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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 This temporary relief will apply until January 1, 2022, unless amended, extended, or superseded in writing before that time.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.


Stimulus bill sent to president

Congress has approved and sent to the president for enactment the long-anticipated $900 billion coronavirus relief package in a record-breaking 5,500 plus-page bill. Key provisions affecting banks include:

  • An additional $284 billion in funding for the Paycheck Protection Program, included an option for prior PPP borrowers to obtain additional funds. Fifteen billion dollars were set aside for PPP loans by community financial institutions.
  • A hold-harmless provision for lenders from penalties related to borrower or applicant certifications for PPP loans
  • A simplified forgiveness process for PPP loans up to $150,000
  • A second round of economic impact payments (stimulus checks) for eligible recipients, that will not be subject to garnishment. Treasury Secretary Mnuchin predicts direct deposits of these payments could start next week.
  • An extension of federally-enhanced unemployment insurance payments
  • Extension until January 1, 2022, of the troubled debt restructuring provisions in the CARES Act
  • A delay of CECL implementation until January 1, 2022.


FHA foreclosure and eviction moratorium extended

The Federal Housing Administration has announced it is extending the foreclosure and eviction moratorium for single family FHA-insured mortgages for an additional two months, through February 28, 2021. The FHA is also extending through February 28, 2021, the deadline for single family borrowers with FHA-insured mortgages to request an initial COVID-19 forbearance from their mortgage servicer to defer or reduce their mortgage payments for up to six months, which can be extended for an additional six months.

To assist lenders and servicers in continuing to supply FHA-insured affordable mortgage financing despite the considerations for social distancing, today FHA also extended:

  • The timeframe for providing an insurance endorsement on single family mortgages in forbearance through March 31, 2021
  • Temporary re-verification of employment guidance and exterior-only appraisal inspection option through February 28, 2021
  • Temporary provisions for verification of self-employment, rental income, and 203(k) Rehabilitation Mortgage escrow accounts through February 28, 2021


Bureau Advisory Opinion on special-purpose credit programs

The CFPB has announced it has issued an advisory opinion to address regulatory uncertainty regarding Regulation B, which implements the Equal Credit Opportunity Act, as it applies to certain aspects of special purpose credit programs (SPCPs).

Under Regulation B, discrimination is prohibited on certain prohibited bases in any aspect of a credit transaction, but it is not discrimination for a for-profit organization to provide SPCPs designed to meet special social needs. The creditor offering the SPCP must determine the status of its own program in that regard. The regulation provides general guidance on compliance.

The CFPB has issued its advisory opinion with the hope that more creditors will offer SPCPs and increase access to credit to underserved groups. Specifically, the Bureau seeks to clarify the content that a for-profit organization must include in a written plan that establishes and administers a SPCP under Regulation B. The advisory opinion also clarifies the type of research and data that may be appropriate to inform a for-profit organization’s determination that a SPCP would benefit a certain class of people.


Small-creditor asset threshold for escrow exemption adjusted

The CFPB has published in today's Federal Register a final rule making an inflation adjustment to the asset-size threshold for certain creditors to qualify for an exemption from the requirement to establish an escrow account for a higher-priced mortgage loan under section 1026.35 of Regulation Z. The threshold is adjusted, effective January 1, 2021, to $2.230 billion from $2.202 billion. Therefore, creditors with assets of less than $2.230 billion (including assets of certain affiliates) as of December 31, 2020, will be exempt, if other requirements of section 1026.35(b)(2)(iii) of Regulation Z are also met, from establishing escrow accounts for higher-priced mortgage loans in 2021. The change is effective January 1, 2021.

The BankersOnline Regulations page for Regulation Z § 1026.35 and its Official Interpretations has been updated, noting and correcting an error in the published rule.


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