The House Financial Services Capital Markets and Government Sponsored Enterprises will hold a hearing today at 10 a.m. ET titled "The Impact of Dodd-Frank on Customers, Credit, and Job Creators." To view the witness list and prepared witness testimony, please click below.
The Consumer Financial Protection Bureau (CFPB) yesterday proposed banning several controversial mortgage fees and unveiled new disclosure forms intended to help borrowers better understand the terms of their home loans, the Washington Post reported today. CFPB Director Richard Cordray highlighted abuses in the mortgage market and said restoring trust in the industry was one of the key drivers for creating the agency. Under the new proposals, all borrowers would receive new disclosures when they apply for a mortgage. The revamped disclosures are part of the CFPB's "Know Before You Owe" initiative, and the agency has spent the past year and a half testing the new forms with consumers, lenders and industry groups.
The Office of the Comptroller of the Currency warned that more than half the amount borrowed on equity lines at national banks, or $221 billion out of $380 billion, will face higher payments from 2014 to 2017, exposing banks to the possibility of losses if some equity-line borrowers default, the Wall Street Journal reported today. Darrin Benhart, deputy comptroller for credit and market risk at the OCC, said that "banks are going to have to be thinking about ways that they're going to address" the problem, including debt restructuring. The OCC report, the first in a series of semiannual reports on financial risks in the banking system, also said that banks have shifted to higher-risk investments to boost interest rate returns, a development that could create future losses for banks. The OCC is separately studying which banks could be hit the hardest if interest rates rise. For larger banks the regulator said that it would focus on problems with mortgage servicing as well as underwriting standards for business loans and exposure to European institutions. The agency will also scrutinize smaller banks to look at loss exposure from commercial real estate loans and new types of auto and other lending products.
A handful of local officials in California who say the housing bust is a public blight on their cities may invoke their eminent-domain powers to restructure mortgages as a way to help some borrowers who owe more than their homes are worth, the Wall Street Journal reported today. Investors holding the current mortgages predict the move will backfire by driving up borrowing costs and further depress property values. Eminent domain allows a government to forcibly acquire property that is then reused in a way considered good for the public—new housing, roads, shopping centers and the like. Owners of the properties are entitled to compensation, which is usually determined by a court. But instead of tearing down property, California's San Bernardino County and two of its largest cities, Ontario and Fontana, want to put eminent domain to a highly unorthodox use to keep people in their homes. The municipalities, about 45 minutes east of Los Angeles, would acquire underwater mortgages from investors and cut the loan principal to match the current property value. Then, they would resell the reduced mortgages to new investors.
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States across the country are proposing a range of new rules that would make it more difficult for banks to foreclose on troubled homeowners, the Wall Street Journal reported today. The moves have been prompted by concerns that lenders have been inefficient in restructuring mortgages, which results in unnecessary foreclosures, while using shoddy paperwork to repossess homes. Lenders are strongly resisting the measures, arguing that they will introduce new bottlenecks in the foreclosure process that could obstruct the incipient housing recovery. The biggest showdown between lenders and lawmakers could occur as soon as today in California, when the state legislature is set to vote on an overhaul detailing new requirements banks must follow in the foreclosure process. While similar measures have failed in each of the last two years, the state's attorney general, Kamala Harris, has pushed strongly for the bills, improving the odds the bills will pass. Nationwide, 25 states have bills contemplating changes to various laws governing the foreclosure process, according to the National Conference of State Legislatures. In Oregon, the state's outgoing attorney general proposed new rules covering how banks handle loan modifications. New York's assembly is considering a measure that would criminalize foreclosure paperwork forgeries.
Economists said that consumer spending in the U.S. probably stalled in May as slower job growth and subdued wage gains prompted Americans to cut back, Bloomberg News reported today. Household purchases, which account for about 70 percent of the economy, were unchanged after a 0.3 percent gain in April, according to the median estimate of 75 economists surveyed by Bloomberg News. Companies added 82,000 workers to payrolls last month, the fewest since August. Next week, the Labor Department may report private payrolls, which exclude government agencies, rose by about 100,000 in June, completing the weakest quarter since January-March 2010, according to the Bloomberg survey median. Consumers have had to rely on savings to boost spending as income growth slowed. The saving rate slipped to 3.4 percent in April, matching February as the lowest reading since December 2007.
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Bank of America Corp. was sued in a Florida federal court by homeowners who allege the company overcharged them for "force-placed" insurance, Bloomberg News reported yesterday. Force-placed insurance, which mortgage companies can purchase for homeowners when their policies lapse, is a "financial windfall: for Bank of America," according to a complaint filed on Monday. "A substantial portion of the premiums are refunded to Bank of America or its affiliates and subsidiaries through various kickbacks, reinsurance and/or unwarranted commissions," according to the homeowners, who seek to proceed on behalf of U.S. borrowers who were charged for the insurance by Bank of America or an affiliate. In April, New York's Department of Financial Services, saying it was seeking a basis for "consistently high profits" at the expense of homeowners and investors, said it was investigating whether force-placed insurance rates are excessive. It said that it was requiring information from insurers including Balboa Insurance Co., which is also a defendant in the Florida case.
PNC Bank, a unit of PNC Financial Services Group Inc., will pay $90 million to settle a lawsuit accusing it of improperly manipulating customers' debit card transactions to generate excess overdraft fees, Bloomberg News reported yesterday. The lawsuit, part of litigation involving more than 30 banks, is pending before U.S. District Judge James Lawrence King in Miami, lawyers for the plaintiffs said yesterday. The customers claimed PNC Bank's computer system resequenced the actual order of debit card and ATM transactions by posting them in highest-to-lowest dollar amount instead of the actual order in which they were initiated, according to the statement. That led to excess overdraft fees, the plaintiffs say.
