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Federal investigators have issued subpoenas to several mortgage lenders that make loans to military veterans, seeking information on delinquencies and payments, Politico reported. The investigation is being led by the Department of Veterans Affairs Office of Inspector General in cooperation with the U.S. attorney in the Eastern District of New York, according to four people with knowledge of the subpoenas. At least eight lenders, and likely more, have been asked to turn over hundreds of files on VA home loans made between 2013 and 2017, according to two people with knowledge of the request. The requests include questions about quality control and loan audits. Some VA lenders have drawn scrutiny from regulators after they sold short-term, adjustable-rate mortgages to military homeowners as interest rates climbed. One VA program in particular — the Interest Rate Reduction Refinance Loan, or IRRRL — allows lenders to put existing VA borrowers into new loans without an appraisal or underwriting and was ripe for abuse.

The House Financial Services Subcommittee on Consumer Protection and Financial Institutions will hold a hearing today at 2 p.m. EDT titled "Ending Debt Traps in the Payday and Small Dollar Credit Industry." Click here to access the live webstream of the hearing, copies of draft legislation to be considered and the witness list.

Two New York City marshals whose work collecting debts for predatory lenders is continuing to make them millionaires, Bloomberg News reported. Vadim Barbarovich, who already had the most lucrative city job in 2017, made 11 percent more last year, earning $1.9 million, according to documents released in response to a public-records request. His main competitor in collections work for the cash-advance industry, Stephen Biegel, almost doubled his take to $1.4 million. The two marshals were the subjects of a Bloomberg News article in November detailing how they collect debts from small-business owners across the country by seizing cash from bank accounts and pocketing a share for themselves, often stretching the limits of their jurisdiction. The article prompted Mayor Bill de Blasio to declare that “the entire model needs a new look.” Five months later, the only sign of change is the steady climb in marshals’ earnings.“The marshals haven’t been deterred one bit,” said Shane Heskin, a lawyer who represents borrowers and has filed complaints against Barbarovich and Biegel. The New York Department of Investigation, which oversees the city’s 35 marshals, said that it has “been in touch with City Hall” but wouldn’t say whether any policy changes were in the works. Diane Struzzi, a spokeswoman for the agency, said an investigation of Barbarovich, disclosed last year, still hadn’t been completed. She declined to comment about whether any marshals had been disciplined recently for overstepping their jurisdiction. De Blasio didn’t reappoint Barbarovich when his five-year term expired in November, but he’s allowing him to remain on the job. The mayor’s office had no comment, and Barbarovich and Biegel didn’t respond to requests for comment.

The House Financial Services Subcommittee on Consumer Protection and Financial Institutions will hold a hearing tomorrow at 2 p.m. EDT titled "Ending Debt Traps in the Payday and Small Dollar Credit Industry." Click here for more information.

A federal appeals court in New York yesterday cleared the way for consumer advocates to sue for injunctions barring officers of Native American tribes from engaging in alleged predatory-lending practices, WSJ Pro Bankruptcy reported. The decision came in the case of Think Finance Inc., an alleged payday lender that resorted to bankruptcy after being sued over “rent-a-tribe,” practices, in which an otherwise illegal business uses a Native American tribe as a front. Defenders of the practice say that U.S. and state laws don’t apply to tribes due to their sovereign national status. Consumer advocates say the tribes aren’t really doing the lending, and they also aren’t getting much of the money generated by high-interest-rate loans sold to consumers online. Wednesday’s appellate court ruling said that Native American tribal sovereign immunity doesn’t provide a shield against laws designed to protect consumers against predatory lending practices. Read more. 

A forthcoming podcast between ABI Editor-at-Large Bill Rochelle and Prof. Jack Williams examines some of the issues related to tribal sovereignty and bankruptcy.

The Consumer Financial Protection Bureau (CFPB) said yesterday that it will share more information with banks and lenders about potentially illegal actions when the agency begins investigating those firms, The Hill reported. The CFPB intends to give banks and lenders under investigation by the bureau a better sense of what activities prompted the agency’s scrutiny when asking for information about that conduct. Banks and lenders facing CFPB investigations receive civil investigative demands (CIDs) from the bureau. Firms are legally required to respond to these formal requests for information, which includes documents, records, oral and written testimony and other material relevant to a potential CFPB probe. Firms under CFPB supervision have long complained about the sheer amount of information sought by the bureau through CIDs and the costly process of fighting these requests. The CFPB said yesterday that the changes are meant to ease concerns of industry advocates raised through a process initiated by Mick Mulvaney, the bureau’s former acting director.

Homeowners in Chicago cheated by a mortgage fraud scheme are seeking to form a committee to protect their interests in the bankruptcy of Ditech Holding Corp., the company that owns their loans, Bloomberg News reported. The Investor Protection Center at the Northwestern Pritzker School of Law filed a request for the creation of a committee of consumer creditors to represent borrowers who were victims of the scheme. The fraud targeted elderly African-American homeowners and coerced them into reverse mortgages with no benefits that left some in foreclosure, the filing states. Ditech, the mortgage lender and servicer led by Tom Marano, filed for bankruptcy in February and has proposed a plan to restructure its debt that would release it from liabilities such as lawsuits filed by consumer borrowers. J. Samuel Tenenbaum, a professor of law at Northwestern, said the homeowners he helps represent will be harmed by such a release of liabilities. The center’s clients “are elderly, disabled, and lack the financial means to obtain representation, are the most vulnerable and at risk of harm in Ditech bankruptcy matters," Tenenbaum, who is the director of the Northwestern’s Complex Civil Litigation and Investor Protection Center, wrote in the filing on Friday.