Nanci Weissgold, Partner, Financial Services and Products, Alston & Bird, LLP
Nanci, I have had the pleasure of knowing you for some time now and I appreciate your many contributions to mortgage and housing finance, especially your impressive legal work on consumer finance services.
You have a well-earned reputation for attention to detail and excellence guiding many industry trade associations and individual companies on emerging issues with regulation and rulemaking. I am so pleased to have the opportunity to sit down with you for this interview today.
Let us get to it!
Faith Schwartz: Take us back to your early years, on your journey to becoming one of the foremost experts in navigating the regulatory rules in housing finance. What drew you to this area of practice?
Nanci Weissgold: I really fell into mortgage finance, and I am glad I did. In law school, I thought I wanted to be a tax lawyer and worked in tax for my first two years after law school. I quickly realized that I wanted something different. I was fortunate to have good mentors and one suggested that I apply for an associate position in the Mortgage Banking Group of a DC firm called Brownstein Zeidman and Lore. I had just purchased my first house, so I knew something about the mortgage process. Not too long after I started, the practice group moved to what became K&L Gates and I was fortunate to go with the group. I worked with the teams at Brownstein and K&L Gates for 20 years. In 2014, I was presented with the opportunity to grow the consumer financial services team at Alston & Bird. I love learning, understanding an issue, and being able to provide pragmatic advice. As my career has grown, I have really enjoyed using my deep regulatory knowledge to be an effective advocate on enforcement matters. I didn’t have the opportunity to work on enforcement matters in my younger years (as it was suggested that regulatory work was more stable for a woman starting a family) but that deep regulatory expertise has helped me become the attorney I am today.
FS: You served as the General Counsel for the Women in Housing & Finance Foundation in 2007-2009. We both share a common passion around supporting Women in Housing & Finance and the role the organizations play in Washington DC. What do you value most about these organizations?
NW: WHF is a fantastic organization, bringing together great speakers and networking opportunities. I feel that our society could do a better job in providing financial literacy education. Through the WHF Foundation, we provide grants to several organizations supporting women and provide much needed financial literacy to help women become more independent. It is also worth mentioning that both men and women can become members of WFH to support its mission.
FS: It is remarkable that you have nearly 30 years’ experience in the law, many as a partner and you enjoy significant experience working with many high profile peer attorneys. Can you share some of the highlights of that experience, especially during the great financial crisis, 2008-2012?
NW: Sure, two experiences come to mind. First, leading up to the Great Financial Crisis was the Subprime Crisis. After the Subprime Crisis, I spent a lot of time advising clients on anti-predatory lending laws, including a rating agency. Two jurisdictions had enacted laws so onerous that the rating agency would not agree to rate those transactions, even with credit enhancement. I convinced both states to amend their laws (one retroactively) so that the rating agency would agree to rate transactions. Second, during the Great Financial Crisis, a client made an unintentional math error that resulted in a borrower being denied for loss mitigation and the home going into foreclosure. After the error was identified, I was able to convince the investor and court to unwind the transaction and put the borrower back in their home. Getting to the right result and making my clients happy keeps me going as an attorney.
FS: Much of what we are seeing today is in the post Dodd Frank legislation and subsequent regulation. Are consumers better off today and, if so, why?
NW: The Great Financial Crisis was caused, in part, by lax underwriting standards that led to riskier mortgages. The Dodd-Frank Act was enacted to protect consumers from abusive practices and to provide federal oversight over financial institutions. As we all know, the Dodd-Frank Act is a massive piece of legislation that created the Consumer Financial Protection Bureau and transferred to the Bureau the authority to regulate and enforce numerous consumer financial protection laws. The Dodd-Frank Act amended RESPA and TILA to regulate servicing practices. The Act also created the Consumer Financial Protection Act (CFPA) which provides the Bureau with authority to regulate unfair, deceptive, and abusive acts and practices. In past Administrations, the CFPB has focused its enforcement authority on areas that were clear cut, such as if a company commits fraud or deceives consumers. More recently, we are seeing much more overreach by the CFPB. By way of recent example, the CFPB sent comment letters to the NY Governor, NY State Senate, and NY State Assembly lobbying for passage of an amendment to New York’s deceptive conduct law to add a prohibition on abusive conduct. In its letter, the CFPB references the reasonable reliance prong of the federal UDAAP standard, which states it is an abusive act or practice to take unreasonable advantage of the reasonable reliance by the consumer on a covered person to at in the interests of the consumer. According to the CFPB, “[t]his component of the federal prohibition recognizes that people reasonably expect that certain businesses will help them make difficult financial decisions, and there is betrayal or exploitation of that trust.” This is troubling if the CFPB is imputing a fiduciary duty, as it is illustrative of how the Bureau is attempting to expand its authority.
FS: You have seen many changes in the industry you serve. Can you share the most transformational issues we need to think about today with regard to enforcement and litigation risks?
NW: I think right now we’re sitting in a period of uncertainty regarding federal enforcement action. The CFPB announced that it has been on a hiring spree for enforcement attorneys, but, overall, we have seen fewer public enforcement actions under this Administration than others. This could signal that the CFPB may be in the process of gearing up to be more aggressive on litigation. The CFPB has broad authority under the Consumer Financial Protection Act and we see the Bureau interpreting its authority of unfairness, deceptive conduct, and abusiveness very broadly. Such a UDAAP claim can carry significant penalties under the statute. We also see states, such as New York, using their authority to add an abusive prong to their consumer protection laws. And let’s not forget that the CFPB is focused on collaborating with state Attorneys General.
FS: From your vantage point, how do you expect we will see fair lending and fair servicing issues evolve over the next year?
NW: Racial equality continues to be a focus of the CFPB and the Biden Administration, as it should be as it is important for our society not to treat one group of people more favorably than others. We will continue to see an emphasis on fair lending, fair servicing, and fair valuations. And that all starts with the data. The CFPB has been focused on the accuracy of HMDA data as that information is the starting point for many fair lending examinations. So, I think we will see more enforcement on data accuracy (and the Bureau has not articulated what is an error versus a violation of HMDA). With regards to fair lending, we continue to see a lot of redlining actions. What is troubling, is that the current Administration’s Combatting Redlining Initiative appears to be instituting a race-based quota system, something that the Supreme Court has recently rejected in the college acceptance sphere. The CFPB and other regulators also have been focused on the fair lending risks associated with pricing exceptions, where minority borrowers receive discretionary pricing exceptions less frequently than non-protected classes. Fair servicing is another issue gaining attention, and I encourage servicers to maintain a fair servicing monitoring program. For both lenders and servicers, it is important to consider how to best service Limited English Proficient borrowers, as this will be a continued area of focus.
FS: Nanci, you are someone that is always on the frontlines, dealing with difficult and challenging issues that the financial industry faces. When you get a break from that pressure cooker of an environment, what do you do for downtime and fun?
NW: Spending time with and traveling with my husband and grown daughters is one of my favorite activities. Whether it is a weekend away or a trip to St John, USVI (my happy place), or a longer vacation, it always recharges me. I am also an avid walker and swimmer. I also enjoy serving on the Board of Directors of Vildwerk, a nonprofit supporting wildlife conservation through the performing arts and look forward to serving on more boards in the future.
FS: What closing words of wisdom do you have for companies navigating the complexities of state and federal regulations in this fast moving world of AI and tech forward solutions in financial services?
NW: Many areas of financial services are ripe for technological innovation, and we embrace change or get run over by it. At the same time, we need to be mindful of the fair lending and UDAAP risk. Now is the time to ensure that a company’s compliance management system keeps up with the risks of AI and other technological innovations. Faith, I also want to thank you for everything you do for our industry. You are such a wonderful role model!
Postscript
What a great interview! So much to learn from Nanci on the legal environment and compliance complexities across housing finance!
At Housing Finance Strategies, we are leading change in all things housing. By interviewing key executives like Nanci Weissgold, our intent is to educate and encourage the industry to constantly grow and evolve.
Thanks so much to Nanci for taking the time. And as I like to say: Grow, lead and mentor your peers!