corporation

Project Sentinel

Public Counsel

Rural Community Assistance Corporation

Sacramento Hosing Alliance