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FHA implements changes to branch office registration requirements
On March 19, the FHA issued Mortgagee Letter 2024-04 to implement the provisions of a Final Rule, “Changes in Branch Office Registration Requirements.” The Final Rule will eliminate the requirement for mortgagees and lenders to register with HUD in each branch office from which they conduct FHA business, making branch registration optional and branch registration fees applicable only to branch offices that mortgagees or lenders choose to register with FHA. As previously covered by InfoBytes, FHA proposed the rule last March. Following public comments, HUD published the Final Rule without changes from the proposed rule, and the Final Rule became effective on March 4.
The Final Rule will exclude branch offices not registered with HUD from the HUD Lender List Search page. The Mortgagee Letter will summarize changes that will be incorporated into Handbook 4000.1 to implement the Final Rule, including updating the policy for registering branch offices, clarifying the “Area Approved for Business” for home offices and branch offices, updating the definitions for Branch Manager and Regional Manager, and clarifying the policy requirements that apply to registered branch offices. Although the Mortgagee Letter will go into effect immediately, it will not impact annual recertifications due to be completed by March 31; rather, the recertification fee “will be calculated based on the registered branches as of the last business day of the mortgagee’s certification period (fiscal year end).”
White House targets “junk fees” in higher education with several new initiatives
On March 15, the White House issued a fact sheet on proposed measures aimed at curbing or eliminating alleged “junk fees” in higher education, citing that it found college students incurred “billions in fees” when having to pay for services they may not want. The first action the Biden Administration highlighted was a FY 2025 budget proposal that would eliminate student loan origination fees. The White House found that seven million student loan borrowers pay origination fees somewhere between one and four percent of their student loans. The second item the Biden Administration sought to end was college banking “junk fees,” citing a recent report by the CFPB on this issue (covered by InfoBytes here). To address this issue, the Dept. of Education has proposed a rule on college banking products that cannot include harmful fees. Third, the White House supports another proposed rulemaking from the Dept. of Education that would end automatic billing on tuition for textbooks, allowing students to shop around for better prices. Last, the Dept. of Education is considering a rulemaking that would stop colleges from pocketing leftover meal plan “dollars,” and instead will return the balance to students. The Biden Administration noted these were just a few items meant to help student initiatives, including increasing the transparency of college costs and preventing schools from withholding transcripts. These rules will go into effect on July 1.
Chopra discusses open banking and standard-setting
On March 13, the Director of the CFPB, Rohit Chopra, delivered prepared remarks at the Financial Data Exchange Global Summit and discussed advancing the U.S. towards open banking. Chopra outlined the current efforts and considerations surrounding the development of industry standards that would help transition consumers with switching financial products. The CFPB had been finalizing rules on Section 1033 of the CFPA which would grant consumers the right to access their financial data and would aim to protect sensitive personal financial information while promoting open banking (covered by InfoBytes here).
Chopra highlighted the importance of creating industry standards for data sharing and communication protocols, drawing parallels with existing standards in electronics and financial services. While the CFPB's proposal acknowledged the role of standards, Chopra noted that it intentionally avoided being overly “prescriptive” to avoid stifling innovation, among other things.
The speech also addressed the potential for anticompetitive behavior in the standard-setting process. Chopra noted historical instances of anticompetitive behavior, a concern that the CFPB had been monitoring closely. The Bureau will be working with the DOJ to prevent such practices.
The Bureau sought to codify what standard-setting organizations must demonstrate to be recognized under the proposed rule, then invite those organizations to begin the process of receiving formal recognition from the CFPB. Based on the comments received on the proposed rule, Chopra expects that by this fall, the final rule will “identify the areas where standards are relevant to the requirements of the final rule.” Chopra also noted the CFPB considered whether standard-setting organizations should be balanced so no entity or group of entities can “dominate[] decision making.” He noted that the Bureau will investigate the makeup of entities’ standard-setting/modification groups and funding structure, warning if an entity’s composition or funding suggests favoritism, then “that will be a problem.” Chopra noted that if the CFPB cannot identify standard-setting organizations, it is prepared to implement more detailed guidance.
FHFA eliminates household income restriction on PTFCs
On March 12, the FHFA published a final rule in the Federal Register titled “Exception to Restrictions on Private Transfer Fee Covenants (PFTCs) for Loans Meeting Certain Duty to Serve Shared Equity Loan Program Requirements,” which established an additional exception to the FHFA’s regulation proscribing Fannie Mae, Freddie Mac, and FHLBanks from “purchasing, investing in, [and] accepting as collateral” mortgages encumbered by certain types of PTFCs, or related securities, subject to certain exceptions. This new exception will allow the banking entities to engage in transactions if the loans met the equity loan program requirements for the resale restriction programs “without regard to any household income limit.” The final rule will go into effect on May 13.
VA proposes rule changes to VA-Guaranteed, IRRRLoans
On March 7, the VA published a supplemental notice of proposed rulemaking in the Federal Register titled “Loan Guaranty: Revisions to VA-Guaranteed or Insured Interest Rate Reduction Refinancing Loans” which sought comment on whether the “date of loan issuance” should be defined as date of the note (as originally suggested) or as the date “the first payment is due.” The notice explained the VA did not receive any comments on this aspect of the proposed rule and enumerated several concerns with the initial proposed definition. The comment period for this proposed rule will close on May 6.
Fed issues final rule for FMUs to update risk management requirements, noting cyber and climate risks
On March 8, the Federal Reserve Board announced a final rule that will update risk management requirements for financial market utilities (FMUs) supervised by the Fed. FMUs provide the financial infrastructure to clear and settle payments and transactions. The rule will go into effect 30 days after publication in the Federal Register, and FMUs are expected to comply with certain updates by 90 days and all updates by 180 days after publication. The Fed reported the final rule is “substantially similar” to the proposed rule and provided additional details to the exiting requirements for the following: (i) review and testing; (ii) incident management; (iii) business continuity management; and (iv) third-party risk management.
FTC updates the Telemarketing Sales Rule, proposes tech support rule
On March 7, the FTC announced updates to the Telemarketing Sales Rule (TSR) to extend fraud protections to businesses and modernize recordkeeping requirements in response to technological advancements. These updates were part of an ongoing review of the TSR, which governs telemarketing practices and includes the Do Not Call Registry (DNC) and issued rules against telemarketing robocalls.
The newly finalized rule broadened the scope of prohibited deceptive and abusive telemarketing practices to include business-to-business calls, which were previously exempt, except in specific cases. The rule also revised the TSR's recordkeeping requirements to reflect changes in technology and telemarketing methods, which included maintaining detailed call records and consent documentation, as well as compliance with the DNC Registry.
In addition to these updates, the FTC proposed a rule that would enhance its ability to tackle tech support scams by extending the TSR's coverage to include inbound telemarketing calls for technical support services. This amendment addressed deceptive tech support schemes and would empower the FTC to seek stronger legal remedies such as civil penalties and consumer compensation. The Commission invited public feedback on a proposed definition of tech support scams.
Ginnie Mae now requires issuers to disclose cybersecurity incidents within 48 hours
On March 4, the President of Ginnie Mae released All Participants Memorandum (APM) 24-02, which set forth a new requirement applicable to all issuers, including issuers that subservice loans for others. The memo mandated that all approved issuers must notify Ginnie Mae of any significant cybersecurity incident within 48 hours of detection. Ginnie Mae defined a “Cyber Incident” as “an event that actually or potentially jeopardizes, without lawful authority, the confidentiality, integrity, or availability of information or an information system; or constituted a violation or imminent threat of violation of security policies, security procedures, or acceptable use policies and has the potential to directly or indirectly impact the Issuer’s ability to meet its obligations under the terms of the Guaranty Agreement.” If a Cyber Incident has occurred, issuers must it report to Ginnie Mae via a specified email address and must include (i) the date and time of the incident, (ii) a summary of the incident, and (iii) points of contact responsible for coordinating any follow-up questions regarding the incident. These requirements are also now reflected in Chapter 03, Part 18 of the Mortgage-Backed Securities Guide, 5500.3, REV-1.
FHFA announces updates for implementation of GSE credit score requirements
On February 29, FHFA announced updates related to the implementation of new credit score requirements for single-family loans acquired by Freddie Mac and Fannie Mae (GSEs). As previously covered by InfoBytes, FHFA released a two-phase plan for soliciting stakeholder input on the agency’s proposed process for updating credit score requirements. The new process, called the FICO 10T model, will, among other things, require two credit reports (a “bi-merge” credit report) from the national consumer reporting agencies, rather than the traditional three (covered by InfoBytes here). After considering stakeholder input, FHFA expects to transition from the Classic FICO credit score model to the bi-merge credit reporting requirement in Q1 2025. The GSEs will also move up the publication of VantageScore 4.0 historical data to Q3 2024 “to better support market participants” and provide pertinent historical data before the transition. FHFA will provide more details on the timing for FICO 10T implementation once this initial process is complete.
FTC proposes two actions to combat AI impersonation fraud
On February 15, the FTC announced its supplemental notice of proposed rulemaking relating to the protection of consumers from impersonation fraud, especially from any impersonations of government entities. The first action from the FTC was a final rule that prohibited the impersonation of government, business, and their officials or agents in interstate commerce. The second action was a notice seeking public comment on a supplemental proposed rulemaking that would revise the first action and add a prohibition on, and penalties for, the impersonation of individuals for entities who provide goods and services (with the knowledge or reason to know that those goods or services will be used in impersonations) that are unlawful. In tandem, these actions sought to prohibit the impersonation of government and business officials.
The FTC notes that these two actions come from “surging complaints” on impersonation fraud, specifically from artificial intelligence-generated deep fakes. The final rule will expand the remedies and provide monetary relief, whereas the FTC stated this rule will provide a “shorter, faster and more efficient path” for injured consumers to recover money. The rule would enable the FTC to seek monetary relief from scammers that use government seals or business logos, spoof government and business emails, and impersonate a government official or falsely imply a business affiliation.