Came by to report this same issue. /usr/share/pam-config/mkhomedir is
being ignored on Ubuntu 16.04 with this configuration:
Name: Create home directory during login
Default: yes
Priority: 900
Session-Type: Additional
Session:
required pam_mkhomedir.so umask=0077 skel=/etc/skel
It was working perfectly fine on Ubuntu 14.04.
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https://bugs.launchpad.net/bugs/682662
Title:
pam-auth-update ignores debconf settings
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