What has the CFPB been up to lately? For starters, remember that the Consumer Financial Protection Bureau's funding comes not from Congress but from the Federal Reserve. The reasons why Congress didn't want to keep control over its funding aside, last week news broke over the possible seemingly incredible cost overruns in the CFPB's real estate practices.

Ballard Spahr's Barbara Mishkin reports, "The ballooning cost estimates for renovating the CFPB's Washington, D.C. headquarters was the subject of verbal sparring between Director Cordray and Republican Congressmen during Director Cordray's most recent appearance before the House Financial Services Committee.  That sparring is likely to become even more heated as a result of a letter issued earlier this week by the Office of Inspector General (OIG) for the Fed and CFPB evaluating the CFPB's renovation budget...The letter indicates that the CFPB's approval processes require major investments to be reviewed by the CFPB's Investment Review Board (IRB) and while IRB approval is not necessary for the CFPB to include a major investment in its budget, such approval is needed for budgeted funds to be available for expenditure. To obtain IRB approval, a CFPB program office must complete an IRB "business case" which, according to the CFPB's internal guidance for making a "sound business case," requires consideration of alternatives, including a comparison of the costs and benefits of alternatives and the rationale for the investment.  It also requires a return on investment to be shown and stresses the importance of a quantitative analysis."

Ms. Mishkin's write up continued. "The OIG found that that CFPB did not follow all of its internal guidance when completing the business case for the renovation.  By way of example, the OIG found that while the CFPB listed alternatives in its business case, it did not complete any analyses of those alternatives and did not include any quantitative information or calculations related to a return on investment.  The OIG was informed by CFPB officials that the IRB approved the business case without such information 'because funding approval was viewed as a formality given that the decision to proceed with the renovation had already been made.'  The CFPB, however, was unable to locate for the OIG any documentation of the decision to fully renovate the building."

But holy smokes... $590 per square foot? Of course it is not quite a fair comparison, but when (and where, outside of SF or NY) was the last time you saw a 1,000 square foot home sell for $590,000?

An industry veteran (and who isn't at this point?) recently sent me an email and asked how many types of reviews the CFPB is conducting. I replied back in scientific notation; she responded with a picture of a cat hanging from a ceiling fan. It turns out she was asking about fair lending supervisory reviews, in which case there currently are three: ECOA Baseline Reviews, ECOA Targeted Reviews, and HMDA Data Integrity Reviews.

An ECOA Baseline Review helps the Bureau identify possible ECOA and Reg B violations within a particular firm or bank. As it has been explained to me, when such a review is warranted, the Bureau's examiners will rely on the Office of Fair Lending, with help from regional management within the CFPB itself to help determine the scope and breadth of the review, which is dependent on the firm's business practices and assumptions of risk. Such a review normally entails an evaluation of the firms fair lending compliance program, P&P's (yes, those are actually looked at contrary to what the people who write them will tell you), training materials, internal oversight which includes controls and any corrective measures taken place in the past. A Baseline Review may end with administrative actions considering the review is targeting ECOA, and may follow with a targeted review.

An ECOA Targeted Review is deemed appropriate if the Baseline Review reveals that a particular institution's business model, polices or procedures, present fair lending risks. Targeted Reviews typically include statistical analyses, and possible loan file reviews, in order to evaluate compliance within ECOA and Reg B for a particular line of business. The CFPB will use data analysis and testing at this point in order to detect and assess disparities between borrowers. If disparities are detected, the Bureau will notify the examinee of its preliminary findings and make a formal request for further data.

HMDA Data Integrity Reviews evaluate the accuracy of a firm's HMDA collections; it's important to note, missing fields and incomplete information, which is historically all too common in the industry, WILL LEAD TO FURTHER IN DEPTH SCRUTINY by the CFPB. With what has been pointed out in the past, if there are substantial data integrity concerns at any level of review, the Bureau may determine (and has) that the examination has been impeded, and will conclude management is solely responsible for having caused such data integrity concerns...which is not a good situation to place your firm. To prepare for such reviews, the CFPB published a HMDA Resubmission Schedule and Guidelines which provides instructions and additional details on the HMDA Data Integrity review process.

As I wrote recently month, the CFPB and Federal Reserve's jointly scheduled webinar, which occurred on June 17^th, covered the final TILA-RESPA Integrated Disclosures Rule that will be effective for applications received by creditors or mortgage brokers on or after August 1, 2015.  The webinar was the first in a planned series intended to help creditors, mortgage brokers, settlement agents, software developers, and other stakeholders familiarize themselves with the rule's architecture and its substantive and procedural disclosure requirements. The CFPB staff used the initial webinar to provide a basic overview of the final rule and new disclosures. Ballard Spahr writes, "According to the CFPB staff, subsequent webinars on the final TILA-RESPA Integrated Disclosures rule will function entirely as a spoken Q&A to answer questions that have been posed to the Bureau.  This is in contrast to the CFPB staff's previous approach of providing private one-on-one interpretive guidance on implementing the Title 14 mortgage rules concerning the Ability-to-Repay and Qualified Mortgage rules. Although the CFPB staff does not plan to issue written Q&A, the staff believes this approach will help facilitate clear guidance on the new rules in an accessible way." If you happened to miss this very informative webinar, or know someone who may benefit from its content, the entire event can be rebroadcast via Outlook Live.

Also recently the CFPB opened its first public Consumer Advisory Board (CAB) meeting, with comments regarding implementation and enforcement of CFPB mortgage rules. Within the last year the Bureau has attempted to publicly outline and clarify its expectations for mortgage originators and servicers. The CFPB's initial public position, particularly with regard to the new servicing rules, was that "in the early months" after the rules took effect, the CFPB would not look for strict compliance, but rather would assess whether institutions have made "good faith efforts" to come into "substantial compliance." CFPB Deputy Direct, Steve Antonakes, made news in February when he attempted to clarify that position in remarks to a Mortgage Bankers Association conference. As Buckley Sandler write, "There he stated "servicers have had more than a year now to work on implementation" of "basic practices of customer service that should have been implemented long ago" and that "a good faith effort . . . does not mean servicers have the freedom to harm consumers." However, Mr. Antonakes took a somewhat softer tone in his remarks during the CAB meeting, stating that the CFPB's goal "is not some one-sided aim to maximize consumer protection or industry deterrence at all costs." He cautioned that "there is such a thing as doing too much" and explained that the Bureau's true goal is to find "an appropriate balance where incentives for homeowners, creditors, and servicers are aligned."

The CFPB recently launched a new eRegulations tool, and wants to show MBA members how it all works in an upcoming complimentary webinar. This new tool includes section-by-section breakouts for each part of Regulation Z, the ability for you to track how this rule has changed, either by legislation or revisions and an explanation of terms and definitions. At the end of this webinar MBA members will be able to read and understand Regulation Z with ease. Register Now.

Compliance folks know that in ECOA enforcement action news, on June 19th, the CFPB and the DOJ both announced enforcement actions against a federal savings bank that allegedly violated ECOA in the offering of credit card debt-repayment programs and allegedly engaged in deceptive marketing practices in the offering of certain card add-on products. The CFPB further alleges that its examiners identified several deceptive marketing practices used by the bank to promote five credit card add-on products. The CFPB alleges that the bank's and its service providers misrepresented the products by: marketing them as free of charge when the fee was avoidable only in certain specific circumstances; failing to disclose consumers' ineligibility, causing certain consumers to purchase products from which they could receive no benefit; failing to disclose that consumers were making a purchase, leading consumers to believe they were receiving a benefit or updating their account; and marketing as a limited time offer products that were not so limited. The bank will pay a total of $228.5 million in customer relief and penalties to resolve the allegations.

Speaking of penalties, it can't be good when "fraud" and "real estate agent" are used to make the headline to a news story; and it's not. According to the Press Democrat, a former Petaluma, California real estate agent is behind a $20 million Ponzi scheme that bankrupted dozens of retired investors, resulting in 73-year old former real estate agent Aldo Baccala being was sentenced to 20 years in prison and ordered to pay a $6.4 million fine.

The markets?! I won't waste your time: there's not much going on with rates, although agency MBS prices improved about .125 yesterday. For benchmarks, the 10-yr ended last week at 2.63% and ended Monday at 2.62%. And to maintain the "short and simple is better" approach, there is no scheduled news today. In the early going rates are a shade better with the 10-yr.'s yield down to 2.60% and agency MBS prices better by a shade.

"Imagine if all 28,394 of us banned together." "Banded" would be the appropriate word to use there, of course. If anyone from the Illinois Association of Mortgage Professionals would like to change that word, you can see it in the first paragraph on your website. Whereas I am good at butchering it, others should do what they can to preserve the English language...