The CFPB’s Impact in California

Have you heard? Yesterday was the 5th anniversary of the Consumer Financial Protection Bureau.  In that short time, the agency has built a reputation for dramatically increasing transparency into the financial services market, leveling the playing field between consumers and financial corporations, and putting bad actors on notice that they will face consequences.

bday cake

Senator Elizabeth Warren is widely credited with the idea of an agency that would stand up for financial consumers, and the CFPB was included in the Dodd Frank financial reform that was passed in response to the mortgage meltdown.

While advocates had repeatedly warned federal and state regulators and elected officials about the predatory mortgages that were being made, these warnings fell on deaf ears.

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Predatory loan advertising

In the summer of 2013, CRC and our allies urged the US Senate to confirm Richard Cordray as director of the CFPB and we were happy to see that he confirmed on July 16, 2013.

CFPB confirm!

CRC and our allies delivering over 25,000 petitions from Californians, urging the US Senate to confirm Richard Cordray.

Since then, Cordray and his CFPB colleagues have been busy!

In an April snapshot about California and complaints submitted by Californians, the CFPB reported:

1) As of April 1, 2016, Californians had submitted 118,900 of the total 859,900 complaints the CFPB had received at that point, or about 14%.

2) Complaints from Los Angeles and San Francisco accounted for nearly 50% of these complaints.  (CRC won’t claim credit for all of the San Francisco complaints, but we receive a fair amount of phone calls from harmed consumers and we frequently suggest making a complaint to the CFPB if it is accepting complaints for that particular product.  Not only does this hopefully lead to redress for the affected consumer, but it also helps the CFPB to see if there are concerning trends- for example if a lot of consumers are complaining about a particular company or product).

3) Speaking of “lots of complaints about a particular product,” mortgages were #1 most complained about product in the April snapshot, accounting for 32% of complaints.  In fact, complaints from California were more likely to be about mortgages as compared to the number of complaints made about mortgages at the national level (about 26%).

4) Debt collection was also frequently complained about, representing 24% of all California complaints, as compared to 26% nationally.

5) Most complained about companies: The CFPB received the most complaints from California consumers about Bank of America, Wells Fargo and Experian.

We’re including five examples of how the CFPB has stood up for consumers below:

1) Stopping Illegal Harassment of Payday Loan Borrowers: The CFPB has stopped companies from engaging in illegal and predatory behavior- like Ace Cash Express illegally harassing their customers into rolling over their payday loans. In announcing the settlement, Director Cordray explained: “This culture of coercion drained millions of dollars from cash-strapped consumers who had few options to fight back.”   Take a look at this graphic from the CFPB’s settlement with Ace Cash Express.  It’s from their new employee training manual and provides a clear diagram on how Ace tried to keep its borrowers caught in the payday loan debt trap:

ACE Cash Express

2) Targeting Enablers Too: The CFPB doesn’t just target bad actors, it also targets companies that enable bad actors- like this California based lead generator (D and D Marketing, doing business as T3Leads (T3)) that sold consumer loan applications as “leads” to small-dollar lenders. The CFPB explained that “T3 failed to vet or monitor its lead generators and lead purchasers, exposing consumers to the risk of having their information purchased by actors who would use it for illegal purposes. T3 allowed its lead generators to attract consumers with misleading statements and took unreasonable advantage of consumers’ lack of understanding of the material risks, costs, or conditions of the loan products for which they apply. T3’s conduct was unfair and abusive….”

To understand why online lead generators can be so bad for customers, take a look at this NPR Story: I applied for an online payday loan: here’s what happened next.

3) Loan Modification Scam Artists: In some ways, California was ground zero for the mortgage meltdown, especially since many of the most predatory lenders (like Countrywide) were headquartered in Southern California.  Since the mortgage meltdown, more bottom-feeding vultures have emerged, preying on desperate homeowners with promises of costly loan modifications that never materialize.  In July 2014, the CFPB, FTC, and state regulators announced a sweep against these scam artists.  The Bureau filed three lawsuits against these companies and individuals who had collected more than $25 million in illegal fees for services that were never delivered.  California was also “well-represented,” with a number of these scam artists located in our state. The CDPB’s complaint alleged that one of these firms,  Clausen, Cobb, and CCMC “managed, staffed, and supported the deceptive loan modification operations of Stephen Siringoringo’s southern California law firm. The State Bar of California initially referred the misconduct to the CFPB.”

4) Predatory Mortgage Loan Servicing: The CFPB hasn’t only gone after scam artists- it’s also worked to stop companies who are cutting corners and hurting their customers in the process.  One such company is Ocwen, a mortgage loan servicer.  In 2013, the CFPB announced a $2 billion settlement against Ocwen for “systemic misconduct at every stage of the mortgage servicing process.”  The settlement also covered homeowners with loans from Litton (a servicer formerly owned by Goldman Sachs who had also received low marks for the way it treated its customers) and Homeward Residential Holdings LLC (formerly American Home Mortgage Servicing Inc.).

5) Protecting Mortgage Customers: During the “Wild West” days of mortgage lending leading which later caused the mortgage meltdown, lenders routinely rewarded their staff members for putting customers into more expensive mortgages.  Surprisingly, this practice was allegedly still in place at RPM Mortgage, according to a 2015, $19 million settlement with the CFPB.

If you’d like to learn more about the CFPB, check out these resources:

Consumers Count: Five years standing up for you

Bill Creating Foreclosure Protections for Widows and Heirs Explained in New Video

pic 2 SB 1150

“Red tape foreclosures” are a problem that are continuing to plague surviving homeowners throughout California, according to housing counselors and attorneys.

New legislation introduced by Senator Leno and Senator Galgiani, The Homeowner Survivor Bill of Rights, Senate Bill 1150, would address this problem.

SB 1150 clarifies the responsibilities of a mortgage lender when a borrower dies and passes the home along to a survivor who wishes to assume the home loan. The legislation ensures that heirs receive accurate information about loan assumption and foreclosure prevention programs. It also gives survivors a single point of contact with the lender and the ability to simultaneously apply for loan assumption and modification. SB 1150 is sponsored by the California Alliance for Retired Americans, Housing and Economic Rights Advocates and California Reinvestment Coalition.

A new interview with Kevin Stein, associate director of the California Reinvestment Coalition, explains the problems surviving homeowners are facing and how SB 1150 would address it.

If you would like to learn more after watching the video, visit: www.survivorbillofrights.org

Supporters of SB 1150 include

  • California Association of Retired Americans (co-sponsor)
  • Housing and Economic Rights Advocates (co-sponsor)
  • California Reinvestment Coalition (co-sponsor)
  • Attorney General Kamala Harris
  • AARP California
  • AIDS Legal Referral Panel
  • Bay Area Legal Aid
  • California District Attorneys Association
  • California Nurses Association
  • California Professional Firefighters
  • California Rural Legal Assistance, Inc.
  • California Rural Legal Assistance Foundation
  • CALPIRG
  • Capital Impact Partners
  • Community Housing Developers, Inc
  • Community Legal Services of East Palo Alto
  • Consumer Federation of California
  • Courage Campaign
  • Fair Housing of Marin
  • Family Caregiver Alliance
  • Institute on Aging
  • Justice in Aging
  • Legal Services of Northern California
  • Los Angeles County Democractic Party
  • National Center for Lesbian Rights
  • National Housing Law Project
  • Nehemiah Corporation of America
  • Neighborhood Housing Services of LA County
  • Project Sentinel
  • Public Counsel
  • Public Law Center
  • Renaissance Entrepreneurship Center
  • Rural Community Assistance Corporation
  • SEIU California
  • The ARC and United Cerebral Palsy California Collaboration
  • United Domestic Workers of America, AFSCME Local 3930, AFL-CIO
  • Unite Here
  • Western Center on Law and Poverty

CRC Guest Blog: Families Win When Banks Stop Funding Displacement

Paulina Gonzalez, executive director at the California Reinvestment Coalition, wrote a guest blog on the Mission Economic Development Agency blog today about Ellis Act evictions, bank loans that finance these evictions, and one bank’s decision to stop providing these loans.  Take a look!

In August of 2015, community organizations and tenants in San Francisco joined together to take a stand against the banks and the role their loans are playing in financing displacement in the city. The story of this organizing victory sets the stage for holding corporate actors accountable to their communities and builds a model for public-private partnerships for the preservation of affordable rental housing…

Read the rest of the post on MEDA’s blog. 

New CFPB Study on Reverse Mortgage Ads find Many Contain Confusing, Incomplete, and Inaccurate Statements

Fred Thompson vs. new CFPB study

Picture of former Senator Fred Thompson in reverse mortgage advertisement

“When it’s a former Congressman endorsing it, it makes it sound like a good idea.” -consumer discussing reverse mortgage advertisements and celebrity spokespeople.

Earlier today, the CFPB released a study that examined advertisements for reverse mortgages.

They found:

Among the advertisements we collected, on their face, many contained confusing, incomplete, and inaccurate statements regarding borrower requirements, government insurance, and borrower risks. Furthermore, after viewing ads in our focus groups, many consumers were confused or had misconceptions about important features and terms of reverse mortgage loans. For example, some consumers struggled to understand that reverse mortgages are loans that must be repaid with interest. Consumers also often misinterpreted the role of the federal government in the reverse mortgage market as providing consumer protections that are not actually offered.

If you’re a regular follower of CRC, you know that we’re opposing the CIT Group and OneWest merger, and one of the issues that has come to light is the reverse mortgage servicing subsidiary of OneWest bank, innocuously named “Financial Freedom.”

At a Federal Reserve hearing held in February 2015 in Los Angeles, dozens of people and organizations testified against the merger.  A number of the people who either spoke or submitted testimony cited their incredibly difficult times trying to work with Financial Freedom, especially after the death of a loved one.

The issue of surviving spouses facing foreclosure due to a reverse mortgage that was originated solely with their deceased spouse has come to light thanks to a class action lawsuit by AARP against HUD for turning a blind eye to reverse mortgage brokers and companies originating these loans to only one spouse, with the implicit suggest that the often younger, often female spouse, wouldn’t face foreclosure and/or could be added to the loan later.  Now, these widowed homeowners are facing foreclosure.

HUD released a policy in January 2015 to address this issue, but most experts predicted it would be useless for the very people it was supposed to help.  In April, HUD rescinded the policy, but what about the homeowners who are potentially facing foreclosure?

Take a look at the testimony by Karen Hunziker, who is a surviving spouse, facing foreclosure.  Does this sound like a helpful loan servicing department, especially if you’re a grieving spouse?

Additionally OWB has failed to provide a Single Point of Contact. This creates a communication maze impossible to navigate for the consumer to get customer support or guidance.

One day, I called 5 times to verify I received the 90 day extension OWB promised in writing. I spoke to 5 different people all with a different story. In part, I was told:

• OWB didn’t receive the documents faxed multiple times,
• The documents needed to be reviewed by their legal department,
• I had to call back in 5 days
• I used up all my extensions.
• I didn’t get the documents in on time,
• The last person told me my property was scheduled for auction in 30 days.

At all times OWB refused to put any phone conversation in writing.

For more background on this issue, read these two articles.

Will grandma get run over by HUD’s reverse mortgage policy?

New Reverse Mortgage Policy Leaves Widows and Widowers Homeless

If you’re an attorney working with a surviving spouse facing foreclosure due to a reverse mortgage, or if you’re a surviving spouse facing foreclosure, please contact CRC if you’d like to join in advocacy on this issue. We are NOT able to represent you as an attorney, but we would like to have you join in our advocacy to bring greater attention to this problem and how it is affecting widowed homeowners.

 

 

HUD Denied Our Fee Waiver for a FOIA Request About Reverse Mortgage Complaints

It would appear that HUD does not want CRC, nor the general public, to know more information about reverse mortgages, complaints about them, or foreclosures on surviving spouses.

In late 2014, we submitted a Freedom of Information Act (FOIA) request to HUD, asking, among other things for data related to:

  • the number of complaints that have been filed to HUD about reverse mortgages serviced by Financial Freedom;
  • any data on estimates of the number of non-borrowing spouses who could face foreclosure if their reverse mortgage borrowing spouse were to pass away;
  • the number of complaints made against Financial Freedom, a reverse mortgage servicer that is owned by OneWest Bank, a bank which is trying to merge with CIT Group; and
  • the number of foreclosures on surviving spouses by Financial Freedom since April 2009, and the number of foreclosures for the industry as a whole.

In December 2014, HUD denied our request for a fee waiver.   We appealed.

Today, we heard back that we have lost our appeal.  HUD’s letter to CRC suggests that we failed to meet the criteria that “the disclosure of the information would contribute significantly to the public’s understanding of government activities or operations.”

To understand why this is so problematic, consider why we submitted a FOIA request in the first place.

For years, reverse mortgage brokers have been telling couples that it is okay to remove the younger spouse from the title of the home in order for the older spouse to obtain a reverse mortgage.  Couples were told there was no chance the younger spouse would be kicked out if the older spouse were to pass away, or in other cases (like this one), they were told the younger spouse could be added onto the mortgage as soon as they turned 62.  All of this was done with HUD turning a blind eye to this practice.  Unfortunately, as the older spouses have passed away, reverse mortgage servicers have been moving to foreclose on the surviving spouse.

HUD is already being sued for enabling these foreclosures and as a result, a federal judge ordered HUD to develop a policy to assist theses non-borrowing, surviving spouses.  The policy that HUD announced in January is NOT expected to help any surviving spouses because it relies on the servicer’s discretion and because it would likely require the surviving spouse to come up with a large lump sum of cash.  For more on this, see today’s press release:  Advocates: Grandma May Get Run Over By HUD’s New Reverse Mortgage Policy

So, what should one conclude from HUD denying a fee waiver for our FOIA request because granting it would NOT contribute significantly to the public’s understanding of government activities or operations?

We feel the public would gain a lot from this knowledge.

A 2013 story below illustrate why we think it’s important for HUD to disclose this information.  Stay tuned to hear our next steps.

Reverse Mortgage Nightmare

WFMY News2Reverse Mortgage Nightmare: Widow Facing Foreclosure

WINSTON-SALEM, N.C.– In 2007, a knock at Barbara Freeman front door, came with a great opportunity: to be debt-free and take care of her sick husband.

This year, another knock at that same door was a sheriff’s deputy serving foreclosure papers — and that’s when her nightmare began.

The widow is now at the brink of losing everything she and her husband worked for all because of a reverse mortgage. In the most simplified terms, reverse mortgages differ from “regular mortgages” because in the latter, a homeowner makes monthly payments to a lender.

Watch the full story here: Reverse Mortgage Nightmare: Widow Facing Foreclosure

 

Surviving Heirs Testify About Their Experiences with Financial Freedom and OneWest Bank Foreclosures

At a public hearing in February, widowed homeowners and surviving heirs were afforded the opportunity to speak about their experiences with Financial Freedom, a reverse mortgage servicer owned by OneWest Bank.  The focus of the hearing was the proposed merger of OneWest Bank with CIT Group.  If you’d like more information about this merger, visit CRC’s Merger Resource Page.  And, if you are a Financial Freedom customer, or you are a family member whose dealing with Financial Freedom, you may want to share your experiences with the Federal Reserve and OCC (they are making the decision about this merger), and you may also want to file a CFPB complaint. Please note: Any submission about the merger will become part of the public record and others will be able to see your submission.

1. Michael Allen’s story: “OneWest Bank (OWB) did not provide a Single Point of Contact nor provide any guidance or instruction to help me satisfy the loan. I initiated all calls to OWB and spoke to a different person with a different story and different reason to deny my requests.”

2. Elizabeth Lavullo’s story: “OneWest Bank refused to honor my letter of intent to repay the loan and refused to grant me the HUD authorized time to obtain a new loan.”

3. Julie Cheney’s story: “I was a Successor Trustee of my parents Trust when they were sold a Financial Freedom reverse mortgage they didn’t need, while my dad was in the last month of his life, with terminal cancer, on narcotic pain medication, and my mother had Alzheimer’s disease and could not complete a sentence.”

4. Noreen O’More’s story: “We called, emailed and faxed every week or two for status.  OWB kept delaying with one excuse after another for more than 18 months.”

5. Lisa Renard’s story: “Because of OWB’s refusal to refund any of the fraudulent funds, Mrs. Rinard was forced to live the last years of her life on Medi-Cal in a nursing home funded by taxpayer dollars.”

6. Karen Hunziker’s story:   Additionally OWB has failed to provide a Single Point of Contact. This creates a communication maze impossible to navigate for the consumer to get customer support or guidance.

One day, I called 5 times to verify I received the 90 day extension OWB promised in writing. I spoke to 5 different people all with a different story. In part, I was told:

• OWB didn’t receive the documents faxed multiple times,
• The documents needed to be reviewed by their legal department,
• I had to call back in 5 days
• I used up all my extensions.
• I didn’t get the documents in on time,
• The last person told me my property was scheduled for auction in 30 days.

At all times OWB refused to put any phone conversation in writing.

7. Sandy Jolley’s testimony:  “No couple thinks on their own ‘let’s get a reverse mortgage and take one of us off title so when the other dies the survivor can be evicted.'”

8. Jose Graulau’s story: “On 12/31 (New Year’s Eve) AlState Process Servers claimed they were hired by OWB to investigate my family and wanted documentation of all known and unknown relatives, either alive or deceased, and those born in or out of wedlock.”

9. Rachel Mehlsak’s (attorney at Bet Tzedek) testimony:”Another client I worked with had lived in her home for over 40 years.  She is elderly, disabled, and supports her daughter and four minor grandchildren on just her monthly Social Security income.  After her husband died, she had trouble maintaining her property tax payments, and OneWest, the parent company of her reverse mortgage lender, Financial Freedom, threatened to foreclose.

Eventually, OneWest initiated foreclosure against the client’s home one month sooner than HUD guidelines required.  OneWest did so even though HUD had just announced a 60-day extension of its foreclosure timeframes for surviving spouses like my client and even though I had asked Financial Freedom multiple times to postpone the foreclosure proceedings.  I was able to help the client obtain a one-month extension of the foreclosure – an outcome she wouldn’t have received without representation – but ultimately OneWest went through with the foreclosure sale.  Three generations of my client’s family were kicked out of their home for less than $1300 owed to Financial Freedom.”

 

Los Angeles Community Leaders Speak Out Against OneWest Bank Merger

The testimony of  Renee M. G. Chavez, Operations Manager of Montebello Housing Development Corporation (MHDC), about the proposed OneWest and CIT Group merger, is featured in its entirety below.

If you were unable to attend the hearing, CRC live-blogged it here and you may also find our CIT Group/OneWest Merger resource page help.  It outlines why 21,000 people are opposing this merger along with 100 California and national organizations. Pictures of the rally against the merger are available here.

Testimony of Renee Chavez

Thank you for taking the time to take our responses.  I hope that you are serious and committed to doing what is right and that we are all not wasting our time today.

My name is Renee M. G. Chavez, I am the Operations Manager of Montebello Housing Development Corporation (MHDC) a 501 (c)(3) non-profit community based housing agency with offices in Montebello, CA that serves low to moderate income families in Los Angeles and San Bernardino Counties via education and counseling.  MHDC was established in 1992 to meet the affordable housing needs of Los Angeles County residents.  MHDC’s mission to educate and assist in the delivery of safe, sanitary, quality and affordable housing to individuals and families of modest financial means has been the driving force of the organization.  We believe in creating financial wealth through home ownership.

All who have responded today and you are aware that Indy Mac was one of the subprime lenders whose bad lending practices preyed on our communities of color and seniors.

During the foreclosure crisis families lost homes and their wealth because of the lack of assistance to modify underwater homeowners. Because of the loss of assets and wealth, communities of color are now struggling to rebuild.  The dream of homeownership was stolen from many families.

The OneWest investors received not only a bargain basement price to purchase Indymac, they also obtained a favorable loss share agreement with the FDIC that provided for the FDIC to cover a significant amount of the losses on loans made by Indymac.

In other words, OneWest investors paid little for a bank that came with limited risks to the investors while forever impacting communities.

15% of OneWest’s branches are located in low and moderate-income census tracts, as compared to a statewide average of 30% of bank branches being located in LMI tracts.  35,000 Californians have lost their homes due to foreclosures by OneWest and its subsidiary, Financial Freedom

All in this room and you know that CIT Group received $2.3 billion from the US taxpayers, via TARP Troubled Asset Recovery Program.  A little while later, CIT Group filed bankruptcy, and eliminated its obligation to repay the government.

How many homeowners might have been able to keep their homes if that money had gone to modifications instead?

Remember those who are still suffering.  In 2014 in LA County there were 21,538 families that faced foreclosure.  In January there were 1631 notice of defaults.  Remember, these people paid the taxes that bailed out CIT.

We hope that the Federal Reserve and the Office of the Comptroller of the Currency is serious about their consideration of another Too Big to Fail Bank.  Our communities have already paid too high a price while both banks were separate entities.  Stop this insult to the taxpayers, that include those people who lost their homes, by rejecting the merger.

Too Big to Fail is too big to approve.

However, since this merger will probably go through it is imperative that protections for our communities be put in place prior to the approval.  These protections should include, at a minimum:

  • Prior to approval, CIT Group and OneWest Banks should be required to make strong public community reinvestment commitment based on the new size of their bank with benchmarks clearly established. These CRA commitments need to made public with input with a cross section of those agencies testifying today.  MHDC, with these other agencies, are interested in safeguarding our communities.  The CIT Group and OneWest Banks are interested in their investors.  Together, there would be a compromise on CRA requirements that could be fair.
  • As both banks have demonstrated that they cannot be trusted to work in good faith, when merged should they be in violation they should be fined $2.3 billion. Those funds could be used to assist communities in low and moderate-income census tracts that continue to be severely underserved.
  • Should the banks be allowed to merge, they should not receive any loss share agreement with the FDIC.
  • If merged, the banks should not be able to participate in any bailout should their business practices, that include obscene salaries to only a few, prove them unfit to continue. The bank should be allowed to fail.  As you know, businesses fail every day.

Thank again for taking time to hear our comments.  I look forward to your response and participating in future discussions to put accountability back into the banking industry.