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CFPB Updates - 3/18/2013

NLRB Recess Appointments Case to Move to Supreme Court;
Could Impact CFPB

The Obama Administration announced on March 12, that it will ask the Supreme Court to review the court decision that declared three of its recess appointments to the National Labor Relations Board unconstitutional. Recess appointments exempt senior personnel from Senate confirmation procedures for a limited period, and can only be made if the Senate is not in session. The U.S. Court of Appeals for the D.C. Circuit ruled in January that President Obama’s NLRB  appointments were unconstitutional because the Senate was not in recess at the time the President installed them.

As CFPB Director Richard Cordray was appointed using the same procedures the same day as the NLRB appointments, a Supreme Court decision in the NLRB case may have significant implications for the CFPB. In particular, a ruling from the Court could be relied upon in a separate case currently pending challenging various aspects of the Dodd-Frank Act, including Director Cordray’s appointment.

However, the NLRB case does not have an immediate direct effect on the CFPB or the status of Director Cordray’s appointment. Indeed, President Obama re-appointed Director Cordray to the CFPB, and the Senate Banking Committee held a hearing regarding his confirmation this week. At the hearing, Director Cordray noted that credit unions did not engage in practices that caused the financial crisis, and said the CFPB’s regulatory actions “should take account of that fact and protect and preserve their traditional model of lending which is a very responsible model and good for many communities across this country.” The agency’s structure and funding were also touched on during the hearing. Cordray said he is open to working with the Senate to further develop transparency and account- ability of the agency. CUNA supports restructuring the leadership of the agency to make it a five-member board if an individual with credit union expertise could be included on the board. Forty-three Senators have indicated they cannot support the nomination unless the agency’s governance is restructured. CUNA will keep you posted on efforts in Congress to consider a restructure and on the outcome of the Senate’s consideration of the Cordray nomination.

CFPB Posts Preliminary List of Rural or Underserved Counties for Escrow Rule
Last week, the Consumer Financial Protection Bureau (CFPB) posted a blog entry discussing an exemption for certain small creditors from the CFPB’s escrow rule under the Truth in Lending Act, which goes into effect on June 1, 2013. Under the rule, creditors are required to create escrow accounts for higher-priced mortgage loans (HPMLs) for a minimum of 5 years. However, the rule exempts small creditors that operate predominantly in rural or underserved counties from this escrow requirement.

The list of rural and underserved counties is also important for other recently issued CFPB mortgage rules. For example, under the CFPB’s Ability-to-Repay and Qualified Mortgage rule, small creditors that operate predominantly in rural or underserved counties will be eligible to originate balloon-payment qualified mortgages Additionally, these same creditors will be exempt from restrictions on balloon payments for certain high-cost mortgage loans under the CFPB’s HOEPA Rule. Both the Ability-to-Repay and HOEPA rule go into effect on January 10, 2014. Finally, certain HPMLs will be exempt from the new second appraisal requirements under the Interagency Appraisals rule for Higher-Priced Mortgages, if they are originated in rural counties. This rule goes into effect on January 18, 2014.

The CFPB also stated that it intends to publish, in the near future, some proposed technical changes to its escrow rule, and it expects to finalize this rule before June 1, 2013. At that time, the CFPB will publish the official list of rural and underserved counties for 2013. For the preliminary list of rural and underserved counties, click here.




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