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A&D Mortgage Trust is preparing to market $390.6 million in mortgage-backed securities to investors, secured by a pool of largely fixed-rate, non-prime mortgages, most of which are newly originated.Atlas A&D Opportunity Fund III is sponsoring the deal, while A&D Mortgage originated the mortgage assets and is on the deal as servicer, according to ratings analysts at Kroll Bond Rating Agency. The transaction, A&D Mortgage Trust 2024-NQM5, is slated to close at the end of the month, and will issue the notes through 13 tranches of notes, including classes A, M and B.ADMT 2024-NQM5 will repay the class A senior notes on a pro-rata basis, and all the senior notes are exchangeable, according to KBRA. The mezzanine and subsequent class B notes will repay investors sequentially, according to the capital structure.Credit enhancement ranges from 51.7% on the class A1A notes to the 2.25% on the class B2 notes.Mizuho Securities is the deal's structuring lead, KBRA said, while a group of about seven banks, including Mizuho Securities, ATLAS SP Securities, Barclays Capital and BNP Paribas, are on as initial purchasers.Aside from the payment priority, the deal includes excess spread as credit enhancement, KBRA said.Generally the pool is comprised of fixed-rate (99.5%), first-lien (95.1%) loans and the assets were underwritten using alternative documentation, about 90.5%. Those methods break down to include bank statements (38.6%), debt service coverage ratios (34.0%) and P&L statements (7.1%), according to KBRA.While A&D will service the loans without a subservicer, it does not have the same breadth of staffing or systems that many large, third-party servicers do in the RMBS space. But Nationstar Mortgage is on the deal as master servicer, KBRA said.Among the deal's credit strengths is that the collateral has just modest leverage, A&D as an experienced non-QM issuer and originator and full-scope third party due diligence reviews from two firms, the rating agency said.KBRA assigns AAA to the A1 classes; AA+ to the A2 tranche; A+ to the A3 tranche; and BBB+ to the M1 notes; BBB- to the class B-1A; BB+ to the B-1B an B+ to the B2 notes.

The Okavage Group is refusing to drop its litigation against United Wholesale Mortgage, which challenges the wholesale lenders All-In initiative announced in 2021.On Oct. 17, the brokerage filed an appeal in the U.S. Court of Appeals for the Eleventh Circuit, in hopes of another outcome.This move comes after a Florida federal court judge dismissed the brokerage's initial complaint with prejudice in late September, meaning the door was kept open for Okavage to refile a complaint if it so desired.Judge Wendy W. Berger, overseeing the case, said the reason for the dismissal stemmed from the plaintiffs' failure to adequately plead antitrust and unfair trade accusations. Her ruling echoed earlier findings of a lower magistrate judge.Okavage's dismissed suit alleges UWM violated the Sherman Antitrust Act, the Florida Antitrust Act, Tortious Interference with Business Relationships and Florida's Deceptive and Unfair Trade Practices Act.UWM declined to comment Friday. An attorney representing the Florida-based brokerage could not be reached.Berger, in her ruling, wrote that numerous arguments by Okavage didn't meet legal standards, such as the brokerage's allegation of "vertical agreements between UWM and many of its brokers.""With respect to communications, plaintiff has failed to make any non conclusory, factual allegations that support an inference that the brokers that agreed to the ultimatum would have not agreed absent an understanding that the other brokers would follow suit," Berger said.Berger also notes that U.S. Magistrate Judge Laura Lothman Lambert, who was the first to recommend a dismissal of the case, did consider Okavage's allegations regarding how the All-In initiative would harm brokers as evidence of harming competition, but that this argument necessitated more context. Berger agrees, she wrote.Okavage's complaint, filed April 23, 2021, was the first to challenge UWM's ultimatum, but not the last. America's Moneyline is another brokerage legally challenging the wholesale lender's initiative. In late September, UWM cited the dismissal of Okavage's suit as evidence that the Michigan court should also throw out AML's complaint.Litigation with AML began when UWM sued it for allegedly working with Rocket Pro TPO, in violation of the ultimatum the brokerage signed in 2021. UWM claims its broker partner originated at least 560 loans with Rocket, accruing a $2.8 million penalty according to calculations from the agreement. The brokerage countersued for fraud, claiming UWM managers assured them there would be no repercussions for violating the mandate before reneging and suing.UWM is suing three other brokerages for violating its All-In mandate. The suits remain pending in federal courts. It also reached a $40,000 settlement agreement with Mid Valley Funding in a lawsuit over its alleged breach of UWM's agreement.

On Tuesday, the Consumer Financial Protection Bureau (CFPB) finalized a long-awaited rule that promises to enable consumers to better control their financial data, marking a major step in a regulatory process that started in 2010.The new regulation is 38 pages long, but it was accompanied by more than 500 pages of commentary by the CFPB explaining the comments the bureau received on the controversial rule and its response to those comments. The regulation has already spawned a lawsuit brought by the Bank Policy Institute, the Kentucky Bankers Association and a community bank in Lexington, Kentucky; statements of support from consumer advocates; and promises of more rules to come.The new rule has the potential to create new competition in the financial services industry, driving down prices and interest rates, according to the CFPB. It also has the potential to spur on fraud and scams that are already plaguing consumers and banks, according to critics.Here's how the rule developed, which institutions must comply, how it affects banks, and when the changes will precipitate.How the open banking rule developedFollowing the 2008 financial crisis, Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act. Title X of that act is titled the Consumer Financial Protection Act of 2010 (CFPA), and Section 1033 of the CFPA calls on financial services companies to make personal financial data available to their customers.The act deferred to a newly established CFPB to sort out the details with a rulemaking process. The agency started that process in 2016, and on Tuesday, the bureau issued its final rule implementing Section 1033. The bureau named this open banking regulation the Personal Financial Data Rights Rule.Medium and large banks and credit unions must complyThe primary types of entity that will have to comply with the CFPB's new open banking rule will be larger community banks, medium and large banks and credit unions, but the rule concerns all so-called "data providers."Any depository institution that falls under the Small Business Administration's definition of a small bank or credit union does not need to comply. That means, currently, any bank or credit union with less than $850 million in assets is exempt. (As of June 2024, 11% of credit unions and 26% of banks had more than $850 million in assets, according to call reports from the National Credit Union Association and Federal Financial Institutions Examination Council.)A data provider, per the new regulation, includes three types of entities. First, it includes financial institutions, according to the definition in Regulation E. These are banks and credit unions.Second, card issuers are data providers. The definition of a card issuer comes from Regulation Z; it is any lender that issues credit cards. While this covers many banks and credit unions that are already included, it also includes entities such as American Express, which is both a card network and a card issuer. The CFPB has also ruled that buy now, pay later (BNPL) providers such as Klarna are card issuers and therefore must comply with the new open banking regulation.The third category of data providers is any entity that "controls or possesses information concerning a covered financial product or service that the consumer obtained" from that entity, according to the regulation. The regulation explicitly says a "digital wallet provider" is one example.The CFPB has not previously said what precisely constitutes a digital wallet, though it started a rulemaking process last year that, among other impacts, would create a regulatory definition for the term. Common definitions of "digital wallet" often encompass Venmo, Apple Cash, PayPal, and other services that provide fully digital means of maintaining a balance and making payments.The CFPB indicated in its comments on the new regulation that it would continue to refine its definition of the term "data provider" through future rulemaking processes, but its current priority is to regulate financial institutions and card issuers."The CFPB intends to implement CFPA section 1033 with respect to other covered persons and consumer financial products or services through future rulemaking," the agency stated in its supplement to the final regulation. "Prioritizing Regulation E accounts, Regulation Z credit cards, and payment facilitation products and services advances competition goals across a broader range of markets while addressing pressing consumer use cases and risks."Authorized third parties will gain access to consumer dataThe CFPB's open banking rule defines a "third party" as any entity other than the consumer whose data is in question or the data provider that possesses that consumer's data. In practical terms, these are fintechs and data aggregators that offer services to consumers using their banking data. These services can include budgeting apps, loans underwritten by the customer's cash flow rather than their credit score, and numerous others.A third party becomes an authorized third party when a consumer, according to the new open banking rule, gives their "informed consent" for the third party to access their financial information. During this authorization process, the third party must disclose to the consumer what data the third party will obtain and how it will use it.This consent can only last for up to a year at a time. The third party must obtain reauthorization from the consumer to get another year of access to their data, and they must inform the consumer about how to revoke access at any time.Banks must share transactions, bills, and more informationThe data that data providers will need to make available to authorized third parties under the new rule must include at least 24 months of transaction information, account balances, information needed to initiate payments from certain accounts, terms and conditions (including fee schedules and interest rates), upcoming bill information, and basic information needed to verify the authenticity of the account.If a customer wants to share any of this data with an authorized third party, the bank must make it available in a machine-readable format, though the specific format is pending finalization.The CFPB explicitly exempted confidential information like algorithms for credit scoring, meaning banks do not need to disclose such information. However, inputs and outputs of these algorithms, such as APRs and pricing terms, are still covered. The rule also exempts information the bank has gathered solely to prevent money laundering, fraud or other financial crimes.The required format of the data is not yet finalDodd-Frank specified that the information shared with consumers under Section 1033 "shall be made available in an electronic form usable by consumers." It specified that the CFPB must prescribe standards for the format of this data.To address this requirement, the CFPB requested applications in June from industry standards-setting bodies so the bureau could pick one to be the official "open banking standard setter."The bureau has published one such application; it came in September from the Financial Data Exchange (FDX), a nonprofit governed by several large banks, fintechs, and data aggregators. FDX is a subsidiary of the Financial Services Information Sharing and Analysis Center, which is an industry group for sharing cybersecurity intel across the financial services sector.Compliance dates range from 2026 to 2030The size of the data provider determines when it must comply with the new regulations.By April 1, 2026, depository institutions with at least $250 billion in assets and nondepository institutions with at least $10 billion in revenue must comply.By April 1, 2027, depository institutions with between $10 billion and $250 billion in assets must comply, as must the rest of the nondepository institutions.By April 1, 2028, depository institutions with between $3 billion and $10 billion in assets must comply.By April 1, 2029, depository institutions with between $1.5 billion and $3 billion in assets must comply.By April 1, 2030, the rest of the covered depository institutions must comply.Screen scraping, an insecure data retrieval practice, is implicitly bannedIn the context of open banking, screen scraping is the practice of a third party saving a bank customer's username and password (with the user's authorization), potentially alongside answers to their security questions, and using those credentials to log into their bank account to access their data.The practice is insecure and the subject of nearly universal criticism, even among practitioners. Among other risks, when a bank customer shares their login information with a third party, it raises the specter of a bad actor targeting the third party to steal banking credentials en masse.These risks are heightened by the relaxed security standards to which non-bank companies are held, in comparison to the standards banks must implement. While prudential regulators examine financial institutions to ensure they are meeting security standards, third parties that store banking credentials do not face the same level of scrutiny. Instead, enforcement tends to be based on complaints and investigations.The Bank Policy Institute, which is an association of large banks, has criticized CFPB director Rohit Chopra for comments he has made suggesting that the bureau's open banking rule helps with "accelerating the shift away" from screen scraping and that the practice will eventually be "sunset." Chopra made the comments Tuesday, following the release of the final open banking rules."Many data aggregators will continue to rely on unsafe practices such as screen scraping to obtain account and transaction data, often collecting and retaining more information than is needed to offer a desired product or service," reads a statement from the Bank Policy Institute in response to Chopra's comments.Indeed, the regulation does not ban screen scraping outright. However, guidance that the CFPB issued alongside the rule suggests the bureau will act against third parties that engage in screen scraping when a more secure alternative exists.The secure alternative of choice in the regulation is a so-called "developer interface," which is only accessible via access tokens rather than consumer credentials. Tokens are more secure than consumer credentials for a variety of reasons, including that tokens expire while credentials do not."If a third party attempts to screen scrape consumer data when a more secure, structured alternative means of access is available, such as the developer interface or a substantially similar interface, then the third party would be needlessly exposing consumers to harm," reads the CFPB's commentary on the new rule."Depending on the facts and circumstances, such activity might well constitute an unfair, deceptive, or abusive act or practice," the bureau concludes, making reference to the type of acts and practices that the CFPB exists to prosecute.Proponents say the rule gives consumers control, promotes competitionSection 1033 of Dodd-Frank tasked the CFPB with establishing rules that would require financial services providers to "make available to a consumer, upon request, information in the control or possession" of the provider.This information includes data related to the "consumer financial product or service that the consumer obtained from" the provider, including "information relating to any transaction, series of transactions, or to the account including costs, charges and usage data."On Tuesday, the CFPB promoted its open banking rule as a means of spurring "more competition in consumer financial services" by making it easier for consumers to "shop around for better products at lower rates and switch to banks, payment products, or other providers that better meet their needs," according to a press release.The rule "should serve as a model for all data privacy regimes in the United States" because it far exceeds the protections of weaker privacy laws that preceded it, according to Chi Chi Wu, a senior attorney at the National Consumer Law Center (NCLC), a consumer advocacy group.The NCLC also said the rule would facilitate competition with the three credit bureaus by promoting new methods of assessing creditworthiness, such as cash flow underwriting, which relies on looking at the transaction history of a consumer's bank account.Other proponents of the new rule include Consumer Reports, the consumer-oriented research and advocacy organization, which touted the rule's requirement that authorized third parties disclose to consumers how they use their data."This rule marks a significant milestone in giving consumers greater control over their financial lives," said Delicia Hand, senior director of the digital marketplace.The North American chapter of the Financial Data and Technology Association (FDATA North America), a trade association representing fintechs and open finance companies, also supported the rule, with minor caveats. Members of FDATA are some of the "third parties" mentioned in the new open banking regulation — the companies that consumers can authorize to access their financial information.Though "highly supportive" of the new open banking rule, according to a press release, FDATA members "expressed disappointment" that Electronic Benefit Transfer data was excluded from the data the rule covers."We applaud the final rule, which puts consumers in control of their financial data, allowing them to select the financial provider that best meets their needs," said Steve Boms, executive director of FDATA North America.Critics say the rule jeopardizes consumers' data securityOn Wednesday, the day after the CFPB issued its open banking rule, Forcht Bank, a $1.5 billion asset bank based in Lexington, Kentucky, filed a lawsuit seeking to block the rule. The Kentucky Bankers Association and the Bank Policy Institute, a national association of large banks, joined the lawsuit."The CFPB's 1033 rulemaking jeopardizes the safety and soundness of our banking system and fails to protect consumer data," said Ballard W. Cassady, Jr. CEO and president of the Kentucky Bankers Association. "We are challenging the CFPB to ensure that banks can continue to protect their consumers and the integrity of the financial system in a safe and sound manner."One of the primary complaints levied both in the lawsuit and previously by critics is that the rule does not institute sufficient oversight of the third parties that consumers authorize to access their financial data, raising concerns that banks might be held liable for data breaches at third parties."The entire responsibility of protecting customers is left to banks under the final rule, while the CFPB takes no accountability for the oversight or supervision of data recipients," reads a Wednesday press release from the Bank Policy Institute. "Mandating data sharing without requiring third parties to sufficiently protect that data will undermine existing consumer protection laws."Regulators have indeed signaled in other contexts that banks are responsible for managing third party risks, particularly cybersecurity risks. However, this scrutiny has focused on vendors that provide IT services to banks, rather than third parties that consumers individually authorize to access their banking data.The CFPB says the rule's benefits outweigh the security risksThe CFPB has responded to these criticisms by saying the rule includes mitigations, such as requiring tokenized account access for third parties as opposed to storing and using consumers' bank login credentials. It also said that these fraud risks already exist under the current system."Practically, the CFPB expects that in order to connect a bank account to a new third party service, a bad actor would need access to the consumer's credentials for their covered account and potentially access to additional information or devices required for authorization, such as codes issued as part of two-factor authentication," reads the CFPB's response to comments that were submitted on a proposed version of the rule.These risks, the CFPB response continues, "exist under the baseline," and the bureau expects any increased risks "are outweighed by the data security and privacy benefits" of the new rule.

Left to right: Amber Lawrence, Wendy Penn, Astrid Vermeer The Mortgage Bankers Association hired accounting and administrative leader Astrid Vermeer as its new senior vice president and chief financial officer. Before ascending to the role at the Washington-based trade group, Vermeer held similar institutional CFO roles at Perkins School for the Blind and the International Foundation for Electoral Systems and will tap into her experience to manage MBA financial operations, including reporting, budgeting, forecasting and risk management.Vermeer's appointment comes following the promotion of Amber Lawrence and Wendy Penn to vice president roles. Lawrence steps up as vice president of diversity, equity and inclusion in charge of DEI programs, development of equitable practices and cooperation with both MBA leadership and members in promoting initiatives. She recently held the title of associate vice president of DEI and previously supported MBA's education efforts.MBA elevated Penn to vice president for affordable housing, a role in which she will oversee initiatives aimed at increasing homeowner and rental affordability and continue to lead the Convergence program serving minority communities. She most recently served as associate vice president, joining MBA this decade after holding similar positions at the National Association of Realtors. 

Increased use of artificial intelligence chatbots by mortgage servicers is inevitable, and how it is presented to the consumer is important for customer satisfaction with the interaction, a J.D. Power study found.A lower satisfaction score comes from consumers who aren't sure whether they are interacting with a bot or with a real person when using the chat function, Bruce Gehrke, senior director of lending intelligence, who authored the report, said.AI was a hot topic at the recent Digital Mortgage conference. The top two finishers in the National Mortgage News' Innovation Challenge, Kastle and Haven (which embeds servicing functions into a lender's brand), will work together to provide artificial intelligence-powered voice agents for mortgage borrowers.As past J.D. Power servicer customer satisfaction surveys have noted, borrowers who are financially unhealthy, and thus more likely to reach out to their provider for questions and assistance, generally give lower scores for their interactions.It also has noted that younger consumers prefer having self-service tools in order to interact with their servicer.The company looked at one aspect from its 2024 study concentrating on the 21% of customers who experienced a problem in the past 12 months.Of that group, just 9% used online chat as their first point of contact with their servicer, versus 48% that made a call to the customer service desk.But the two youngest demographics that contain the bulk of future customers, Gens Y (those born between 1977 and 1994) and Z (1995-2006), were three times more likely to use a chatbot than older groups. (Note: J.D. Power's definitions place the millennials as a subset of Gen Y.)The finding, showing a stark generational divide, creates an opportunity for servicers to improve how they interact with those groups."I think most servicers can view them as the future customer, the numbers are going to start to grow," Gehrke said. "So it's important to be able to address the concerns of those younger segments."The real difference in quality comes when the bot is not just using scripted questions, Gehrke said. If the questions aren't perceived as scripted, the satisfaction is higher with the interaction.Meanwhile, the benefit about self-service is ease of use. "If the chat isn't delivering on the ease of use, then you start to see less satisfaction, even if you get the problem resolved," Gehrke said. "Because the feeling then is, I could have called anyway, and I would have been done by now."On the origination side, however, a study from Cloudvirga found almost 60% of recent homebuyers said if AI was used during the loan process, it would drive them to a different lender.Still, the majority of servicing customers who used chat to answer their question found it to be a positive experience, J.D. Power said. About two-thirds (67%) of survey participants said it was to try to solve a problem, with 83% of that group responding their problem was resolved on that chat. They gave their servicers an overall customer satisfaction rating of 702 (on a 1,000-point scale), much higher than the 482 for those who could not solve their problem. Lenders are looking to increase the efficiency of their interaction with customers while not having to add staffers.The study noted nearly three-fourths (73%) of customers who used chat said they interacted with a live person in the online chat, while 10% thought it was a chat bot, and 17% were not sure. The group that responded they had a human interaction felt they had a better experience than those who thought it was a machine on the other side of the conversation, J.D. Power said.A word of advice for servicers: "If you're going to push chat, make sure you have the capabilities aligned, because otherwise you create frustration, and frustration just drives lower satisfaction," Gehrke said.

We’re currently in a strange sort of housing crisis where existing homeowners are in a fantastic spot, but prospective buyers are mostly priced out.The issue is both an affordability problem and a lack of available inventory problem. Namely, the type of inventory first-time home buyers are looking for.So you’ve got a market of haves and have nots, and a very wide gap between the two.At the same time, you’ve got millions and millions of locked-in homeowners, with mortgages so cheap they’ll never refinance or sell.This exacerbates the inventory problem, but also makes it difficult for mortgage lenders to stay afloat due to plummeting application volume.The solution? Offer your existing customers a second mortgage that doesn’t disturb the first.Loan Servicers Want to Do More Than Service Your LoanOver the past several years, mortgage loan servicers have been embracing technology and making big investments to ramp up their recapture game.They’re no longer satisfied with simply collecting monthly principal and interest payments, or managing your escrow account.Realizing they’ve got a goldmine of data at their fingertips, including contact information, they’re making big moves to capture more business from their existing clientele.Why go out and look for more prospects when you’ve got millions in your own database? Especially when you know everything about your existing customers?Everyone knows mortgage rate lock-in has effectively crushed rate and term refinance demand.And cash out refinances are also a non-starter for many homeowners unless they have other really high-rate debt that’s pressing enough to give up their low-rate mortgage.So lenders are left with a pretty small pool of in-the-money borrowers to approach. Still, thanks to their investments, they’re getting better and better at retaining this business.Instead of their customers going to an outside lender, they’re able to sell them on a streamline refinance or other option and keep them in-house.But they know the volume on first mortgages just isn’t there, so what’s the move? Well, offer them a second mortgage, of course.Your Loan Servicer Wants You to Take Out a Second MortgageI’ve talked about loan servicer recapture before, where new loans like refis stay with the company that serviced the loan.So if you have a home loan serviced by Chase, a loan officer from Chase might call you and try to sell you on a cash out refi or another option.I’ve warned people to watch out for inferior refinance offers from the original lender. And to reach out to other lenders when they reach out to you.But that was just the tip of the iceberg. You’re going to see a big push by servicers to get their existing customers to take out second mortgages.This is especially true on conventional loans backed by Fannie Mae and Freddie Mac, for which borrowers are mostly locked-in and streamline options don’t exist.They know you’re not touching your first mortgage, but they still want to increase production.So you’ll be pitched a new HELOC or home equity loan to accompany your low-rate first mortgage.As a result, you’ll have a higher outstanding balance and blended rate between your two loans and become a more profitable customer.This is Pennymac’s approach, as seen above, which launched of closed-end second (CES) mortgage product in 2022. They are one of the nation’s largest mortgage servicers.It allows their existing customers to access their home equity while retaining their low-rate, first mortgage. And most importantly, it keeps the customer with Pennymac.Notice how much higher the recapture percentage is once they tack on a CES.Other servicers are doing the same thing. Just last month, UWM launched KEEP, which recaptures past clients for its mortgage broker partners.Second Mortgage Push Might Allow the Spending to ContinueOne major difference between this housing cycle and the early 2000s one is how little equity has been tapped.In the early 2000s, it was all about 100% cash out refis and piggyback seconds that went to 100% CLTV.Lenders basically threw any semblance of quality underwriting out the door and approved anyone and everyone for a mortgage.And they allowed homeowners to borrow every last dollar, often with faulty appraisals that overstated home values.We all know how that turned out. Fortunately, things actually are a lot different today, for now.If this second mortgage push materializes, as I believe it will, consumer spending will continue, even if economic conditions take a turn for the worse.Lots of Americans have already burned through excess savings squirreled away during the easy-money days of the pandemic.And you’re hearing about folks being a lot more stretched, not even able to weather three months without income. But if they’re able to access a new lifeline, the spending can go on.Then you start to envision a situation similar to the early 2000s where homeowners are using their properties as ATMs again.In the end, we might start to see CLTVs creep higher and higher, especially if home prices flatten or even fall in certain overheated metros.The good news is we still have the highest home equity levels on record, and home equity lending remains quite subdued compared to that time period.But it should be noted that it hit its highest point since 2008 in the first half of 2024. And if it increases substantially from there, we could have a situation where homeowners are overextended again. Before creating this site, I worked as an account executive for a wholesale mortgage lender in Los Angeles. My hands-on experience in the early 2000s inspired me to begin writing about mortgages 18 years ago to help prospective (and existing) home buyers better navigate the home loan process. Follow me on Twitter for hot takes.Latest posts by Colin Robertson (see all)

Thinkstock/Getty Images LOS ANGELES — California is getting the word out that four segments of the financial services industry — debt settlement firms, earned wage access providers, private secondary education financing and student debt relief services — are required to register with the state by February 15, 2025.The state's Department of Financial Protection and Innovation is implementing new regulatory powers that allows the agency to establish mandatory registration that is also temporary, lasting just four years. Suzanne Martindale, DFPI's senior deputy commissioner in the consumer financial protection division, said registration of the exact number of companies that fall under the new registration requirements is not yet known."Because these industries have been operating outside of our formal supervision, it's a little bit of an unknown universe until people start to come to us and register," Martindale said. "People are launching new companies every day."Registration authority is unique to California. The Democratic-controlled legislature passed the California Consumer Financial Protection Law in 2020 that requires companies offering certain financial products and services to register with and submit data to the agency. The law gives DFPI the authority to prohibit unlawful, unfair, deceptive, or abusive acts and practices. Since the law went into effect in 2021, the agency has charged companies with more than 300 violations, Martindale said.Scott Pearson, a partner at Manatt, said that California's registration regime "is barely  distinguishable from licensing" because it requires companies to complete forms in the Conference of State Bank Supervisors Nationwide Mortgage Licensing System. The forms are used to apply for and maintain a license with disclosures on directors and principal officers. Debt settlement companies likely are the largest sector under the new registration regime, but California has seen a proliferation of student loan relief and document prep companies, and earned wage access products are growing dramatically. Earned wage access and various models on wage advances are included in the registration process. DFPI has clarified that income-based advances are "loans," and voluntary or optional payments are considered "charges" under that law. [Buy now/pay later companies already are licensed under California's Financing Law.]The agency will collect information on transaction volumes, business models and charges to consumers and will prepare a report at the end of the four-year period. Then the legislature will review the report and determine whether to continue with the supervisory oversight going forward. "We are the first and only state to have this kind of authority but the legislature does have a check on what we do with registration," she said. "It's temporary because it's meant to be an incubator for emerging industries, [for us] to learn and get some valuable insight into these newer markets so that we can determine the long-term path forward."Martindale was a key architect of California's Consumer Financial Protection Law, which gave the department expanded oversight and enforcement authority over previously unregulated industries including debt collectors, fintech firms and credit reporting agencies. Before joining DFPI in 2021, Martindale served as senior policy counsel at Consumer Reports and was a lecturer at the University of California, Berkeley School of Law. "It is a great mechanism for balancing consumer protection and responsible innovation, which is the whole mission of the department," she said.The Consumer Financial Protection Bureau's authority extends only to large banks and credit unions with more than $10 billion in assets, as well as to large nonbank participants in specific industries including consumer reporting, consumer debt collection, student loan servicing, international money transfers and automobile financing. By contrast, DFPI has the authority — albeit temporary — to register all companies large and small. "We're letting companies do their thing, but with oversight — and that should ideally foster a race to the top for fair competition," she said. "The transparency gives companies time to operate legally and grow their business models, before the legislature comes in and says, 'Here are the minimum standards for your industry segment.'"

The Federal Trade Commission is on the offensive to save its noncompete ban, filing an appeal with the U.S. Court of Appeals for the Fifth Circuit on Oct. 18.Two months prior, a federal judge in Texas halted the FTCs ban on noncompete agreements set for September, permitting employers, including mortgage companies, to potentially keep using them.The agency said it was disappointed with the outcome and hinted that it would appeal the decision.The FTC declined to comment Thursday.In her decision that struck down the rule, Judge Ada Brown of the U.S. District Court in Dallas said the FTC's ban on noncompetes violated the Administrative Procedure Act, exceeded the agency's statutory authority and should be "set aside.""The Commission's lack of evidence as to why they chose to impose such a sweeping prohibition — that prohibits entering or enforcing virtually all noncompetes — instead of targeting specific, harmful noncompetes, renders the rule arbitrary and capricious," Brown wrote in a filing.The decision stemmed from legal actions the U.S. Chamber of Commerce and others quickly filed against the FTC after the agency released its rule in April. Opponents of the ban, including the Chamber, argued it represented an illegal overreach that could harm competition.Under the FTC's scrapped rule, employers would be prohibited from entering into or enforcing new noncompetes with senior executives, though existing ones would remain in place. Around 30 million workers are subject to noncompetes, or close to 20% of the nation's workforce, the FTC estimates. Noncompetes are sometimes used in the mortgage industry to keep loan originators, executives and marketing personnel from jumping ship to competitors. They may also be used to protect information after an executive leaves a company, attorneys have said in previous interviews. Nonsolicitation agreements are much more common in the mortgage industry. Some have speculated that the new law would lead to increased scrutiny of nonsolicitation clauses and impose a higher burden of proof for poaching lawsuits.Legal experts say that while the noncompete rule is blocked, employers should not get complacent in monitoring changes that impact employee agreements."For now, the FTC noncompete ban remains blocked, but the battle is far from over," wrote Troy Garris, co-managing partner at law firm Garris Horn, in a blog. "With the Fifth Circuit set to weigh in, and the potential for this issue to reach the Supreme Court, employers should stay vigilant."

Fairway Independent Mortgage Corp. did not pay its loan officers overtime and failed to reimburse them for work-related expenses, litigation claims.The suit, filed in a Wisconsin federal court by April Shakoor-Delgado, claims Fairway, when she was employed with them from December 2020 to December 2021, did not compensate for any overtime that exceeded 40 hours.By doing so, the mortgage lender violated state and federal regulations, such as the Fair Labor Standards Act, she said."Fairway knew that - or acted with reckless disregard as to whether - its refusal or failure to properly compensate plaintiff and the collective members over the course of their employment would violate the FLSA," the complaint claims.This is Shakoor's second suit against a lender in the past half a year. Previously the loan officer lodged a complaint against CrossCountry Mortgage for failing to reimburse remote work costs.Fairway declined to comment on the pending litigation. An attorney representing Shakoor could not immediately be reached Thursday.Apart from failing to compensate overtime pay, Fairway had requirements for tools that employees had to have at home in order to do their job, but it did not compensate for the costs of such expenditures, the suit claims.Specifically, Fairway required high-speed internet, phone and a dedicated home office space.Without high-speed internet, employees could not access Fairway's software platform, so this was in reality for Fairway's benefit, the suit said. The same goes for having to have an unlimited data cell phone plan, which was required to communicate with employees and customers. Shakoor claims she spent $200 each month on high-speed internet and $100 per month for an unlimited cell phone data plan to be able to do her work at Fairway. All in all that totals $3,600 in expenses, none of which were reimbursed. This, she claims, is a violation of Illinois' minimum wage law.The plaintiff brings the suit as a collective action on behalf of all LOs current and former who worked an excess of 40 hours per week and were compensated on a commission basis, at any time starting before her complaint was filed Oct. 8, 2024.Shakoor also lodged a complaint against CrossCountry in May, a company she worked for from 2019 to 2020.Similarly, the plaintiff claims CrossCountry imposed certain requirements such as high speed internet for remote work, but did not pay employees back for the expenses. She is asking the court to certify the suit as a class action. The company allegedly violated the Illinois Wage Payment and Collection Act, which mandates that employers compensate their workers for all necessary expenditures or losses incurred directly related to services performed for the employer. If certified, the prospective class includes over 100 people and the amount in controversy exceeds $5 million, the suit reads.In September, CrossCountry filed a motion to dismiss the case because it failed to state a claim. As of Oct. 24, 2024, the case is still pending in an Illinois federal court.Following the 2020 to 2021 refi boom, a plethora of suits have been filed alleging lenders violated the FLSA.Lenders, including CrossCountry and Rocket Mortgage, have been dinged with such legislation. Most recently, Rocket Mortgage has moved to settle such a case for $3.5 million.