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Financial Services Law Insights and Observations

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  • FHFA announces 2022 confirming loan limits

    Federal Issues

    On November 30, FHFA announced that it will raise the maximum conforming loan limits (CLL) for mortgages purchased in 2022 by Fannie Mae and Freddie Mac from $548,250 to $647,200 (the 2021 CLL limits were covered previously by InfoBytes here). In most high-cost areas, the maximum loan limit for one-unit properties will be $970,800. According to FHFA, due to generally rising home values, “the CLLs will be higher in all but four U.S. counties or county equivalents.” A county-specific list of 2022 conforming loan limits for all counties and county-equivalent areas in the U.S. can be accessed here.

    Federal Issues FHFA Mortgages Fannie Mae Freddie Mac Conforming Loan Consumer Finance

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  • HUD issues 2022 mortgage and HECM limits

    Federal Issues

    On November 30, HUD issued Mortgagee Letter 2021-28, which provides the 2022 nationwide forward mortgage limits. According to HUD, FHA calculates forward mortgage limits based on the median house prices in accordance with the National Housing Act (NHA). Additionally, FHA sets these limits at or between the low-cost area and high-cost area limits based on the median house prices for the area and publishes the updated limits each calendar year. Among other things, HUD noted that the FHA national low-cost area mortgage limits are set at 65 percent of the national conforming limit of $647,200 for a one-unit property, and, for high-cost area mortgage limits, the FHA national high-cost area mortgage limits are set at 150 percent of the national conforming limit of $647,200 for a one-unit property. Forward mortgage limits for 2022 are effective for case numbers assigned on or after January 1, 2022.

    The same day, HUD issued Mortgagee Letter 2021-29, which provides the 2022 home equity conversion mortgage (HECM) limits. According to the letter, the HECM maximum claim amount limits for traditional HECM, HECM for purchase, and HECM-to-HECM refinances are governed by the maximum claim amount limitation in the NHA. For the period of January 1, 2022, to December 31, 2022, the maximum claim amount for FHA-insured HECMs is $970,800 (150 percent of Freddie Mac’s national conforming limit of $647,200).

    Federal Issues FHA HUD HECM Mortgages Consumer Finance

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  • NY Fed launches center to study fintech and central banking

    Federal Issues

    On November 29, the Federal Reserve Bank of New York announced the launch of the New York Innovation Center (NYIC), which is intended to advance the partnership with the Bank for International Settlements (BIS) Innovation Hub. According to the announcement, the NYIC will aim to, among other things: (i) identify and develop insights on financial technology trends associated to central banks; (ii) examine the development of public goods to increase the global financial system function; and (iii) “advance and support expertise in the area of central bank innovation.” According to the announcement, to inform the activities of the NYIC, the New York Fed will focus on five opportunity areas, which include “Supervisory and Regulatory Technology, Financial Market Infrastructures, Future of Money, Open Finance, and Climate Risk.” The announcement also noted that, “[t]his work will be based on the venture development process, drawing on principles from entrepreneurship, venture capital, and corporate innovation to produce high-impact solutions.”

    Federal Issues Federal Reserve Bank of New York Fintech Bank Regulatory

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  • Freddie says cryptocurrency can’t be used for mortgage qualification

    Federal Issues

    On December 1, Freddie Mac released Bulletin 2021-36 to Freddie Mac sellers to provide guidance on selling updates. The bulletin provides guidance on, among other things: (i) 2022 conforming loan limits; (ii) extension of the guarantee fee obligation; (iii) affordable lending; (iv) credit underwriting; and (v) document custody. In order to address uncertainty regarding the treatment of cryptocurrency in mortgage underwriting, the bulletin specifically addresses requirements related to cryptocurrency’s use in the mortgage qualification process. These requirements include, among other things, that income paid to the borrower in cryptocurrency cannot be utilized to qualify for a mortgage and that “[c]ryptocurrency may not be included in the calculation of assets as a basis for repayment of [the] obligation.” Unless otherwise noted, the changes issues in the bulletin are effective immediately.

    Federal Issues Freddie Mac Mortgages Cryptocurrency Consumer Finance Fintech

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  • CFPB sets 2022 FCRA asset threshold

    Agency Rule-Making & Guidance

    On November 29, the CFPB announced the annual adjustment to the maximum amount that consumer reporting agencies are permitted to charge consumers for making a file disclosure to a consumer under the FCRA. According to the rule, the ceiling on allowable charges under Section 612(f) of the FCRA will increase to $13.50, which is a $0.50 increase from the ceiling on allowable charges for 2021. The rule is effective on January 1, 2022.

    Agency Rule-Making & Guidance CFPB FCRA Consumer Finance

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  • Fed provides guidance on LIBOR transition

    Agency Rule-Making & Guidance

    On November 19, the Federal Reserve Board announced answers to “Supervision FAQs on the Transition away from LIBOR.” The Fed’s announcement follows an October 2021 joint statement by the CFPB, Fed, FDIC, NCUA, and OCC, in conjunction with the state bank and state credit union regulators, regarding the transition away from LIBOR. (Covered by InfoBytes here.) Among other things, the FAQs included statements regarding what qualifies as a “new contract” under the previously issued guidance, specifically regarding: (i) modifications to adjustable-rate mortgages; (ii) loans that “automatically renew” after December 31, 2021; and (iii) physical settlement of a contract that existed before December 31, 2021. The FAQs also discussed: (i) Board-supervised institutions engaging in secondary trading of LIBOR-linked cash instruments that were issued before December 31, 2021; (ii) the need for fallback language in contracts entered into prior to 2022; and (iii) the approach by examiners in assessing firms’ LIBOR transition plans.

    Agency Rule-Making & Guidance Federal Reserve LIBOR Mortgages Bank Regulatory

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  • OCC gives guidance on cryptocurrency, trust bank chartering

    Agency Rule-Making & Guidance

    On November 23, the OCC issued Interpretive Letter 1179, which clarified and expanded on prior interpretive letters concerning bank engagements in cryptocurrency activities. Interpretive Letter 1179 also addressed the OCC’s authority to charter national trust banks. According to the OCC, national banks and federal savings associations may engage in certain cryptocurrency activities discussed in Interpretive Letters 1170, 1172, and 1174, provided a bank is able to “demonstrate, to the satisfaction of its supervisory office, that it has controls in place to conduct the activity in a safe and sound manner.” Legally permissible activities include those pertaining to (i) cryptocurrency custody services; (ii) the holding of dollar deposits to serve as “reserves backing stablecoin in certain circumstances”; (iii) acting “as nodes on an independent node verification network” to verify customer payments; and (iv) bank engagements with distributed ledger technology to facilitate payment transactions for certain stablecoin activities. A bank intending to engage in such activities must first notify its supervisory office and should not engage in any activity until it receives permission. Supervisory offices must assess whether a bank’s risk management systems and controls are sufficiently adequate for engagement in such activities. “Today’s letter reaffirms the primacy of safety and soundness. Providing this clarity will help ensure that these cryptocurrency, distributed ledger, and stablecoin activities will be conducted by national banks and federal savings associations in a safe and sound manner,” acting Comptroller Michael Hsu stated in an agency press release. “Because many of these technologies and products present novel risks, banks must be able to demonstrate that they have appropriate risk management systems and controls in place to conduct them safely. This will provide assurance that crypto-asset activities taking place inside of the federal regulatory perimeter are being conducted responsibly.”

    The Interpretive Letter also addressed OCC standards for chartering national bank trusts, as previously discussed in Interpretive Letter 1176. The OCC reiterated that it “retains discretion to determine if an applicant’s activities that are considered trust or fiduciary activities under state law are considered trust or fiduciary activities for purposes of applicable federal law.” The OCC further emphasized that the OCC’s chartering authority does not expand or modify current responsibilities under 12. C.F.R. Part 9 for national banks that have already been granted fiduciary powers, and that “national banks currently conducting activities in a non-fiduciary capacity that are not subject to Part 9 have not, and will not, become subject to 12 C.F.R. Part 9 because of the letter.”

    Agency Rule-Making & Guidance OCC Bank Regulatory Cryptocurrency Fintech Bank Charter

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  • Agencies finalize 2022 HPML exemption threshold

    Agency Rule-Making & Guidance

    On November 30, the CFPB, OCC, and Federal Reserve Board published finalized amendments to the official interpretations for regulations implementing Section 129H of TILA, which establishes special appraisal requirements for “higher-priced mortgage loans” (HPMLs). The final rule increases the TILA smaller loan exemption threshold for the special appraisal requirements for HPMLs. Each year the threshold must be readjusted based on the annual percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers. The exemption threshold for 2022 will increase from $27,200 to $28,500 effective January 1.

    Agency Rule-Making & Guidance CFPB OCC Federal Reserve HPML Appraisal Mortgages Bank Regulatory

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  • Agencies finalize TILA, CLA 2022 thresholds

    Agency Rule-Making & Guidance

    On December 1, the CFPB and the Federal Reserve Board finalized the annual dollar threshold adjustments that govern the application of TILA (Regulation Z) and the Consumer Leasing Act (Regulation M) (available here and here), as required by the Dodd-Frank Act. The exemption threshold for 2021, based on the annual percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers, will increase from $58,300 to $61,000, except for private education loans and loans secured by real or personal property used or expected to be used as the principal dwelling of a consumer, which are subject to TILA regardless of the amount. The final rules takes effect January 1, 2022.

    Agency Rule-Making & Guidance CFPB Federal Reserve TILA Consumer Leasing Act Regulation Z Regulation M Bank Regulatory Dodd-Frank

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  • FFIEC updates BSA/AML examination manual

    Agency Rule-Making & Guidance

    On December 1, the Federal Financial Institutions Examinations Council (FFIEC) published updated versions of three sections and one new section of the Bank Secrecy Act/Anti-Money Laundering (BSA/AML) Examination Manual (Manual), which provides examiners with instructions for assessing a bank or credit union’s BSA/AML compliance program and adherence to BSA regulatory requirements. The new section is Introduction – Customers, and the revisions include the following updated sections: Charities and Nonprofit Organizations, Independent Automated Teller Machine Owners or Operators, and Politically Exposed Persons. The FFIEC noted that the “updates should not be interpreted as new instructions or as a new or increased focus on certain areas,” but rather are intended to “provide information and considerations related to certain customers that may indicate the need for bank policies, procedures, and processes to address potential money laundering, terrorist financing, and other illicit financial activity risks.” In addition, the Manual itself does not establish requirements for financial institutions, which are found in applicable statutes and regulations. (See also FDIC FIL-12-2021 and OCC Bulletin 2021-10.) As previously covered by InfoBytes, in June, the FFIEC updated the following sections of the Manual: International Transportation of Currency or Monetary Instruments ReportingPurchase and Sale of Monetary Instruments RecordkeepingReports of Foreign Financial Accounts, and Special Measures.

    Agency Rule-Making & Guidance FDIC Federal Reserve OCC FFIEC NCUA Bank Secrecy Act Anti-Money Laundering Of Interest to Non-US Persons Financial Crimes Bank Regulatory

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