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OCC issues interpretation of preemption standards

The OCC has issued an interpretation of 12 U.S.C. 25b, which codifies preemption standards and established procedural requirements for certain preemption actions by the agency. Federal preemption permits national banks and federal savings associations, many of which operate across state lines, to operate under a uniform set of rules to support nationwide banking. The OCC concluded that the federal banking system, and its customers, would benefit from a comprehensive interpretation of these provisions, which sets out a consistent framework for compliance.

The OCC's Interpretive Letter 1173, issued on December 18, 2020, discusses, among other topics:

  • Standards for preemption of state consumer financial laws
  • State law preemption no requiring a statutory "preemption determination"
  • Preemption determinations under the Barnett standard
  • Preservation of powers related to charging interest
  • Deference
  • The OCC Framework for Compliance


OCC issues final Activities and Operations rule

The Office of the Comptroller of the Currency has issued a final rule to amend its regulations in 12 CFR 7, “Activities and Operations of National Banks and Federal Savings Associations.” The final rule updates or eliminates outdated regulatory requirements that no longer reflect the modern financial system, clarifies and codifies recent OCC interpretations, integrates certain regulations for national banks and federal savings associations, and makes other technical and conforming changes. The amendments are effective April 1, 2021.


House prices continue to rise

The Federal Housing Finance Agency's House Price Index for October 2020 has been released and reports house prices rose 10.2 percent from October 2019 to October 2020. The previously reported 1.7 percent price change for September 2020 remained unchanged. For the nine census divisions, seasonally adjusted monthly house price changes from September 2020 to October 2020 ranged from +0.9 percent in the West North Central and East South Central divisions to +2.1 percent in the New England division. The 12-month changes ranged from +8.4 percent in the West South Central division to +12.5 percent in the Mountain and New England divisions.


COVID-19 forbearance extended

The Federal Housing Finance Agency has announced that Fannie Mae and Freddie Mac (the Enterprises) will continue to offer COVID-19 forbearance to qualifying multifamily property owners through March 31, 2021. The Enterprise forbearance programs were set to expire December 31, 2020.

Property owners with Enterprise-backed multifamily mortgages can enter a new or, if qualified, modified forbearance if they experience a financial hardship due to the COVID-19 emergency. Property owners who enter into a new or modified forbearance agreement must:

  • Inform tenants in writing about tenant protections available during the property owner's forbearance and repayment periods; and
  • Agree not to evict tenants solely for the nonpayment of rent while the property is in forbearance.

Additional tenant protections apply during the repayment periods. These protections include:

  • Giving tenants at least a 30-day notice to vacate;
  • Not charging tenants late fees or penalties for nonpayment of rent; and
  • Allowing tenant flexibility in the repayment of back rent over time, and not necessarily in a lump sum.


FEMA to suspend communities from flood insurance program

The Federal Emergency Management Agency will publish a notice in the December 28, 2020, Federal Register identifying communities in Iowa, Michigan, South Dakota, Texas, and Wisconsin that have been scheduled from suspension from the National Flood Insurance Program for noncompliance with the floodplain management requirements of the Program on December 30, 2020.

  • IA: Aurora, Brandon, Buchanan County (unincorporated areas), Fairbank, Hazleton, Independence, Jesup, Lamont, and Quasqueton
  • MI: Clinton, Harrison, and New Baltimore
  • SD: Clay County (unincorporated areas)
  • TX: Angleton, Brazoria, Clute, Freeport, Jones Creek, Manvel, and West Columbia
  • WI: Pierce County (unincorporated areas) and Spring Valley


Agencies revise statement on status of certain investment funds

The OCC, FRB, and FDIC yesterday issued a revised statement to supersede the "Statement Regarding Status of Certain Investment Funds and Their Portfolio Investments for Purposes of Regulation O and Reporting Requirements under Part 363 of FDIC Regulations" issued on December 27, 2019, and set to expire on January 1, 2021.

The revised interagency statement explains that the agencies will continue to exercise discretion not to take action against banks, or against certain asset managers that become principal shareholders of banks (principal shareholder fund complexes), with respect to certain extensions of credit by banks to portfolio companies of the principal shareholder fund complex (fund complex-controlled portfolio companies) that otherwise would violate Regulation O, 12 CFR 215, provided certain eligibility criteria are satisfied. The agencies are providing this temporary relief while the Board, in consultation with the other agencies, considers whether to amend Regulation O to address this issue. This temporary relief will apply until January 1, 2022, unless amended, extended, or superseded in writing before that time.


FHFA proposes Enterprises living will requirement

The Federal Housing Finance Agency (FHFA) has announced that it has issued a notice of proposed rulemaking that would require Fannie Mae and Freddie Mac (the Enterprises) to develop credible resolution plans, also known as living wills. These resolution plans would facilitate a rapid and orderly resolution should FHFA again have to be appointed their receiver under the Housing and Economic Recovery Act of 2008.

The proposed rule is similar to those issued by the Federal Reserve Board and the Federal Deposit Insurance Corporation under the Dodd–Frank Act, which requires many large financial institutions to submit living wills. The Department of Treasury's 2019 Plan highlighted the need for a credible resolution framework for the Enterprises, and the Financial Stability Oversight Council endorsed Enterprise living wills in the early fall of 2020. Under the proposed rule, the Enterprises must demonstrate how core or important business lines would be maintained to ensure continued support for mortgage finance and stabilize the housing finance system, without extraordinary government support to prevent an Enterprise from being placed in receivership, indemnify investors against losses, or fund the resolution of an Enterprise.

Comments will be accepted for 60 days following Federal Register publication.


FHA simplifies certification form

The Federal Housing Administration has announced the completion of its revised and streamlined loan-level certification form required from lenders when originating a single family mortgage intended for FHA insurance endorsement. The updated form eliminates unnecessarily dense language while remaining consistent with pertinent statutes and other program requirements. The form also continues to safeguard FHA against fraud and misrepresentation by requiring lenders and borrowers to certify to the truthfulness and accuracy of required information.


Subprime auto lender pays $4.75M for credit reporting violations

The CFPB has announced it has issued a consent order to Santander Consumer USA, Inc. (Santander), a subsidiary of Banco Santander S.A., after finding that Santander, a leading originator and servicer of nonprime auto loans and leases headquartered in Fort Worth, Texas, engaged in multiple violations of the Fair Credit Reporting Act and the Consumer Financial Protection Act of 2010. Santander furnishes credit information on the auto loans it services by sending monthly data files to CRAs. The Bureau found that the consumer loan data Santander furnished to CRAs between January 2016 and August 2019 contained many systemic errors that in many instances, could have negatively impacted consumers’ credit scores and access to credit. The consent order requires Santander to take certain steps to prevent future violations and imposes a $4,750,000 civil money penalty.

For additional information, see "Santander Consumer USA penalized for credit reporting violations," in BankersOnline's Penalty Pages.


Bureau fines Discover Bank for student loan servicing practices

The CFPB has announced it has reached a settlement with Discover Bank and its affiliates, The Student Loan Corporation and Discover Products, Inc., (collectively, "Discover") and issued a consent order for payment of at least $10 million in consumer redress and a $25 million civil money penalty. Discover Bank is an insured depository institution headquartered in Greenwood, Delaware, that provides and services private student loans. The Student Loan Corporation and Discover Products, Inc., also service student loans.

The Bureau had issued an Order in 2015 based on the CFPB's finding that Discover misstated the minimum amounts due on billing statements as well as tax information consumers needed to get federal income tax benefits. The Bureau also found that Discover engaged in illegal debt collection practices. The Bureau’s 2015 Order required Discover to refund $16 million to consumers, pay a penalty, and fix its unlawful practices servicing and collection practices. The Bureau found that Discover violated the 2015 Order’s requirements in several ways. Discover misrepresented the minimum loan payments consumers owed, the amount of interest consumers paid, and other material information, such as interest rates, payments, due dates, and the availability of rewards, among other things. Discover also did not provide all of the consumer redress the 2015 Order required.

For more information on the Bureau's enforcement action, see "Discover Bank and affiliates pay $25 million CMP," in BankersOnline's Penalty Pages.


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