U.S. Backs Student Loan Servicer in Lawsuit by Massachusetts
The U.S. Justice Department has filed papers arguing that the Massachusetts attorney general cannot pursue claims under state law that one of the nation's largest student loan servicers undermined a federal debt-forgiveness program, Reuters reported. Loan servicer Pennsylvania Higher Education Assistance Agency (PHEAA) seized on the department's filing to argue during a court hearing on Wednesday in Boston that Massachusetts Attorney General Maura Healey's (D) lawsuit should be dismissed. The student loan servicing industry has lobbied the U.S. Department of Education under Republican President Donald Trump to take steps to block state actions against servicers. The Justice Department, representing the Education Department, argued in a filing on Monday that federal law, including the Higher Education Act, pre-empted Healey's state-law claims. Healey criticized the filing. "We sued to hold the company accountable for cheating students and families under Massachusetts law, and the Department of Education has no business in this case," Healey said. In August, Healey sued PHEAA, which does business as FedLoan Servicing and manages over a fourth of the nation's $1.4 trillion student loan debt on behalf of various lenders. The lawsuit accused PHEAA of deceptive practices that caused public servants to lose benefits and financial assistance under two federal programs, including one that forgives student loans after about 10 years of public-service work..
Report: Looming Student Loan Default Crisis Likely Worse Than Earlier Predictions
A report released today by the Brookings Institute found that the student loan default rate for for-profit entrants is nearly four times the rate seen in other educational sectors, where only 12 to 13 out of every 100 entrants default. The report utilizes new data, released by the U.S. Department of Education in October 2017, linking two waves of the Beginning Postsecondary Student (BPS) survey, a nationally representative survey of first-time college beginners, to administrative data on debt and defaults. "Among all new students entering the for-profit sector in 2004, nearly half had defaulted within 12 years (47 percent), compared to 'just' 24 percent in the 1996 cohort," according to the report. Click here to read the full report.
The Consumer Bankruptcy Commission’s Committee on Case Administration and the Estate is considering the important issue of student loan debt and bankruptcy, and the Commission is reviewing a paper submitted by ABI's Consumer Committee at the last open meeting at WLC. Click here to read the paper. For more information, including videos, audio and written submissions at last year’s open meetings, please click here.
Trump Administration Seeks to Change Rules on Bank Lending to the Poor
The Trump administration plans to unveil a major revision to decades-old banking rules that mandate lending to poor borrowers, the Wall Street Journal reported. Changes to the regulations of the Community Reinvestment Act (CRA) — a law first enacted in 1977 — could potentially transform the way banks make billions of dollars in loans, investments and donations to poorer customers. In all, they could make it easier for banks to meet certain lending requirements and lower penalties for compliance problems. Community groups that support the law fear that any rollback could mean that poorer people over time would have less access to loans and banking services. In recent years, for example, some lenders have focused on serving more affluent customers. The CRA, though, generally has prevented banks from focusing only on the wealthy. Some of the government’s changes have already gone into effect. In early 2018, the Treasury Department is planning to unveil broader recommendations to revamp the government’s enforcement of the CRA, according to a Treasury spokeswoman.
CoreLogic: Early-Stage Mortgage Delinquencies on the Rise After Recent Hurricane Season
Even as overall delinquencies decreased, early-stage delinquencies saw an uptick after last year’s active hurricane season, according to the latest Loan Performance Insights Report from CoreLogic, a property information, analytics and data-enabled solutions provider, Housing Wire reported. Nationally, 5.1 percent of mortgages remained in some stage of delinquency — those 30 days or more past due including homes in foreclosure — in October. This is down 0.1 percentage point from October 2016, when 5.2 percent of all homes with a mortgage were in a stage of delinquency. The foreclosure inventory rate, which measures the share of mortgages in some stage of the foreclosure process, decreased 0.2 percentage points from last year’s 0.8 percent to 0.6 percent in October. The foreclosure inventory rate has remained at 0.6 percent since August 2017 and represents the lowest level since June 2007.
U.S. Jobless Claims Increase for Fourth Straight Week
The number of Americans filing for unemployment benefits unexpectedly rose last week, hitting the highest level in more than three months, Reuters reported. Initial claims for state unemployment benefits increased 11,000 to a seasonally adjusted 261,000 for the week ended Jan. 6, the highest level since late September, the Labor Department said today. Claims have now risen for four straight weeks. However, the increase likely does not suggest a material shift in labor market conditions, as claims data tend to be volatile during year-end holidays. Last week marked the 149th straight week that claims remained below the 300,000 threshold, which is associated with a strong labor market. That is the longest such stretch since 1970.
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New on ABI’s Bankruptcy Blog Exchange: Fed's Kashkari Playing Long Game in Plan to End 'Too Big to Fail'
Minneapolis Fed President Neel Kashkari acknowledges that his plan to raise capital at the biggest banks and ease the burden for smaller ones isn't likely to be enacted soon, but says its time will come, according to a recent blog post.
To read more on this blog and all others on the ABI Blog Exchange, please click here.
