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Top Story Lending Related

12/14/2020

CFPB settles with home-alarm company

The Bureau and the Arkansas Attorney General have settled with Alder Holdings, LLC, resolving their allegations that Alder failed to provide proper notices under the Fair Credit Reporting Act. Alder is a Utah-based company that sells home-security and alarm systems, primarily door-to-door, throughout the country and has sold its products and services to over 115,000 customers. The Bureau and Arkansas filed a proposed stipulated final judgment and order in the United States District Court for the Eastern District of Arkansas. If entered by the court, the settlement would require Alder to pay a $600,000 civil money penalty, $100,000 of which will be offset if Alder pays that amount to settle related litigation with the State of Arkansas that is currently pending in state court in Arkansas. The settlement would also require Alder to provide proper notices under the FCRA.

12/14/2020

CFPB Fall 2020 rulemaking agenda

The Bureau has published its Fall 2020 Rulemaking Agenda, which lists the regulatory matters that it expects to focus on for the remainder of 2020 through the spring of 2021. Key among these are:

  • In addition to completing and publishing the October 30, 2020, final rule on debt collection, the Bureau has also engaged in testing of time-barred debt disclosures that were not the focus of the May 2019 proposal. In early 2020, after completing the testing, the Bureau published a supplemental NPRM related to time-barred debt disclosures. The Bureau expects to issue a final rule in December 2020 addressing, among other things, disclosures related to the validation notice and time-barred debt.
  • The Bureau is continuing a rulemaking to address the anticipated expiration of the LIBOR index On Monday, November 30, regulatory authorities in the UK announced that they are considering extending the availability of US$ LIBOR for legacy loan contracts until June 2023 instead of the end of 2021. In light of this development, the Bureau anticipates publishing the final rulemaking on the LIBOR transition later than the January 2021 target identified in the Unified Agenda.
  • The Bureau is participating in interagency rulemaking processes with the Board of Governors of the Federal Reserve System, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, the National Credit Union Administration, and the Federal Housing Finance Agency to develop regulations to implement the amendments made by the Dodd-Frank Act to the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA) concerning appraisals. These amendments require implementing regulations for quality control standards for automated valuation models (AVMs). The Agencies will continue to develop a proposed rule to implement the Dodd-Frank Act’s AVM amendments to FIRREA.
  • The Bureau anticipates issuing an NPRM in spring 2021 to consider possible amendments to the Bureau’s mortgage servicing rules to address actions required of servicers working with borrowers affected by natural disasters or other emergencies.
  • The Bureau anticipates publishing two NPRMs in early 2021 concerning possible revisions to the 2015 Home Mortgage Disclosure Act (HMDA). One of these follows an Advance Notice of Proposed Rulemaking in May 2019 concerning certain data points that are required to be reported under the HMDA rule and coverage of certain business or commercial purpose loans, addressing concerns about regulatory burden. The second would address the public disclosure of HMDA data in light of consumer privacy interests, so that stakeholders can concurrently consider and comment on the collection and reporting of data points and public disclosure of those data points. This NPRM will follow up on the Bureau’s 2018 final policy guidance regarding disclosure of the HMDA data. (These proposed rules may not be released by the anticipated February target in the Unified Agenda.)

The Bureau has also added two new items to its long-term agenda. First, the Bureau will weigh feedback from its assessment of the TRID Rule suggesting that modifications of certain aspects of that rule make it more effective. Second, the CFPB has begun research that focuses on providing information to consumers about the costs associated with payday loans. The results of the qualitative testing will inform the Bureau in deciding whether and how to move forward with quantitative testing that might support possible future rulemaking or other actions related to payday loan disclosures.

In August 2020, the Bureau also began its review of Regulation Z rules that implement the CARD Act of 2009, with a focus on an interim final rule and three final rules published by the Federal Reserve Board from July 2009 to April 2011.

12/14/2020

McWilliams remarks at Federal Reserve Bank Supervision Conference

In a presentation at the Federal Reserve Board Conference on Bank Supervision: Past, Present, and Future, FDIC Chairman McWilliams discussed the steps taken by the FDIC in the last two years to improve its supervisory program. She noted the FDIC's task is really quite simple:

  • Foster a technological transformation in the industry we oversee, promoting a safe, dynamic, technology-driven marketplace for financial services;
  • Develop a more dynamic supervision model that improves FDIC effectiveness and promotes financial stability; and
  • Do it all in a manner that reduces unnecessary regulatory burden and cuts compliance costs for banks.

McWilliams said of the agency's current project to leverage technology to engage more regularly and more informally to discuss operations, understanding emerging risks, and resolve questions surrounding new products and services, “When we are successful, this system will reduce the reporting burden for institutions and the compliance costs of an annual examination, while simultaneously providing greater visibility for the FDIC into an institution's financial health and into the health of the entire financial system. And, because we are engaging more regularly, the FDIC will be able to help institutions identify and mitigate risks to financial health or consumers before they become bigger, more challenging problems.”

12/14/2020

FDIC Board meeting tomorrow

The FDIC Board of Directors will hold an open meeting at 10:00 a.m. on Tuesday, December 15, 2020, via a and subsequently made available on-demand approximately one week after the event.

Selected items from the Summary Agenda for the meeting include—

  • Final Rule on Revising the FDIC’s Regulations Concerning Collection of Delinquent Civil Money Penalties.
  • Notice of Proposed Rulemaking on Computer-Security Incident Notification.
  • Notice of Proposed Rulemaking on Additional Exemptions to Suspicious Activity Report Requirements (12 CFR part 353).
  • Final Rules on the Removal and Rescission of Transferred OTS Regulations
  • Combined Final Rule on Brokered Deposits and Interest Rate Restrictions.
  • Final Rule on Parent Companies of Industrial Banks and Industrial Loan Companies.

12/14/2020

Swap Margin Rule - legacy swaps

The OCC has issued Bulletin 2020-108 concerning the Joint Statement issued by the OCC and Board of Governors of the Federal Reserve System to address the ability of a covered swap entity subject to the OCC’s or Federal Reserve Board’s jurisdiction, respectively, to service the covered swap entity’s cross-border clients. The OCC and the Federal Reserve Board are issuing this statement in light of the approaching end of the transition period during which the laws of the European Union have continued to apply in the United Kingdom after the United Kingdom’s withdrawal (commonly referred to as Brexit) from the European Union. The OCC’s swap margin rule applies to certain national banks, federal savings associations, and federal branches and agencies of foreign banking organizations (collectively, banks).

The OCC expects the Joint Statement to have no impact on community banks.

12/11/2020

Bureau issues two final QM rules

The Consumer Financial Protection Bureau has issued two final rules related to qualified mortgage (QM) loans. The first final rule, the General QM Final Rule, replaces the current requirement for General QM loans that the consumer’s debt-to-income ratio (DTI) not exceed 43 percent with a limit based on the loan’s pricing. In the second final rule issued today, the Bureau creates a new category for QMs, Seasoned QMs.

Under the General QM Final Rule, a loan receives a conclusive presumption that the consumer had the ability to repay if the annual percentage rate does not exceed the average prime offer rate for a comparable transaction by 1.5 percentage points or more as of the date the interest rate is set. A loan receives a rebuttable presumption that the consumer had the ability to repay if the annual percentage rate exceeds the average prime offer rate for a comparable transaction by 1.5 percentage points or more but by less than 2.25 percentage points. In addition, the General QM Final Rule:

  • Provides higher pricing thresholds for loans with smaller loan amounts, for certain manufactured housing loans, and for subordinate-lien transactions.
  • Retains the General QM loan definition’s existing product-feature and underwriting requirements and limits on points and fees.
  • Requires lenders to consider a consumer’s DTI ratio or residual income, income or assets other than the value of the dwelling, and debts and removes appendix Q and provides more flexible options for creditors to verify the consumer’s income or assets other than the value of the dwelling and the consumer’s debts for QM loans.

The Seasoned QM Final Rule creates a new category of Seasoned QMs for first-lien, fixed-rate covered transactions that have met certain performance requirements, are held in portfolio by the originating creditor or first purchaser for a 36-month period, comply with general restrictions on product features and points and fees, and meet certain underwriting requirements. To be eligible to become a Seasoned QM, a loan must be a first-lien, fixed-rate loan with no balloon payments and must meet certain other product restrictions. As under the General QM Final Rule, the creditor must also consider the consumer’s DTI ratio or residual income, income or assets other than the value of the dwelling, and debts and verify the consumer’s income or assets other than the value of the dwelling and the consumer’s debts. The loan can have no more than two delinquencies of 30 or more days and no delinquencies of 60 or more days at the end of the seasoning period. The creditor or first purchaser also generally must hold the loan in portfolio until the end of the seasoning period.

These final rules will take effect 60 days after publication in the Federal Register. The General QM Final Rule will have a mandatory compliance date of July 1, 2021. Between the General QM Final Rule’s effective date and mandatory compliance date, there will be an optional early compliance period during which creditors will be able to use either the current General QM definition or the revised General QM definition. The Seasoned QM Final Rule will apply to covered transactions for which creditors receive an application on or after the effective date.

  • PUBLICATION AND EFFECTIVE DATE UPDATE: These rules were published at 85 FR 86308 (General Qualified Loan Definition) and 85 FR 86402 (Seasoned Qualified Mortgage Loan Definition) on December 29, 2020. Both rules become effective March 1, 2021.

12/11/2020

FinCEN issues new 314(b) sharing information

In prepared remarks at the American Bankers Association/ American Bar Association Financial Crimes Enforcement Conference, Kenneth Blanco, FinCEN Director, announced that FinCEN was issuing important guidance clarifying how financial institutions may fully utilize FinCEN’s 314(b) information sharing program. A new 314(b) Fact Sheet was issued yesterday as the result of the feedback provided by financial institutions and through our own experiences at FinCEN. It is intended to clarify in greater detail the circumstances where 314(b) applies, with the hope of enhancing participation and utility of the 314(b) program. [FinCEN rescinded previously issued guidance (FIN-2009-G002) and a former administrative ruling (FIN-2012-R006) with the publication of the new Fact Sheet.]

The main themes of the 314(b) Fact Sheet are:

  • Financial institutions may share under Section 314(b) information relating to activities that they suspect may involve possible terrorist financing or money laundering. This includes, but is not limited to, information about activities they suspect involve the proceeds of a specified unlawful activity (SUA). Importantly, our guidance clarifies that:
  • Financial institutions do not need to have specific information that these activities directly relate to proceeds of an SUA, or to have identified specific proceeds of an SUA being laundered.
  • Financial institutions do not need to have made a conclusive determination that the activity is suspicious.
  • Financial institutions may share information about activities as described, even if such activities do not constitute a “transaction.” This includes, for example, an attempted transaction, or an attempt to induce others to engage in a transaction. This clarification is significant and addresses some uncertainty with sharing incidents involving possible fraud, cybercrime, and other predicate offenses when financial institutions suspect those offenses may involve terrorist acts or money laundering activities.
  • In addition, the guidance notes that there is no limitation under Section 314(b) on the sharing of personally identifiable information, or the type or medium of information that can be shared (to include sharing information verbally).
  • An entity that is not itself a financial institution under the Bank Secrecy Act may form and operate an association of financial institutions whose members share information under Section 314(b). Notably, this includes compliance service providers.
  • An unincorporated association governed by a contract among the group of financial institutions that constitutes its members may engage in information sharing under Section 314(b).

Director Blanco also discussed FinCEN’s COVID-19 Response, Expansion of Rapid Response Program, Guidance to Financial Institutions, FinCEN Advisories, Medical Fraud, Imposter Scams and Money Mules, Cybercrime and Cyber-Enabled Crime , Unemployment Insurance Fraud, Charities Fact Sheet, COVID-related SAR Filings, Rulemakings, and Stakeholder Engagement.

12/11/2020

COVID 19-related loan flexibilities extended

The Federal Housing Finance Agency has announced that Fannie Mae and Freddie Mac (the Enterprises) will extend several loan origination flexibilities through January 31, 2021. The changes are to ensure continued support for borrowers during the COVID-19 national emergency. The flexibilities were set to expire on December 31, 2020.

Extended flexibilities include:

  • Alternative appraisals on purchase and rate term refinance loans
  • Alternative methods for documenting income and verifying employment before loan closing; and
  • Expanding the use of powers of attorney to assist with loan closings.

12/10/2020

NMLS annual conference

Registration for the 2021 NMLS Annual Conference & Training is now open. It will be held online from February 23-26, 2021, 1:00-5:00 p.m. ET.

12/10/2020

Bureau sues debt collector BounceBack, Inc.

The Consumer Financial Protection Bureau has sued BounceBack, Inc.. a Kansas City, Missouri-based operator of bad-check pretrial-diversion programs on behalf of more than 90 district attorneys' offices throughout the country. The Bureau alleges that in the course of implementing this program, BounceBack violated the Fair Debt Collection Practices Act (FDCPA) and the Consumer Financial Protection Act of 2010 (CFPA). The Bureau’s complaint seeks injunctions against BounceBack, as well as damages, redress to consumers, disgorgement of ill-gotten gains, and the imposition of a civil money penalty.

The Bureau's complaint alleges that since at least 2015, in the course of administering these bad-check pretrial-diversion programs, BounceBack used district-attorney letterheads to threaten more than 19,000 consumers with prosecution if they did not pay the amount of the check, enroll and pay for a financial-education course, and pay various other fees. BounceBack failed to—

  • reveal to consumers that BounceBack—and not district attorneys—sent the letters
  • reveal that district attorneys almost never prosecuted these cases, even when consumers ignored BounceBack’s threats. In fact, in most cases, BounceBack did not refer cases for prosecution, even if the check writer failed to respond to its collection letter.
  • include disclosures required under the FDCPA.

The Bureau alleges that BounceBack’s conduct violated the FDCPA, was deceptive under both the FDCPA and the CFPA, and that its violations of the FDCPA constituted violations of the CFPA.

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