Top Story Lending Related

The CFPB has reported it has sued Rocket Homes Real Estate LLC, JMG Holding Partners LLC and 45 real estate brokerage affiliates, and Jason Mitchell to stop them from providing incentives to real estate brokers and agents in exchange for steering homebuyers to Rocket Mortgage, LLC for loans.

The CFPB alleges that Rocket Homes pressured real estate brokers and agents not to share valuable information with their clients concerning products not offered by Rocket Mortgage, such as the availability of down payment assistance programs, which often save homebuyers thousands of dollars. The CFPB is suing Rocket Homes, The Mitchell Group, and Jason Mitchell to stop the kickback scheme, provide consumer redress, and obtain a civil penalty which will be deposited into the CFPB’s victims relief fund.

The CFPB’s investigation found that Rocket Homes gave referrals and other incentives to real estate brokerages under an agreement or understanding that the real estate brokers and agents would refer real estate settlement business to Rocket Mortgage and a separate Rocket affiliate called Amrock, which handles title, closing, and escrow services.

The Bureau's complaint alleges that the defendants committed multiple violations of the Real Estate Settlement Procedures Act (RESPA).

The CFPB published [89 FR 104398] a final rule in today's Federal Register amending the official commentary to its Regulation Z to make annual adjustments to the asset-size thresholds exempting certain creditors from the requirement to establish an escrow account for a higher-priced mortgage loan (HPML). The exemption threshold for creditors and their affiliates that regularly extended covered transactions secured by first liens is adjusted to $2.717 billion (up from $2.640 billion) and the exemption threshold for certain insured depository institutions and insured credit unions with assets of $10 billion or less is adjusted to $12.179 billion (up from $11.835 billion).

The amendments will be effective on January 1, 2025. They have been incorporated into the BankersOnline Regulations page for § 1026.35 of Regulation Z.

The FDIC, OCC, and Federal Reserve Board have jointly announced the 2025 updated Community Reinvestment Act (CRA) "small bank" and "intermediate small bank" asset-size thresholds.

As a result of the 2.91 percent increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) for the period ending in November 2024, the CRA asset-size thresholds for small banks and intermediate small banks are:

• A small bank is an institution that, as of December 31 of either of the prior two calendar years, had assets of less than $1.609 billion.
• An intermediate small bank is a small institution with assets of at least $402 million as of December 31 of both of the prior two calendar years and less than $1.609 billion as of December 31 of either of the prior two calendar years.

These thresholds are in effect from January 1, 2025, through December 31, 2025. A list of the current and historical asset-size thresholds is available here.

• Federal Register Notice

The OCC has released a list of enforcement actions taken against national banks and federal savings associations (banks), and individuals currently and formerly affiliated with banks the OCC supervises.

• A Formal Agreement with the The Fairfield National Bank, Fairfield, Illinois, for unsafe or unsound practices, including those related to staffing and training, credit risk rating, credit underwriting, credit administration, loan review, allowance for credit losses, and a violation related to failure to file true and correct Reports of Condition and Income.
• A Formal Agreement with The First National Bank of Williamson, Williamson, West Virginia, for unsafe or unsound practices, including those related to staffing, capital planning, strategic planning, interest rate risk management, audit committee oversight, allowances for credit losses, credit administration, and commercial credit.
• The Cease and Desist Order against USAA, Federal Savings Bank that we reported in yesterday's Top Stories.
• A Notice of Charges for an Order of Prohibition against Armando De Leon, former Store Manager at a Hialeah, Florida, branch of TD Bank, N.A., Wilmington, Delaware, alleging, among other things, that while he was a bank employee, De Leon submitted fraudulent Payment Protection Program loan applications that received over $80,000 in funding.
• A Notice of Charges for Order of Prohibition against Emily M. Niedwiecky, former Senior Customer Service Representative at a Raleigh, North Carolina, Auto Operations Center of Wells Fargo Bank, N.A., Sioux Falls, South Dakota, alleging, among other things, that Niedwiecky falsely disputed with the bank approximately $22,000 in purchases she made with her personal debit cards.
• An Order of Prohibition against Wendell Pialet, former Business Relationship Manager at a San Diego, California, branch of JPMorgan Chase Bank, N.A., Columbus, Ohio, for accepting a bribe to open a bank account that was to be used to receive proceeds from fraudulent Paycheck Protection Program loans.

The Financial Stability Board (FSB) has published a consultation report on leverage in non-bank financial intermediation (NBFI). The proposed policy recommendations are addressed to FSB member authorities and standard-setting bodies. They aim to enhance the ability of authorities and market participants to monitor vulnerabilities from NBFI leverage, contain NBFI leverage where it may create risks to financial stability, and mitigate the impact of these risks.

The nine policy recommendations cover:

• Risk identification and monitoring, supported by a suite of risk metrics, and work to assess and address data challenges
• Measures to address financial stability risks related to NBFI leverage in core financial markets, including measures that affect specific activities, types of entities, and concentration-related risks
• Counterparty credit risk management and private disclosure
• Addressing inconsistencies by adopting the principle of “same risk, same regulatory treatment”
• Enhancing cross-border cooperation and collaboration

Entities in scope are non-bank financial firms that use leverage, either financial or synthetic, including hedge funds, other leveraged investment funds, pension funds, and insurance companies. Where relevant, banks and broker-dealers are also in scope in their role as leverage providers.

• Financial Stability Board press release

The Office of the Comptroller of the Currency yesterday announced it had issued a comprehensive cease-and-desist order against USAA Federal Savings Bank to require the bank to correct a range of deficiencies. This order replaces prior cease-and-desist orders issued against the bank in 2019 and 2022.

The OCC reported it took this action based on unsafe or unsound practices relating to management, earnings, information technology, consumer compliance, and internal audit and suspicious activity reporting violations. The bank also was not in compliance with OCC’s Heightened Standards requirements for large banks detailed at 12 CFR Part 30, Appendix D.

The order incorporates articles from the 2019 and 2022 orders that remain in noncompliance and requires the bank to take comprehensive corrective actions to enhance its risk governance, compliance risk management, information technology management, fraud risk management, and third-party, affiliate, and shared services risk management. The order also imposes limitations on the bank’s ability to add certain new products and services, as well as expanding its membership criteria.

The Federal Reserve Board and the Federal Open Market Committee have released the FOMC statement following its meeting of December 17–18.

The Committee decided to lower the target range for the federal funds rate by 1/4 percentage point to 4-1/4 to 4-1/2 percent. The implementation note released with the FOMC Statement indicates that the Board of Governors voted unanimously to lower the interest rate paid on reserve balances to 4.4 percent, and to approve a 1/4 percentage point decrease in the primary credit rate to 4.5 percent, both effective December 19, 2024.

• Economic projections by FOMC participants in conjunction with the December meeting

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"
• PUBLICATION UPDATE: Published at 90 FR 2434 in the January 10, 2025, Federal Register

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.

[Editor's note: The CFPB has placed Circular 2024-07 on file for public inspection with the Office of Federal Register, and scheduled it for publication on 12/30/2024.]

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.