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Top Story Lending Related

03/11/2016

FDIC updates flood insurance videos

FDIC FIL-18-2016 announces the update of the agency's technical assistance videos on flood insurance. The new videos provide financial institution management, compliance officers, and staff with resources for a better understanding of federal flood insurance laws, regulations, and compliance responsibilities. The updated videos include information about the changes to federal flood insurance compliance requirements brought about by the Biggert-Waters Flood Insurance Reform Act, the Homeowner Flood Insurance Affordability Act, and the agency's final rules on flood insurance. They reflect changes in federal flood insurance laws, including changes regarding escrowing of flood insurance premiums and fees, insuring detached structures, and force-placed insurance. They also address other key requirements of the federal flood insurance regulations, common flood insurance violations, frequently asked questions, and elements of an effective compliance management system.

03/10/2016

FTC lawsuit halts brokered data scam

The Federal Trade Commission has announced that orders requested by the Commission have been issued by a federal district court banning Ideal Financial Solutions, Inc., its subsidiaries, and seven individuals form collecting or disclosing consumer information. A lawsuit filed in 2013 by the Commission alleged the defendants operated a massive scam that took money from consumers’ bank accounts without their authorization. The defendants bought consumer payday loan applications, which included Social Security and bank account numbers, from data brokers and payday loan websites, and used the information to defraud consumers. The court has imposed a $43,083,720 judgment against Ideal Financial Solutions and its subsidiaries, Steven Sunyich, Christopher Sunyich, Michael Sunyich, and Melissa Sunyich Gardner, and a $36,575,542 judgment against Jared Mosher. The court banned the ringleaders, Jared Mosher, Steven Sunyich and Christopher Sunyich, from marketing, selling and handling any credit-related products or services. It banned all of the defendants from collecting or disclosing consumer account numbers except for transactions expressly authorized by the consumer.

03/09/2016

GAO recommends Treasury better forecast MHA expenditures

The Government Accountability Office (GAO) has issued GAO-16-351, a report to Congress, which examines the extent to which Treasury is reviewing unexpended balances and cost projections for the Making Home Affordable (MHA) programs. Since 2009, Treasury has obligated $27.8 billion in Troubled Asset Relief Program (TARP) funds through its MHA program to help struggling homeowners avoid foreclosure. The Emergency Economic Stabilization Act of 2008 includes a provision for GAO to report every 60 days on TARP activities. In the report, the GAO made two recommendations to Treasury and offered one matter for congressional consideration. Treasury should (1) estimate future expenditures for the MHA program and any unexpended balances and (2) deobligate funds that its review shows will likely not be expended and move up to $2 billion of such funds to the TARP-funded Hardest Hit Fund, as authorized. Congress should consider permanently rescinding any deobligated MHA funds that are not moved to the Hardest Hit Fund and make them available for other priorities.

03/08/2016

January consumer credit report mixed

The January 2016 G.19 Consumer Credit data have been released by the Federal Reserve. In January, consumer credit increased at a seasonally adjusted annual rate of 3-1/2 percent. Revolving credit decreased at an annual rate of 1-1/4 percent, while nonrevolving credit increased at an annual rate of 5-1/2 percent.

03/08/2016

RI bond agency and Wells Fargo Securities charged with fraud

The SEC has charged a Rhode Island bond agency and its bond underwriter, Wells Fargo Securities, with defrauding investors in a municipal bond offering to finance startup video game company 38 Studios. The Rhode Island Economic Development Corporation (RIEDC, now called the Rhode Island Commerce Corporation) issued $75 million in bonds for the 38 Studios project as part of a state government program intended to spur economic development and increase employment opportunities by loaning bond proceeds to private companies. According to the SEC’s complaint filed in federal district court in Providence:

  • The RIEDC loaned $50 million in bond proceeds to 38 Studios. Remaining proceeds were used to pay related bond offering expenses and establish a reserve fund and a capitalized interest fund.
  • The loan and, in turn, bond investors would be repaid from revenues generated by video games that 38 Studios planned to develop.
  • The bond offering document produced by the RIEDC and Wells Fargo failed to disclose to investors that 38 Studios had stated it needed at least $75 million in funding to produce a particular video game.
  • Therefore, investors weren’t fully informed when deciding to purchase the bonds that 38 Studios faced a funding shortfall even with the loan proceeds and could not develop the video game without additional sources of financing.
  • When 38 Studios was later unable to obtain additional financing, the video game didn’t materialize and the company defaulted on the loan.

The SEC also charged Wells Fargo’s lead banker on the deal, Peter M. Cannava, and two then-RIEDC executives, Keith W. Stokes and James Michael Saul, with aiding and abetting the fraud. In a separate administrative proceeding, the RIEDC’s financial advisor for the bond offering – First Southwest Company LLC – agreed to settle charges that it violated MSRB rules by failing to document in writing the scope of the services the firm was providing in the bond offering until seven months after the financial advisory relationship began.

03/08/2016

Bureau accepting complaints about online lenders

The CFPB has announced it is now accepting complaints from consumers encountering problems with loans from online marketplace lenders. The agency also release a consumer bulletin that provides an overview of online marketplace lending and outlines tips for consumers who are considering taking out loans from these types of lenders.

03/07/2016

FDIC CRA ratings released

The FDIC has issued a list of sixty state nonmember banks recently evaluated for compliance with the Community Reinvestment Act (CRA). Two received an outstanding rating, 57 were rated satisfactory, and one bank garnered a "needs to improve" evaluation.

03/07/2016

Board proposes large bank single-counterparty credit risk rule

The Board of Governors of the Federal Reserve System has announced a proposed rule to address the risk associated with excessive credit exposures of large banking organizations to a single counterparty. As demonstrated during the financial crisis, large credit exposures, particularly between financial institutions, can spread financial distress and undermine financial stability. The proposal would apply single-counterparty credit limits for bank holding companies with total consolidated assets of $50 billion or more. The proposed limits are tailored to increase in stringency as the systemic footprint of a firm increases:

  • A global systemically important bank, or G-SIB, would be restricted to a credit exposure of no more than 15 percent of the bank's tier 1 capital to another systemically important financial firm, and up to 25 percent of the bank's tier 1 capital to another counterparty;
  • A bank holding company with $250 billion or more in total consolidated assets, or $10 billion or more in on-balance-sheet foreign exposure, would be restricted to a credit exposure of no more than 25 percent of the bank's tier 1 capital to a counterparty;
  • A bank holding company with $50 billion or more in total consolidated assets would be restricted to a credit exposure of no more than 25 percent of the bank's total regulatory capital to another counterparty;
  • And bank holding companies with less than $50 billion in total consolidated assets, including community banks, would not be subject to the proposal.

Comments are invited until June 3, 2016. A statement from Board Chair Yellen regarding the proposal was also released.

03/07/2016

Regulators clarify expectations for use of property evaluations

The Federal Reserve Board, FDIC and OCC have issued guidance to clarify their expectations for the use of property evaluations by banking institutions. The guidance responds to questions raised during outreach meetings held by the agencies last year pursuant to the Economic Growth and Regulatory Paperwork Reduction Act (EGPRA). It also addresses the use of alternative valuation approaches, methods, and other information that financial institutions may use to develop an evaluation in areas with few, if any, recent comparable property sales in reasonable proximity to the subject property. Regardless of the approach or method used to estimate the market value of real property, an evaluation report should contain sufficient information and analysis to support the value conclusion and the institution's decision to engage in the transaction.

Agency releases:

03/04/2016

Fannie and Freddie get passing grades

The Federal Housing Finance Agency (FHFA) has issued a 2015 Scorecard Progress Report summarizing the 2015 activities Fannie Mae and Freddie Mac (the Government Sponsored Enterprises, or GSEs) took in furtherance of FHFA’s three strategic objectives as conservator: Maintain, Reduce, and Build. The scorecard details efforts taken to counter the restrained access to credit for creditworthy borrowers, help financially struggling borrowers and hardest-hit communities avoid or mitigate the impact of foreclosures, and support affordable multifamily lending. It also describes the GSEs' credit risk transfer programs and other activities to increase the role of private capital in the secondary mortgage market, as well as their ongoing work to develop the Common Securitization Platform and a Single Security. In addition, the report describes Fannie Mae and Freddie Mac’s actions to promote diversity and inclusion in furtherance of the strategic goals of their conservatorships.

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