By Robert R.Michael, Esq.

BWW LawGroup, LLC *

USFN Member(MD, DC, VA)

As one of only two U.S. cities to host a pair of its own MLB teams, Chicago, IL, is accustomed to midsummer grand slams. In July 2023, the USFN Compliance and Legal Issues Seminar hit another, with a speaker lineup led by three big league keynote speakers.

First on deck was Mark McArdle, Assistant Director of Mortgage Markets for the Consumer Financial Protection Bureau, who was introduced by Richard Nielson of Reimer Law Co.

McArdle has been with the CFPB since 2017, serving under five directors and acting directors. Prior to his tenure with the CFPB, he served as the Deputy Assistant Secretary for Financial Stability at the U.S. Department of the Treasury. In that role, McArdle led the office that managed the Troubled Asset Relief Program (TARP). He played a key role in the development of the HAMP Program and oversaw the creation of the Hardest Hit Fund, which provided funding to state housing finance agencies for foreclosure prevention efforts.

McArdle discussed the current regulatory environment and its impacts on homeowner assistance.  For context, he recalled the record and document-driven process which governed HAMP, where the rules were designed around the paperwork. He then confirmed that the current goal of the CFPB is to streamline the rules so the paperwork necessary for loss mitigation is designed around the rules.

McArdle confirmed that the CFPB is working in conjunction with other agencies, particularly through the Financial Stability Oversight Council to increase liquidity for non-bank mortgage originators. He noted that six of the 10 largest mortgage originators are non-banks, and account for 60% of mortgage originations. However, those entities have no access to emergency liquidity funds. If those entities suddenly exit the market, who will originate those mortgage loans?

Finally, McArdle encouraged maintaining open lines of communication with the CFPB, specifically encouraging the use of the Regulatory Inquiries Line for questions. He mentioned that the CFPB’s current enforcement actions are a good measure of its priorities. Currently, eliminating junk fees is high on that list. When asked what constitutes a “junk fee,” McArdle stressed that the CFPB recognizes good faith and referred to the CFPB’s Request for Information on the subject. He gave a very straightforward practical response, “Is there a cost to the service provider that roughly relates to the fee? Or, is it a $100 fee for an event which costs the lender/provider nothing?”

The second keynote speaker was William Collins, the Director of the Department of Housing and Urban Development’s National Servicing Center, in Oklahoma City, OK. Collins was presented, townhall interview style, by Jeffrey Weisserman of Trott Law, P.C. Asked about the recovery since COVID-19, “how has it gone?” Collins had a positive outlook. He stressed that redefault rates remain low and that current default rates are at pre-COVID levels. The most telling figures was that FHA had approximately 950,000 loans in forbearance in the second quarter of 2022, versus only 150,000 in July 2023.

In a moment that would have been the bright spot at any USFN seminar, Collins foretold of an anticipated proposed Rule which will modify how interest debenture curtailments are assessed. Collins could have been channeling any of the USFN member firms when he described the disconnect between the actual harm caused by missing a first legal action deadline by one day, and the penalty as currently assessed. Weisserman said, “I was sure that would get an applause from this group.” Having received permission, applause did ensue.

Of course, no conversation regarding FHA loans would be complete without some discussion of the “face-to-face” requirement for loss mitigation solicitations. Collins confirmed the trend toward allowing servicers to leverage technologies to accomplish the same goals of the face-to-face meeting.

Collins also fielded a question regarding the “marketability” versus “insurability” standards for title to real property acquired by the Department of Housing and Urban Development. It did not surprise those in attendance to learn that there were no changes on the horizon on that issue.

Finally, Collins confirmed that HUD is making efforts to allow cash-for-keys to be offered to borrowers prior to a foreclosure sale. The hope is to increase the volume of foreclosure sales that are acquired by investors and to increase the utility of the claims without conveyance of title and second chance auction programs.

The final keynote presentation was delivered by Manuel (“Manny”) Newberger of Barron & Newburger, P.C.  Newburger is recognized nationally for his expertise in consumer and commercial law, consulting on FDCPA, FCRA, and TCPA compliance.

Newburger discussed the upcoming U.S. Supreme Court argument in Consumer Financial Protections Bureau v. Community Financial Services Association of America, which is scheduled for oral arguments in October 2023. In an almost prophetic statement quoting from the Art of War, Newburger said that “Strategy without tactics is the slowest route to victory. Tactics without strategy is the noise before defeat.” Newburger included necessary critiques of the CFPB, though warning that “you don’t want the CFPB to go away.”

This final keynote presentation then hinged on three proposed Rules. First was the CFPB’s proposed Registry to Detect Repeat Offenders. This Rule, which was proposed without a SBREFA hearing, would require certain nonbank financial firms to register with the CFPB when they become subject to certain local, state, or federal consumer financial protection agency or court orders. This Rule would require an entity to designate a responsible executive to be the highest-ranking person responsible for overseeing your compliance with the Rule or Order. That executive would then be required to file an attestation each year confirming compliance. Newburger predicts that this Rule would significantly decrease an entity’s willingness to enter into an Agreed Order.

The second proposed Rule was the CFPBs proposed Rule to require nonbanks that are subject to CFPB supervision, and which use form contracts to impose terms and conditions that limit or purport to limit consumer rights and legal protections to register with the CFPB. Newburger considers this an end run around the CFPB’s failed rule to prevent financial companies from using arbitration clauses. The prior Arbitration Agreements Rule was upended on November 1, 2017, by a joint resolution passed by Congress and signed by then President Donald Trump.

The third proposed Rule was announced in January 2023, the day after three Consent Orders were entered involving non-compete agreements which the CFPB asserted were excessively broad and abusive. Newburger interprets the CFPB’s messaging on this front to be, “this is the CFPB’s litigation strategy, whether or not the Rule is enacted.”

Newburger summed up his experience with the CFPB to remind those in attendance that forms, processes and templates have proliferated to comply with the Rules created by the CFPB. For example, without Regulation F, the model validation notice (which has been adopted industrywide) would likely run afoul of the straightforward text of the FDCPA. He has had generally fair and positive experiences with those who work for the CFPB and implores his audience to abide by “Manny’s Rules”:

•        External optics must match internal legal positions; and

•        If you don’t want the government to think you are criminals, don’t act like criminals.

These keynote presentations along with evening networking at the House of Blues, a morning walk-run through downtown Chicago led by Doug Oliver of McCalla Raymer Leibert Pierce, LLC, and a host of presentations by USFN members and servicers alike, knocked the ball out of the park for a grand slam in the summer of 2023.

Copyright @2023 USFN

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