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Top Story Lending Related

11/03/2023

OCC lists 24 CRA evaluations

The OCC yesterday released a list of CRA performance evaluations that were made public in October. Of the 24 evaluations made public this month, 16 are rated satisfactory, and the following eight are rated outstanding.

11/02/2023

HUD proposes enhancements to HECM program

Yesterday, HUD and the Federal Housing Administration announced they have posted for industry feedback a set of proposed policy updates to its Home Equity Conversion Mortgage (HECM) program designed to improve program stability and to respond to changing market conditions. FHA is seeking feedback on the policy updates contained in its draft Mortgagee Letter through November 7, 2023.

The proposed updates posted yesterday would streamline certain requirements and reduce operational challenges associated with servicing a HECM portfolio. Key changes include:

  • Allowing mortgage servicers to contact borrowers by phone to verify occupancy for the program’s required annual occupancy certification;
  • Allowing outstanding homeowner’s association dues to be included in the calculation of a repayment plan for borrowers who are behind on their HECM financial obligations;
  • Expanding the ability of mortgage servicers to work with borrowers who are behind on their property tax or hazard insurance by an amount up to $5,000 without calling the mortgage due and payable;
  • Allowing mortgage servicers to assign a HECM to HUD after the servicer has funded a cure for a borrower’s delinquent financial obligations so long as the borrower has made all property charge payments for one year and all other assignment eligibility criteria are met;
  • Streamlining requirements for executing alternatives to foreclosure and updating existing incentive payments for successful completion of loss mitigation options; and
  • Providing a new incentive payment to mortgage servicers for completing these alternatives.

11/02/2023

Registration opens for car dealers to provide direct tax credits for clean vehicles

The Treasury Department and IRS yesterday announced they have begun to allow car dealers to register for the IRS Energy Credits Online portal. This is a key step in implementing a provision of the Inflation Reduction Act that will lower costs for consumers and help car dealers grow their businesses by increasing access to tax credits at point of sale for new and previously owned clean vehicles.

Starting January 1, 2024, consumers will be able to choose to transfer their new clean vehicle credit of up to $7,500 and their previously owned clean vehicle credit of up to $4,000 to a registered car dealer. This provision of the Inflation Reduction Act (IRA) will effectively lower the vehicle’s purchase price by providing consumers with an upfront down payment on their clean vehicle at the point of sale, rather than having to wait to claim their credit on their tax return the next year. Only vehicles purchased under the consumer clean vehicle credits are eligible for this benefit.

The new Energy Credits Online portal will allow registered dealers to submit clean vehicle sales information to the IRS and promptly receive payment for transferred credits. Dealers will also use Energy Credits Online to submit “time of sale” reports, which will confirm vehicles’ eligibility for a credit, whether or not the buyer chooses to transfer the credit to the dealer.

11/02/2023

Fed releases FOMC statement after October 31–November 1 meeting

The Federal Reserve has released the Federal Open Market Committee Statement issued following the Committee's October 31–November 1 meeting.

The Committee decided to maintain the target range for the federal funds rate at 5-1/4 to 5-1/2 percent. The Committee will continue to assess additional information and its implications for monetary policy. In determining the extent of additional policy firming that may be appropriate to return inflation to 2 percent over time, the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments. In addition, the Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities, as described in its previously announced plans. The Committee is strongly committed to returning inflation to its 2 percent objective.

In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee's goals. The Committee's assessments will take into account a wide range of information, including readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments.

The Implementation Note issued following the meeting indicates that the Federal Reserve Board voted unanimously to maintain the interest rate paid on reserve balances at 5.4 percent, and to approve the establishment of the primary credit rate at the existing level of 5.5 percent.

11/02/2023

SBA adds 3 new SBLC licenses to fill funding gaps

Yesterday, SBA Administrator Isabel Guzman announced that the SBA has granted three new Small Business Lending Company (SBLC) licenses to lenders focused on historically underserved markets – the first expansion of the SBLC program in more than 40 years. The lending companies – Arkansas Capital Corporation, Alaska Growth Capital BIDCO, Inc., and Funding Circle – will help support SBA’s ongoing efforts to increase access to affordable capital for business owners in underserved markets across America, to advance equity and build an inclusive economy.

Each of the three new SBLC license holders will focus on historically underserved markets, including small businesses in Native, rural, and low-income communities.

11/02/2023

OCC urges caution with venture loans

OCC Bulletin 2023-34, issued yesterday, provides policy guidance to OCC-supervised institutions relative to commercial loans to early-, expansion-, and late-stage companies (collectively referred to as “venture loans"). There is heightened uncertainty and higher probability of failure associated with new business ventures. The OCC expects banks engaging in venture lending to do so in a safe and sound manner, in compliance with applicable laws and regulations, and with support from sound risk management systems.

OCC examiners will scrutinize loan commitments that are underwritten without an adequate assessment of the borrower’s capacity to repay and will determine whether such loans should be subject to supervisory criticism. Examiners will ask banks to determine the impact that any weak venture loan underwriting standards may have on the assumptions used in calculating loan loss reserves.

The bulletin —

  • presents background information on venture lending
  • describes venture lending risks
  • discusses risk management practices for venture lending
  • provides guidance for risk-rating venture loans and evaluating repayment capacity

11/02/2023

Consumer Compliance Outlook released

10/31/2023

Court permanently bans funding company and owner

The Federal Trade Commission reported yesterday that, as a result of a Commission lawsuit, Jonathan Braun, who controlled small-business funding company RCG Advances, will face a permanent ban from the merchant cash advance and debt collection industries. A federal court issued summary judgment in favor of the FTC in the case along with a permanent injunction against Braun.

The FTC sued Braun in June 2020, along with four other defendants, for his role with RCG Advances, which formerly did business as Richmond Capital Group, charging that he deceived small businesses and other organizations by misrepresenting the terms of merchant cash advances the business provided, and then used unfair collection practices, including sometimes threatening physical violence, to compel consumers to pay.

The suit also alleged that Braun and the other defendants made unauthorized withdrawals from consumers’ accounts and required businesses and their owners to sign confessions of judgment as part of their contracts, which allowed the defendants to go immediately to court and obtain an uncontested judgment in case of an alleged default. The complaint alleges that the defendants unlawfully and unfairly used these confessions of judgment to seize consumers’ personal and business assets in circumstances not expected by consumers or permitted by the defendants’ financing contracts.

The permanent injunction includes a number of key provisions. Braun is—

  • Permanently banned from any involvement with the merchant cash advance industry, including assisting anyone else in offering those services.
  • Permanently banned from the debt collection industry.
  • Required to contact credit reporting agencies within 30 days to remove any negative information that was filed on consumer or business credit reports as a result of his actions.
  • Prohibited from deceiving consumers about any product or service, and is also prohibited from charging consumers without their authorization

The court has scheduled a trial for January 2024 to determine the amount of monetary relief that should be imposed for Braun’s law violations.

Earlier related news items:

10/31/2023

Court expands injunction on 1071 rule to all lenders

Bloomberg Law has reported that the U.S. District Court for the Southern District of Texas has expanded the Court's July injunction stopping the CFPB from requiring selected lenders to comply with its Small Business Lending Data Collection Rule. The expanded injunction, which now covers all banks, credit unions, fintechs and other lenders.

The Rule, which was added to Regulation B on August 29, was mandated under Section 1071 of the Dodd-Frank Act. The injunction will hold until the U.S. Supreme Court makes its ruling on the constitutionality of the Bureau's funding mechanism, which is expected in the first half of 2024.

10/26/2023

CFPB reports consumers paid record $130B in credit card interest and fees in 2022

The CFPB has released its biennial report to Congress on the consumer credit card market. The report found that in 2022 credit card companies charged consumers more than $105 billion in interest and more than $25 billion in fees. Total outstanding credit card debt eclipsed $1 trillion for the first time since the CFPB began collecting this data. The report highlights areas of concern, including more consumers carrying balances month to month, with many falling deeper into debt over time, while credit card company profits remained significantly above pre-pandemic levels.

This is the Bureau's sixth biennial report on the credit card market. It identifies several recent trends in consumer credit card activity, including:

  • Credit card company profits remain high: Major credit card companies’ profits are now higher than pre-pandemic levels, potentially signaling a lack of competition in a market consistently dominated by the top 10 credit card companies.
  • APRs continue to rise above the cost of offering credit: Major credit card companies continue to set interest rates far above major indexes like the federal funds target rate, with an average APR margin of 15.4 percentage points above the prime rate in 2022. Margins continued to rise for across all credit score tiers, even as charge-off rates fell during the pandemic.
  • Consumers were charged $130 billion in interest and fees: For consumers who carried a balance, they paid about 20 percent of their average balance in interest and fees over the course of the year (18 percent of annualized balances on general purpose cards and 21 percent on private label accounts). Many cardholders with subprime scores paid 30 to 40 cents in interest and fees per dollar borrowed each year.
  • Consumers were charged $14.5 billion in late fees, returning to pre-pandemic levels and up from $11.3 billion in 2021
  • More borrowers getting caught in debt: More cardholders are carrying balances month to month or failing behind on payments, and a greater percentage of balances are going more than 180 days delinquent.
  • Consumers with revolving balances were charged more in interest and fees than they earned in rewards

The report also finds a continuing shift toward digital communication. Consumers are increasingly using digital portals, such as website and mobile apps, to manage their cards and make payments. Nearly 80 percent of cardholders are enrolled in their card’s mobile app, with adoption rates even higher for consumers under 65. The report also finds that credit card companies and debt collectors are relying more on text messaging and email to contact borrowers about past-due balances, alongside more traditional means like phone calls or postal mail.

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