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Monday Morning Cup Of Coffee: Mulvaney’s CFPB losing interest in payday lenders?

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Monday Morning Cup of Coffee takes a look at news coming across the HousingWire weekend desk with more coverage to come on bigger issues.

The Consumer Financial Protection Bureau’s acting director, Mick Mulvaney, has stopped the agency’s pursuit to sue a payday lender and is mulling over dropping the cases against three more payday lenders, according to an exclusive report by Reuters’ Patrick Rucker.

The cases, according to the report, are part of about a dozen that Richard Cordray, the bureau’s former director, approved for litigation before his resignation in November.

Cordray was ready to sue Kansas-based National Credit Adjusters, which primarily collects debt for online lenders operating on tribal land, according to the article. Cordray’s CFPB concluded that NCA had no right to collect on such online loans, no matter where they were made.

A lawyer for NCA, Sarah Auchterlonie, told Reuters this week that Mulvaney has dropped the matter and the case is “dead.” The report also said she noted the agency appeared to be backing off issues involving tribal sovereignty.

Meanwhile, Mulvaney is also reviewing three cases against lenders based in southern states, where high-interest loans are permitted. He must eventually decide whether to sue the companies, settle with a fine or scrap the cases, according to the report.

From the article:

Lawyers working for Cordray had concluded that Security Finance, Cash Express LLC and Triton Management Group violated customer rights when attempting to collect, among other lapses.

Spokespeople for the companies declined to comment. A spokesman for the CFPB did not respond to a request for comment. None of the sources wished to be identified because they are not authorized to speak about the cases.

The CFPB concluded that debt collectors working for Security Finance, which offers loans at rates that often climb into triple-digits, harassed borrowers at home and work, violating federal laws, and the company had faulty recordkeeping that could hurt borrowers’ credit scores. The CFPB database shows customers complained that Cash Express used high-pressure collection tactics and Cordray was prepared to sue the company on those grounds, sources told Reuters.

Mulvaney previously announced that the CFPB would “reconsider” its payday lending rules, as well as quietly dropped a case the agency had against South Carolina-based payday lender World Acceptance Corporation, which has donated at least $4,500 to Mulvaney's previous congressional campaigns. 

Despite the turbulence that rocked the U.S. stock market last week, JPMorgan Chase said market conditions are looking favorable heading into the second quarter, according to a Bloomberg article by Joanna Ossinger.

In a note released Friday after the S&P closed down 6% for the week, a team of JPMorgan strategists said the conditions for stability will probably come together in the second quarter, and asset allocations should remain oriented toward growth.

Bloomberg also reported that the strategists also suggested, however, that a potential trade war is a threat to economic growth.

From the article:

"Two of four conditions for market stability have been met (tamer inflation, not-so-hawkish Federal Reserve), and the two others could align in the second quarter (stable activity data, de-escalation of trade conflict),” the strategists wrote.

Their recommended asset allocation includes being overweight equities versus bonds; long financials, industrials and oil; and selectively long on emerging markets.

While there’s now a risk premium for worse growth through bad policies, the strategists said that U.S. sanctions this year "equate to less than 0.5 percent of U.S. gross domestic product," and China’s retaliation this week has been “disproportionately mild.”

An update on the U.S. housing and mortgage market from S&P Global Ratings’ Senior Director Tom Schopflocher notes that profits falling over the last four quarters may be from stricter credit standards over the last year.

Citing Freddie Mac’s 2018 Q1 Mortgage Lender Sentiment Survey, the report noted that “mortgage lenders in the U.S. have reported a net negative profit margin outlook for the sixth consecutive quarter and of those who expect lower profit margins, competition from lenders was cited as the primary reason for doubts. However, it was noted in the report that after rising for four consecutive quarters, the share of lenders reporting easing credit standards has fallen.”

As home sales continue to soar in the Bay Area, a political fight to build more housing up, not out, is brewing in the Golden state. According to the San Francisco Chronicle, California state Sen. Scott Wiener, D-San Francisco, recently proposed a bill that would strip local governments of their ability to reject taller and denser apartment and condominium buildings if developers want to build them near public transit stops.

From the article:

Its supporters say it would prevent obstructionist NIMBYs from standing in the way of housing solutions. Opponents foresee low-income people being pushed out of neighborhoods to make way for structures that turn surviving small homes into something out of the movie “Up.”

“The bill has definitely struck a nerve,” Wiener said. “I knew it would be a controversial and hard bill, but I didn’t anticipate this level of focus.”

His SB827 would require cities to allow four- to eight-story apartment and condo buildings in residential areas if they are within a half mile of major transit hubs, such as a BART or Caltrain station. It would also mandate that cities allow such buildings within a quarter mile of highly used bus and light-rail stops.

Wiener said the bill is intended to deal with “the heart of our affordability crisis” in California — a shortage of new housing, especially in areas where people are being attracted by the tech industry. “California’s housing deficit is approaching 4 million homes, and it goes up by 100,000 a year,” Wiener said, according to the Chronicle.

More than 100 tech executives voiced support for the bill, including leaders at Salesforce, Reddit, Twitter and Lyft. The group sent a letter to Wiener explaining California’s housing shortage is making it harder to recruit and retain employees.

“We recognize that the housing shortage leads to displacement, crushing rent burdens, long commutes, and environmental harm, and we want to be part of the solution,” they wrote.

The bill’s opposition is loud. The Chronicle reports that officials in cities whose height limits would be wiped out by the bill say the list of “society’s ills caused by the housing shortage shouldn’t be their problem alone.”

Fairfax Mayor Peter Lacques told the state senator that his bill “obliterates the kind of local control and flexibility that is required for towns and cities,” and Orinda Mayor Amy Worth, whose city would be affected because of its BART station, said the legislation “would subvert, and potentially derail” community planning efforts.

The bill has caused “raucous debate” at a San Francisco Board of Supervisors meeting this month. Various public speakers referred to the bill as an “undemocratic power grab” and a “hydrogen bomb” that will “blow San Francisco to bits,” according to the article.

The Chronicle’s Melody Gutierrez reported that SB827 would apply to most of San Francisco, because 96% of the city’s residential parcels are within a half mile of a major transit stop, according to an analysis of the bill. San Francisco now limits construction in more than 90% of residential areas to four stories or less.

Again, from the article:

Besides raising those caps, Wiener’s bill would relax density requirements so more units could be built in each building.

“These are small to midsized apartments that we used to build all over,” Wiener said.

He argued that building more housing near mass transit would reduce not only traffic gridlock but California’s carbon footprint, helping the state meet its goal of cutting greenhouse gas emissions by 40 percent below 1990 levels by 2030. But the Sierra Club, one of the most influential environmental groups in the country, opposes it.

The bill will face its first hearing in the state Capitol in April.

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