CFPB Deputy Director Announces Departure

Steven Antonakes

Steven L. Antonakes, the Consumer Financial Protection Bureau (CFPB)’s second-in-command official, announced Thursday in a memo to employees that he is stepping down from his position with the CFPB.

Antonakes, who currently serves as Deputy Director at the Bureau to Director Richard Cordray, announced that he is leaving the CFPB to return to Massachusetts, where his family resides. He said in the email to employees that he has been commuting from Boston for five years and has “logged hundreds of thousands of miles and missed entirely too many class plays, teacher conference meetings, and little league games.”

“Accordingly, I have decided to return home to Massachusetts and pursue opportunities that will ensure that I am home for dinner with my wife and family and can assist my five children with their homework,” Antonakes said in the memo.

Before being appointed as the CFPB’s Deputy Director, Antonakes served as the Bureau’s Assistant Director of Large Bank Supervision.

“Steve has been an enormous asset to the Bureau, and a great friend and colleague to me since our time together in SEFL in the early days of the Bureau,” Cordray said in an email to employees. “His contributions to this agency have been extensive in his dual roles as Deputy Director and SEFL Associate Director, and I know many of you share my appreciation for all his work. I have great respect for Steve’s decision to move closer to his family given my own situation with a weekly interstate commute.  It is not easy to juggle work at the Bureau with family far away during the week, and Steve has done so incredibly well.”

Antonakes began his professional career as an entry level bank examiner with the Commonwealth of Massachusetts Division of banks in 1990 and later served in several managerial capacities. He served as Commissioner of Banks from 2003 to 2010, becoming only the second career bank examiner to serve in that position. Antonakes received the Government Service Award from NeighborWorks America in 2007 for his work in combating foreclosures. He has a bachelor’s degree from Penn State University, a master’s from Salem State University, and a Doctorate in Philosophy in Law and Public Policy from Northeastern University.

“My time at the Bureau has been the apex of my 25 years in government and bank regulation.  I have been blessed to do worthwhile and interesting work alongside, smart, tenacious, and dedicated public servants,” Antonakes said. “It is in many ways a bittersweet decision.  However, I am confident that this team will continue to do great work for American consumers.  I wish you all the best.”


HUD Appropriations Bill Passes in Senate Committee


The U.S. Senate Committee on Appropriations recently approved theFY2016 Transportation, HUD (THUD), and related agencies Appropriations Bill. The major goals of the bill are to increase the efficiency and affordability of federal housing programs and provide funding for transportation and infrastructure priorities, working within the guidelines of the Budget Control Act. The bill was approved on a 20-10 vote.

According to a press release from the committee, this action will make $55.65 billion in funds available for consideration by the Senate, a $1.88 billion increase from FY2015 and $7 billion below the amount the President Obama requested. The legislation provides $37.56 billion for HUD specifically, an increase of nearly $2 billion above the FY2015 enacted level and $3 billion below the President’s request.

“The American economy relies on the effectiveness of our infrastructure, which makes this legislation important,” said U.S. Senator Thad Cochran (R-Mississippi), chairman of the Senate Appropriations Committee. “The demands for more infrastructure investment are significant.  The budget requires us to set priorities and this Senate bill makes those choices and focuses on using the taxpayer money wisely.”

The bill provides additional funding for housing America’s most vulnerable individuals and families, while improving housing programs’ effectiveness, according to the committee. The measure also recommends $40.26 billion for federal-aid highway programs and increases funding for U.S. aviation, rail safety and the nation’s ports, and intermodal water and land transportation.

“Through negotiation and compromise, this bipartisan bill makes smart investments in our nation’s infrastructure, helps meet the housing needs of the most vulnerable among us, and provides funding for economic development projects in our communities,” said U.S. Senator Susan Collins (R-Maine), chair of the Senate Transportation, Housing and Urban Development Appropriations Subcommittee. “From rental assistance for low-income families to safety-related provisions for our transportation infrastructure, the many critical programs funded by this bill were balanced to fund the wide range of operations that play a crucial role in reinvigorating our economy.”

HUD Secretary Julián Castro voiced his concerns with the proposed FY16 budget, noting that the Republican budget would only make matters worse. He also said that a deep cut is being made to a vital housing program, HOME Investment Partnerships Program (HOME), down to $66 million from$1.05 billion per President Obama’s request and this would be a loss of an estimated 38,665 affordable housing units.

“HUD creates new opportunities for the people we serve every single day. Yet, in this difficult fiscal environment, our budget is unable to keep up with the need for our services,” Castro said. “At current funding levels, we are only able to serve one in four families who are eligible for our housing.  We cannot meet our mission of providing every American with access to quality housing and a strong community by allowing sequestration level cuts to continue.”

HUD Goals Defined by the U.S. Senate Committee on Appropriations:

  • Community Planning and Development
  • Emphasis on Youth Homelessness
  • Moving-to-Work Expansion
  • Section 8 and Public Housing
  • Preserving Rental Assistance

Hazard Claims Challenges Within Our Industry: What Are Your Clients Concerned With?


As in many industries, risk and compliance continue to be a major concern. Hazard claim challenges in the mortgage servicing space fall within similar concerns. To limit risk, mortgage servicers manage hazard claim lines by prioritizing and addressing major areas of vulnerability, one of which is physical damage at assets either in the process of foreclosure or currently in REO status. Events that trigger a hazard claim will continue, that we are all assured, but to recover funds directly related to a hazard claim, the mortgage servicer must first initiate procedures, internally or externally, to manage the process of filing and recovering the claim. To what extent will the servicer go to manage the process and how?

Although there are a number of ways to manage a process that leads to the recovery of hazard claims, careful consideration is prudent prior to a final decision. Mortgage servicers can choose to manage claims internally, outsource to a third-party company, or accept many losses up to a certain dollar threshold to prevent delays for conveyance or foreclosure proceedings. All of these options are costly, so what is the most cost effective?

If the objective of the servicer is to recover claims while reducing employee cost, partnering with a third-party company may make both risk and financial sense. A third-party company can keep a servicers employee cost at bay while ensuring knowledgeable licensed hazard claim professional are working in your best interest to recover your losses.

Key factors to consider when choosing a hazard claim partner are:

  • What is the percentage take on each claim by the hazard claim company?
  • Do the adjusters maintain a license to file hazard claims?
  • Will the claims file within a timeline that allows maximum payout of the claim, including recoverable depreciation?

Overall, nearly all mortgage servicers and large real estate holding companies should consider their options when choosing, but regardless of the direction chosen, claims should be filed and funds should be recovered. It’s your money; shouldn’t you claim it?

Federal Court Rules HOAs Cannot Use ‘Super-Priority Lien’ to Foreclose on GSE-Backed Loans


The U.S. District Court for the District of Nevada ruled this week that homeowners’ associations (HOAs) that attach super-priority lien status to mortgage loans cannot foreclose non-judicially on mortgages backed by Fannie Mae and Freddie Mac.

Judge Gloria Navarro ruled in the case of Skylights LLC v. Byron that federal law prohibits a state-law HOA foreclosure from extinguishing a first deed of trust that is guaranteed by one of the government-sponsored enterprises.

Currently, 22 states allow HOAs to attach super-priority lien status to mortgages. The subject has been a controversial one because in some cases banks and lenders that have suffered huge losses when HOAs  have extinguished mortgages where the delinquent HOA dues amounted to a fraction of the balance on the mortgage claim that the super-priority lien law gives the HOAs too much power. HOAs contend that the super-priority lien status is necessary because it forced the banks and lenders to pay the delinquent HOA dues and not leave responsible HOA members to pick up the tab in order to keep the HOA’s infrastructure intact and protect the community and neighborhood.

The Nevada State Supreme Court made a controversial ruling last September that gave HOAs the authority  to foreclose on a home and extinguish a mortgage non-judicially, a ruling that was subsequently appealed by lenders on the grounds that the Housing and Economic Recovery Act (HERA), a federal law, prohibits state laws from extinguishing a deed of trust if the mortgage is backed by Fannie Mae or Freddie Mac. The Federal Housing Finance Agency (FHFA) issued a warning in December to HOAs that attach super-priority lien status to mortgages, saying that such liens will not push mortgages backed by Fannie Mae and Freddie Mac into the secondary position because of the risk they pose to taxpayers while the GSEs are under the FHFA’s conservatorship. In order to protect the GSEs’ property rights, FHFA intervened in two Nevada cases in which an HOA extinguished a mortgage last year.

FHFA general counsel Alfred Pollard testified before the Nevada State Legislature Judiciary Committee in early April, backing Nevada Senate Bill 306, which proposed an amendment to the law on super-priority liens. The bill passed in late May at the last minute before the end of the judiciary session. The bill calls for an HOA to provide the mortgagee with a formal notice with the amount on which the homeowner is delinquent on HOA dues, this giving the mortgagee the opportunity to address the deficiency if the homeowner will not – therefore allowing the mortgagee to protect its position.

In the case decided in the federal court on Thursday, Las Vegas residents David and Jennifer Byron obtained a mortgage in November 2007 for $105,700, from CitiMortgage that was secured by a deed of trust property. Mortgage Electronic Registration Systems, Inc. (MERS) was named the beneficiary and First American Title Company was named trustee. In November 2011, MERS assigned the interest in the deed of trust to CitiMortgage, which in turn assigned it to Fannie Mae in March 2014. Six months later, in September 2014, an agent for the HOA sold the home to Skylights LLC in a foreclosure auction for $28,500, despite the fact that Fannie Mae’s conservator, FHFA, never gave consent for the foreclosure. FHFA and Fannie Mae filed a joint motion for summary judgment, arguing that Skylights could not legally extinguish the deed of trust when it purchased the property at the foreclosure auction.

The court upheld a federal statute that bars the foreclosure of a homeowner association’s lien from extinguishing property of FHFA without its consent and ruled that the arguments presented by Skylights and the HOA claiming that statute did not apply in this case were “without merit.”

Navarro’s ruling includes language that may limit its scope, however – the decision could apply only in cases where one of the GSEs is the recorded beneficiary of the deed of trust (even if they purchased the deed of trust prior to the HOA’s foreclosure sale) at the time of the HOA’s foreclosure sale. There were two similar cases argued in the U.S. District Court for the District of Nevada last week in which investors sued JPMorgan Chase bank that are currently awaiting Navarro’s ruling; the GSEs were not the recorded beneficiary of the deed of trust at the time of the HOA foreclosure sale in either case.

GDP Contracts in Final Q1 Estimate, But Majority of Lenders Remain Optimistic


The nation’s real gross domestic product (GDP) declined at the annual rate of 0.2 percent for Q1, according to the Bureau of Economic Analysis (BEA)’s third and final estimate for the quarter released this week.

While the economy contracted in the final estimate, which is based on more complete source data than were available for the first two estimates, it was still an improvement over the second estimate of minus 0.7 percent released in May. In the third estimate for Q1, exports decreased less than previously estimated while personal consumptions and expenditures increased more than previously estimated, according to the BEA. In the fourth quarter last year, real GDP increased at an annual rate of 2.2 percent.

“The decrease in real GDP in the first quarter primarily reflected negative contributions from exports, nonresidential fixed investment, and state and local government spending that were partly offset by positive contributions from PCE, private inventory investment, and residential fixed investment,” the BEA said in its report.

According to Fannie Mae’s National Housing Survey for May 2015 released earlier this week, the majority of mortgage lenders (61 percent) believe that the economy is on the right track, while 29 percent said they believed it was on the wrong track.

“This sanguine view of the economy is held by mortgage lenders of all sizes, larger institutions, mid-sized institutions, and smaller institutions,” said Michael Neal, senior economist with the National Home Builders’ Association (NAHB).

While more than half of lenders said they thought the economy is on the right track, Neal said, “However, a greater proportion of mid-sized lenders reported this kind of optimism. Furthermore, while still holding optimistic views, a greater percentage of larger institutions than smaller institutions believe that the U.S. economy is on the ‘wrong track.’ Smaller lenders were more likely to be unsure of current economic conditions.”

Many consumers did not share the same sentiment regarding the economy as mortgage lenders – only 38 percent of consumers said they believe the U.S. economy is on the right track, compared with 52 percent who said they believe it is on the wrong track, according to Fannie Mae’s survey. But according to Neal, “Improving labor market conditions and income growth should help improve consumer moods.”

Key Takeaways From CFPB Whistleblower Hearing in House Subcommittee


Witnesses presented new evidence at a recent House Subcommittee hearing that the Consumer Financial Protection Bureau (CFPB) discriminated against its employees and retaliated against the whistleblowers.

Thursday’s hearing, which took place in the Oversight and Investigations Subcommittee of the House Financial Services Committee, was titled “Examining Continuing Allegations of Discrimination and Retaliation at the Consumer Financial Protection Bureau.” It was the fourth hearing in which the CFBP’s employees or former employees have testified of discrimination and retaliation within the Bureau since the investigation of such allegations began in April 2014. In two of the previous hearings, members of the Committee questioned CFPB Director Richard Cordray about the CFPB’s alleged unacceptable workplace environment. The director promised at those hearings to take action, according to an announcement on the House Financial Services Committee website.

Here are some key takeaways from Thursday’s hearing:

  • “Unacceptable behavior” – Witnesses testified that the “unacceptable behavior” of discrimination and retaliation at the CFPB has gotten worse despite the Committee’s urging of Cordray to take action.
  • New evidence – The Committee determined that greater accountability and oversight from the Bureau is needed based on new evidence that indicates a “culture” of discrimination and retaliation at the CFPB
  • “Ineffective and insufficient” – The Committee found that any action the CFPB has taken to address the culture of discrimination and retaliation has been “ineffective and insufficient.”

“Of all the federal financial agencies, the CFPB has the worst track record of protecting its own employees against discrimination,” said Sean Duffy (R-Wisconsin), Chairman of the Oversight and Investigations Subcommittee. “The per capita number of Equal Employment Opportunity complaints at the CFPB is far higher than at other federal agencies. Despite disturbing reports of low morale and Congressional investigations, the leadership at the CFPB continues to turn a blind eye to the treatment of its own people. The CFPB is more concerned with bad press than the underlying problem, and has done little more than run an ineffective internal PR campaign to assuage employee concerns.”

Witnesses who testified at Thursday’s hearing were Robert Cauldwell, President of the National Treasury Employees Union Chapter 335 and CFPB Examiner, and Florine Williams, Senior Equal Employment Specialist of the CFPB’s Office of Civil Rights.

Cauldwell went as far as to say the word “allegations” should be removed from the title of the hearing, because “discrimination and retaliation against CFPB employees is a fact.” He claimed in his testimony that the CFPB’s leadership has failed to carry out the Bureau’s mission as outlined by the Dodd-Frank Act.

“Hubris, persecution, retaliation, discrimination,” Cauldwell said. “These are not words one would associate with an agency that is supposed to protect American consumers from these very same vices in the financial industry. It is my belief, based on careful consideration and talks with employees for the past two years, that the Bureau does not have the capacity to clean someone else’s house when they cannot get their own house in order.”

Williams said that until she was employed at CFPB, she had never witnessed such “blatant and willful disregard for the law” as well as merit system principles and well-being of employees.

“Because of the CFPB’s mission, I believed I was joining an EEO program where the rule of law was respected, and the workforce would be treated with civility, dignity, and professionalism,” Williams said. “Unfortunately, my experience at the Bureau has been a radical departure from the 32 years that preceded it.”

U.S. Congressman Randy Neugebauer (R-Texas), Chairman of the House Subcommittee on Financial Institutions and Consumer Credit, introduced the Financial Products Safety Commission Act (H.R. 1266) in March to replace the CFPB’s Director with a bipartisan five-member board. On Thursday, Neugebauer praised the witnesses for having the courage to “shine the light” on the “shocking” allegations of discrimination and retaliation within the Bureau.

“Before the CFPB can protect the American consumer, it must protect its employees,” Neugebauer said. “It is absolutely unacceptable that two years later concerns of discrimination and retaliation have not been adequately handled by CFPB management.”

CFPB spokesman Sam Gilford issued the following statement in response to the hearing and allegations: “The CFPB takes these issues extremely seriously and we will continue our ongoing efforts to improve as an organization. The Bureau is committed to fostering an inclusive and equitable workplace where all employees are treated fairly. To that end, the Bureau has implemented robust processes for handling and redressing Equal Employment Opportunity complaints. As the Office of Inspector General concluded in its March 2015 report, the CFPB’s processes ‘give employees the opportunity to have their complaints heard, investigated, and redressed in a fair and equitable manner.'”

Gilford pointed to a comprehensive review of the CFPB conducted by Charles River Associates last year, which the Bureau ordered to have conducted after detecting demographics-related differences in FY12 and FY13 employee performance management ratings. The independent analysis concluded that “It is important to note that this research to find the root causes of the distributional differences did NOT find any evidence of intentional discrimination” and “The CFPB’s efforts to understand and address the problem of distributional differences in PM ratings have not only been reasonable and sufficient, but demonstrate a sensitivity and level of concern that is much greater than other organizations.”

HUD Announces Final Rule to Further Fair Housing In HUD-Funded Communities


HUD announced Wednesday the Affirmatively Furthering Fair Housing Final Rule, which will help communities that receive HUD funding get the help they need to meet fair housing obligations in the use of HUD funds, according to an announcement from HUD.

In addition to equipping these communities with data and tools to help them meet their fair housing obligations, additional guidance and technical assistance will be provided by HUD to assist local decision-makers on fair housing priorities and affordable housing and community development goals. The aim of the final rule is to provide participants in HUD programs with clear guidelines and data they need to achieve the goals outlined in the Fair Housing Act of 1968, which directs HUD and its program participants to promote fair housing and equal opportunity so that everyone can have access to affordable, quality housing regardless of race, color, national origin, religion, sex, disability, or familial status.

HUD Secretary Julián Castro called the final rule “historic” in a report from the Washington Post on Wednesday. That same report said the new rule has been a “top demand of civil rights groups” in order to dismantle segregation and promote integration in major metro areas such as Chicago and Baltimore that have historically been deeply segregated.

“As a former mayor, I know firsthand that strong communities are vital to the well-being and prosperity of families,”  Castro said. “Unfortunately, too many Americans find their dreams limited by where they come from, and a ZIP code should never determine a child’s future. This important step will give local leaders the tools they need to provide all Americans with access to safe, affordable housing in communities that are rich with opportunity.”

The final rule is the result of recommendations of a 2010 report from the Government Accountability Office; stakeholders and HUD program participants who had asked for clarification, technical assistance, better compliance, and more meaningful outcomes; and feedback from significant public input and comments received during the final rule’s development.

HUD announced that in response to public feedback, the Department will phase in the implementation of the final rule to give grantees time to transition to the new balanced approach that includes targeted investments in revitalizing areas and increased housing choices in areas of opportunity, according to HUD.

The new rule also includes the promotion of access to community assets such as quality education, employment, and transportation for HUD’s program participants.

“We’re eager to support local leaders in giving every person an equal chance to access quality housing near good schools, transportation, and jobs, no matter who they are, what they look like, how they worship, or where they’re from,” Castro said in a conference call about the final rule on Wednesday. “This is vitally important because we know that were you live matters. Recently, Harvard economists led by Raj Chetty released a groundbreaking report that verified what many of us already knew in our gut – that children who live in good neighborhoods do much better than those who are stuck in poverty, which is why we must give every young person access to a community of opportunity.”

In addition to clarifying and simplifying existing fair housing obligations, HUD’s new final rule creates a streamlined Assessment of Fair Housing planning process in order to help communities analyze challenges to fair housing choice and establish goals and priorities to address those challenges.

“The Affirmatively Furthering Fair Housing provision of the Fair Housing Act was intended to help remedy years of government-supported segregation and inequality, not by forcing diversity, but by empowering and encouraging states and localities to partner with the federal government to address the effects of these harmful policies,” U.S. Representative Maxine Waters (D-California) said. “The regulation released today would provide communities with greater clarity on how to help break down barriers to creating neighborhoods of opportunity by arming local authorities with better data to analyze their housing needs. It will empower them to be more strategic in their housing policies and help ensure federal funds are not used to support discriminatory policies, such as those that unfairly deprive minority communities of investment, or zoning laws that unfairly exclude persons with disabilities.”

The rule will take effect 30 days after it is published in the Federal Register, though it will not be immediately fully implemented, according to HUD. The Department will provide support to program participants that need to complete an Assessment of Fair Housing to make sure those participants understand the process and identify best practices, according to HUD’s announcement.