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The Consumer Financial Protection Bureau has announced a final rule mandated by Congress (section 307 of the Economic Regulatory Relief and Consumer Protection Act (EGRRCPA)) that applies existing residential mortgage protections to Property Assessed Clean Energy (PACE) loans.

PACE loans are used by homeowners for clean energy upgrades and disaster readiness that are paid back through their property tax bills. Because of concerns about subprime-style lending that puts homeowners at risk of losing their home, Congress required the CFPB to enhance protections. The rule will ensure that PACE borrowers have the right to receive standard mortgage disclosures that allow them to compare the cost of the PACE loan with other forms of financing, and the lender will be responsible for ensuring that the borrower is not set up to fail with an unaffordable loan.

While PACE financing can provide quick cash for home improvements, CFPB research shows that:

• Most PACE borrowers are eligible for other forms of financing, often at much cheaper rates than PACE loans.
• PACE loans caused borrowers’ property taxes to increase by about $2,700 per year or an 88 percent increase.
• PACE borrowers were more likely to fall behind on their first mortgage than people who chose not to finance home improvements with PACE.
• PACE loans tend to be more expensive – around five percentage points higher -- than first mortgages, even though PACE loans get paid at a foreclosure sale before first mortgages.

The rule amends Regulation Z to make PACE loans subject to the regulation and its TRID disclosure and ability-to-repay requirements. The amendments will become effective March 1, 2026.

• Federal Register document
• Executive Summary
• CFPB Report: "Property Assessed Clean Energy (PACE) Financing and Consumer Financial Outcomes"

The CFPB yesterday issued a report on the experiences of homeowners dealing with their mortgage company after divorce or the death of an original borrower.

The report indicates that many homeowners report that their servicers push them to take on new, higher-interest loans instead of keeping their existing mortgage. Homeowners also report recurring requests from servicers for the same or updated documents extending over months and sometimes years, at the same time they are dealing with the death of a loved one or a divorce. Domestic violence survivors face additional challenges, including mortgage companies continuing to send critical mortgage information to the abuser and thus putting the survivor’s safety at risk. Servicers generally blame investor requirements, processing volumes, or “systems issues,” rather than taking responsibility for their shoddy customer service.

Based on its review of consumer complaints, the CFPB has identified multiple areas of concern, including:

• Pressure to take out higher-interest loans: Homeowners report servicers telling them they must refinance their mortgages at today's higher interest rates even though federal mortgage guidelines allow them to maintain the existing loan terms.
• Repeated delays and paperwork requests: Many homeowners report waiting months or even years for servicers to process their paperwork, with some reporting that servicers repeatedly request the same documentation or fail to respond to inquiries.
• Refusals to release the original borrower from liability: Some homeowners report that servicers are denying their requests to remove the original borrower from the mortgage, even when the successor homeowner has been making all payments on the mortgage for years.
• Risks to domestic violence survivors: Survivors of domestic violence have reported that servicers continue sending account information to their abusers and require their abusers' consent for account changes, potentially creating safety threats.

The CFPB yesterday announced actions taken to protect consumers from illegal credit card practices and help people save money on interest and fees.

In a circular on "Design, marketing, and administration of credit card rewards programs" to other law enforcement agencies, the CFPB warned that some credit card companies operating rewards programs may be breaking the law, including by illegally devaluing rewards points and airline miles.

The CFPB also published new research finding that retail credit cards—which typically offer store-specific rewards and loyalty programs—charge significantly higher interest rates than traditional cards.

In addition, the CFPB launched a new tool, Explore Credit Cards, to help consumers find the best credit card rates across both rewards cards and traditional cards. This first-of-its-kind tool enables consumers to compare more than 500 credit cards using unbiased, comprehensive data.

The OCC has issued a report on the performance of first-lien mortgages in the federal banking system during the third quarter of 2024. The OCC Mortgage Metrics Report, Third Quarter 2024 showed that 97.4 percent of mortgages included in the report were current and performing at the end of the quarter, a slight increase from 97.3 percent one year earlier.

The percentage of seriously delinquent mortgages – mortgages that are 60 or more days past due and all mortgages held by bankrupt borrowers whose payments are 30 or more days past due – increased from the prior quarter; however, it has decreased from the third quarter of 2023.

Servicers completed 7,450 modifications during the third quarter of 2024, a 0.5 percent decrease from the previous quarter’s 7,488 modifications. Of these 7,450 modifications, 6,885, or 92.4 percent, were “combination modifications” — modifications that included multiple actions affecting the affordability and sustainability of the loan, such as an interest rate reduction and a term extension.

The first-lien mortgages included in the OCC’s quarterly report comprise 21.1 percent of all residential mortgage debt outstanding in the United States or approximately 11.2 million loans totaling $2.8 trillion in principal balances.

The CFPB issued a "Data Spotlight" on a recent analysis of credit card cash advance fees and interest. The CFPB analyzed cash advance fees after the legalization of sports betting in Kansas and Ohio, as well as cardholder agreements, consumer complaints, and online sports betting platforms. The Bureau found that:

• Issuers that allow consumers to use their credit cards with sportsbooks are largely treating the transactions as cash advances
• Cash advances can incur high fees as a percentage of the transaction amount and start accruing interest from day one
• Credit card use data from Kansas and Ohio suggest that legalizing sports betting corresponded with an increase in cash advance fee incidence
• Disclosures made by credit card issuers about cash advance fees for online betting are not always clear or consistent

The CFPB on Monday released a special edition of Supervisory Highlights that focuses on significant unlawful activities identified by CFPB examiners across student loan markets. The report covers violations related to student loan refinancing, private lending and servicing, debt collection, and federal loan servicing.

Student loans represent the second-largest form of U.S. consumer debt at more than $1.7 trillion in total outstanding balances. Within the past year, many student borrowers faced challenges, including as 28 million federal student loan borrowers returned to repayment following the end of the COVID-19 payment pause. The report details illegal practices, including:

• Lenders misleading borrowers and failing to carry out their instructions for refinancing
• Private lenders deceiving borrowers or denying benefits
• Servicers failing to address claims related to school misconduct
• Servicers distributing contracts allowing illegal collection tactics
• Federal loan servicers harming borrowers during return to repayment

The Office of the Comptroller of the Currency has reported the key issues facing the federal banking system in its Semiannual Risk Perspective for Fall 2024.

The OCC highlighted credit, operational, compliance, and market risks, as the key risk themes in the report. Highlights from the report include:

• Commercial credit risk remains moderate and shows signs of stabilizing as risks are better identified, monitored, and controlled.
• Overall retail credit risk is stable. Delinquency and loss rates on residential real estate-secured loans held by banks remain historically low but are increasing. Delinquencies in other retail asset classes, namely credit cards and auto loans, reflect an increasing trend.
• Operational risk is elevated. Banks continue to respond to an evolving and increasingly complex operating environment. Evolving cyber threats by sophisticated malicious actors target the financial services industry and their key service providers.
• From a compliance risk perspective, banks continue to operate in a dynamic banking environment as customers’ needs and preferences related to products, services, and delivery channels evolve.
• Community Reinvestment Act (CRA) related risks remain stable as the OCC continues to assess banks’ CRA performance under the 1995/2021 regulatory framework.
• Regarding market risk, banks net interest margin (NIM) performance has varied across bank asset sizes.

A special topic in the report focuses on the increasing trend in external fraud activity targeting consumers and the federal banking system. The frequency of both traditional and novel, more sophisticated fraud activities targeting customers and banks continues to increase. Banks should maintain sound fraud risk management practices through prudent controls and appropriate fraud monitoring capabilities to identify, investigate, mitigate, and report fraudulent activity. Banks can also support their customers by providing educational information about trending fraud activities and ways to protect themselves.

The FDIC, Federal Reserve Board, and OCC, as members of the Federal Financial Institutions Examination Council (FFIEC), have jointly released data on small business, small farm, and community development lending during 2023, as required by the Community Reinvestment Act.

The FFIEC also prepared aggregate disclosure statements of small business and small farm lending for all of the metropolitan statistical areas and non-metropolitan counties in the United States and its territories. These statements are available on the FFIEC's website.

• Data tables
• Fact Sheet

The FDIC has released an update to several sections of its Consumer Compliance Examination Manual (CEM). The December 2024 update includes changes in these Chapters:

• Overview of Compliance Examinations (II-1.1): This chapter was updated with technical changes related to supervisory recommendations.
• Review and Analysis (II-5.1): This chapter was updated with technical changes related to supervisory recommendations.
• Documenting the Examination (II-7.1): This chapter was updated with technical changes related to supervisory recommendations.
• Violation Codes (II-14.1): This chapter was with a technical revision to violation code TILA-B 1026.9(g).
• Fair Lending Laws and Regulations (IV-1.1): This chapter was updated with technical changes related to ECOA.
• Equal Credit Opportunity Act (V-7.1): This chapter was updated with technical changes related to ECOA.
• Fair Housing Act (V-8.1): This chapter was updated with technical changes related to ECOA.
• Home Mortgage Disclosure Act (V-9.1): This chapter was updated with technical changes related to supervisory recommendations.
• Unfair, Deceptive, and Abusive Practices — Federal Trade Commission Act/Dodd-Frank Act (VII-1.1): This chapter was updated with technical changes related to ECOA.
• FTC Rule — Preservation of Claims and Defenses (VII-2.1): This chapter was updated with technical revisions.
• Telephone Consumer Protection Act (VIII-5.1): This chapter was updated with technical changes related to supervisory recommendations.
  

On Friday, the CFPB released its annual report on trends in the residential mortgage lending market. In 2023, there was a significant decline in mortgage lending activities, with loan applications and originations dropping by about a third from 2022. The decline was more prominent in refinancing activity than home purchase, with single-family refinance originations down nearly two-thirds from 2022. Median total loan costs also jumped significantly in 2023, with a higher percentage of borrowers reported having paid discount points than any other year since tracking of the data began.

The report also noted that total loan costs increased faster for Hispanic and Black borrowers than for Asian and non-Hispanic borrowers, and that non-depository institutions continued to increase their share of originations.

• CFPB press release